We have found, and the charts below indicate, that primary and secondary markets have similar occupancy and rent growth experiences. Furthermore, secondary industrial property markets generally provide ~~less~~similar rent volatility and equivalent occupancy, compared to primary industrial property markets. The ~~tables~~charts below, based on data provided by CB Richard Ellis—Econometric Advisors (“CBRE-EA”), show the quarter-over-quarter (“Q-o-Q”) percentage changes in warehouse rent and occupancy for primary and secondary markets.

Our Strategies

Our primary business objectives are to own and operate a balanced and diversified portfolio of binary risk investments (individual single-tenant 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 through the following strategies.

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External Growth Strategy

We focus our acquisition activities (assuming our market opportunity remains attractive) on our core property types: warehouse/distribution facilities and light manufacturing facilities. ~~From time to time, if an attractive opportunity presents itself, we may consider portfolio acquisitions.~~

Underwriting Strategy

We blend fundamental real estate analysis with corporate credit analysis in our proprietary model to make a probabilistic assessment of future cash flows. We focus on quality real estate, long-term ownership, and ~~long-term ownership.~~the present value of estimated future cash flows.

Our underwriting strategy involves our asset management and leasing, credit, capital markets and legal departments. For each asset, our analysis focuses on the following ~~which we input~~and determines the inputs into our risk assessment ~~model:~~model.

Asset Management and Leasing. We evaluate the physical real estate within the context of the market (and submarket) in which it is located and the prospect for re-tenanting the building if it becomes vacant by estimating the following:

current and future market rent for this building in this location;

downtime to re-lease and related carrying costs;

cost (tenant improvements, leasing commissions and capital expenditures) to achieve the occupancy and the projected market rent within the projected downtime; ~~and~~

the fungibility of the property with other properties in the market and the flexibility of the property for other uses, including single-tenant or multi-tenant ~~reuse.~~reuse; and

~~Renewal~~renewal probability, which we determine by the tenant’s use of the property and the degree to which the property is central to the tenant’s ongoing operations, the tenant’s potential cost to relocate, the supply/demand dynamic in the relevant submarket and the availability of suitable alternative properties.

Credit. We apply fundamental credit analysis to evaluate the tenant’s credit profile by focusing on the tenant’s current and historical financial status, general business plan, operating risks, capital sources, industry trends, and earnings expectations. We also analyze Securities and Exchange Commission (“SEC”) filings, press releases, ~~tenant management calls,~~ rating agency reports, macroeconomic variables, analyst reports, and market signals. In the case of a private, non‑rated firm, we will generally obtain financial information from the tenant, calculate common measures of credit strength and coverage ratios, evaluate qualitative factors including but not limited to competition and customer/supplier concentration, obtain third party references, and conduct tenant interviews. For publicly rated firms, we use our own internal underwriting model, as well as the credit information issued by Moody’s Investor Services, Standard & Poor’s, Fitch Ratings, and ~~Fitch Ratings.~~other ratings agencies. Using this data and publicly available bond default studies of comparable tenant credits, we estimate the probability of future rent loss due to tenant default, as well as the possibility of a reorganization or liquidation in the case of a tenant default or bankruptcy event.

Capital Markets. We evaluate the leverage levels, credit spreads, and costs associated with the capital used to fund the proposed acquisition. In addition, we estimate future inflation rates and interest rates.

Legal. We evaluate transaction documents, the tenant and landlord obligations contained within the existing or proposed leases, and other legal issues associated with the building, such as zoning, encroachments and environmental conditions.

For our portfolio as a whole, we use risk management guidelines to ensure diversification by tenant, industry, lease term and geography.

Real Estate Operation Strategy

We establish direct, long-term relationships with our tenants and use our in-house expertise in asset management and leasing to ~~manage~~oversee all operational aspects of our portfolio. We also engage and actively manage high-quality third parties for localized leasing, property management, and construction services. Our asset management team utilizes our direct tenant relationships and leasing expertise to strive to achieve better than market levels of occupancy and rental rates. We utilize third party real estate brokers for the execution of new ~~leases; however, we typically manage the~~and renewal ~~of leases with our tenants directly, thereby reducing the amount of leasing commissions paid.~~leases. The team also collaborates with our internal credit function to monitor the credit profile of

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each of our tenants through financial statement review, tenant management calls, and press releases. The team’s efforts have resulted in our achieving aan Operating Portfolio tenant retention rate of approximately ~~70%~~69.8% for those tenants whose leases ~~were scheduled~~expired during the period from January 1, 2014 to ~~expire since our IPO in 2011.~~December 31, 2016. As of December 31, ~~2015,~~2016, our portfolio had approximately ~~4.4%~~5.3% of our total rentable square feet available for lease, compared to ~~5.2%~~4.4% as of December 31, ~~2014.~~

We continually evaluate dispositions on an opportunistic basis by evaluating tenants, property locations, and asset class. During the three months ended December 31, 2015, we reviewed our portfolio and identified several properties for potential disposition. We reviewed our current properties for disposition to realize value created in the portfolio and enhance the quality of the portfolio by disposing of underperforming assets. During the year ended December 31, 2015, we sold six industrial buildings consisting of approximately 0.8 million square feet for a net gain of approximately $5.0 million.2015.

Financing Strategy

Our main focus is to preserve a flexible capital structure and maintain a relatively low-leveraged balance sheet designed to allow us to capitalize on market opportunities throughout the economic cycle. We seek to maintain a conservative balance sheet and we achieve this by capitalizing new acquisitions with approximately 60% equity and 40% ~~debt.~~debt, and by managing our consolidated leverage ratio, as defined in our respective loan agreements, to sub 45%. As of December 31, ~~2015,~~2016, our ratio of net debt to real estate cost basis was approximately ~~45%~~41.0% and our ratio of total long-term indebtedness to enterprise value was approximately ~~40%~~32.6%. For purposes of these ratios, we define:

“net debt” as our total long-term indebtedness outstanding, less cash and cash equivalents on hand;

“long-term indebtedness” as the principal balance on our unsecured credit facility, unsecured term loans, unsecured notes and mortgage notes;

“real estate cost basis” as the book value of rental property and deferred leasing intangibles, exclusive of the related accumulated depreciation and ~~amortization;~~ amortization; and

“enterprise value” as the market value of our common stock (based on the period-end closing price on the ~~NYSE)~~NYSE multiplied by our common stock and units) plus the liquidation value of our preferred stock plus the amounts outstanding under our ~~long-term indebtedness.~~unsecured credit facility, unsecured term loans, unsecured notes, and mortgage notes.

We raise capital through equity offerings, including discrete marketed offerings and ongoing “at the market” (“ATM”) offerings, and through unsecured debt offerings such as bank borrowings and private placement issuances. We believe unsecured indebtedness is generally more efficient and less restrictive operationally than secured indebtedness. We continue to utilize our ATM program as our primary source of equity capital when required and available. As a supplement to the ATM activity, we have also executed marketed overnight equity offerings. From time to time, we issue common units of limited partnership interest in our Operating Partnership to acquire properties from owners who desire a tax-deferred transaction.

~~Management Team and Personnel~~

~~We have a fully integrated, highly experienced management team, and a majority of our senior management team has two or more decades of single-tenant, industrial real estate experience.~~

Regulation

General

Our properties are subject to various laws, ordinances and regulations, including regulations relating to common areas and fire and safety requirements. We believe that we and/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, all public accommodations must meet 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.

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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, imposition of fines by the U.S. government or an 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 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 some of our properties. 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. Certain of our properties are on or are adjacent to or near other properties upon which others, 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 or operators 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 building owners or operators who fail to comply with these requirements and may allow third parties to seek recovery from owners or operators 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 ~~shareholders.~~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.

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

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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 individuals or local 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.”

Employees

As of December 31, ~~2015,~~2016, we employed 68 full-time ~~employees. We believe that we have good relationships with our~~ employees. None of our employees are represented by a labor union.

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 the Operating Partnership. We also wholly own the sole general partner (the manager) of the Operating Partnership. Substantially all of our assets are held in, and substantially all of our operations are conducted through, the Operating Partnership. Shares of our common stock are listed and traded on the NYSE. The limited partnership interests in the Operating Partnership, which we sometimes refer to as “units,” 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 a property from an owner on a tax-deferred basis by issuing units in exchange for the property.

The common units of limited partnership interest in our Operating Partnership correlate on a one-for-one economic basis to the shares of common stock in the REIT. Each common unit ~~in the Operating Partnership~~ 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 a cash ~~payment~~ 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.

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The following is a simplified diagram of our UPREIT structure at December 31, ~~2015.~~2016.

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 through the SEC's website at www.sec.gov. In addition, the public may read and copy materials we file with the SEC at the SEC’s public reference room located at 100 F Street, N.E., Washington, D.C. 20549. Information on the operation of the public reference room can be obtained by calling the SEC at ~~1-800- SEC-0330.~~1-800-SEC-0330.

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. If any of the following or other risks occur, our business, financial condition, operating results, cash flows, and distributions, as well as the market prices for our securities, could be materially adversely affected.

Risks Related to Our Business and Operations

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, ~~2015, all~~2016, most of our ~~291~~314 buildings were industrial properties, including ~~223~~243 warehouse/distribution facilities, 4754 light manufacturing facilities, ~~and 21~~16 flex/office ~~facilities.~~facilities, and one building in redevelopment. This concentration may expose us to the risk of economic downturns in

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the industrial real estate sector to a greater extent than if our properties were more diversified across other sectors of the real estate industry.

Adverse economic conditions will harm our returns and profitability.

Our operating results may be affected by market and economic challenges and uncertainties, which may result from a continued or exacerbated general economic slowdown experienced by the nation as a whole or by the local economies where our properties may be located or our tenants may conduct business, or by the real estate industry, including the following:

poor economic conditions may result in tenant defaults under ~~leases;~~leases and extended vacancies at our properties;

re-leasing may require concessions or reduced rental rates under the new leases due to reduced demand;

adverse capital and credit market conditions may restrict our operating activities; and

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 that it attracts at the time of our purchases, 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 ~~pay~~paid for these investments. The length and severity of any economic slowdown or downturn cannot be predicted. Our operations could be negatively affected to the extent that an economic slowdown or downturn is prolonged or becomes more severe.

Substantial international, national and local government deficits and the weakened financial condition of these governments may adversely affect us.

The values of, and the cash flows from, the properties we own may be affected by developments in global, national and local economies. As a result of the recent global economic crisis and the significant government interventions, federal, state and local governments have incurred record deficits and assumed or guaranteed liabilities of private financial institutions or other private entities. These increased budget deficits and the weakened financial condition of federal, state and local governments 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, which may directly or indirectly adversely affect our business, financial condition and results of operations.

There can be no assurance that the global market disruptions, including the increased cost of funding for certain governments and financial institutions, will improve, nor can there be any assurance that future assistance packages will be available or, even if provided, will be sufficient to stabilize the affected countries and markets. Risks and ongoing concerns about the global economic crisis could have a detrimental impact on economic recovery, financial markets and institutions and the availability of debt financing, which may directly or indirectly adversely affect us.

In addition, on June 23, 2016, the United Kingdom held a referendum in which a majority of voters voted to exit the European Union, known as Brexit. Negotiations will determine the future terms of the United Kingdom’s relationship with the European Union, including, among other things, the terms of trade between the United Kingdom and the European Union. The effects of Brexit will depend on any agreements the United Kingdom makes to retain access to European Union markets either during a transitional period or more permanently. Brexit could adversely affect European and global economic or market conditions and could contribute to instability in global financial markets. Any of these effects of Brexit, and others we cannot anticipate, may adversely affect us.

Events or occurrences that affect areas in which our properties are geographically concentrated may impact financial results.

In addition to general, regional, national and international economic conditions, our operating performance is impacted by the economic conditions of the specific markets in which we have concentrations of properties. We have holdings in the following states, which, as of December 31, ~~2015, accounted~~2016, were the three largest when accounting for the percentage of our total annualized base

rental ~~revenue indicated:~~revenue: Illinois (8.2%, spread over 2 CBSA's); Ohio ~~(8.6%);~~ ~~Illinois~~ ~~(7.9%);~~ ~~North Carolina~~ ~~(7.7%);~~ ~~Pennsylvania~~ ~~(6.4%)~~(7.5%, spread over 9 CBSA's); and ~~Texas~~South Carolina ~~(5.5%~~(7.4%, spread over 6 CBSA's). We define Core Based Statistical Area ("CBSA"). as a U.S. geographic area defined by the Office of Management and Budget that consists of one or more counties (or equivalents) anchored by an urban center of at least 10,000 people plus adjacent counties that are socioeconomically tied to the urban center by commuting. Our operating performance could be adversely affected if conditions become less favorable in any of the states or regions in which we have a concentration of properties.

We are subject to industry concentrations that make us susceptible to adverse events with respect to certain industries.

We are subject to certain industry concentrations with respect to our properties, including the following, which, as of December 31, ~~2015, accounted~~2016, were the three largest when accounting for the percentage of our total annualized base rental ~~revenue indicated:~~ ~~Air Freight & Logistics~~ ~~(12.2%;~~revenue: Automotive ~~(11.9%~~(13.6%); Industrial Equipment, Component &and Metals ~~(10.8%);~~ ~~Food & Beverages~~ ~~(9.3%~~ (11.3%); and ~~Containers & Packaging~~ ~~(9.2%~~Air Freight and Logistics (11.2%). Such industries are subject to specific risks that could result in downturns within the industries. Any downturn in one or more of these industries, or in any other industry in which we may have a significant concentration now or in the future, could adversely affect our tenants who are involved in such industries. If any of these tenants is unable to withstand such downturn or is otherwise unable to compete effectively in its business, it may be forced to declare bankruptcy, fail to meet its rental obligations, seek rental concessions or be unable to enter into new leases, which could materially and adversely affect us.

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Default by one or more of our tenants could materially and adversely affect us.

Any of our tenants may experience a downturn in its business at any time that may significantly weaken its financial condition or cause its failure. As a result, such a tenant may decline to extend or renew its lease upon expiration, fail to make rental payments when due or declare bankruptcy. 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 normally 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.

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 our tenants are unable to obtain financing necessary to continue to operate their businesses, they may be unable to meet their rent obligations to us or enter into new leases with us or be forced to declare bankruptcy and reject our leases, which could materially and adversely affect us.

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. While we have entered into employment contracts with our executive officers, they may nevertheless cease to provide services to us at any time. If any of our key personnel were to cease employment with us, our operating results could suffer. Our ability to retain our management group or to attract suitable replacements should any members of the management group leave is dependent on the competitive nature of the employment market. The loss of services from key members of the management group or a limitation in their availability could adversely impact our financial condition and cash flows. Further, such a loss could be negatively perceived in the capital markets. WeAs of December 31, 2016, we have not obtained and do not expect to obtain key man life insurance on any of our key personnel except for Mr. Benjamin S. Butcher, the founder of our predecessor business and our Chief Executive Officer, President and Chairman of the Board. The policy has limits in the amount of $5.0 million and covers us in the event of Mr. Butcher’s death; this policy expires in 2016.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.

Our growth will depend upon future acquisitions of properties, and we may be unable to consummate acquisitions on advantageous terms or acquisitions may not perform as we expect.

We acquire and intend to continue to acquire primarily ~~generic~~ warehouse/distribution properties and light manufacturing properties. The acquisition of properties entails various risks, including the risks that our investments may not perform as we expect. Further, we face competition for attractive investment opportunities from other well-capitalized real estate investors, including both publicly-traded REITs and private institutional investment funds, and these competitors may have greater financial resources than we and a greater ability to borrow funds to acquire properties. This competition will increase as investments in real estate become increasingly attractive relative to other forms of investment. As a result of competition, we may be unable to acquire additional

properties for the purchase price we desire. 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 be unable to source “limited marketing” deal flow in the future, which could adversely affect our ability to locate and acquire additional properties at attractive prices.~~

A key component of our growth strategy is to continue to acquire additional industrial real estate assets. We seek to acquire assets before they are widely marketed by real estate brokers. Properties that are acquired in such “limited marketing” transactions are typically more attractive to us as a purchaser because of the absence of a formal sales process that could lead to higher prices. If we cannot obtain “limited marketing” deal flow in the future, our ability to locate and acquire additional properties at attractive prices could be adversely affected.

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The cash available for distribution to stockholders may not be sufficient to pay dividends 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 results of operations;

our financial condition, especially in relation to the anticipated future capital needs of our properties;

the distribution requirements for REITs under the Code;

our operating expenses; and

other factors our board of directors deems relevant.

Consequently, we may not continue our current level of distributions to stockholders, and our distribution levels may fluctuate.

In addition, some of our distributions may include a return of capital. 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. If we borrow to fund distributions, our future interest costs would increase, thereby reducing our earnings and cash available for distribution from what they otherwise would have been.

We have owned our properties for a limited time, and we may not be aware of characteristics or deficiencies involving any one or all of them.

The majority of our properties have been under management for less than five years. In addition, ~~since~~in the ~~completion of our IPO,~~past five years, we have acquired ~~an additional 217~~264 buildings totaling approximately ~~43.5~~53.8 million rentable square feet. 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.

We face risks associated with security breaches through cyber attacks, cyber intrusions or otherwise, 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 or cyber intrusions over the internet, malware, computer viruses, attachments to e-mails, persons inside our organization or persons with access to systems inside 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 or cyber intrusion, including by computer hackers, foreign governments and cyber terrorists, has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased. Our IT networks and related systems are essential to the operation of our business and our ability to perform day-to-day operations and, in some cases, may be critical to the operations of certain of our tenants. Although we make efforts to maintain the security and integrity of these types of IT networks and related systems, and we have implemented various measures to manage the risk of a security breach or disruption, there can be no assurance that our security efforts and measures will be effective or that attempted security breaches or disruptions would not be successful or damaging. Even the most well protected information, networks, systems and facilities remain potentially vulnerable because the techniques used in such attempted security breaches evolve and generally are not recognized until launched against a target, and in some cases are designed to not be detected and, in fact, may not be detected. Accordingly, we may be unable to anticipate these techniques or to implement adequate security barriers or other preventative measures, and thus it is impossible for us to ~~entirely~~ mitigate this ~~risk.~~risk entirely. A security breach or other significant 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 ~~properly~~ monitor our compliance with the rules and regulations regarding our qualification as a REIT; result in the unauthorized access to, and destruction, loss, theft, misappropriation or release of proprietary, confidential, sensitive or otherwise valuable information of ours or others, which others could use to compete against us or for disruptive, destructive or otherwise harmful purposes and outcomes; require significant

management attention and resources to remedy any damages that result; subject us to claims for breach of contract, damages, credits, penalties or termination of leases or other agreements; or damage our reputation among our tenants and investors generally.

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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 seize strategic opportunities, satisfy debt obligations and make distributions to our stockholders.

In order to maintain our qualification as a REIT, we are generally required under the Code to distribute annually 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 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 distribution requirements, we may not be able to fund future capital needs, including any necessary acquisition financing, from operating cash flow. Consequently, we may rely on third-party sources to fund our capital needs. We may not be able to obtain financing on favorable terms or at all. Any additional debt we incur will increase our leverage. 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 cash dividends; and

the market price per share of our common stock.

If we cannot obtain capital from third-party sources, we may not be able to acquire properties when strategic opportunities exist, meet the capital and operating needs of our existing properties or satisfy our debt service obligations. Further, in order to meet the REIT distribution requirements and maintain our REIT status and to 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.

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 and result in us not meeting our projected earnings and distributable cash flow levels in a particular reporting period. Failure to meet our projected earnings and distributable cash flow levels in a particular reporting period could have an adverse effect on our financial condition and on the market price of our stock.

We have experienced historical net losses and accumulated deficits after depreciation and amortization and we may experience future losses.

We had historical net losses attributable to common stockholders for the years ended December 31, 2015 and December 31, 2014 ~~and December 31, 2013~~ of ~~$40.6 million, $15.2~~approximately $38.6 million and ~~$4.2~~$14.9 million, respectively. There can be no assurance that we will not incur net losses in the future after excluding the effects of depreciation and amortization, which could adversely affect our ability to service our indebtedness and our ability to make distributions, any of which could adversely affect the trading price of our stock.

Certain of our officers and ~~some~~the chairman of our board of directors have duties to Fund II, which may create conflicts of interest and may impede business decisions that could benefit our stockholders.

Certain of our executive officers and ~~one~~the chairman of our board of directors also serve as officers or on the board of managers of STAG Investments II, LLC (“Fund II”), a private equity real estate fund that continues to operate as a private, fully invested fund. Our officers and ~~director~~the chairman of our board of directors may have conflicting duties because they have a duty to both us and to Fund II, which retained ownership of certain of its properties. While Fund II is pursuing an orderly liquidation and will not be making any additional investments, some of its existing properties may be competitive with our properties. It is possible that the officers’ and ~~directors’~~the chairman of our board of directors' fiduciary duty to Fund II, including, without limitation, their interests in Fund II, will conflict with what will be in the best interests of our company.

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, as the sole member of the general partner of our Operating Partnership, have fiduciary duties to the other limited partners in our Operating Partnership, the discharge of which may conflict with the interests of our stockholders. The limited partners of our

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Operating Partnership have agreed that, in the event of a conflict in the fiduciary duties owed by us to our stockholders and, in our capacity as indirect general partner of our Operating Partnership, to such limited partners, we are under no obligation to give priority to the interests of such limited partners. In addition, those persons holding common units will have the right to vote on certain amendments to the Operating Partnership agreement (which require approval by a majority in interest of the limited partners, including us) and individually to approve certain amendments that would adversely affect their rights. 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.

In addition, conflicts 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. Tax consequences to holders of common units upon a sale or refinancing of our properties may cause the interests of our senior management to differ from your own. As a result of unrealized built-in gain attributable to contributed property at the time of contribution, some holders of common units, including our principals, may suffer different and more adverse tax consequences than holders of our securities upon the sale or refinancing of the properties owned by our Operating Partnership, 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 may experience conflicts of interest with several members of our senior management team and board who have or may become limited partners in our Operating Partnership through the receipt of common units or long-term incentive plan units in our Operating Partnership (“LTIP units”) granted under our 2011 Equity Incentive Plan (the “2011 Plan”).

We are subject to financial reporting and other requirements for which our accounting, internal audit and other management 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; and 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 price of our securities.

Our charter, the partnership agreement of our Operating Partnership and Maryland law contain provisions that may delay or prevent a change of control transaction.

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. In addition, the articles supplementary for our ~~9.0% Series A Cumulative Redeemable Preferred Stock, par value $0.01 per share (the “Series A Preferred Stock”) and our~~ 6.625% Series B Cumulative Redeemable Preferred Stock, par value $0.01 per share (the “Series B Preferred Stock”), and our 6.875% Series C Cumulative Redeemable Preferred Stock, par value $0.01 per share (the “Series C Preferred Stock”) provide that generally no person may own, or be deemed to own by virtue of the attribution provisions of the Code, either more than 9.8% in value or in number of shares, whichever is more restrictive, of our outstanding Series AB Preferred Stock or Series BC Preferred Stock. Our board of directors, in its sole discretion, may exempt a proposed transferee from the ownership limits. However, our board of directors may not grant an exemption from the ownership limits to any proposed transferee whose ownership, direct or indirect, of more than 9.8% of the value or number of our outstanding shares of our common stock, our Series AB Preferred Stock or our Series BC Preferred Stock could jeopardize our status as a REIT. The ownership limits contained in our charter and the restrictions on ownership of our common stock may delay or prevent a transaction or a change of control that might be in the best interest of our stockholders.

Our board of directors may create and issue a class or series of preferred stock without stockholder approval. Subject to the rights of holders of Series AB Preferred Stock and Series BC Preferred Stock to approve the classification or issuance of any class or series of stock ranking senior to the Series AB Preferred Stock or Series BC Preferred Stock, our board of directors is empowered

under our charter to amend our charter to increase or decrease the aggregate number of shares of our common stock or the number of shares of stock of any class or series that we have authority to issue, to designate and issue from time to time one or more classes or series of preferred stock and to classify or reclassify any unissued shares of our common stock or preferred stock without stockholder approval. Subject to the rights of holders of Series AB Preferred Stock and Series BC Preferred Stock discussed above,

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our board of directors may determine the relative rights, preferences and privileges of any class or series of preferred stock issued. The issuance of preferred stock could also have the effect of delaying or preventing a change of control transaction that might otherwise be in the best interests of our stockholders.

Certain provisions in the partnership agreement for our Operating Partnership may delay or prevent unsolicited acquisitions of us. Provisions in the partnership agreement for our Operating Partnership could discourage third parties from making proposals involving an unsolicited acquisition of us or change of our control, although some stockholders might consider such proposals, if made, desirable. These provisions include, among others:

redemption rights of qualifying parties;

transfer restrictions on our common units;

the ability of the general partner in some cases to amend the partnership agreement without the consent of the limited partners; and

the right of the limited partners to consent to transfers of the general partnership interest and mergers under specified circumstances.

Any potential change of control transaction may be further limited as a result of provisions of the partnership unit designation for the LTIP units, which require us to preserve the rights of LTIP unit holders and may restrict us from amending the partnership agreement for our Operating Partnership in a manner that would have an adverse effect on the rights of LTIP unit holders.

Certain provisions of Maryland law could inhibit changes in control. Certain provisions of the Maryland General Corporation Law (“MGCL”) may have the effect of inhibiting a third party from making a proposal to acquire us or impeding a change of control under circumstances that might be in the best interest of our stockholders, including:

“business combination” provisions that, subject to limitations, prohibit certain business combinations between us and an “interested stockholder” (defined generally as any person who beneficially owns 10% or more of the voting power of our shares or an affiliate thereof) for five years after the most recent date on which the stockholder becomes an interested stockholder, and thereafter impose special appraisal rights and special stockholder voting requirements on these combinations; and

“control share” provisions that provide that “control shares” of our company (defined as shares which, when aggregated with other shares controlled by the stockholder, entitle the stockholder to exercise one of three increasing ranges of voting power in electing directors) acquired in a “control share acquisition” (defined as the direct or indirect acquisition of ownership or control of “control shares”) have no voting rights except to the extent approved by our stockholders by the affirmative vote of at least two-thirds of all the votes entitled to be cast on the matter, excluding all interested shares.

We have elected to opt out of these provisions of the MGCL, in the case of the business combination provisions of the MGCL, by resolution of our board of directors, and in the case of the control share provisions of the MGCL, pursuant to a provision in our bylaws. Only upon the approval of our stockholders, our board of directors may repeal the foregoing opt-outs from the business combination provisions of the MGCL and opt in to the control share provisions of the MGCL in the future.

Additionally, Title 8, Subtitle 3 of the MGCL, permits our board of directors, without stockholder approval and regardless of what is currently provided in our charter or our bylaws, to implement takeover defenses, some of which (for example, a classified board) we do not currently have. These provisions may have the effect of inhibiting a third party from making an acquisition proposal for our company or of delaying, deferring or preventing a change in control of our company under circumstances that might be in the best interest of our stockholders.

Our charter, bylaws, the partnership agreement for our Operating Partnership and Maryland law also contain other provisions that may delay, defer or prevent a transaction or a change of control that might be in the best interest of our stockholders.

Under their employment agreements, our executive officers have the right to terminate their employment and, under certain conditions, receive severance, which may adversely affect us.

The employment agreements with our executive officers provide that each executive may terminate his or her employment and, under certain conditions, receive severance based on two or three times (depending on the officer) the annual total of salary and bonus and immediate vesting of ~~all outstanding~~ equity-based awards. In the case of certain terminations, they would not be restricted from competing with us after their departure.

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Compensation awards to our management may not be tied to or correspond with our improved financial results or the stock price, 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. Our compensation committee has significant discretion in structuring 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 share price of our common stock.

Our board of directors can take many actions without stockholder approval.

Our board of directors has overall authority to oversee our operations and determine our major corporate policies. This authority includes significant flexibility. For example, our board of directors can do the following:

amend or revise at any time and from time to time our investment, financing, borrowing and dividend policies and our policies with respect to all other activities, including growth, debt, capitalization and operations;

amend our policies with respect to conflicts of interest provided that such changes are consistent with applicable legal requirements;

within the limits provided in our charter, prevent the ownership, transfer and/or 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;

issue additional shares without obtaining stockholder approval, which could dilute the ownership of existing stockholders;

amend our charter to increase or decrease the aggregate number of shares of stock or the number of shares of stock of any class or series, without obtaining stockholder approval;

subject to the rights of holders of Series AB Preferred Stock and of Series BC Preferred Stock, classify or reclassify any unissued shares of our common stock or preferred stock, set the preferences, rights and other terms of such classified or reclassified shares, without obtaining stockholder approval;

make certain amendments to our equity incentive plan;

employ and compensate affiliates;

direct our resources toward investments that do not ultimately appreciate over time;

change creditworthiness standards with respect to third-party tenants; and

determine that it is no longer in our best interests to continue to qualify as a REIT.

Any of these actions could increase our operating expenses, impact our ability to make distributions or reduce the value of our assets without giving you, as a stockholder, the right to vote.

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 money 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. 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.

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The number of shares of our common stock available for future sale, including by our affiliates ~~and other continuing~~or investors in our Operating Partnership, could adversely affect the market price of our common stock, and future sales by us of shares of our common stock may be dilutive to existing stockholders.

Sales of substantial amounts of shares of our common stock in the public market, or upon exchange of common units or exercise of any options, or the perception that such sales might occur could adversely affect the market price of our common stock. The exchange of common units for common stock, the exercise of any stock options or the vesting of any restricted stock granted under our 2011 Plan, the issuance of our common stock or common units in connection with property, portfolio or business acquisitions and other issuances of our common stock or common units could have an adverse effect on the market price of the shares of our common stock. Also, continuing investors in our IPO and the related formation transactions that hold common units are parties to an agreement that provides for registration rights. These registration rights required us to file a “shelf” registration statement covering all shares of our common stock for which their common units may be redeemed or exchanged pursuant to the partnership agreement of our Operating Partnership. A shelf registration statement covering these shares has been filed and is currently effective. The existence of shares of our common stock reserved for issuance under our 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 have filed a registration statement with the SEC allowing us to offer, from time to time, an indefinite amount of equity securities (including common or preferred stock) on an as-needed basis and subject to our ability to affect offerings on satisfactory terms based on prevailing conditions. In addition, our board of directors authorized us to issue shares of common stock in our “at-the-market” offering program. 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, including issuances of common and preferred stock. 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 shares. In addition, future sales by us of our common stock may be dilutive to existing stockholders.

Future offerings of debt securities, which would be senior to our common stock upon liquidation, or equity securities, which would dilute our existing stockholders and may be senior to our common stock for the purposes of distributions, may adversely affect the market price of our securities.

Our common stock is ranked junior to our Series AB Preferred Stock and Series BC Preferred Stock. Our outstanding Series AB Preferred Stock and Series BC Preferred Stock also has or will have a preference upon our dissolution, liquidation or winding up in respect of assets available for distribution to our stockholders. Holders of our common stock are not entitled to preemptive rights or other protections against dilution. In the future, we may attempt to increase our capital resources by making additional offerings of debt or equity securities, including commercial paper, medium-term notes, senior or subordinated notes and classes of preferred or common stock. 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 price of our securities or both. 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 price of our securities and diluting their proportionate ownership.

The market price and trading volume of our common stock may be volatile.

The market price of our common stock may be volatile. In addition, the trading volume in our common stock may fluctuate and cause significant price variations to occur. If the market price of our common stock declines significantly, you may be unable to resell your shares at or above the price at which they traded when you acquired them. We cannot assure you that the market price of our common stock will not fluctuate or decline significantly in the future. Some of the factors that could negatively affect the market price of our common stock or result in fluctuations in the market price or trading volume of our common stock include:

actual or anticipated variations in our quarterly operating results;

changes in our operations or earnings estimates or publication of research reports about us or the industry;

changes in our dividend policy;

increases in market interest rates that lead purchasers of our shares to demand a higher yield;

changes in market valuations of similar companies;

adverse market reaction to any increased indebtedness we incur in the future;

our ability to comply with applicable financial covenants in our unsecured credit facility, unsecured term loans, unsecured ~~private~~ notes, and other loan agreements;

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additions or departures of key management personnel;

actions by institutional stockholders;

the realization of any of the other risk factors presented in this report;

speculation in the press or investment community; and

general U.S. and worldwide market and economic conditions.

General Real Estate Risks

Our performance and value are 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 pay distributions to our 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:

changes in general or local economic climate;

the attractiveness of our properties to potential tenants;

changes in supply of or demand for similar or competing properties in an area;

bankruptcies, financial difficulties or lease defaults by our tenants;

changes in interest rates and availability of permanent mortgage funds that may render the sale of a property difficult or unattractive or otherwise reduce returns to stockholders;

changes in operating costs and expenses and our ability to control rents;

changes in or increased costs of compliance with governmental rules, regulations and fiscal policies, including changes in tax, real estate, environmental and zoning laws, and our potential liability thereunder;

our ability to provide adequate maintenance and insurance;

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;

tenant turnover;

general overbuilding or excess supply in the market; and

disruptions in the global supply chain caused by political, regulatory or other factors including terrorism.

In addition, periods of economic slowdown or recession, rising interest rates or declining demand for real estate, or public perception that any of these events may occur, would result in a general decrease in rents or an increased occurrence of defaults under existing leases, which would adversely affect our financial condition and results of operations. Future terrorist attacks may result in declining economic activity, which could reduce the demand for, and the value of, our properties. To the extent that future attacks impact our tenants, their businesses similarly could be adversely affected, including their ability to continue to honor their existing leases.

For these and other reasons, we cannot assure you that we will be profitable or that we will realize growth in the value of our real estate properties.

Actions by our competitors may decrease or prevent increases in the occupancy and rental rates of our properties.

We compete with other owners, operators and developers of real estate, some of which own properties similar to ours in the same markets and submarkets in which our properties are located. If our competitors offer space at rental rates below current market

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rates or below the rental rates we currently charge our tenants, we may lose potential tenants, and we may be pressured to reduce our rental rates below those we currently charge in order to retain tenants when our tenants’ leases expire.

A significant portion of our properties have leases that expire in the next three years and we may be unable to renew leases, lease vacant space or re-lease space as leases expire.

Our results of operations, cash flows, cash available for distribution, and the value of our securities would be adversely affected if we are unable to lease, on economically favorable terms, a significant amount of space in our operating properties. As of December 31, ~~2015,~~2016, leases with respect to approximately ~~42.6%~~44.8% (excluding month to month leases, which comprises an additional ~~0.3%~~0.4%) of our total annualized base rental revenue will expire before December 31, ~~2018.~~2019. 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 ~~average base~~market rental rates. In addition, the number of vacant or partially vacant industrial properties in a market or submarket could adversely affect our ability to re‑lease the space at attractive rental rates.

A property that incurs a vacancy could be difficult to sell or re-lease.

A property may incur a vacancy either by the continued default of a tenant under its lease or the expiration of one of our leases. In addition, certain of the properties we acquire may have some level of vacancy at the time of closing. Certain of our properties may be specifically suited to the particular needs of a tenant. We may have difficulty obtaining a new tenant for any vacant space we have in our properties. If the vacancy continues for a long period of time, we may suffer reduced revenue resulting in less cash available to be distributed to stockholders. In addition, the resale value of a property could be diminished because the market value of a particular property will depend principally upon the value of the leases of such property.

We may not have funding for future tenant improvements.

When a tenant at one of our properties does not renew its lease or otherwise vacates its space in one of our buildings, it is likely that, in order to attract one or more new tenants, we will be required to expend funds to construct new tenant improvements in the vacated space. Except with respect to our current reserves for capital expenditures, tenant improvements and leasing commissions, we cannot assure you that we will have adequate sources of funding available to us for such purposes in the future.

Bankruptcy laws will limit our remedies if a tenant becomes bankrupt and rejects the lease and we may be unable to collect balances due on our leases.

If a tenant becomes bankrupt or insolvent, that could diminish the income we receive from that tenant’s ~~leases.~~lease. Our tenants may experience downturns in their operating results due to adverse changes to their business or economic conditions, and those tenants that are highly leveraged may have a higher possibility of filing for bankruptcy or insolvency. We may not be able to evict a tenant solely because of its bankruptcy. On the other hand, a bankruptcy court might authorize the tenant to terminate its ~~leases~~lease with us. If that happens, our claim against the bankrupt tenant for unpaid future rent would be an unsecured prepetition 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 ~~leases.~~lease. In addition, any claim we have for unpaid past rent could be substantially less than the amount owed. If the lease for such a property is rejected in bankruptcy, our revenue would be reduced and could adversely impact our ability to pay distributions to stockholders.

Real estate investments are not as liquid as other types of ~~assets.~~investments.

Real estate investments are not as liquid as other types of investments, and this lack of liquidity may limit our ability to 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. In addition, we intend to comply with the safe harbor rules relating to the number of properties that can be disposed of in a year, the tax bases and the costs of improvements made to these properties, and other items that enable a REIT to avoid punitive taxation on the sale of assets. Thus, our ability at any time to sell assets or contribute assets to property funds or other entities in which we have an ownership interest may be restricted. This lack of liquidity may limit our ability to vary our portfolio promptly in response to changes in economic or other conditions.

Acquired properties may be located in new markets where we may face risks associated with investing in an unfamiliar market.

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 may face risks associated with a lack of market knowledge or understanding of the local economy, forging new business relationships in the area and unfamiliarity with local government and permitting procedures.

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Uninsured losses relating to real property may adversely affect your returns.

We attempt to ensure that all of our properties are adequately insured to cover casualty losses. However, 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, and we could experience a significant loss of capital invested and potential revenue in these properties and could potentially remain obligated under any recourse debt associated with the property. Moreover, we, as the indirect general partner of our Operating Partnership, generally will be liable for all of our Operating Partnership’s unsatisfied recourse obligations, including any obligations incurred by our Operating Partnership as the general partner of joint ventures. In addition, we may have no source of funding to repair or reconstruct the damaged property, and we cannot assure you that any such sources of funding will be available to us for such purposes in the future. We evaluate our insurance coverage annually in light of current industry practice through an analysis prepared by outside consultants.

Contingent or unknown liabilities could adversely affect our financial condition.

As part of the formation transactions related to our IPO, we assumed existing liabilities of contributed operating companies and liabilities in connection with contributed properties, some of which may be unknown or unquantifiable. Unknown liabilities might include liabilities for cleanup or remediation of undisclosed environmental conditions beyond the scope of our environmental insurance coverage, claims of tenants, vendors or other persons dealing with the entities prior to our IPO, tax liabilities, and accrued but unpaid liabilities whether incurred in the ordinary course of business or otherwise. In addition, we may in the future acquire properties, or may have previously owned properties, subject to liabilities and without any recourse, or with only limited recourse, with respect to unknown liabilities. As a result, if a liability were asserted against us based on ownership of any of these entities or properties, then we might have to pay substantial sums to settle it, which could adversely affect our cash flows.

Environmentally hazardous conditions may adversely affect our operating results.

Under various federal, state and local environmental laws, a current or previous owner or operator of real property may be liable for the cost of removing or remediating hazardous or toxic substances on such property. Such laws often impose liability whether or not the owner or operator 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 owner or operator of a site for damages based on personal injury, natural resources or 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 cost of defending against environmental claims, of compliance with environmental regulatory requirements or of remediating any contaminated property could materially adversely affect our business, assets or results of operations and, consequently, amounts available for distribution to our stockholders.

Environmental laws in the U.S. also require that owners or operators 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 building owners or operators who fail to comply with these requirements and may allow third parties to seek recovery from owners or operators for personal injury associated with exposure to asbestos. Some of our properties contain asbestos‑containing building materials.

We invest in properties historically used for industrial, light manufacturing and commercial purposes. Some of these properties contain, or may have contained, underground storage tanks for the storage of petroleum products and other hazardous or toxic substances. All of these operations create a potential for the release of petroleum products or other hazardous or toxic substances. Some of our properties are adjacent to or near other properties that have contained or currently contain underground storage tanks

used to store petroleum products or other hazardous or toxic substances. In addition, certain of our properties are on or are adjacent to or near other properties upon which others, 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.

From time to time, we may acquire properties, or interests in properties, with known adverse environmental conditions where we believe that the environmental liabilities associated with these conditions are quantifiable and that the acquisition will yield a

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superior risk‑adjusted return. In such an instance, we underwrite the costs of environmental investigation, clean‑up and monitoring into the cost. 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.

Before acquiring a property, we typically obtain a preliminary assessment of environmental conditions at the property that meets certain specifications, ~~are~~ often referred to as “Phase I environmental site assessment” or “Phase I environmental assessment.” It is intended to discover and evaluate information regarding the environmental condition of the surveyed property and surrounding properties. A Phase I environmental assessment generally includes an historical review, a public records review, an investigation of the surveyed site and surrounding properties, and preparation and issuance of a written report, but does not include soil sampling or subsurface investigations and typically does not include an asbestos survey. Material environmental conditions, liabilities or compliance concerns may arise after the environmental assessment has been completed. 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.

Compliance or failure to comply with the Americans with Disabilities Act and other similar 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 could result in the imposition of fines by the federal government or the award of damages to private litigants. If we are required to make unanticipated expenditures to comply with the ADA, including removing access barriers, then our cash flows and the amounts available for distributions to our stockholders may be adversely affected. While we believe that our properties are currently in material compliance with these regulatory requirements, the requirements may change or new requirements may be imposed that could require significant unanticipated expenditures.

~~Five~~Some of our properties are subject to a ground lease that exposes us to the loss of such property upon breach or termination of the ground lease and may limit our ability to sell the property.

We own ~~five of our~~some properties through leasehold interests in the land underlying the building and we may acquire additional buildings in the future that are subject to similar ground leases. 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.

In the future, our ground leases may contain certain provisions that may limit our ability to sell certain of our properties. In addition, in the future, in order to assign or transfer our rights and obligations under certain of our ground leases, we may be required to obtain the consent of the landlord which, in turn, could adversely impact the price realized from any such sale.

We also own ~~two~~ properties that benefit from payment in lieu of tax (“PILOT”) programs or similar programs and to facilitate such tax treatment our ownership in this property is structured as a leasehold interest with the relevant municipality serving as lessor. With respect to such arrangements, we have the right to purchase the fee interest in the property for a nominal purchase price, so the risk factors set forth above for traditional ground leases are mitigated by our ability to convert such leasehold interests to fee interests. In the event of such a conversion of our ownership interests, however, any preferential tax treatment offered by the PILOT programs will be lost.

We may be unable to sell a property if or when we decide to do so, including as a result of uncertain market conditions.

We expect to hold the various real properties in which we invest until such time as we decide that a sale or other disposition is appropriate given our investment objectives. Our ability to dispose of properties on advantageous terms depends on factors beyond our control, including competition from other sellers and the availability of attractive financing for potential buyers of our properties. We cannot predict the various market conditions affecting real estate investments which will exist at any particular time in the future. Due to the uncertainty of market conditions which may affect the future disposition of our properties, we cannot assure you that we will be able to sell our properties at a profit in the future. Accordingly, the extent to which you will receive cash distributions and realize potential appreciation on our real estate investments will be dependent upon fluctuating market conditions.

Furthermore, we may be required to expend funds to correct defects or to make improvements before a property can be sold. We cannot assure you that we will have funds available to correct such defects or to make such improvements.

~~Table of Contents~~

If we sell properties and provide financing to purchasers, defaults by the purchasers would adversely affect our cash flows.

If we decide to sell any of our properties, we presently intend to use our best efforts to sell them for cash. However, in some instances we may sell our properties by providing financing to purchasers. If we provide financing to purchasers, we will bear the risk that the purchaser may default, which could negatively impact our cash distributions to stockholders and result in litigation and related expenses. Even in the absence of a purchaser default, the distribution of the proceeds of sales to our stockholders, or their reinvestment in other assets, will be delayed until the promissory notes or other property we may accept upon a sale are actually paid, sold, refinanced or otherwise disposed of.

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 or percentage of indebtedness that 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 property or properties securing its debt. This could cause us to lose part or all of our investment. Certain of our existing secured ~~future~~ 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 the amount of our debt payments and adversely affect our ability to make distributions to our stockholders.

As of December 31, ~~2015,~~2016, we had total outstanding debt of approximately ~~$987.2 million,~~$1.0 billion, including ~~$56.0~~$28.0 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 reduces our cash available for distributions. Since we have incurred and may continue to incur variable rate debt, increases in interest rates raise our interest costs, which reduces our cash flows and our ability to make distributions to you. If we are unable to refinance our indebtedness at maturity or meet our payment obligations, the amount of our distributable cash flows and our financial condition would be adversely affected, and we may lose the property 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.

Covenants in our unsecured credit facility, unsecured term loans, unsecured notes and mortgage notes and any future debt instruments could limit our flexibility, prevent us from paying distributions, and adversely affect our financial condition or our status as a REIT.

The terms of certain of our mortgage notes require us to comply with loan-to-collateral-value ratios, debt service coverage ratios and, in the case of an event of default, limitations on the ability of our subsidiaries that are borrowers under our mortgage notes to make distributions to us or our other subsidiaries. In addition, our unsecured credit facility, unsecured term loans and unsecured notes require us to comply with loan-to-collateral-value ratios, debt service coverage ratios, leverage ratios, recourse indebtedness thresholds, fixed charge coverage ratios and tangible net worth thresholds and limits. Our existing loan covenants may reduce flexibility in our operations, and breaches of these covenants could result in defaults under the instruments governing the applicable indebtedness even if we have satisfied our payment obligations. In addition, upon a default, our unsecured credit facility, unsecured term loans and unsecured notes, will limit, among other things, our ability to pay dividends, even if we are otherwise in compliance with our financial covenants. Other indebtedness that we may incur in the future may contain financial or other covenants more restrictive than those in our unsecured credit facility, unsecured term loans, unsecured notes and mortgage notes.

In addition, as of December 31, ~~2015,~~2016, we had certain secured loans that are cross-collateralized by multiple properties. If we default on any of these loans we may then be required to repay such indebtedness, together with applicable prepayment charges, to avoid foreclosure on all cross-collateralized properties within the applicable pool. Moreover, our unsecured credit facility, unsecured term loans and unsecured notes contain, and future borrowing facilities may contain, certain cross-default provisions which are triggered in the event that our 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. If our properties were foreclosed upon, or if we are unable to refinance our indebtedness at maturity or meet our payment obligations, we would be adversely affected.

~~Table of Contents~~

We are a holding company and conduct all of our operations through our Operating Partnership. We do not have, apart from our ownership of our Operating Partnership, any independent operations. As a result, we will rely on distributions from our Operating Partnership to pay any dividends we might declare on our securities. We will also rely on distributions from our Operating Partnership to meet our debt service and other obligations, including our obligations to make distributions required to maintain our REIT status. The ability of subsidiaries of our Operating Partnership to make distributions to our Operating Partnership, and the ability of our Operating Partnership to make distributions to us in turn, will depend on their operating results and on the terms of any loans that encumber the properties owned by them. Such loans may contain lockbox arrangements, reserve requirements, financial covenants and other provisions that restrict the distribution of funds. In the event of a default under these loans, the defaulting subsidiary would be prohibited from distributing cash. For example, our subsidiaries are party to mortgage notes that prohibit, in the event of default, their distribution of any cash to a related party, including 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 required to maintain our REIT status.

Financing arrangements involving balloon payment obligations may adversely affect us.

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 of these loans, we will need to refinance this debt. 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. These options include agreeing to otherwise unfavorable financing terms on one or more of our unencumbered assets, selling one or more properties on disadvantageous terms or defaulting on the loan and permitting the lender to foreclose. The effect of a refinancing or sale could affect the rate of return to stockholders and the projected time of disposition of our assets. In addition, payments of principal and interest made to service our debts may leave us with insufficient cash to pay the distributions that we are required to pay to maintain our qualification as a REIT.

If mortgage debt or unsecured debt is unavailable at reasonable rates, we may not be able to finance or refinance our properties.

If mortgage debt or unsecured debt is unavailable at reasonable rates, we may not be able to finance the purchase of properties. In addition, we run the risk of being unable to refinance mortgage debt or unsecured debt when the loans come due or of being unable to refinance such debt on favorable terms. If interest rates are higher when we refinance such debt, our net income could be reduced. We may be unable to refinance such debt at appropriate times, which may require us to sell properties on terms that are not advantageous to us or could result in the foreclosure of any mortgaged properties. 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 our 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 our stockholders.

Our hedging strategies may not be successful in mitigating our risks associated with interest rates and could reduce the overall returns on your investment.

We use various derivative financial instruments to provide a level of protection against interest rate risks, but no hedging strategy can protect us completely. These instruments involve 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 the 75% or 95% REIT income tests. In addition, the nature and timing 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. Moreover, hedging strategies involve transaction and other costs. We cannot assure you that our hedging strategy and the derivatives that we use will adequately offset the risk of interest rate volatility or that our hedging transactions will not result in losses that may reduce the overall return on your investment.

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.

~~Table of Contents~~

Even if we qualify 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 our stockholders.

Even if we qualify as a REIT for federal income tax purposes, we may be subject to some federal, state and local taxes on our income or property. For example:

To qualify as a REIT, we must distribute annually at least 90% of our REIT taxable income to our stockholders (which is determined without regard to the dividends-paid deduction or net capital gain). To the extent that we satisfy the distribution requirement but distribute less than 100% of our REIT taxable income, we will be subject to federal corporate income tax on the undistributed income.

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.

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, we must pay a tax on that income at the highest corporate income tax rate.

If we sell an asset, other than foreclosure property, that we hold primarily for sale to customers in the ordinary course of business, our gain would be subject to the 100% “prohibited transaction” tax unless such sale were made by our taxable REIT subsidiary (“TRS”) or if we qualify for a safe harbor from tax.

We intend to make distributions to our stockholders to comply with the REIT requirements of the Code.

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 flow available for distribution to stockholders. If we do not have other funds available in these situations, we could be required to borrow funds, sell investments at disadvantageous prices, make taxable distributions of our stock or debt securities or find another alternative source of funds to make distributions sufficient to enable us to pay out 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. Thus, compliance with the REIT requirements may hinder our ability to operate solely on the basis of maximizing profits.

To maintain our REIT status, we may be forced to forego otherwise attractive opportunities, which may delay or hinder our ability to meet our investment objectives and reduce our stockholders’ overall return.

To qualify 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. 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.

Recharacterization of sale‑leaseback transactions may cause us to lose our REIT status.

In certain circumstances, we expect to purchase real properties and lease them back to the sellers of such properties. While we intend to structure any such sale‑leaseback transaction such that the lease will be characterized as a “true lease” for tax purposes, thereby allowing us to be treated as the owner of the property for federal income 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 recharacterized 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 recharacterized, we might fail to satisfy the REIT qualification “asset tests” or “income tests” and, consequently, lose our REIT status effective with the year of recharacterization. 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.

We may be subject to adverse legislative or regulatory tax ~~changes affecting REITs that could have a negative effect on us.~~changes.

The rules dealing with federal income taxation are constantly under review by persons involved in the legislative process and by the IRS and the U.S. Department of the Treasury. Changes to the tax laws, with or without retroactive application, could adversely affect our stockholders or us. We cannot predict how changes in the tax laws might affect our stockholders or us. New legislation,

~~Table of Contents~~

Treasury Regulations, administrative interpretations or court decisions could significantly and negatively affect our ability to qualify as a REIT or the federal income tax consequences of such ~~qualification.~~qualification, or may reduce the relative attractiveness of an investment in a REIT compared to a corporation not qualified as a REIT.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

~~The characteristics of the properties within our portfolio as of December 31, 2015 and December 31, 2014 are shown in the table below:~~

Portfolio characteristics December 31, 2015 December 31, 2014
Number of Buildings 291
248
Square Feet 54,712,384
47,024,076
Average Building Size (square feet) 188,015
189,613
Average Building Age (years) 28
29
Average Minimum and Maximum Clear Height (feet) ⁽¹⁾
25-29
26-29
Number of Tenants 266
227
Number of Leases 319
261
Average Lease Size (square feet) 163,884
170,890

~~(1) Excludes flex/office buildings~~

Our target properties fit into two general categories:

Warehouse/Distribution—properties generally 200,000 to 1,000,000 square feet in size with ceiling heights between 22 feet and 36 feet and used to store and ship various materials and products.

Light Manufacturing—properties generally 75,000 to 250,000 square feet in size with ceiling heights between 16 feet and 22 feet and used to manufacture all types of goods and products.

During the year ended December 31, ~~2015,~~2016, we acquired ~~49 industrial~~47 buildings consisting of approximately ~~8.7~~10.3 million square feet for approximately ~~$427.3~~$471.8 million. These acquisitions ~~have~~had a weighted average remaining lease term of ~~5.4 years.~~

~~Table~~approximately 6.5 years as of ~~Contents~~the acquisition date, weighted by square footage.

As of December 31, ~~2015,~~2016, we owned the properties listed below. ~~Except as otherwise noted in the footnotes, we own fee simple interests in all of the properties.~~


State	City	Number of Buildings	Asset Type⁽¹⁾	Total Rentable Square Feet		City	Number of Buildings	Asset Type⁽¹⁾	CBSA⁽²⁾	Total Rentable Square Feet
Alabama
						Montgomery	1	Warehouse / Distribution	Montgomery, AL	332,000
	Phenix City	1	Warehouse / Distribution	117,568		Phenix City	1	Warehouse / Distribution	Columbus, GA-AL	117,568
Arkansas
	Rogers	1	Warehouse / Distribution	400,000		Rogers	1	Warehouse / Distribution	Fayetteville-Springdale-Rogers, AR-MO	400,000
Arizona
	Phoenix	1	Warehouse / Distribution	102,747		Phoenix	1	Warehouse / Distribution	Phoenix-Mesa-Scottsdale, AZ	102,747
California
						Camarillo	2	Warehouse / Distribution	Oxnard-Thousand Oaks-Ventura, CA	732,606
	Camarillo	2	Warehouse / Distribution	732,606		Visalia	1	Warehouse / Distribution	Visalia-Porterville, CA	635,281
Colorado
	Longmont	1	Warehouse / Distribution	159,611		Golden	1	Warehouse / Distribution	Denver-Aurora-Lakewood, CO	227,500
	Golden	1	Warehouse / Distribution	227,500		Grand Junction	1	Warehouse / Distribution	Grand Junction, CO	82,800
	Grand Junction	1	Warehouse / Distribution	82,800		Longmont	1	Warehouse / Distribution	Boulder, CO	159,611
Connecticut
	Avon	1	Light Manufacturing	78,400		Avon	1	Light Manufacturing	Hartford-West Hartford-East Hartford, CT	78,400
	East Windsor	1	Warehouse / Distribution	145,000		East Windsor	2	Warehouse / Distribution	Hartford-West Hartford-East Hartford, CT	271,111
	North Haven	3	Warehouse / Distribution	824,727		North Haven	3	Warehouse / Distribution	New Haven-Milford, CT	824,727
Delaware
						Newark	2	Flex / Office	Philadelphia-Camden-Wilmington, PA-NJ-DE-MD	52,665
	Newark	2	Flex / Office	52,665		New Castle	1	Warehouse / Distribution	Philadelphia-Camden-Wilmington, PA-NJ-DE-MD	485,987
Florida
	Daytona Beach	1	Light Manufacturing	142,857		Daytona Beach	1	Light Manufacturing	Deltona-Daytona Beach-Ormond Beach, FL	142,857
	Ocala	1	Warehouse / Distribution	619,466		Ocala	1	Warehouse / Distribution	Orlando-Kissimmee-Sanford, FL	619,466
	Orlando	1	Light Manufacturing	215,900		Orlando	1	Light Manufacturing	Orlando-Kissimmee-Sanford, FL	215,900
	Orlando	1	Warehouse / Distribution	155,000		Orlando	1	Warehouse / Distribution	Orlando-Kissimmee-Sanford, FL	155,000
	Pensacola	2	Flex / Office	38,029		Pensacola	1	Flex / Office	Pensacola-Ferry Pass-Brent, FL	30,620
Georgia
	Atlanta	1	Warehouse / Distribution	407,981		Calhoun	1	Warehouse / Distribution	Calhoun, GA	151,200
	Calhoun	1	Warehouse / Distribution	151,200		Dallas	1	Warehouse / Distribution	Atlanta-Sandy Springs-Roswell, GA	92,807
	Conyers	3	Warehouse / Distribution	572,921		Forest Park	2	Warehouse / Distribution	Atlanta-Sandy Springs-Roswell, GA	799,200
	Dallas	1	Warehouse / Distribution	92,807		LaGrange	1	Warehouse / Distribution	LaGrange, GA	219,891
	LaGrange	1	Warehouse / Distribution	219,891		Norcross	1	Warehouse / Distribution	Atlanta-Sandy Springs-Roswell, GA	152,036
	Savannah	1	Warehouse / Distribution	504,200	(2) (3)	Savannah	1	Warehouse / Distribution	Savannah, GA	504,200
	Shannon	1	Warehouse / Distribution	568,516		Shannon	1	Warehouse / Distribution	Rome, GA	568,516
	Smyrna	1	Warehouse / Distribution	102,000		Smyrna	1	Warehouse / Distribution	Atlanta-Sandy Springs-Roswell, GA	102,000
	Statham	1	Warehouse / Distribution	225,680		Statham	1	Warehouse / Distribution	Atlanta-Sandy Springs-Roswell, GA	225,680
Idaho
	Idaho Falls	1	Warehouse / Distribution	90,300		Idaho Falls	1	Warehouse / Distribution	Idaho Falls, ID	90,300
	Pocatello	1	Flex / Office	43,353		Pocatello	1	Flex / Office	Pocatello, ID	43,353
Illinois
	Belvidere	9	Warehouse / Distribution	1,106,960		Belvidere	9	Warehouse / Distribution	Rockford, IL	1,133,018
	DeKalb	1	Warehouse / Distribution	146,740		DeKalb	1	Warehouse / Distribution	Chicago-Naperville-Elgin, IL-IN-WI	146,740
	Gurnee	2	Warehouse / Distribution	562,500		Gurnee	2	Warehouse / Distribution	Chicago-Naperville-Elgin, IL-IN-WI	562,500
	Harvard	1	Light Manufacturing	126,304		Harvard	1	Light Manufacturing	Chicago-Naperville-Elgin, IL-IN-WI	126,304
	Libertyville	1	Warehouse / Distribution	251,961		Itasca	1	Warehouse / Distribution	Chicago-Naperville-Elgin, IL-IN-WI	202,000
	Libertyville	1	Flex / Office	35,141		Libertyville	1	Warehouse / Distribution	Chicago-Naperville-Elgin, IL-IN-WI	251,961
	Machesney Park	1	Warehouse / Distribution	80,000		Libertyville	1	Flex / Office	Chicago-Naperville-Elgin, IL-IN-WI	35,141
	Montgomery	1	Warehouse / Distribution	584,301		Machesney Park	1	Warehouse / Distribution	Rockford, IL	80,000
	Mt. Prospect	1	Warehouse / Distribution	87,380
	Sauk Village	1	Warehouse / Distribution	375,785
	South Holland	1	Warehouse / Distribution	202,902
	Woodstock	1	Light Manufacturing	129,803
Indiana
	Albion	7	Light Manufacturing	261,013
	Elkhart	2	Warehouse / Distribution	170,100
	Kendallville	1	Light Manufacturing	58,500
	Fort Wayne	1	Warehouse / Distribution	108,800
	Franklin	1	Warehouse / Distribution	703,496
	Goshen	1	Warehouse / Distribution	366,000
	Lafayette	3	Warehouse / Distribution	466,400

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State	City	Number of Buildings	Asset Type⁽¹⁾	Total Rentable Square Feet		City	Number of Buildings	Asset Type⁽¹⁾	CBSA⁽²⁾	Total Rentable Square Feet
Indiana (continued)	Marion	1	Warehouse / Distribution	249,600
						Montgomery	1	Warehouse / Distribution	Chicago-Naperville-Elgin, IL-IN-WI	584,301
						Sauk Village	1	Warehouse / Distribution	Chicago-Naperville-Elgin, IL-IN-WI	375,785
						South Holland	1	Warehouse / Distribution	Chicago-Naperville-Elgin, IL-IN-WI	202,902
						West Chicago	1	Warehouse / Distribution	Chicago-Naperville-Elgin, IL-IN-WI	249,470
						West Chicago	5	Light Manufacturing	Chicago-Naperville-Elgin, IL-IN-WI	305,874
						Wood Dale	1	Light Manufacturing	Chicago-Naperville-Elgin, IL-IN-WI	137,607
						Woodstock	1	Light Manufacturing	Chicago-Naperville-Elgin, IL-IN-WI	129,803
Indiana
						Albion	7	Light Manufacturing	Kendallville, IN	261,013
						Elkhart	2	Warehouse / Distribution	Elkhart-Goshen, IN	170,100
						Kendallville	1	Light Manufacturing	Kendallville, IN	58,500
						Fort Wayne	1	Warehouse / Distribution	Fort Wayne, IN	108,800
						Franklin	1	Warehouse / Distribution	Indianapolis-Carmel-Anderson, IN	703,496
						Goshen	1	Warehouse / Distribution	Elkhart-Goshen, IN	366,000
						Lafayette	3	Warehouse / Distribution	Lafayette-West Lafayette, IN	466,400
	Mishawaka	1	Light Manufacturing	308,884		Marion	1	Warehouse / Distribution	Marion, IN	249,600
	Portage	1	Warehouse / Distribution	212,000	(3)	Portage	1	Warehouse / Distribution	Chicago-Naperville-Elgin, IL-IN-WI	212,000
	South Bend	1	Warehouse / Distribution	225,000		South Bend	1	Warehouse / Distribution	South Bend-Mishawaka, IN-MI	225,000
Iowa
	Marion	1	Warehouse / Distribution	95,500		Marion	1	Warehouse / Distribution	Cedar Rapids, IA	95,500
	Sergeant Bluff	1	Flex / Office	148,131		Sergeant Bluff	1	Flex / Office	Sioux City, IA-NE-SD	148,131
Kansas
	Kansas City	1	Light Manufacturing	56,580
	Lenexa	2	Warehouse / Distribution	276,219		Lenexa	2	Warehouse / Distribution	Kansas City, MO-KS	276,219
	Parsons	1	Light Manufacturing	120,000		Olathe	1	Warehouse / Distribution	Kansas City, MO-KS	496,373
	Wichita	4	Warehouse / Distribution	293,310		Wichita	3	Warehouse / Distribution	Wichita, KS	248,550
Kentucky
	Bardstown	1	Warehouse / Distribution	102,318		Bardstown	1	Warehouse / Distribution	Louisville/Jefferson County, KY-IN	102,318
	Danville	1	Warehouse / Distribution	757,047		Danville	1	Warehouse / Distribution	Danville, KY	757,047
	Georgetown	1	Warehouse / Distribution	97,500		Erlanger	1	Warehouse / Distribution	Cincinnati, OH-KY-IN	108,620
	Hebron	1	Warehouse / Distribution	109,000		Hebron	1	Warehouse / Distribution	Cincinnati, OH-KY-IN	109,000
	Louisville	2	Warehouse / Distribution	497,820		Louisville	2	Warehouse / Distribution	Louisville/Jefferson County, KY-IN	497,820
Louisiana
	Shreveport	1	Warehouse / Distribution	420,259		Shreveport	1	Warehouse / Distribution	Shreveport-Bossier City, LA	420,259
Maine
	Belfast	5	Flex / Office	318,979		Belfast	5	Flex / Office	—	318,979	(3)
	Lewiston	1	Flex / Office	60,000		Biddeford	2	Warehouse / Distribution	Portland-South Portland, ME	265,126
	Portland	1	Warehouse / Distribution	100,600		Gardiner	1	Warehouse / Distribution	Augusta-Waterville, ME	265,000
						Lewiston	1	Flex / Office	Lewiston-Auburn, ME	60,000
						Portland	1	Warehouse / Distribution	Portland-South Portland, ME	100,600
Maryland
	Hampstead	1	Warehouse / Distribution	1,035,249		Hampstead	1	Warehouse / Distribution	Baltimore-Columbia-Towson, MD	1,035,249
	Sparks	2	Flex / Office	34,800		Sparks	2	Flex / Office	Baltimore-Columbia-Towson, MD	34,800
Massachusetts
	Chicopee	1	Warehouse / Distribution	217,000		Chicopee	1	Warehouse / Distribution	Springfield, MA	217,000
	Malden	2	Light Manufacturing	109,943		Malden	2	Light Manufacturing	Boston-Cambridge-Newton, MA-NH	109,943
	Norton	1	Warehouse / Distribution	200,000		Norton	1	Warehouse / Distribution	Providence-Warwick, RI-MA	200,000
	Stoughton	2	Warehouse / Distribution	250,213		Stoughton	2	Warehouse / Distribution	Boston-Cambridge-Newton, MA-NH	258,213
						Westborough	1	Warehouse / Distribution	Worcester, MA-CT	121,700
Michigan
	Chesterfield	4	Warehouse / Distribution	478,803		Chesterfield	4	Warehouse / Distribution	Detroit-Warren-Dearborn, MI	478,803
	Grand Rapids	1	Warehouse / Distribution	301,317		Grand Rapids	1	Warehouse / Distribution	Grand Rapids-Wyoming, MI	301,317
	Holland	2	Warehouse / Distribution	463,000
	Holland	1	Light Manufacturing	177,062
	Kentwood	1	Light Manufacturing	85,157
	Lansing	4	Warehouse / Distribution	770,425
	Marshall	1	Light Manufacturing	57,025
	Novi	2	Warehouse / Distribution	245,860
	Plymouth	1	Warehouse / Distribution	125,214
	Sterling Heights	1	Warehouse / Distribution	108,000
	Walker	1	Warehouse / Distribution	210,000
Minnesota
	Carlos	1	Light Manufacturing	196,270
	New Hope	1	Light Manufacturing	107,348
	Rogers	1	Warehouse / Distribution	386,724
	Savage	1	Warehouse / Distribution	244,050
Mississippi
	Jackson	2	Flex / Office	51,509
Missouri
	Kansas City	1	Warehouse / Distribution	226,576
	Hazlewood	1	Warehouse / Distribution	305,550
	O'Fallon	1	Warehouse / Distribution	77,000
Nevada
	Reno	1	Light Manufacturing	87,264
New Hampshire
	Londonderry	1	Warehouse / Distribution	125,060
	Nashua	1	Warehouse / Distribution	337,391
New Jersey
	Burlington	2	Warehouse / Distribution	1,552,121

~~Table of Contents~~

State City
Number of
Buildings

Asset Type⁽¹⁾

Total Rentable
Square Feet

New Jersey (continued) Lopatcong 1 Warehouse / Distribution 87,500

Piscataway 1 Warehouse / Distribution 228,000

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

Gloversville 1 Flex / Office 26,529

Johnstown 3 Warehouse / Distribution 169,602

Johnstown 1 Light Manufacturing 42,325

North Carolina
Charlotte 5 Warehouse / Distribution 1,349,599

Charlotte 1 Light Manufacturing 123,333

Durham 1 Warehouse / Distribution 80,600

Huntersville 1 Warehouse / Distribution 185,570

Lexington 1 Warehouse / Distribution 201,800

Mebane 2 Warehouse / Distribution 606,840

Mebane 1 Light Manufacturing 202,691

Mooresville 1 Warehouse / Distribution 300,000

Mountain Home 1 Warehouse / Distribution 146,014

Newton 1 Warehouse / Distribution 187,200

Pineville 1 Light Manufacturing 75,400

Rural Hall 1 Warehouse / Distribution 250,000

Smithfield 1 Warehouse / Distribution 191,450

Winston-Salem 1 Warehouse / Distribution 385,000

Ohio
Boardman 1 Warehouse / Distribution 175,900

Boardman 1 Light Manufacturing 95,000

Canton 1 Warehouse / Distribution 398,000

Cincinnati 1 Flex / Office 114,532
(4)
Columbus 1 Warehouse / Distribution 186,000

Dayton 1 Flex / Office 88,000

Dayton 1 Warehouse / Distribution 205,761

Fairborn 1 Warehouse / Distribution 258,680

Gahanna 1 Warehouse / Distribution 383,000

Hamilton 1 Warehouse / Distribution 245,000

Macedonia 1 Warehouse / Distribution 201,519

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 2 Warehouse / Distribution 345,000

Springfield 1 Warehouse / Distribution 350,500

Strongsville 1 Warehouse / Distribution 161,984

Streetsboro 1 Warehouse / Distribution 343,416

Toledo 1 Warehouse / Distribution 177,500

Twinsburg 1 Warehouse / Distribution 150,974

Oklahoma
Catoosa 1 Light Manufacturing 100,100
(3)
Oklahoma City 1 Warehouse / Distribution 223,340

Tulsa 1 Warehouse / Distribution 175,000

Oregon
Gresham 1 Warehouse / Distribution 420,690

Salem 2 Light Manufacturing 155,900

Pennsylvania
Allentown 1 Warehouse / Distribution 289,900

Elizabethtown 1 Warehouse / Distribution 206,236

Lancaster 1 Warehouse / Distribution 240,529

Mechanicsburg 3 Warehouse / Distribution 747,054

New Kingston 1 Warehouse / Distribution 330,000

Muhlenberg Townsh 1 Warehouse / Distribution 394,289

O'Hara Township 1 Warehouse / Distribution 887,084

State

City

Number of

Buildings

Asset Type⁽¹⁾

CBSA⁽²⁾

Total Rentable

Square Feet

Holland

Warehouse / Distribution

Grand Rapids-Wyoming, MI

195,000

Holland

Light Manufacturing

Holland, MI

177,062

Kentwood

Light Manufacturing

Grand Rapids-Wyoming, MI

85,157

Lansing

Warehouse / Distribution

Lansing-East Lansing, MI

770,425

Marshall

Light Manufacturing

Battle Creek, MI

57,025

Novi

Warehouse / Distribution

Detroit-Warren-Dearborn, MI

245,860

Plymouth

Warehouse / Distribution

Detroit-Warren-Dearborn, MI

125,214

Sterling Heights

Warehouse / Distribution

Detroit-Warren-Dearborn, MI

108,000

Walker

Warehouse / Distribution

Grand Rapids-Wyoming, MI

210,000

Warren

Warehouse / Distribution

Detroit-Warren-Dearborn, MI

268,000

Minnesota

Brooklyn Park

Warehouse / Distribution

Minneapolis-St. Paul-Bloomington, MN-WI

200,720

Carlos

Light Manufacturing

Alexandria, MN

196,270

New Hope

Light Manufacturing

Minneapolis-St. Paul-Bloomington, MN-WI

107,348

Rogers

Warehouse / Distribution

Minneapolis-St. Paul-Bloomington, MN-WI

386,724

Savage

Warehouse / Distribution

Minneapolis-St. Paul-Bloomington, MN-WI

244,050

Missouri

Earth City

Warehouse / Distribution

St. Louis, MO-IL

116,783

Hazlewood

Warehouse / Distribution

St. Louis, MO-IL

305,550

Kansas City

Warehouse / Distribution

Kansas City, MO-KS

226,576

O'Fallon

Warehouse / Distribution

St. Louis, MO-IL

77,000

Nevada

Reno

Light Manufacturing

Reno, NV

87,264

New Hampshire

Londonderry

Warehouse / Distribution

Boston-Cambridge-Newton, MA-NH

125,060

Nashua

Warehouse / Distribution

Manchester-Nashua, NH

337,391

New Jersey

Burlington

Warehouse / Distribution

Philadelphia-Camden-Wilmington, PA-NJ-DE-MD

1,552,121

Lopatcong

Warehouse / Distribution

Allentown-Bethlehem-Easton, PA-NJ

87,500

Piscataway

Warehouse / Distribution

New York-Newark-Jersey City, NY-NJ-PA

228,000

New York

Buffalo

Warehouse / Distribution

Buffalo-Cheektowaga-Niagara Falls, NY

117,000

Cheektowaga

Warehouse / Distribution

Buffalo-Cheektowaga-Niagara Falls, NY

121,760

Farmington

Warehouse / Distribution

Rochester, NY

149,657

Gloversville

Warehouse / Distribution

Gloversville, NY

211,554

Johnstown

Warehouse / Distribution

Gloversville, NY

169,602

Johnstown

Light Manufacturing

Gloversville, NY

42,325

North Carolina

Charlotte

Warehouse / Distribution

Charlotte-Concord-Gastonia, NC-SC

884,276

Charlotte

Light Manufacturing

Charlotte-Concord-Gastonia, NC-SC

104,852

Durham

Warehouse / Distribution

Durham-Chapel Hill, NC

80,600

Huntersville

Warehouse / Distribution

Charlotte-Concord-Gastonia, NC-SC

185,570

Lexington

Warehouse / Distribution

Winston-Salem, NC

201,800

Mebane

Warehouse / Distribution

Burlington, NC

606,840

Mebane

Light Manufacturing

Burlington, NC

202,691

Mooresville

Warehouse / Distribution

Charlotte-Concord-Gastonia, NC-SC

300,000

Mountain Home

Warehouse / Distribution

Asheville, NC

146,014

Newton

Warehouse / Distribution

Hickory-Lenoir-Morganton, NC

187,200

Pineville

Light Manufacturing

Charlotte-Concord-Gastonia, NC-SC

75,400

Rural Hall

Warehouse / Distribution

Winston-Salem, NC

250,000

~~Table of Contents~~

State City
Number of
Buildings

Asset Type⁽¹⁾

Total Rentable
Square Feet

Pennsylvania (continued) Warrendale 1 Warehouse / Distribution 148,065

Williamsport 1 Warehouse / Distribution 250,000

South Carolina
Edgefield 1 Light Manufacturing 126,190

Duncan 2 Warehouse / Distribution 787,380

Greenville 1 Warehouse / Distribution 157,500

Greenwood 2 Light Manufacturing 175,055

Greer 4 Warehouse / Distribution 290,000

Laurens 1 Warehouse / Distribution 125,000

Orangeburg 1 Warehouse / Distribution 319,000

Piedmont 3 Warehouse / Distribution 400,000

Spartanburg 5 Warehouse / Distribution 635,740

Simpsonville 2 Warehouse / Distribution 411,994

Ware Shoals 1 Light Manufacturing 20,514

West Columbia 1 Warehouse / Distribution 273,280

South Dakota
Rapid City 1 Flex / Office 137,000

Tennessee
Chattanooga 3 Warehouse / Distribution 646,200

Cleveland 1 Warehouse / Distribution 151,704

Clinton 1 Warehouse / Distribution 166,000

Jackson 1 Warehouse / Distribution 235,855

Jefferson City 1 Warehouse / Distribution 486,109

Knoxville 1 Warehouse / Distribution 108,400

Loudon 1 Warehouse / Distribution 104,000

Madison 1 Warehouse / Distribution 418,406

Mascot 1 Light Manufacturing 130,560

Murfreesboro 1 Warehouse / Distribution 102,505

Nashville 1 Warehouse / Distribution 150,000

Portland 1 Warehouse / Distribution 414,043
(2)
Vonore 1 Warehouse / Distribution 342,700

Texas
Arlington 2 Warehouse / Distribution 290,132

El Paso 6 Warehouse / Distribution 1,404,198
(3)
Fort Worth 1 Warehouse / Distribution 101,500

Garland 1 Light Manufacturing 253,900

Garland 1 Warehouse / Distribution 164,914

Houston 2 Warehouse / Distribution 352,834

Houston 1 Light Manufacturing 185,000

Waco 1 Warehouse / Distribution 66,400
(3)
Virginia
Buena Vista 1 Light Manufacturing 172,759

Chester 1 Warehouse / Distribution 100,000

Fairfield 1 Light Manufacturing 75,221

Harrisonburg 1 Warehouse / Distribution 357,673

Independence 1 Warehouse / Distribution 120,000

Wisconsin
Appleton 1 Light Manufacturing 113,379

Chippewa Falls 2 Light Manufacturing 97,400

De Pere 1 Warehouse / Distribution 200,000

East Troy 1 Warehouse / Distribution 149,624

Germantown 1 Warehouse / Distribution 202,500

Janesville 1 Warehouse / Distribution 700,000

Mayville 1 Light Manufacturing 339,179

Milwaukee 2 Warehouse / Distribution 117,564

New Berlin 2 Warehouse / Distribution 285,728

Sun Prairie 1 Warehouse / Distribution 427,000

West Allis 4 Warehouse / Distribution 241,977

Yorkville 1 Warehouse / Distribution 98,151

Totals 291 54,712,384

State

City

Number of

Buildings

Asset Type⁽¹⁾

CBSA⁽²⁾

Total Rentable

Square Feet

Smithfield

Warehouse / Distribution

Raleigh, NC

191,450

Winston-Salem

Warehouse / Distribution

Winston-Salem, NC

385,000

Ohio

Boardman

Warehouse / Distribution

Youngstown-Warren-Boardman, OH-PA

175,900

Boardman

Light Manufacturing

Youngstown-Warren-Boardman, OH-PA

95,000

Cincinnati

Flex / Office

Cincinnati, OH-KY-IN

114,532

Columbus

Warehouse / Distribution

Columbus, OH

186,000

Dayton

Warehouse / Distribution

Dayton, OH

205,761

Fairborn

Warehouse / Distribution

Dayton, OH

258,680

Fairfield

Warehouse / Distribution

Cincinnati, OH-KY-IN

206,448

Gahanna

Warehouse / Distribution

Columbus, OH

383,000

Grove City

Warehouse / Distribution

Columbus, OH

175,512

Hamilton

Warehouse / Distribution

Cincinnati, OH-KY-IN

245,000

Macedonia

Warehouse / Distribution

Akron, OH

201,519

Mason

Light Manufacturing

Cincinnati, OH-KY-IN

116,200

North Jackson

Warehouse / Distribution

Youngstown-Warren-Boardman, OH-PA

209,835

North Jackson

Redevelopment

Youngstown-Warren-Boardman, OH-PA

307,315

Oakwood Village

Warehouse / Distribution

Cleveland-Elyria, OH

75,000

Salem

Light Manufacturing

Salem, OH

271,000

Seville

Warehouse / Distribution

Cleveland-Elyria, OH

345,000

Springfield

Warehouse / Distribution

Springfield, OH

350,500

Streetsboro

Warehouse / Distribution

Akron, OH

343,416

Strongsville

Warehouse / Distribution

Cleveland-Elyria, OH

161,984

Toledo

Warehouse / Distribution

Toledo, OH

177,500

Twinsburg

Warehouse / Distribution

Akron, OH

150,974

West Chester

Warehouse / Distribution

Cincinnati, OH-KY-IN

269,868

Oklahoma

Oklahoma City

Warehouse / Distribution

Oklahoma City, OK

303,740

Catoosa

Light Manufacturing

Tulsa, OK

100,100

Tulsa

Warehouse / Distribution

Tulsa, OK

175,000

Oregon

Salem

Light Manufacturing

Salem, OR

155,900

Pennsylvania

Allentown

Warehouse / Distribution

Allentown-Bethlehem-Easton, PA-NJ

289,900

Elizabethtown

Warehouse / Distribution

Lancaster, PA

206,236

Lancaster

Warehouse / Distribution

Lancaster, PA

240,529

Langhorne

Warehouse / Distribution

Philadelphia-Camden-Wilmington, PA-NJ-DE-MD

102,000

Langhorne

Light Manufacturing

Philadelphia-Camden-Wilmington, PA-NJ-DE-MD

287,647

Mechanicsburg

Warehouse / Distribution

Harrisburg-Carlisle, PA

747,054

Muhlenberg Townsh

Warehouse / Distribution

Reading, PA

394,289

New Kingston

Warehouse / Distribution

Harrisburg-Carlisle, PA

330,000

O'Hara Township

Warehouse / Distribution

Pittsburgh, PA

887,084

Reading

Warehouse / Distribution

Reading, PA

248,000

Williamsport

Warehouse / Distribution

Williamsport, PA

250,000

South Carolina

Columbia

Light Manufacturing

Columbia, SC

185,600

Duncan

Warehouse / Distribution

Spartanburg, SC

787,380

Edgefield

Light Manufacturing

Augusta-Richmond County, GA-SC

126,190

Fountain Inn

Warehouse / Distribution

Greenville-Anderson-Mauldin, SC

168,087

State

City

Number of

Buildings

Asset Type⁽¹⁾

CBSA⁽²⁾

Total Rentable

Square Feet

Graniteville

Warehouse / Distribution

Augusta-Richmond County, GA-SC

450,000

Greenville

Warehouse / Distribution

Greenville-Anderson-Mauldin, SC

157,500

Greenwood

Light Manufacturing

Greenwood, SC

175,055

Greer

Warehouse / Distribution

Greenville-Anderson-Mauldin, SC

290,000

Laurens

Warehouse / Distribution

Greenville-Anderson-Mauldin, SC

125,000

Piedmont

Warehouse / Distribution

Greenville-Anderson-Mauldin, SC

400,000

Rock Hill

Warehouse / Distribution

Charlotte-Concord-Gastonia, NC-SC

315,520

Simpsonville

Warehouse / Distribution

Greenville-Anderson-Mauldin, SC

411,994

Spartanburg

Warehouse / Distribution

Spartanburg, SC

1,209,260

Ware Shoals

Light Manufacturing

Greenwood, SC

20,514

West Columbia

Warehouse / Distribution

Columbia, SC

569,532

South Dakota

Rapid City

Flex / Office

Rapid City, SD

132,365

Tennessee

Chattanooga

Warehouse / Distribution

Chattanooga, TN-GA

646,200

Cleveland

Warehouse / Distribution

Cleveland, TN

151,704

Clinton

Warehouse / Distribution

Knoxville, TN

166,000

Jackson

Warehouse / Distribution

Jackson, TN

235,855

Jefferson City

Warehouse / Distribution

Morristown, TN

486,109

Knoxville

Warehouse / Distribution

Knoxville, TN

108,400

Loudon

Warehouse / Distribution

Knoxville, TN

104,000

Madison

Warehouse / Distribution

Nashville-Davidson--Murfreesboro--Franklin, TN

418,406

Mascot

Warehouse / Distribution

Knoxville, TN

130,560

Mascot

Light Manufacturing

Knoxville, TN

130,560

Murfreesboro

Warehouse / Distribution

Nashville-Davidson--Murfreesboro--Franklin, TN

102,505

Nashville

Warehouse / Distribution

Nashville-Davidson--Murfreesboro--Franklin, TN

150,000

Portland

Warehouse / Distribution

Nashville-Davidson--Murfreesboro--Franklin, TN

414,043

Vonore

Warehouse / Distribution

Knoxville, TN

342,700

Texas

Arlington

Warehouse / Distribution

Dallas-Fort Worth-Arlington, TX

290,132

Cedar Hill

Warehouse / Distribution

Dallas-Fort Worth-Arlington, TX

420,000

El Paso

Warehouse / Distribution

El Paso, TX

1,404,198

Fort Worth

Warehouse / Distribution

Dallas-Fort Worth-Arlington, TX

101,500

Garland

Light Manufacturing

Dallas-Fort Worth-Arlington, TX

253,900

Garland

Warehouse / Distribution

Dallas-Fort Worth-Arlington, TX

164,914

Houston

Warehouse / Distribution

Houston-The Woodlands-Sugar Land, TX

352,834

Houston

Light Manufacturing

Houston-The Woodlands-Sugar Land, TX

408,599

San Antonio

Warehouse / Distribution

San Antonio-New Braunfels, TX

247,861

Waco

Warehouse / Distribution

Waco, TX

66,400

Virginia

Buena Vista

Light Manufacturing

—

172,759

(3)

Chester

Warehouse / Distribution

Richmond, VA

100,000

Harrisonburg

Warehouse / Distribution

Harrisonburg, VA

357,673

Independence

Warehouse / Distribution

—

120,000

(3)

Wisconsin

Appleton

Light Manufacturing

Appleton, WI

113,379

Chippewa Falls

Light Manufacturing

Eau Claire, WI

97,400

De Pere

Warehouse / Distribution

Green Bay, WI

200,000

DeForest

Warehouse / Distribution

Madison, WI

254,431

East Troy

Warehouse / Distribution

Whitewater-Elkhorn, WI

149,624

Germantown

Warehouse / Distribution

Milwaukee-Waukesha-West Allis, WI

202,500

State

City

Number of

Buildings

Asset Type⁽¹⁾

CBSA⁽²⁾

Total Rentable

Square Feet

Hartland

Warehouse / Distribution

Milwaukee-Waukesha-West Allis, WI

121,050

Janesville

Warehouse / Distribution

Janesville-Beloit, WI

700,000

Kenosha

Light Manufacturing

Chicago-Naperville-Elgin, IL-IN-WI

175,052

Mayville

Light Manufacturing

Beaver Dam, WI

339,179

Milwaukee

Warehouse / Distribution

Milwaukee-Waukesha-West Allis, WI

117,564

New Berlin

Warehouse / Distribution

Milwaukee-Waukesha-West Allis, WI

205,063

Sun Prairie

Warehouse / Distribution

Madison, WI

427,000

West Allis

Warehouse / Distribution

Milwaukee-Waukesha-West Allis, WI

241,977

Yorkville

Warehouse / Distribution

Racine, WI

98,151

Total

314

60,878,204


(1)	Flex / Office are properties that are generally 50,000 to 200,000 square feet in size and used for office space, light manufacturing, research and development and warehousing.

~~Table of Contents~~


(2)	~~Subject~~We define Core Based Statistical Area ("CBSA") as a U.S. geographic area defined by the Office of Management and Budget that consists of one or more counties (or equivalents) anchored by an urban center of at least 10,000 people plus adjacent counties that are socioeconomically tied to ~~a PILOT agreement.~~the urban center by commuting.


(3)	~~One of the buildings is subject to ground lease.~~


~~(4)~~	~~The parking lot utilized by the tenant adjacent to the property is subject to~~These properties do not have a ~~ground lease.~~CBSA.

As of December 31, ~~2015, 57~~2016, 46 of our ~~291~~314 buildings were encumbered by mortgage indebtedness totaling ~~$230.7~~$164.3 million (excluding unamortized deferred financing fees, debt issuance costs, and fair market value premiums). See Note 54 in the accompanying Notes to the Consolidated Financial Statements and the accompanying Schedule III ~~beginning on page~~ F-46 for additional information.

Property Diversification

The following table ~~and chart set~~sets forth information relating to diversification by ~~property~~building type in our portfolio as of December 31, 2016.



		Square Footage					Total Annualized Base Rental Revenue
Building Type	Number of Buildings	Square Feet	%		Occupancy Rate⁽¹⁾		Amount (in thousands)		%
Warehouse/Distribution	243	53,674,674	88.2	%	95.6	%	$	201,208	87.0	%
Light Manufacturing	54	5,925,629	9.7	%	96.3	%	23,120		10.0	%
Total Operating Portfolio	297	59,600,303	97.9	%	95.7	%	$	224,328	97.0	%

Redevelopment	1	307,315	0.5	%	—		—		—
Flex/Office	16	970,586	1.6	%	62.6	%	6,994		3.0	%
Total/weighted average	314	60,878,204	100.0	%	94.7	%	$	231,322	100.0	%


(1)	We define Occupancy Rate as the percentage of total leasable square footage for which the lease term has commenced as of the close of the reporting period.

Geographic Diversification

The following table sets forth information about the ten largest states in our portfolio based on total annualized base rental revenue as of December 31, ~~2015:~~2016.

Building Type Number of Buildings Square Feet
Occupancy⁽¹⁾
Annualized Base Rental Revenue (in thousands) % of Total Annualized Base Rental Revenue
Warehouse/Distribution 223
48,374,300
96.0 % $ 182,255
86.8 %
Light Manufacturing 47
5,189,416
98.5 % 19,557
9.3 %
Flex/Office 21
1,148,668
64.7 % 8,218
3.9 %
Total/weighted average
291
54,712,384
95.6 % $ 210,030
100.0 %


~~(1)~~	Calculated as the average economic occupancy weighted by each property’s rentable square footage. As used herein, economic occupancy includes all square footage where an existing lease is in place whether or not such square footage is physically occupied.

~~Geographic Diversification~~



Top Ten States	Number of CBSA's	% of Total Annualized Base Rental Revenue
Illinois	2	8.2	%
Ohio	9	7.5	%
South Carolina	6	7.4	%
Pennsylvania	7	6.9	%
Texas	5	6.0	%
North Carolina	7	5.8	%
Michigan	5	5.4	%
Wisconsin	10	5.3	%
New Jersey	3	4.9	%
Tennessee	6	4.9	%
Total	60	62.3	%

The following table and chart set forth information relating to geographic diversification by region and state, respectively, in our portfolio based on total annualized base rental revenue as of December 31, 2015:

Region
Total
Number
of
States

Total
Number
of
Buildings

Regional
Occupancy

% of Total
Leased Square
Feet

% of Total
Annualized Base
Rental Revenue

Midwest 10 119 94.4 % 37.2 % 36.7 %
East 13 105 95.9 % 37.4 % 38.5 %
South 9 55 96.2 % 21.5 % 19.3 %
West 6 12 100.0 % 3.9 % 5.5 %
Total/weighted average 38 291 95.6 % 100.0 % 100.0 %

Industry Diversification

The following table ~~and chart set~~sets forth information about the ten largest tenant industries in our portfolio based on total annualized base rental revenue as of December 31, ~~2015:~~2016.

Top Ten Tenant Industries
Total Number
of Leases

Total Leased
Square Feet

Total Annualized
Base Rental
Revenue (in thousands)

% of Total
Annualized Base Rental Revenue
Air Freight & Logistics 43 6,695,668
$ 25,593
12.2 %
Automotive 42 6,273,103
25,066
11.9 %
Ind Equip, Component & Metals 39 5,428,365
22,563
10.8 %
Food & Beverages 26 5,019,161
19,532
9.3 %
Containers & Packaging 22 5,108,981
19,367
9.2 %
Retail 13 3,240,980
11,156
5.3 %
Personal Products 10 2,601,482
11,007
5.2 %
Household Durables 11 2,882,427
10,166
4.8 %
Non-Profit/Government 7 1,245,044
8,974
4.3 %
Office Supplies 10 2,383,405
8,725
4.2 %
Total 223 40,878,616
$ 162,149
77.2 %

~~Table of Contents~~

~~Top Tenants~~



Top Ten Tenant Industries	% of Total Annualized Base Rental Revenue
Automotive	13.6	%
Ind Equip, Component & Metals	11.3	%
Air Freight & Logistics	11.2	%
Containers & Packaging	9.6	%
Food & Beverages	8.7	%
Retail	7.2	%
Personal Products	6.6	%
Household Durables	5.3	%
Business Services	5.2	%
Non-Profit/Government	3.6	%
Total	82.3	%

Tenant Diversification

As of December 31, 2016, our buildings were leased to 275 tenants. The following table sets forth information about the ten largest tenants in our portfolio based on total annualized base rental revenue as of December 31, ~~2015:~~2016.


Top Ten Tenants	Number of Leases	Total Leased Square Feet	Annualized Base Rental Revenue (in thousands)		% of Total Annualized Base Rental Revenue		Number of Leases	% of Total Annualized Base Rental Revenue
General Services Administration	1	1,048,631	$	7,026	3.3	%
XPO Logistics Supply Chain Inc	4	1,157,684	5,226		2.5	%
General Service Administration							1	3.1	%
XPO Logistics Supply Chain Inc.							4	2.2	%
Deckers Outdoor Corporation	2	723,106	4,067		1.9	%	2	1.8	%
Solo Cup Company	1	1,035,249	3,810		1.8	%	1	1.7	%
Generation Brands, LLC							1	1.1	%
Exel Logistics	4	1,094,694	3,675		1.8	%	3	1.1	%
International Paper Company	3	698,323	3,548		1.7	%
Generation Brands, LLC	1	503,490	2,634		1.3	%
American Tire Distributors	4	457,980	2,351		1.1	%
Perrigo Holland	2	669,000	2,351		1.1	%	2	1.0	%
American Tire Distributors Inc.							4	1.0	%
Spencer Gifts, LLC	1	491,025	2,252		1.1	%	1	1.0	%
Armacell, LLC							3	0.9	%
Total	23	7,879,182	$	36,940	17.6	%	22	14.9	%

As of December 31, 2015, based upon our tenants’ public filings and our tenants’ internally prepared financial data, our tenants, guarantors, or their parents (including parents not guaranteeing any tenant lease obligations) had the following characteristics based on annualized base rent:



~~Credit~~	~~December 31, 2015~~
~~Tenants Publicly Rated~~	~~56.9~~	%
~~Tenants Rated Investment Grade~~	~~28.8~~	%
~~Tenant Revenue > $100 Million~~	~~88.0~~	%
~~Tenant Revenue > $1 Billion~~	~~60.8~~	%

~~Top Leases~~Lease Diversification

The following table sets forth information about the ten largest leases in our portfolio based on total annualized base rental revenue as of December 31, ~~2015:~~2016.

Top Ten Leases
Leased
Square Feet

% of Total
Leased
Square Feet

Annualized Base
Rental Revenue
(in thousands)

% of Total
Annualized Base
Rental Revenue

General Service Administration 1,048,631
2.0 % $ 7,026
3.3 %
Solo Cup Company 1,035,249
2.0 % 3,810
1.8 %
XPO Logistics Supply Chain Inc 528,997
1.0 % 2,777
1.3 %
Generation Brands, LLC 503,490
1.0 % 2,634
1.3 %
International Paper Company 465,323
0.9 % 2,517
1.2 %
Deckers Outdoor Corporation 423,106
0.8 % 2,379
1.1 %
Spencer Gifts, LLC 491,025
0.9 % 2,252
1.1 %
Closetmaid Corporation 619,466
1.2 % 2,053
1.0 %
CareFusion 213, LLC 360,134
0.7 % 1,956
0.9 %
Archway Marketing Serv., Inc. 386,724
0.7 % 1,858
0.9 %
Total 5,862,145
11.2 % $ 29,262
13.9 %



Top Ten Leases	% of Total Annualized Base Rental Revenue
General Service Administration	3.1	%
Solo Cup Company	1.7	%
XPO Logistics Supply Chain Inc.	1.2	%
Generation Brands, LLC	1.1	%
Deckers Outdoor Corporation	1.1	%
Spencer Gifts, LLC	1.0	%
Closetmaid Corporation	0.9	%
Jo-Ann Stores, LLC	0.9	%
Archway Marketing Serv., Inc.	0.8	%
CareFusion 213, LLC	0.8	%
Total	12.6	%

~~Table of Contents~~

Scheduled Lease Expirations

As of December 31, ~~2015,~~2016, our weighted average in place remaining lease term was approximately ~~4.0~~4.2 years. For the year ended December 31, ~~2015,~~2016, we have achieved approximately a ~~69.8%~~69.5% tenant retention rate for those tenants whose leases were scheduled to expire in ~~2015.~~2016. The following table ~~and chart set~~sets forth a summary of lease expirations for leases in place as of December 31, ~~2015,~~2016, plus available space, for each of the ten calendar years beginning with ~~2016~~2017 and thereafter in our portfolio. The information in the table ~~and chart~~ assumes that tenants exercise no renewal options, ~~and no~~purchase options, or early termination rights.


Lease Expiration Year	Number of Leases Expiring	Total Rentable Square Feet ⁽¹⁾	% of Total Occupied Square Feet		Total Annualized Base Rental Revenue (in thousands)		% of Total Annualized Base Rental Revenue		Average Annualized Base Rental Revenue per Expiring Square Foot		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	—	2,433,427	—		—		—		—		—	3,254,516	—		—		—
Month-to-month leases	8	181,490	0.3	%	$	627	0.3	%	$	3.45	7	281,824	0.5	%	$	885	0.4	%
2016	46	5,607,996	10.7	%	23,803		11.3	%	4.24
2017	50	7,176,749	13.7	%	28,694		13.7	%	4.00		45	5,393,284	9.4	%	22,956		9.9	%
2018	55	9,692,999	18.6	%	37,029		17.6	%	3.82		65	11,038,428	19.2	%	43,394		18.8	%
2019	42	7,825,545	15.0	%	29,744		14.1	%	3.80		52	9,642,460	16.7	%	37,175		16.1	%
2020	33	6,648,221	12.7	%	29,514		14.1	%	4.44		34	7,931,114	13.8	%	33,024		14.3	%
2021	28	4,929,104	9.4	%	20,175		9.6	%	4.09		39	6,468,139	11.2	%	27,361		11.8	%
2022	17	2,375,944	4.5	%	9,482		4.5	%	3.99		24	3,331,130	5.8	%	13,737		5.9	%
2023	11	2,382,466	4.6	%	8,762		4.2	%	3.68		12	2,537,340	4.4	%	9,005		3.9	%
2024	7	1,423,071	2.7	%	5,690		2.7	%	4.00		9	2,152,791	3.7	%	7,709		3.3	%
2025	7	1,335,563	2.6	%	5,357		2.6	%	4.01		11	1,788,742	3.1	%	7,550		3.3	%
2026											13	2,930,441	5.1	%	10,728		4.6	%
Thereafter	15	2,699,809	5.2	%	11,153		5.3	%	4.13		19	4,127,995	7.1	%	17,798		7.7	%
Total/weighted average	319	54,712,384	100.0	%	$	210,030	100.0	%	$	4.02	330	60,878,204	100.0	%	$	231,322	100.0	%


~~(1)~~	During the three months ended June 30, 2015, we evaluated the rentable square feet in our portfolio, and determined that, in management's opinion, approximately 212,000 square feet is not considered leasable to a third party tenant and therefore is no longer included in rentable square feet.

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 ~~which,~~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.

Item 4. Mine Safety Disclosures

Not applicable.

~~Table of Contents~~

PART II.

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 ~~2016~~2017 Annual ~~Stockholders’ Meeting.~~Meeting of Stockholders.

Market Information

Our common stock has been listed on the NYSE since April 15, 2011, and is traded under the symbol “STAG.” The closing share price for our common stock on February ~~22, 2016,~~14, 2017, as reported by the NYSE, was ~~$16.29.~~$23.94. For the year ended December 31, ~~2015,~~2016, our total stockholder return was ~~-19.59%.~~38.0%, assuming an investment in our common stock on December 31, 2015 and that all dividends were reinvested. The following table sets forth, for the periods indicated, the high and low sale prices in dollars on the NYSE for our common stock as well as the dividends declared per share of common stock.


Quarter ended	High		Low		Dividends per common share⁽¹⁾		High		Low		Dividends Per Common Share⁽¹⁾
December 31, 2016							$	24.41	$	21.21	$	0.347499
September 30, 2016							$	25.51	$	22.68	$	0.347499
June 30, 2016							$	23.83	$	19.42	$	0.347499
March 31, 2016							$	20.54	$	14.97	$	0.347499
December 31, 2015	$	21.13	$	18.01	$	0.3450	$	21.13	$	18.01	$	0.345000
September 30, 2015	$	21.29	$	16.66	$	0.3450	$	21.29	$	16.66	$	0.345000
June 30, 2015	$	23.81	$	19.89	$	0.3375	$	23.81	$	19.89	$	0.337500
March 31, 2015	$	27.61	$	22.28	$	0.3375	$	27.61	$	22.28	$	0.337500
December 31, 2014	$	25.26	$	20.65	$	0.3300
September 30, 2014	$	24.46	$	20.57	$	0.3300
June 30, 2014	$	25.19	$	23.05	$	0.3150
March 31, 2014	$	24.71	$	19.75	$	0.3150

(1)

On ~~October 22, 2015,~~November 2, 2016, our board of directors declared the common stock dividend for the months ending January 31, ~~2016,~~2017, February ~~29, 2016~~28, 2017 and March 31, ~~2016~~2017 at a monthly rate of ~~$0.115833~~$0.116667 per share of common stock. On February ~~22, 2016~~15, 2017, our board of directors declared the common stock dividend for the months ending April 30, ~~2016,~~2017, May 31, ~~2016~~2017, and June 30, ~~2016~~2017, at a monthly rate of ~~$0.115833~~$0.116667 per share of common stock.

Holders of Our Common Stock

As of February ~~22, 2016,~~14, 2017, we had approximately 6465 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.

Common Units and Recent Sales of Unregistered Securities

On January 22, 2015, in connection with our acquisition of a building, our Operating Partnership issued 812,676 common units of limited partnership. On December 11, 2015, in connection with our acquisition of another building, our Operating Partnership issued 51,607 common units of limited partnership. The issuance of the common units of limited partnership was effected in reliance upon an exemption from registration provided by Section 4(2) under the Securities Act of 1933, as amended, and Regulation D promulgated thereunder. The Operating Partnership relied on the exemption based on representations given by the recipients of the common units of limited partnership. Subject to certain restrictions, common units of limited partnership may be redeemed for cash or, at our election, our common stock on a one for one basis, subject to adjustment, as provided in the operating partnership agreement.

~~Additionally, during the year ended December 31, 2015, 2,400 common units of limited partnership held by certain limited partners of our Operating Partnership were redeemed for cash.~~None.

~~Table of Contents~~

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 ~~April 15,~~December 31, 2011 to December 31, ~~2015~~2016 and assumes that $100 was invested in our common stock and in each index on ~~April 15,~~December 31, 2011 and that all dividends were reinvested.

This performance graph shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act, or incorporated by reference into any filing by us under the Securities ~~Exchange~~ Act, ~~of 1933, as amended,~~ except as shall be expressly set forth by specific reference in such filing.

Item 6. Selected Financial Data

The “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 our IPO in April 2011. 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 our financial information.

~~Table of Contents~~

ended December 31, 2016, December 31, 2015, December 31, 2014, December 31, 2013 and December 31, 2012, ~~and the period from April 20, 2011 to December 31, 2011,~~ have been derived from the audited financial statements of STAG Industrial, Inc. The selected historical Combined Statements of Operations data for the period from January 1, 2011 to April 19, 2011, has been derived from the audited Combined Financial Statements of the STAG Predecessor Group. Certain prior year amounts have been reclassified to conform to the current year presentation. The results of operations for all periods presented have been adjusted to reflect discontinued ~~operations:~~operations.

~~Table of Contents~~


	STAG Industrial, Inc.															STAG Predecessor Group			Year Ended December 31,
	Year Ended December 31, 2015			Year Ended December 31, 2014			Year Ended December 31, 2013			Year Ended December 31, 2012			Period from April 20, 2011 to December 31, 2011			Period from January 1, 2011 to April 19, 2011			2016			2015⁽¹⁾			2014⁽¹⁾			2013			2012
Statements of Operations Data:
Revenue
Total revenue	$	218,633		$	173,816		$	133,893		$	84,052		$	41,116		$	7,707		$	250,243		$	218,633		$	173,816		$	133,893		$	84,052
Expenses
Property	42,627			33,388			24,010			12,841			7,180			2,067			48,904			42,627			33,388			24,010			12,841
General and administrative	28,750			26,396			17,867			14,617			8,443			484			33,395			28,750			26,396			17,867			14,617
Property acquisition costs	4,757			4,390			3,427			4,218			1,088			—			4,567			4,757			4,390			3,427			4,218
Depreciation and amortization	112,545			88,057			67,556			42,427			21,325			2,345			125,444			110,421			87,703			67,556			42,427
Loss on impairments	29,272			2,840			—			622			—			—			16,845			29,272			2,840			—			622
Other expenses	1,048			803			621			339			294			—			1,149			1,048			803			621			339
Total expenses	218,999			155,874			113,481			75,064			38,330			4,896			230,304			216,875			155,520			113,481			75,064
Other income (expense)
Interest income	9			15			13			19			28			1			10			9			15			13			19
Interest expense	(36,098		)	(25,109		)	(20,319		)	(16,110		)	(11,829		)	(3,825		)	(42,923		)	(36,098		)	(25,109		)	(20,319		)	(16,110		)
Gain on interest rate swaps	—			—			—			215			2,179			762			—			—			—			—			215
Formation transaction costs	—			—			—			—			(3,674		)	—
Loss on extinguishment of debt	—			(686		)	—			(929		)	—			—			(3,261		)	—			(686		)	—			(929		)
Gain on sales of rental property	4,986			2,799			—			—			—			—
Gain on the sales of rental property, net																			61,823			4,986			2,799			—			—
Total other income (expense)	(31,103		)	(22,981		)	(20,306		)	(16,805		)	(13,296		)	(3,062		)	15,649			(31,103		)	(22,981		)	(20,306		)	(16,805		)
Net income (loss) from continuing operations	$	(31,469	)	$	(5,039	)	$	106		$	(7,817	)	$	(10,510	)	$	(251	)	$	35,588		$	(29,345	)	$	(4,685	)	$	106		$	(7,817	)
Total income (loss) attributable to discontinued operations	—			—			4,796			(2,382		)	1,283			22			—			—			—			4,796			(2,382		)
Net income (loss)	$	(31,469	)	$	(5,039	)	$	4,902		$	(10,199	)	$	(9,227	)	$	(229	)	$	35,588		$	(29,345	)	$	(4,685	)	$	4,902		$	(10,199	)
Less: loss attributable to noncontrolling interest after preferred stock dividends	(2,066		)	(1,014		)	(620		)	(3,720		)	(3,396		)
Less: income (loss) attributable to noncontrolling interest after preferred stock dividends																			1,069			(1,962		)	(992		)	(620		)	(3,720		)
Less: preferred stock dividends	10,848			10,848			9,495			6,210			1,018						13,897			10,848			10,848			9,495			6,210
Less: amount allocated to unvested restricted stockholders	385			345			262			122			—
Net loss attributable to common stockholders	$	(40,636	)	$	(15,218	)	$	(4,235	)	$	(12,811	)	$	(6,849	)
Net loss per share from continuing operations attributable to the common stockholders	$	(0.61	)	$	(0.28	)	$	(0.20	)	$	(0.44	)	$	(0.49	)
Income (loss) per share from discontinued operation attributable to common stockholders	—			—			0.10			(0.07		)	0.05
Net loss per share attributable to the common stockholders	$	(0.61	)	$	(0.28	)	$	(0.10	)	$	(0.51	)	$	(0.44	)
Balance Sheets Data (End of Period):
Less: amount allocated to participating securities																			384			385			345			262			122
Net income (loss) attributable to common stockholders																			$	20,238		$	(38,616	)	$	(14,886	)	$	(4,235	)	$	(12,811	)
Net income (loss) per share from continuing operations attributable to the common stockholders — basic and diluted																			$	0.29		$	(0.58	)	$	(0.28	)	$	(0.20	)	$	(0.44	)
Income (loss) per share from discontinued operation attributable to common stockholders — basic and diluted																			—			—			—			0.10			(0.07		)
Net income (loss) per share attributable to common stockholders — basic and diluted																			$	0.29		$	(0.58	)	$	(0.28	)	$	(0.10	)	$	(0.51	)
Balance Sheets Data (December 31):
Rental property, before accumulated depreciation and amortization	$	2,188,642		$	1,809,895		$	1,389,214		$	1,059,715		$	642,603		$	—		$	2,541,705		$	2,188,642		$	1,809,895		$	1,389,214		$	1,059,715
Rental property, after accumulated depreciation and amortization	$	1,837,489		$	1,558,080		$	1,222,360		$	957,607		$	585,547		$	—		$	2,116,836		$	1,839,967		$	1,558,434		$	1,222,360		$	957,607
Total assets	$	1,906,236		$	1,629,317		$	1,270,281		$	1,005,124		$	624,514		$	—		$	2,186,156		$	1,901,782		$	1,623,802		$	1,266,460		$	1,003,342
Total debt	$	987,180		$	686,347		$	556,091		$	479,215		$	296,779		$	—		$	1,036,139		$	980,248		$	680,478		$	552,270		$	477,433
Total liabilities	$	1,050,857		$	737,793		$	595,717		$	515,664		$	314,605		$	—		$	1,119,230		$	1,043,925		$	731,924		$	591,896		$	513,882
Total equity	$	855,379		$	891,524		$	674,564		$	489,460		$	309,909		$	—		$	1,066,926		$	857,857		$	891,878		$	674,564		$	489,460
Other Data:
Dividend declared per common share	$	1.365		$	1.29		$	1.20		$	1.07		$	0.7257		$	—		$	1.389996		$	1.365		$	1.29		$	1.20		$	1.07
Cash flow provided by operating activities	$	121,707		$	96,676		$	82,687		$	48,011		$	14,666		$	2,359		$	135,423		$	121,707		$	96,676		$	82,687		$	48,011
Cash flow used in investing activities	$	(372,038	)	$	(421,713	)	$	(325,231	)	$	(417,203	)	$	(114,458	)	$	(581	)	$	(347,112	)	$	(372,038	)	$	(421,713	)	$	(325,231	)	$	(417,203	)
Cash flow provided by (used in) financing activities	$	238,464		$	342,225		$	230,228		$	371,700		$	116,013		$	(3,070	)
Cash flow provided by financing activities																			$	211,870		$	238,464		$	342,225		$	230,228		$	371,700


(1)	These amounts are revised as shown in Note 2 to the Consolidated Financial Statements.

~~Table of Contents~~

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. ~~The consolidated financial statements as of December 31, 2015 and 2014 and for the years ended December 31, 2015, 2014 and 2013 include the financial information of our company, ourOperating Partnershipand our subsidiaries.~~

Overview

We are a REIT focused on the acquisition, ownership, and operation of single-tenant, industrial properties throughout the ~~United States.~~U.S. We ~~endeavor~~seek to (i) identify properties that ~~create~~offer relative value ~~investments~~ across all locations, ~~single-tenant~~ 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 depends 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, ~~2015,~~2016, we owned ~~291~~314 buildings in 3837 states with approximately ~~54.7~~60.9 million rentable square feet, consisting of ~~223~~243 warehouse/distribution buildings, 4754 light manufacturing buildings, ~~and 21~~16 flex/office ~~buildings.~~buildings, and one building in redevelopment. As of December 31, ~~2015,~~2016, our buildings were approximately ~~95.6%~~94.7% leased to ~~266~~275 tenants, with no single tenant accounting for more than approximately ~~3.3%~~3.1% of our total annualized ~~rent~~base rental revenue and no single industry accounting for more than approximately ~~12.2%~~13.6% of our total annualized ~~rent.~~base rental revenue.

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 the Operating Partnership. As of December 31, ~~2015,~~2016, we owned approximately ~~95.1%~~95.7% of the common equity of our Operating Partnership, and our current and former executive officers, directors, senior employees and their affiliates, and third parties who contributed properties to us in exchange for common equity in our Operating Partnership, owned the remaining ~~4.9%~~4.3%. We completed our IPO and related formation transactions, pursuant to which we succeeded to the business of our predecessor, on April 20, 2011.

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.

Outlook

The outlook for our business remains positive, albeit on a moderated basis in light of ~~equity market turmoil, mixed~~continued slow economic ~~data,~~growth, some uncertainty regarding the new U.S. presidential administration and its policy initiatives, and continued asset appreciation. ~~In December 2015, the Federal Reserve raised the~~The federal funds target rate ~~from~~was raised 25 basis points in December; however, the target rate remains very low, in a range of 0%0.50% to ~~0.25% to a~~0.75%. This range ~~of 0.25% to 0.50% due to~~aligns with the Central Bank’s ~~belief that the U.S. economy is in a strong position. The Central Bank commented~~consistent commentary that future rate hikes ~~will~~would be gradual and rates will likely remain ~~below long-term rate expectations~~historically low for ~~some~~an extended period of time. At the same time, its most recent commentary suggests increasing comfort with hiking rates again in the near future. If interest rates ~~continue~~were to rise further as a result of Federal Reserve policy action (short-term interest rates) or changes in market expectations and capital flows (long-term interest rates), we believe strengthening economic conditions are likely to accompany these changes. This strengthening of economic conditions combined with the currently favorable industrial ~~supply~~ supply/demand environment should translate to a net positive result for our business. Specifically, our existing portfolio should benefit from rising rental rates and our acquisition activity should benefit from higher yields. Furthermore, we believe certain characteristics of our business should position us well in a rising interest rate environment, including the fact that we have minimal floating rate debt exposure (taking into account our hedging activities) and that many of our competitors for the assets we purchase tend to be smaller local investors who are likely to be more heavily impacted by interest rate increases.

~~Table~~The results of ~~Contents~~

the U.S. presidential election was largely unanticipated by the media, and it remains unclear what impact new policies will have on the economy. The positive capital market moves since the election appear to indicate net favorable expectations on key areas, including corporate tax, healthcare, regulation, infrastructure, and trade. Other notable ~~recent developments~~items with economic impacts include the continued relative strength of the U.S. dollar versus competing currencies ~~including~~(including the euro and ~~yen, continued falling~~pound), the continuation of relatively low oil prices, and ~~the slowdown in the Chinese economy.~~Brexit. A strong U.S. dollar can harm U.S. exporters and U.S. multi-nationals; however, it can also benefit foreign multi-nationals ~~that~~positively, which support U.S. subsidiaries and operate U.S. industrial properties. Oil price declines over the past two years and the lack of a sustained rebound in price have put significant pressure on oil and gas exploration and production companies, resulting in many oil and gas sector bankruptcies, while simultaneously benefiting many industries (e.g. automotive, freight) and consumers’ disposable incomes. In ~~China, policy decisions have hurt its equity~~June, the passing of the U.K.’s referendum to separate itself from the European Union, known as Brexit, was a major surprise to the markets. The process to renegotiate financial and ~~currency markets. Additionally,~~economic relationships and the resulting outcomes will take many years to unfold. Right now, the decline in value of the pound is a ~~slowing Chinese growth rate is decreasing demand for commodities and creating some uncertainty in~~short-term benefit to U.K. exporters. The long-term impacts on the U.S. ~~stock market. We note that exports to China make up less than 1% of U.S. gross domestic produce ("GDP")~~ and ~~consumer spending accounts for more than two-thirds.~~global economy are unclear. We believe our direct exposure to ~~tenants in~~ the ~~oil and gas industry and the Chinese economy~~U.K. market is limited. Of our tenants that do have direct exposure to the U.K., we believe they are well-diversified businesses. We will continue to monitor these trends for short-term and long-term impacts to ~~our business.~~us.

Several economic indicators and other factors provide insight into the U.S. economic environment and industrial demand. Presently, we believe the key factors include ~~GDP~~gross domestic product ("GDP") growth rate, unemployment rate, non-farm payrolls, Conference Board consumer confidence index, manufacturing-purchasing manager index (“ISM”), the 10-year Treasury yield, U.S. total vehicle sales, and durable goods new orders. Below are recent trends in each of these ~~factors:~~factors.


Economic Indicators⁽¹⁾	December 31, 2015	September 31, 2015	June 30, 2015	March 31, 2015	December 31, 2014	December 31, 2016	September 31, 2016	June 30, 2016	March 31, 2016	December 31, 2015
GDP Growth Rate	0.7%	2.0%	3.9%	0.6%	2.1%	— ⁽²⁾	3.5%	1.4%	0.8%	0.9%
Unemployment Rate	5.0%	5.1%	5.3%	5.5%	5.6%	4.7%	4.9%		5.0%
Change in Non-Farm Employment (in thousands)	292.0	145.0	245.0	119.0	329.0	156.0	208.0	271.0	186.0	271.0
Consumer Confidence Index	96.3	102.6	99.8	101.4	93.1	113.3	104.1	97.4	96.1	96.3
Purchasing Managers Index (ISM)⁽²⁾	48.2%	50.2%	53.5%	51.5%	55.1%
ISM⁽³⁾						54.7%	51.5%	53.2%	51.8%	48.0%
10-year Treasury Yield	2.27%	2.06%	2.35%	1.94%	2.17%	2.45%	1.60%	1.49%	1.78%	2.27%
Seasonally Adjusted Annualized Rate US Total Vehicle Sales (in thousands)	17,657	18,514	17,430	17,508	17,223	18,680	18,059	17,161	17,032	17,830
Manufacturing New Orders: Durable Goods (in millions)	225,400	232,015	236,611	236,671	226,739	227,108	228,204	219,055	228,499	223,402


(1)	Sources: Bureau of Economic Analysis, Bureau of Labor Statistics, Conference Board, Board of Governors of the Federal Reserve System, U.S. Census Bureau, and Institute for Supply Management. Each statistic is the latest revision available at the time of publishing this report.


(2)	This statistic was not available at the time of publishing this report.

(3)

ISM is a composite index based on a survey of over 300 purchasing and supply executives from across the country who respond to a monthly questionnaire about changes in production, new orders, new export orders, imports, employment, inventories, prices, lead-times, and timelines of supplier deliveries in their companies. When the index is over 50, it indicates expansion, while a reading below 50 signals contraction.

Currently, the GDP growth ~~solid~~rate, growing non-farm ~~payrolls, record high~~employment, strong U.S. total vehicle sales, ISM level, consumer confidence, and low interest rates are positive fundamental signs for industrial demand. Expanding job count and the ongoing ~~drop in~~low unemployment rate suggests consumers will be spending more money on goods in the foreseeable future. The strengthening U.S. dollar means that U.S. consumers may be purchasing a relatively larger amount of imported goods and that U.S. companies are likely to lower their rate of exports. This is likely to be a net positive for industrial real estate demand as imports tend to lead to greater net absorption than do exports. At the end of December 2016, the consumer confidence index reached a 13-year high and the ISM level reached its highest level in two years. On the negative side, the 2016 speculative grade corporate default rate surpassed its long-term average and reached 5.1%, significantly driven by oil and gas and mining industry defaults. We expect default rates to be stable in the coming year behind positive economic growth. However, we believe improving commodity markets and capital markets stability will be important in supporting this outlook. We also note that while automotive sales closed the ~~ISM level dropped below 50, signaling contraction~~year strong, they have moderated their growth in ~~the manufacturing sector for first time since late 2012,~~recent months and ~~consumer confidence surprisingly weakened.~~we are seeing many large multinational companies experience weak organic growth, commonly due to negative currency effects and commodity price deflation. We believe the combination of these observations signal some caution in underlying economic strength; however, we still expect an increase in industrial activity and more demand for industrial space in the foreseeable future given the job growth, low-interest rate environment, and GDP growth.

~~We believe the recovery of the U.S. economy and specifically the improving dynamic for U.S.~~Several industrial ~~production is expected to continue to increase demand for industrial space in the U.S.. Several~~specific trends ~~and other factors~~ contribute to the expected demand increase, including:

an increasing attractiveness of the U.S. as a manufacturing and distribution location because of the size of the U.S. consumer market, an increase in overseas labor costs and the overall cost of supplying and shipping goods (i.e., the shortening and fattening of the supply chain);

the overall quality of the transportation infrastructure in the U.S.; and

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.

Furthermore, the lack of material speculative development in most of our markets and the ~~more broad~~broader failure of supply to keep pace with demand in many of our markets may improve occupancy levels and rental rates in our ~~owned~~ portfolio. We believe, however, that industrial supply, more so than other real estate property ~~type,~~types, has historically had a short lead time and can appear quickly. We have started to see a notable pick-up in development activity in a ~~small~~growing number of the more active industrial markets, but this has yet to take firm hold on a broader scale. We will continue to monitor the supply and demand fundamentals for industrial real estate and assess its impact on our business.

~~Table of Contents~~

~~Conditions in Our Markets~~Scheduled Lease Expirations

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 and natural disasters and other factors in these markets may affect our overall performance.

~~Rental Revenue~~

We receive income primarily in the form of rental revenue from the tenants who occupy our buildings. The amount of rental revenue generated by the buildings in our portfolio depends principally on occupancy and rental rates. As of December 31, ~~2015,~~2016, our ~~buildings were~~weighted average in place remaining lease term was approximately ~~95.6% leased and our lease rates as defined by GAAP on new and renewal leases together grew approximately 16.4% and 4.6% during~~4.2 years. For the year ended December 31, 2016, we have achieved approximately a 69.5% tenant retention rate for those tenants whose leases were scheduled to expire in 2016. The following table sets forth a summary of lease expirations for leases in place as of December 31, 2016, plus available space, for each of the ten calendar years beginning with 2017 and thereafter in our portfolio. The information in the table assumes that tenants exercise no renewal options, purchase options, or early termination rights.



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	—	3,254,516	—		—		—
Month-to-month leases	7	281,824	0.5	%	$	885	0.4	%
2017	45	5,393,284	9.4	%	22,956		9.9	%
2018	65	11,038,428	19.2	%	43,394		18.8	%
2019	52	9,642,460	16.7	%	37,175		16.1	%
2020	34	7,931,114	13.8	%	33,024		14.3	%
2021	39	6,468,139	11.2	%	27,361		11.8	%
2022	24	3,331,130	5.8	%	13,737		5.9	%
2023	12	2,537,340	4.4	%	9,005		3.9	%
2024	9	2,152,791	3.7	%	7,709		3.3	%
2025	11	1,788,742	3.1	%	7,550		3.3	%
2026	13	2,930,441	5.1	%	10,728		4.6	%
Thereafter	19	4,127,995	7.1	%	17,798		7.7	%
Total/weighted average	330	60,878,204	100.0	%	$	231,322	100.0	%

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.

Item 4. Mine SafetyDisclosures

Not applicable.

PART II.

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 2017 Annual Meeting of Stockholders.

Market Information

Our common stock has been listed on the NYSE since April 15, 2011, and is traded under the symbol “STAG.” The closing share price for our common stock on February 14, 2017, as reported by the NYSE, was $23.94. For the year ended December 31, 2016, our total stockholder return was 38.0%, assuming an investment in our common stock on December 31, 2015 ~~respectively. Future economic downturns or regional downturns affecting~~and that all dividends were reinvested. The following table sets forth, for the periods indicated, the high and low sale prices in dollars on the NYSE for our ~~submarkets that impair~~common stock as well as the dividends declared per share of common stock.



Quarter ended	High		Low		Dividends Per Common Share⁽¹⁾
December 31, 2016	$	24.41	$	21.21	$	0.347499
September 30, 2016	$	25.51	$	22.68	$	0.347499
June 30, 2016	$	23.83	$	19.42	$	0.347499
March 31, 2016	$	20.54	$	14.97	$	0.347499
December 31, 2015	$	21.13	$	18.01	$	0.345000
September 30, 2015	$	21.29	$	16.66	$	0.345000
June 30, 2015	$	23.81	$	19.89	$	0.337500
March 31, 2015	$	27.61	$	22.28	$	0.337500

(1)

On November 2, 2016, our board of directors declared the common stock dividend for the months ending January 31, 2017, February 28, 2017 and March 31, 2017 at a monthly rate of $0.116667 per share of common stock. On February 15, 2017, our board of directors declared the common stock dividend for the months ending April 30, 2017, May 31, 2017, and June 30, 2017, at a monthly rate of $0.116667 per share of common stock.

Holders of Our Common Stock

As of February 14, 2017, we had approximately 65 stockholders of record. This figure does not reflect the beneficial ownership of shares held in the nominee name.

Dividends

To maintain our ~~ability~~qualification as a REIT, we must make annual distributions to ~~renew or re-lease space~~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.

Common Units and Recent Sales of Unregistered Securities

None.

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 ~~ability~~MSCI US REIT Index. The MSCI US REIT Index represents performance of ~~our tenants~~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, 2011 to ~~fulfill their lease commitments, as in the case of tenant bankruptcies, could adversely affect our ability to maintain or increase rental rates at our buildings. Our ability to lease our properties~~December 31, 2016 and ~~the attendant rental rate is dependent upon, among other things, (i) the overall economy, (ii) the supply/demand dynamic~~assumes that $100 was invested in our ~~markets, (iii)~~common stock and in each index on December 31, 2011 and that all dividends were reinvested.

This performance graph shall not be deemed “filed” for purposes of Section 18 of the ~~quality of our properties, including age, clear height, and configuration, and (iv) our tenants’ ability to meet their contractual obligations to us.~~Securities 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.

Item 6. Selected Financial Data

The following ~~table provides~~sets forth selected financial and operating data for our company on a ~~summary~~historical consolidated basis. The following data should be read in conjunction with the Consolidated Financial Statements and Notes thereto and “Management’s Discussion and Analysis of ~~leases executed~~Financial Condition and Results of Operations” included elsewhere in this Annual Report on Form 10-K. Our selected historical Consolidated Balance Sheet information as of December 31, 2016, December 31, 2015, December 31, 2014, December 31, 2013 and December 31, 2012, and our selected historical Consolidated Statement of Operations data for the years ended December 31, 2016, December 31, 2015, December 31, 2014, December 31, 2013 and December 31, ~~2014.~~2012, have been derived from the audited financial statements of STAG Industrial, Inc. Certain prior year amounts have been reclassified to conform to the current year presentation. The ~~table does not include month-to-month leases or leases with initial terms less than 12 months.~~results of operations for all periods presented have been adjusted to reflect discontinued operations.

Square Feet Cash Basis Rent Per Square Foot GAAP Basis Rent Per Square Foot
Total Turnover Costs Per Square Foot ⁽¹⁾
Cash Basis Rent Growth
GAAP Basis Rent Growth⁽²⁾⁽³⁾

Weighted Average Lease Term⁽⁴⁾

Year ended December 31, 2015

New Leases 1,439,366
$ 3.63
$ 3.49
$ 2.00
11.2 % 16.4 % 7.8
Renewal Leases 2,950,326
3.98
4.14
0.61
(1.0 )% 4.6 % 4.1
Total / weighted average 4,389,692
$ 3.87
$ 4.00
$ 1.06
1.6 % 7.1 % 5.4
Temporary Leases 1,356,770

Total Leasing Activity 5,746,462

Year ended December 31, 2014
New Leases 646,452
$ 4.02
$ 4.13
$ 1.14
6.5 % 11.5 % 5.8
Renewal Leases 4,288,760
3.79
3.84
0.72
5.0 % 8.8 % 3.6
Total / weighted average 4,935,212
$ 3.82
$ 3.87
$ 0.78
5.1 % 9.0 % 3.9
Temporary Leases 1,058,701

Total Leasing Activity 5,993,913



	Year Ended December 31,
	2016			2015⁽¹⁾			2014⁽¹⁾			2013			2012
Statements of Operations Data:
Revenue
Total revenue	$	250,243		$	218,633		$	173,816		$	133,893		$	84,052
Expenses
Property	48,904			42,627			33,388			24,010			12,841
General and administrative	33,395			28,750			26,396			17,867			14,617
Property acquisition costs	4,567			4,757			4,390			3,427			4,218
Depreciation and amortization	125,444			110,421			87,703			67,556			42,427
Loss on impairments	16,845			29,272			2,840			—			622
Other expenses	1,149			1,048			803			621			339
Total expenses	230,304			216,875			155,520			113,481			75,064
Other income (expense)
Interest income	10			9			15			13			19
Interest expense	(42,923		)	(36,098		)	(25,109		)	(20,319		)	(16,110		)
Gain on interest rate swaps	—			—			—			—			215
Loss on extinguishment of debt	(3,261		)	—			(686		)	—			(929		)
Gain on the sales of rental property, net	61,823			4,986			2,799			—			—
Total other income (expense)	15,649			(31,103		)	(22,981		)	(20,306		)	(16,805		)
Net income (loss) from continuing operations	$	35,588		$	(29,345	)	$	(4,685	)	$	106		$	(7,817	)
Total income (loss) attributable to discontinued operations	—			—			—			4,796			(2,382		)
Net income (loss)	$	35,588		$	(29,345	)	$	(4,685	)	$	4,902		$	(10,199	)
Less: income (loss) attributable to noncontrolling interest after preferred stock dividends	1,069			(1,962		)	(992		)	(620		)	(3,720		)
Less: preferred stock dividends	13,897			10,848			10,848			9,495			6,210
Less: amount allocated to participating securities	384			385			345			262			122
Net income (loss) attributable to common stockholders	$	20,238		$	(38,616	)	$	(14,886	)	$	(4,235	)	$	(12,811	)
Net income (loss) per share from continuing operations attributable to the common stockholders — basic and diluted	$	0.29		$	(0.58	)	$	(0.28	)	$	(0.20	)	$	(0.44	)
Income (loss) per share from discontinued operation attributable to common stockholders — basic and diluted	—			—			—			0.10			(0.07		)
Net income (loss) per share attributable to common stockholders — basic and diluted	$	0.29		$	(0.58	)	$	(0.28	)	$	(0.10	)	$	(0.51	)
Balance Sheets Data (December 31):
Rental property, before accumulated depreciation and amortization	$	2,541,705		$	2,188,642		$	1,809,895		$	1,389,214		$	1,059,715
Rental property, after accumulated depreciation and amortization	$	2,116,836		$	1,839,967		$	1,558,434		$	1,222,360		$	957,607
Total assets	$	2,186,156		$	1,901,782		$	1,623,802		$	1,266,460		$	1,003,342
Total debt	$	1,036,139		$	980,248		$	680,478		$	552,270		$	477,433
Total liabilities	$	1,119,230		$	1,043,925		$	731,924		$	591,896		$	513,882
Total equity	$	1,066,926		$	857,857		$	891,878		$	674,564		$	489,460
Other Data:
Dividend declared per common share	$	1.389996		$	1.365		$	1.29		$	1.20		$	1.07
Cash flow provided by operating activities	$	135,423		$	121,707		$	96,676		$	82,687		$	48,011
Cash flow used in investing activities	$	(347,112	)	$	(372,038	)	$	(421,713	)	$	(325,231	)	$	(417,203	)
Cash flow provided by financing activities	$	211,870		$	238,464		$	342,225		$	230,228		$	371,700


(1)	~~Turnover costs~~These amounts are ~~comprised~~revised as shown in Note 2 to the Consolidated Financial Statements.

Item 7. Management’s Discussion and Analysisof Financial Condition and Results of Operations

Overview

We are a REIT focused on the acquisition, ownership, and operation of single-tenant, industrial properties throughout the U.S. 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.”

As of December 31, 2016, we owned 314 buildings in 37 states with approximately 60.9 million rentable square feet, consisting of 243 warehouse/distribution buildings, 54 light manufacturing buildings, 16 flex/office buildings, and one building in redevelopment. As of December 31, 2016, our buildings were approximately 94.7% leased to 275 tenants, with no single tenant accounting for more than approximately 3.1% of our total annualized base rental revenue and no single industry accounting for more than approximately 13.6% of our total annualized base rental revenue.

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 the Operating Partnership. As of December 31, 2016, we owned approximately 95.7% of the common equity of our Operating Partnership, and our current and former executive officers, directors, senior employees and their affiliates, and third parties who contributed properties to us in exchange for common equity in our Operating Partnership, owned the remaining 4.3%. We completed our IPO and related formation transactions, pursuant to which we succeeded to the business of our predecessor, on April 20, 2011.

Factors That May Influence Future Results of Operations

Outlook

The outlook for our business remains positive, albeit on a moderated basis in light of continued slow economic growth, some uncertainty regarding the new U.S. presidential administration and its policy initiatives, and continued asset appreciation. The federal funds target rate was raised 25 basis points in December; however, the target rate remains very low, in a range of 0.50% to 0.75%. This range aligns with the Central Bank’s consistent commentary that future rate hikes would be gradual and rates will likely remain historically low for an extended period of time. At the same time, its most recent commentary suggests increasing comfort with hiking rates again in the near future. If interest rates were to rise further as a result of Federal Reserve policy action (short-term interest rates) or changes in market expectations and capital flows (long-term interest rates), we believe strengthening economic conditions are likely to accompany these changes. This strengthening of economic conditions combined with the currently favorable industrial supply/demand environment should translate to a net positive result for our business. Specifically, our existing portfolio should benefit from rising rental rates and our acquisition activity should benefit from higher yields. Furthermore, we believe certain characteristics of our business should position us well in a rising interest rate environment, including the fact that we have minimal floating rate debt exposure (taking into account our hedging activities) and that many of our competitors for the assets we purchase tend to be smaller local investors who are likely to be more heavily impacted by interest rate increases.

The results of the U.S. presidential election was largely unanticipated by the media, and it remains unclear what impact new policies will have on the economy. The positive capital market moves since the election appear to indicate net favorable expectations on key areas, including corporate tax, healthcare, regulation, infrastructure, and trade. Other notable items with economic impacts include the continued relative strength of the U.S. dollar versus competing currencies (including the euro and pound), the continuation of relatively low oil prices, and Brexit. A strong U.S. dollar can harm U.S. exporters and U.S. multi-nationals; however, it can also benefit foreign multi-nationals positively, which support U.S. subsidiaries and operate U.S. industrial properties. Oil price declines over the past two years and the lack of a sustained rebound in price have put significant pressure on oil and gas exploration and production companies, resulting in many oil and gas sector bankruptcies, while simultaneously benefiting many industries (e.g. automotive, freight) and consumers’ disposable incomes. In June, the passing of the U.K.’s referendum to separate itself from the European Union, known as Brexit, was a major surprise to the markets. The process to renegotiate financial and economic relationships and the resulting outcomes will take many years to unfold. Right now, the decline in value of the pound is a short-term benefit to U.K. exporters. The long-term impacts on the U.S. and global economy are unclear. We believe our direct exposure to the U.K. market is limited. Of our tenants that do have direct exposure to the U.K., we believe they are well-diversified businesses. We will continue to monitor these trends for short-term and long-term impacts to us.

Several economic indicators and other factors provide insight into the U.S. economic environment and industrial demand. Presently, we believe the key factors include gross domestic product ("GDP") growth rate, unemployment rate, non-farm payrolls, Conference Board consumer confidence index, manufacturing-purchasing manager index (“ISM”), the 10-year Treasury yield, U.S. total vehicle sales, and durable goods new orders. Below are recent trends in each of these factors.



Economic Indicators⁽¹⁾	December 31, 2016	September 31, 2016	June 30, 2016	March 31, 2016	December 31, 2015
GDP Growth Rate	— ⁽²⁾	3.5%	1.4%	0.8%	0.9%
Unemployment Rate	4.7%	4.9%	4.9%	5.0%	5.0%
Change in Non-Farm Employment (in thousands)	156.0	208.0	271.0	186.0	271.0
Consumer Confidence Index	113.3	104.1	97.4	96.1	96.3
ISM⁽³⁾	54.7%	51.5%	53.2%	51.8%	48.0%
10-year Treasury Yield	2.45%	1.60%	1.49%	1.78%	2.27%
Seasonally Adjusted Annualized Rate US Total Vehicle Sales (in thousands)	18,680	18,059	17,161	17,032	17,830
Manufacturing New Orders: Durable Goods (in millions)	227,108	228,204	219,055	228,499	223,402

(1)

Sources: Bureau of Economic Analysis, Bureau of Labor Statistics, Conference Board, Board of Governors of the ~~costs~~Federal Reserve System, U.S. Census Bureau, and Institute for ~~improvements~~Supply Management. Each statistic is the latest revision available at the time of vacant and renewal spaces, as well as the commissions for leasing transactions. Turnover costs per square foot represent the total turnover costs expected to be incurred on the leases signed during the period and do not reflect actual expenditures for the period.publishing this report.


(2)	~~Excludes 414,334 square feet and 269,500 square feet~~This statistic was not available at the time of new leases, where there were no prior comparable leases, due to extended downtime or materially different lease structures, during the years ended December 31, 2015 and December 31, 2014, respectively.publishing this report.

(3)

~~GAAP basis rent growth~~ISM is a ~~ratio~~composite index based on a survey of over 300 purchasing and supply executives from across the ~~change~~country who respond to a monthly questionnaire about changes in ~~base rent (including straight-line rent adjustments as required by GAAP)~~production, new orders, new export orders, imports, employment, inventories, prices, lead-times, and timelines of supplier deliveries in their companies. When the ~~comparable lease.~~


~~(4)~~	~~The lease term~~index is ~~expressed in years. Assumes no exercise of lease renewal or termination options, if any.~~over 50, it indicates expansion, while a reading below 50 signals contraction.

~~Certain leases contain~~Currently, the GDP growth rate, growing non-farm employment, strong U.S. total vehicle sales, ISM level, consumer confidence, and low interest rates are positive fundamental signs for industrial demand. Expanding job count and the ongoing low unemployment rate suggests consumers will be spending more money on goods in the foreseeable future. The strengthening U.S. dollar means that U.S. consumers may be purchasing a relatively larger amount of imported goods and that U.S. companies are likely to lower their rate of exports. This is likely to be a net positive for industrial real estate demand as imports tend to lead to greater net absorption than do exports. At the end of December 2016, the consumer confidence index reached a 13-year high and the ISM level reached its highest level in two years. On the negative side, the 2016 speculative grade corporate default rate surpassed its long-term average and reached 5.1%, significantly driven by oil and gas and mining industry defaults. We expect default rates to be stable in the coming year behind positive economic growth. However, we believe improving commodity markets and capital markets stability will be important in supporting this outlook. We also note that while automotive sales closed the year strong, they have moderated their growth in recent months and we are seeing many large multinational companies experience weak organic growth, commonly due to negative currency effects and commodity price deflation. We believe the combination of these observations signal some caution in underlying economic strength; however, we still expect an increase in industrial activity and more demand for industrial space in the foreseeable future given the job growth, low-interest rate environment, and GDP growth.

Several industrial specific trends contribute to the expected demand increase, including:

an increasing attractiveness of the U.S. as a manufacturing and distribution location because of the size of the U.S. consumer market, an increase in overseas labor costs and the overall cost of supplying and shipping goods (i.e. the shortening and fattening of the supply chain);

the overall quality of the transportation infrastructure in the U.S.; and

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.

Furthermore, the lack of material speculative development in most of our markets and the broader failure of supply to keep pace with demand in many of our markets may improve occupancy levels and rental ~~concessions. Any such rental concessions are accounted for~~rates in our portfolio. We believe, however, that industrial supply, more so than other real estate property types, has historically had a short lead time and can appear quickly. We have started to see a notable pick-up in development activity in a growing number of the more active industrial markets, but this has yet to take firm hold on a ~~straight-line basis over~~broader scale. We will continue to monitor the ~~term of the lease. The following table provides a summary of leases with rental concessions executed~~supply and demand fundamentals for ~~the years ended~~ ~~December 31, 2015~~industrial real estate and ~~December 31, 2014, respectively. The table does not include month-to-month leases or leases with initial terms less than 12 months.~~

Square Feet
Rental Concessions⁽¹⁾
Weighted Average Lease Term (years)
Year ended December 31, 2015
New Leases 896,528
$ 730,558
4.2
Renewal Leases 300,000
169,610
7.2
Total/weighted average 1,196,528
$ 900,168
4.9
Year ended December 31, 2014
New Leases 189,252
$ 125,947
2.9
Renewal Leases 690,700
246,726
4.0
Total/weighted average 879,952
$ 372,673
3.8
assess its impact on our business.


~~(1)~~	~~Represents the total concession for the entire lease term.~~

~~Table of Contents~~

~~Property Operating Expenses~~

Our rental expenses generally consist of utilities, real estate taxes, management fees, insurance and site repair and maintenance costs. For the majority of our tenants, our rental 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. 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 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 rental expenses to our tenants.

Scheduled Lease Expirations

As of December 31, 2016, our weighted average in place remaining lease term was approximately 4.2 years. For the year ended December 31, 2016, we have achieved approximately a 69.5% tenant retention rate for those tenants whose leases were scheduled to expire in 2016. The following table sets forth a summary of lease expirations for leases in place as of December 31, 2016, plus available space, for each of the ten calendar years beginning with 2017 and thereafter in our portfolio. The information in the table assumes that tenants exercise no renewal options, purchase options, or early termination rights.



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	—	3,254,516	—		—		—
Month-to-month leases	7	281,824	0.5	%	$	885	0.4	%
2017	45	5,393,284	9.4	%	22,956		9.9	%
2018	65	11,038,428	19.2	%	43,394		18.8	%
2019	52	9,642,460	16.7	%	37,175		16.1	%
2020	34	7,931,114	13.8	%	33,024		14.3	%
2021	39	6,468,139	11.2	%	27,361		11.8	%
2022	24	3,331,130	5.8	%	13,737		5.9	%
2023	12	2,537,340	4.4	%	9,005		3.9	%
2024	9	2,152,791	3.7	%	7,709		3.3	%
2025	11	1,788,742	3.1	%	7,550		3.3	%
2026	13	2,930,441	5.1	%	10,728		4.6	%
Thereafter	19	4,127,995	7.1	%	17,798		7.7	%
Total/weighted average	330	60,878,204	100.0	%	$	231,322	100.0	%

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.

Item 4. Mine SafetyDisclosures

Not applicable.

PART II.

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 2017 Annual Meeting of Stockholders.

Market Information

Our common stock has been listed on the NYSE since April 15, 2011, and is traded under the symbol “STAG.” The closing share price for our common stock on February 14, 2017, as reported by the NYSE, was $23.94. For the year ended December 31, 2016, our total stockholder return was 38.0%, assuming an investment in our common stock on December 31, 2015 and that all dividends were reinvested. The following table sets forth, for the periods indicated, the high and low sale prices in dollars on the NYSE for our common stock as well as the dividends declared per share of common stock.



Quarter ended	High		Low		Dividends Per Common Share⁽¹⁾
December 31, 2016	$	24.41	$	21.21	$	0.347499
September 30, 2016	$	25.51	$	22.68	$	0.347499
June 30, 2016	$	23.83	$	19.42	$	0.347499
March 31, 2016	$	20.54	$	14.97	$	0.347499
December 31, 2015	$	21.13	$	18.01	$	0.345000
September 30, 2015	$	21.29	$	16.66	$	0.345000
June 30, 2015	$	23.81	$	19.89	$	0.337500
March 31, 2015	$	27.61	$	22.28	$	0.337500

(1)

Holders of Our Common Stock

As of February 14, 2017, we had approximately 65 stockholders of record. This figure does not reflect the beneficial ownership of shares held in the nominee name.

Dividends

Common Units and Recent Sales of Unregistered Securities

None.

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, 2011 to December 31, 2016 and assumes that $100 was invested in our common stock and in each index on December 31, 2011 and that all dividends were reinvested.

This performance graph shall not be deemed “filed” for purposes of Section 18 of the Securities 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.

Item 6. Selected Financial Data

The following sets forth selected financial and operating data for our company on a historical consolidated basis. The following data should be read in conjunction with the Consolidated Financial Statements and Notes thereto and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this Annual Report on Form 10-K. Our selected historical Consolidated Balance Sheet information as of December 31, 2016, December 31, 2015, December 31, 2014, December 31, 2013 and December 31, 2012, and our selected historical Consolidated Statement of Operations data for the years ended December 31, 2016, December 31, 2015, December 31, 2014, December 31, 2013 and December 31, 2012, have been derived from the audited financial statements of STAG Industrial, Inc. Certain prior year amounts have been reclassified to conform to the current year presentation. The results of operations for all periods presented have been adjusted to reflect discontinued operations.



	Year Ended December 31,
	2016			2015⁽¹⁾			2014⁽¹⁾			2013			2012
Statements of Operations Data:
Revenue
Total revenue	$	250,243		$	218,633		$	173,816		$	133,893		$	84,052
Expenses
Property	48,904			42,627			33,388			24,010			12,841
General and administrative	33,395			28,750			26,396			17,867			14,617
Property acquisition costs	4,567			4,757			4,390			3,427			4,218
Depreciation and amortization	125,444			110,421			87,703			67,556			42,427
Loss on impairments	16,845			29,272			2,840			—			622
Other expenses	1,149			1,048			803			621			339
Total expenses	230,304			216,875			155,520			113,481			75,064
Other income (expense)
Interest income	10			9			15			13			19
Interest expense	(42,923		)	(36,098		)	(25,109		)	(20,319		)	(16,110		)
Gain on interest rate swaps	—			—			—			—			215
Loss on extinguishment of debt	(3,261		)	—			(686		)	—			(929		)
Gain on the sales of rental property, net	61,823			4,986			2,799			—			—
Total other income (expense)	15,649			(31,103		)	(22,981		)	(20,306		)	(16,805		)
Net income (loss) from continuing operations	$	35,588		$	(29,345	)	$	(4,685	)	$	106		$	(7,817	)
Total income (loss) attributable to discontinued operations	—			—			—			4,796			(2,382		)
Net income (loss)	$	35,588		$	(29,345	)	$	(4,685	)	$	4,902		$	(10,199	)
Less: income (loss) attributable to noncontrolling interest after preferred stock dividends	1,069			(1,962		)	(992		)	(620		)	(3,720		)
Less: preferred stock dividends	13,897			10,848			10,848			9,495			6,210
Less: amount allocated to participating securities	384			385			345			262			122
Net income (loss) attributable to common stockholders	$	20,238		$	(38,616	)	$	(14,886	)	$	(4,235	)	$	(12,811	)
Net income (loss) per share from continuing operations attributable to the common stockholders — basic and diluted	$	0.29		$	(0.58	)	$	(0.28	)	$	(0.20	)	$	(0.44	)
Income (loss) per share from discontinued operation attributable to common stockholders — basic and diluted	—			—			—			0.10			(0.07		)
Net income (loss) per share attributable to common stockholders — basic and diluted	$	0.29		$	(0.58	)	$	(0.28	)	$	(0.10	)	$	(0.51	)
Balance Sheets Data (December 31):
Rental property, before accumulated depreciation and amortization	$	2,541,705		$	2,188,642		$	1,809,895		$	1,389,214		$	1,059,715
Rental property, after accumulated depreciation and amortization	$	2,116,836		$	1,839,967		$	1,558,434		$	1,222,360		$	957,607
Total assets	$	2,186,156		$	1,901,782		$	1,623,802		$	1,266,460		$	1,003,342
Total debt	$	1,036,139		$	980,248		$	680,478		$	552,270		$	477,433
Total liabilities	$	1,119,230		$	1,043,925		$	731,924		$	591,896		$	513,882
Total equity	$	1,066,926		$	857,857		$	891,878		$	674,564		$	489,460
Other Data:
Dividend declared per common share	$	1.389996		$	1.365		$	1.29		$	1.20		$	1.07
Cash flow provided by operating activities	$	135,423		$	121,707		$	96,676		$	82,687		$	48,011
Cash flow used in investing activities	$	(347,112	)	$	(372,038	)	$	(421,713	)	$	(325,231	)	$	(417,203	)
Cash flow provided by financing activities	$	211,870		$	238,464		$	342,225		$	230,228		$	371,700


(1)	These amounts are revised as shown in Note 2 to the Consolidated Financial Statements.

Item 7. Management’s Discussion and Analysisof Financial Condition and Results of Operations

Overview

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 the Operating Partnership. As of December 31, 2016, we owned approximately 95.7% of the common equity of our Operating Partnership, and our current and former executive officers, directors, senior employees and their affiliates, and third parties who contributed properties to us in exchange for common equity in our Operating Partnership, owned the remaining 4.3%. We completed our IPO and related formation transactions, pursuant to which we succeeded to the business of our predecessor, on April 20, 2011.

Factors That May Influence Future Results of Operations

Outlook



Economic Indicators⁽¹⁾	December 31, 2016	September 31, 2016	June 30, 2016	March 31, 2016	December 31, 2015
GDP Growth Rate	— ⁽²⁾	3.5%	1.4%	0.8%	0.9%
Unemployment Rate	4.7%	4.9%	4.9%	5.0%	5.0%
Change in Non-Farm Employment (in thousands)	156.0	208.0	271.0	186.0	271.0
Consumer Confidence Index	113.3	104.1	97.4	96.1	96.3
ISM⁽³⁾	54.7%	51.5%	53.2%	51.8%	48.0%
10-year Treasury Yield	2.45%	1.60%	1.49%	1.78%	2.27%
Seasonally Adjusted Annualized Rate US Total Vehicle Sales (in thousands)	18,680	18,059	17,161	17,032	17,830
Manufacturing New Orders: Durable Goods (in millions)	227,108	228,204	219,055	228,499	223,402


(1)	Sources: Bureau of Economic Analysis, Bureau of Labor Statistics, Conference Board, Board of Governors of the Federal Reserve System, U.S. Census Bureau, and Institute for Supply Management. Each statistic is the latest revision available at the time of publishing this report.


(2)	This statistic was not available at the time of publishing this report.

(3)

Currently, the GDP growth rate, growing non-farm employment, strong U.S. total vehicle sales, ISM level, consumer confidence, and low interest rates are positive fundamental signs for industrial demand. Expanding job count and the ongoing low unemployment rate suggests consumers will be spending more money on goods in the foreseeable future. The strengthening U.S. dollar means that U.S. consumers may be purchasing a relatively larger amount of imported goods and that U.S. companies are likely to lower their rate of exports. This is likely to be a net positive for industrial real estate demand as imports tend to lead to greater net absorption than do exports. At the end of December 2016, the consumer confidence index reached a 13-year high and the ISM level reached its highest level in two years. On the negative side, the 2016 speculative grade corporate default rate surpassed its long-term average and reached 5.1%, significantly driven by oil and gas and mining industry defaults. We expect default rates to be stable in the coming year behind positive economic growth. However, we believe improving commodity markets and capital markets stability will be important in supporting this outlook. We also note that while automotive sales closed the year strong, they have moderated their growth in recent months and we are seeing many large multinational companies experience weak organic growth, commonly due to negative currency effects and commodity price deflation. We believe the combination of these observations signal some caution in underlying economic strength; however, we still expect an increase in industrial activity and more demand for industrial space in the foreseeable future given the job growth, low-interest rate environment, and GDP growth.

Several industrial specific trends contribute to the expected demand increase, including:

an increasing attractiveness of the U.S. as a manufacturing and distribution location because of the size of the U.S. consumer market, an increase in overseas labor costs and the overall cost of supplying and shipping goods (i.e. the shortening and fattening of the supply chain);

the overall quality of the transportation infrastructure in the U.S.; and

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.

Furthermore, the lack of material speculative development in most of our markets and the broader failure of supply to keep pace with demand in many of our markets may improve occupancy levels and rental rates in our portfolio. We believe, however, that industrial supply, more so than other real estate property types, has historically had a short lead time and can appear quickly. We have started to see a notable pick-up in development activity in a growing number of the more active industrial markets, but this has yet to take firm hold on a broader scale. 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

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. As of December 31, 2016, our Operating Portfolio was approximately 95.7% leased and our lease rates as defined by GAAP on new and renewal leases together grew approximately 7.3% and 7.2% during the years ended December 31, 2016 and December 31, 2015, respectively. 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, 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 provides a summary of our Operating Portfolio leases executed during the years ended December 31, 2016 and December 31, 2015. 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⁽¹⁾		GAAP Basis Rent Per Square Foot⁽²⁾		Total Turnover Costs Per Square Foot⁽³⁾		Cash Rent Change⁽¹⁾		GAAP Rent Change⁽²⁾		Weighted Average Lease Term⁽⁴⁾(years)	Rental Concessions per Square Foot⁽⁵⁾
Operating Portfolio		Square Feet	Cash Basis Rent Per Square Foot⁽¹⁾		GAAP Basis Rent Per Square Foot⁽²⁾		Total Turnover Costs Per Square Foot⁽³⁾		Cash Rent Change⁽¹⁾		GAAP Rent Change⁽²⁾		Weighted Average Lease Term⁽⁴⁾(years)	Rental Concessions per Square Foot⁽⁵⁾
Year ended December 31, 2016
New Leases⁽⁶⁾		749,275	$	3.90	$	4.16	$	2.25	(0.5	)%	4.0	%	8.2	$	0.42
Renewal Leases⁽⁷⁾		4,817,462	4.02		4.14		0.56		1.4	%	7.4	%	4.8	0.15
Total/weighted average		5,566,737	$	4.00	$	4.14	$	0.79	1.3	%	7.3	%	5.3	$	0.18
Temporary Leases⁽⁸⁾		1,329,245
Total leasing activity	��	6,895,982
Year ended December 31, 2015
New Leases⁽⁶⁾		1,393,810	$	3.40	$	3.28	$	1.85	10.8	%	18.3	%	7.9	$	0.44
Renewal Leases⁽⁷⁾		2,921,673	3.89		4.04		0.60		(0.8	)%	4.7	%	4.1	0.06
Total/weighted average		4,315,483	$	3.73	$	3.87	$	1.01	1.4	%	7.2	%	5.4	$	0.18
Temporary Leases⁽⁸⁾		1,234,600
Total leasing activity		5,550,083

(1)

We define Cash Basis Rent Change as the percentage change in base rent (excluding straight-line rent adjustments and above/below market lease amortization as required by GAAP) of the Comparable Lease. We define a Comparable Lease as a lease 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, leases on space with downtime in excess of two years, leases with materially different lease structures, leases associated with known vacates at the time of acquisition, and leases with credit-related modifications.


(2)	We define GAAP Rent Change as the percentage change in the average base rent over the contractual lease term (excluding above/below market lease amortization) of the Comparable Lease.


(3)	We define Turnover Costs as the costs for improvements of vacant and renewal spaces, as well as the commissions for leasing transactions. Turnover Costs per square foot represent the total turnover costs expected to be incurred on the leases signed during the period and do not reflect actual expenditures for the period.


(4)	We define Weighted Average Lease Term as the contractual lease term in years as of the lease start date weighted by square footage.


(5)	Represents the total concession (free rent) for the entire lease term.


(6)	We define a New Lease as any lease that is signed for an initial term equal to or greater than twelve months for any vacant space; this includes a new tenant or an existing tenant that is expanding into new (additional) space.


(7)	We define a Renewal Lease as a lease signed by an existing tenant to extend the term for twelve 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 and (iii) an early renewal or workout, which ultimately does extend the original term for twelve months or more.


(8)	We define a Temporary Lease or a License Agreement as any lease that is signed for an initial term of less than twelve months; this includes short-term new leases and short-term renewal leases.

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. 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 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 ~~11.3%~~9.9% of our total annualized base rental revenue will expire during the period from January 1, ~~2016~~2017 to December 31, ~~2016,~~2017, 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. ~~In the vacate and re-let cases,~~Assuming we ~~did~~do not ~~assume that market rents would grow from our current property estimates. Using the aforementioned assumptions,~~dispose of any of these buildings, we expect that the rental rates on the respective new leases will generally be lower than the rates under existing leases expiring during the period January 1, 2017 to December 31, 2017, thereby resulting in lower revenue from the same space.

As of December 31, ~~2015,~~2016, we had approximately ~~2.4~~3.3 million square feet of currently available space in our buildings. Of the approximately ~~4.9~~5.2 million square feet of leases that expired during the year ended December 31, ~~2015,~~2016, we have renewed

approximately ~~3.4~~3.6 million square feet ofsubject to leases, resulting in a ~~69.8%~~69.5% Operating Portfolio tenant retention rate for the year ended December 31, ~~2015.~~2016. As of December 31, ~~2015,~~2016, for the period January 1, ~~2016~~2017 to December 31, ~~2016, two~~2017, none of our top ten leases, based on December 31, ~~2015~~2016 total annualized base rental revenue, will be expiring. The Archway Marketing Services, Inc. lease for 386,724 square feet is scheduled to expire on October 14, 2016 and the Carefusion 213, LLC lease for 360,134 square feet is scheduled to expire on October 31, 2016. On February 5, 2016, our leasing team successfully executed a five year renewal with Archway Marketing Services, Inc. for the entire 386,724 square feet. Our leasing team has been in preliminary discussions on a possible renewal with Carefusion 213, LLC.

Tenant Retention

Our direct relationships with our tenants and our in-house expertise in leasing, asset management, engineering, and credit help us to manage all operational aspects of our portfolio, maintain occupancy, and increase rental rates.

The following table provides a summary of our ~~historical~~Operating Portfolio tenant retention ~~since our initial public offering:~~for the years ended December 31, 2016, December 31, 2015, and December 31, 2014.

Historical Retention
Retention ⁽¹⁾%
Expiring Square Feet
Renewal Square Feet ⁽²⁾
Cash Rollover Rent Change GAAP Rollover Rent Change
April 20, 2011 to December 31, 2011 73.9 % 514,476
380,136
1.0 % 1.9 %
Year ended December 31, 2012 82.0 % 2,152,085
1,765,353
(0.9 )% 1.2 %
Year ended December 31, 2013 58.5 % 2,811,984
1,646,283
3.6 % 6.7 %
Year ended December 31, 2014 69.7 % 3,467,769
2,418,076
5.1 % 9.4 %
Year ended December 31, 2015 69.8 % 4,938,386
3,444,670
4.2 % 8.4 %
Total/weighted average 69.5 % 13,884,700
9,654,518
3.0 % 6.4 %



Operating Portfolio Tenant Retention	Retention %⁽¹⁾		Weighted Average Lease Term (years)	Expiring Square Feet	Renewal Square Feet⁽²⁾	Cash Rent Change		GAAP Rent Change
Year ended December 31, 2016	69.5	%	4.7	5,210,736	3,620,369	3.0	%	8.2	%
Year ended December 31, 2015	69.5	%	2.8	4,895,033	3,401,317	4.5	%	8.9	%
Year ended December 31, 2014	70.8	%	3.5	3,295,096	2,331,698	5.8	%	8.5	%
Total/weighted average	69.8	%	3.7	13,400,865	9,353,384	4.2	%	8.5	%

(1)

We define Retention isas the percentage determined by taking Renewal Lease square footage commencing in the period divided by square footage of leases expiring ~~leases~~ in the ~~period that execute a lease renewal for a term greater than one year.~~period. Neither the Renewal Leases nor leases expiring include Temporary Leases or License Agreements. Retention excludes leases associated with known vacates at the time of acquisition, leases with credit-related modifications, and early terminations.


(2)	~~Represents~~We define Renewal Square Feet as the square footage of renewal leases ~~in which revenue recognition commenced~~commencing during the ~~period.~~period, irrespective of the date signed.

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

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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 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 and depreciated 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 ~~considered~~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 qualifying assets and liabilities and the results of operations that have been sold, or otherwise qualify as held for sale, as discontinued operations in all periods when the sale meets the definition of discontinued operations. Under GAAP, the definition of discontinued operations a component or group of components that is disposed of or isthose properties classified as held for sale with any qualifying assets and represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results. The components of the property’s net income (loss) that are reflected as discontinued operations include operating results, depreciation and interest expense (if the property is subject to a secured loan). In April 2014, the Financial Accounting Standards Board issued Accounting Standards Update 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~~liabilities associated with those properties 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. We early adopted~~in the ~~provision effective January 1, 2014. Prior to January 1, 2014, all properties identified as held for sale and/or disposed of were presented in discontinued operations for all periods presented.~~accompanying Consolidated Balance Sheets.

We allocate the purchase price of business combinations of properties based upon the fair value of the assets and liabilities acquired, 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 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 above and below market lease values are amortized into rental income over the remaining term plus the terms of bargain renewal options or assumed exercise of early termination options of the respective leases. 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 value of in-place lease intangibles and tenant relationships,

which are included as components of deferred leasing intangibles, are amortized over the remaining lease term (and expected renewal periods of the respective lease for tenant relationships or assumed exercise of early termination ~~options)~~options for in-place lease intangibles) as increases ~~or decreases~~ to depreciation and amortization expense. If a tenant terminates its lease, the unamortized portion of above and below market leases ~~are~~is accelerated into rental income and the in-place lease value and tenant relationships are accelerated into depreciation or amortization expense over the shortened lease term.

The purchase price allocated to deferred leasing intangible assets are included in rental property on our Consolidated Balance Sheets and the purchase price allocated to deferred leasing intangible liabilities are included in ~~the~~ deferred leasing intangibles on ~~the~~ our 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.~~debt on a basis which approximates the effective interest method.

Using information available at the time of acquisition, we allocate the total consideration to tangible assets and liabilities and identified intangible assets and liabilities, as discussed above. We may adjust the preliminary purchase price allocations after obtaining more information about asset valuations and liabilities assumed.

We evaluate the carrying value of all tangible and intangible real estate assets 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 asset and the ultimate sale of the asset. If such cash flows are less than the asset’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 such estimates could differ from actual results.

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Depreciation and amortization expense is computed using the straight-line method based on the following ~~lives:~~lives.



Building	40 Years
Building and land improvements	~~5 -~~Up to 20 ~~Years~~years
Tenant improvements	Shorter of useful life or terms of related lease
Above and below market leases and other deferred leasing intangibles	Terms of the related lease plus terms of bargain renewal options or assumed exercise of early termination options
Tenant relationships	Terms of the related lease plus estimated renewal period
Assumed debt fair value premium/discount	Terms of the related loan

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 $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. 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 not recorded any impairments to goodwill through December 31, ~~2015.~~2016.

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 ~~its~~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 the interest rate swaps 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. The fair values of the cash and cash equivalents, restricted cash, tenant accounts receivable, accounts payable and accrued expenses approximate their carrying or contract values because of the short term maturity of these instruments. See Note 4 in the accompanying Notes to Consolidated Financial Statements for the fair values of our debt. See Note 5 in the accompanying Notes to Consolidated Financial Statements for the fair values 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, outperformance programs, and ~~outperformance programs.~~performance units. See Notes 6, 7 and 128 in the accompanying Notes to Consolidated Financial Statements for further discussion of restricted shares of common stock, LTIP units, and the outperformance programs and performance units, respectively. We measure

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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.~~period, and forfeitures are recognized in the period in which they occur.

Revenue Recognition

All current leases are classified as operating leases and rental revenue is recognized on a straight-line basis over the term of the lease (and expected bargain renewal ~~terms)~~terms or assumed exercise of early termination options) when collectability is reasonably assured. Differences between rental revenue earned and amounts due under the lease are charged or credited, as applicable, to accrued rental revenue. Additional rents from expense reimbursements for insurance, real estate taxes and certain other expenses are recognized in the period in which the related expenses are incurred.

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 earn revenue from asset management fees, which are included in our Consolidated Statements of Operations in other income. We recognize revenue from asset management fees when the related fees are earned and are realized or realizable.

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 our 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, we would record a liability for such obligation. We do not recognize recovery revenue related to leases where the tenant will pay expenses directly for real estate taxes, insurance, ground lease payments, and certain other expenses.

Results of Operations

Our results of operations are largely driven by our levels of occupancy as well as the rental rates we receive from tenants. From a rental rate standpoint, we have historically achieved overall rental increases in our tenant rollovers on a cash basis and GAAP basis.

The following discussion of our results of our same store 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. We consider our same store portfolio to consist of only those industrial buildings owned and operated at the beginning and at the end of both of the applicable periods presented. Same store results are considered to be useful to investors in evaluating our performance because they provide information relating to changes in ~~building-level~~property level operating performance without taking into account the effects of acquisitions or dispositions. However, because we have generally acquired 100% occupied properties and have grown the portfolio significantly every year since our initial public offering, our same store results do not represent a market portfolio with market occupancy. Because we have above market same store occupancy, our same store results may look unfavorable at times as we trend to market levels. 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.

Comparison of the year ended December 31, 2016 to the year ended December 31, 2015

Our results of operations are affected by the acquisition and disposition activity during the 2016 and 2015 periods as described below. The following discussion of our same store portfolio excludes flex/office buildings, redevelopment buildings, and those classified as held for sale on the accompanying Consolidated Balance Sheets. On December 31, 2016 we owned 204 industrial buildings consisting of 40,957,663 square feet, which represents approximately 67.3% of our total portfolio, that are considered our same store portfolio in the analysis below. Same store occupancy decreased approximately 1.1% to 95.3% as of December 31, 2016 compared to 96.4% as of December 31, 2015.

The following table summarizes selected operating information for our same store portfolio and our total portfolio for the years ended December 31, 2016 and December 31, 2015 (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, 2016 and December 31, 2015 with respect to the buildings acquired and disposed of after January 1, 2015 and our flex/office buildings, redevelopment buildings, and those classified as held for sale.



	Same Store Portfolio									Acquisitions/Dispositions				Other ⁽¹⁾				Total Portfolio
	Year ended December 31,				Change					Year ended December 31,				Year ended December 31,				Year ended December 31,						Change
	2016		2015		$			%		2016		2015		2016		2015		2016			2015			$			%
Revenue
Operating revenue
Rental income	$	148,670	$	147,322	$	1,348		0.9	%	$	56,743	$	29,746	$	7,328	$	9,395	$	212,741		$	186,463		$	26,278		14.1	%
Tenant recoveries	24,317		23,317		1,000			4.3	%	10,282		5,754		2,508		2,595		37,107			31,666			5,441			17.2	%
Other income	102		84		18			21.4	%	71		25		222		395		395			504			(109		)	(21.6	)%
Total operating revenue	173,089		170,723		2,366			1.4	%	67,096		35,525		10,058		12,385		250,243			218,633			31,610			14.5	%
Expenses
Property	30,036		30,280		(244		)	(0.8	)%	13,920		8,235		4,948		4,112		48,904			42,627			6,277			14.7	%
Net operating income ⁽²⁾	$	143,053	$	140,443	$	2,610		1.9	%	$	53,176	$	27,290	$	5,110	$	8,273	201,339			176,006			25,333			14.4	%
Other expenses
General and administrative																		33,395			28,750			4,645			16.2	%
Property acquisition costs																		4,567			4,757			(190		)	(4.0	)%
Depreciation and amortization																		125,444			110,421			15,023			13.6	%
Loss on impairments																		16,845			29,272			(12,427		)	(42.5	)%
Other expenses																		1,149			1,048			101			9.6	%
Total other expenses																		181,400			174,248			7,152			4.1	%
Total expenses																		230,304			216,875			13,429			6.2	%
Other income (expense)
Interest income																		10			9			1			11.1	%
Interest expense																		(42,923		)	(36,098		)	(6,825		)	18.9	%
Loss on extinguishment of debt																		(3,261		)	—			(3,261		)	100.0	%
Gain on the sales of rental property, net																		61,823			4,986			56,837			1,139.9	%
Total other income (expense)																		15,649			(31,103		)	46,752			150.3	%
Net income (loss)																		$	35,588		$	(29,345	)	$	64,933		221.3	%


(1)	Includes flex/office buildings, and redevelopment buildings, and buildings classified as held for sale, which are excluded from the same store portfolio. Also includes corporate sublease rental income and asset management fee income, which are separated for purposes of calculating NOI.

(2)

Excluding corporate sublease rental income and asset management fee income, NOI for the total portfolio for the years ended December 31, 2016 and December 31, 2015 was $201.1 million and $175.4 million, respectively. Corporate sublease rental income and asset management fee income are included in rental income and other income, respectively, in the table above. For a detailed discussion of NOI, including the reasons management believes NOI is useful to investors, see “Non-GAAP Financial Measures” below.

Net income (loss) for our total portfolio increased by $64.9 million or 221.3% to a net income position of $35.6 million for the year ended December 31, 2016, compared to a net loss position of $29.3 million for the year ended December 31, 2015. For a detailed reconciliation of our same store portfolio to net income (loss), see the table on the previous page.

Same Store Total Operating Revenue

Same store operating revenue consists primarily of (i) rental income consisting of base rent, termination income, straight-line rent and above and below market lease amortization from our properties, and (ii) tenant reimbursements for insurance, real estate taxes and certain other expenses (“tenant recoveries”).

For a detailed reconciliation of our same store portfolio to net income (loss), see the table on the previous page.

Same store rental income increased by $1.3 million or 0.9% to $148.7 million for the year ended December 31, 2016, compared to $147.3 million for the year ended December 31, 2015. Approximately $3.7 million of the increase was attributable to rental increases due to new leases and renewals of existing tenants. Same store rental income also increased approximately $0.4 million due to a net decrease in the amortization of net above market leases and approximately $0.1 million due to the recognition of a straight-line termination fee at our Golden, CO property, as discussed in Note 2 of the accompanying Notes to Consolidated Financial Statements. These increases were partially offset by an approximately $3.0 million decrease due to a reduction of base rent due to tenants downsizing their spaces and vacancies.

Same store tenant recoveries increased by $1.0 million or 4.3% to $24.3 million for the year ended December 31, 2016, compared to $23.3 million for the year ended December 31, 2015. This increase is primarily related to an increase of approximately $2.1 million related to increases of real estate taxes levied by the related taxing authority, occupancy in previously vacant buildings, as well as changes to lease terms where we began paying the real estate taxes and operating expenses on behalf of tenants that had previously paid its taxes and operating expenses directly to respective vendors. These increases were partially offset by a decrease of approximately $1.1 million related to decreases of real estate taxes levied by the related taxing authority and vacancies.

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 to net income (loss), see the table on the previous page.

Total same store expenses decreased by $0.2 million or 0.8% to $30.0 million for the year ended December 31, 2016, compared to $30.3 million for the year ended December 31, 2015. This decrease is primarily related to a decrease of approximately $0.1 million in snow removal expenses attributable to a more mild winter in 2016 as compared to 2015, as well as a decrease of approximately $0.3 million in general repairs and maintenance expenses. These decreases were partially offset by an increase of approximately $0.2 million related to increases of real estate taxes levied by the related 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.

Acquisitionsand DispositionsNet Operating Income

For a detailed reconciliation of our acquisitions and dispositions portfolio to net income (loss), see the table on the previous page.

Subsequent to January 1, 2015, we acquired 96 buildings consisting of approximately 19.0 million square feet, and sold 30 buildings consisting of approximately 5.0 million square feet. For the years ended December 31, 2016 and December 31, 2015, the buildings acquired after January 1, 2015 contributed approximately $46.4 million and $14.6 million to NOI, respectively. For the years ended December 31, 2016 and December 31, 2015, the buildings sold after January 1, 2015 contributed approximately $6.8 million and $12.7 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, redevelopment buildings, and buildings classified as held for sale. It also includes corporate sublease rental income and asset management fee income, which are separated for purposes of calculating NOI for the total portfolio.

For a detailed reconciliation of our flex/office buildings, redevelopment buildings, and buildings classified as held for sale to net income (loss), see the table on the previous page.

At December 31, 2016 we owned 15 flex/office buildings consisting of approximately 0.9 million square feet and one redevelopment building consisting of approximately 0.3 million square feet that are not included in our same store or acquisitions and dispositions portfolios. These building contributed approximately $4.9 million and $7.7 million to NOI for the years ended December 31, 2016 and December 31, 2015, respectively. Additionally, we earned $0, $0.2 million, $0.2 million, and $0.4 million in corporate sublease rental income and asset management fee income for the years ended December 31, 2016 and December 31, 2015, respectively.

Total Other Expenses

Total other expenses consist of general and administrative expense, property acquisition costs, depreciation and amortization, loss on impairments, and other expenses.

Total other expenses increased $7.2 million or 4.1% for the year ended December 31, 2016 to $181.4 million compared to $174.2 million for the year ended December 31, 2015. The increase was primarily related to an increase of $15.0 million in depreciation and amortization as a result of buildings acquired, net of buildings disposed, which increased the depreciable asset base. Approximately $4.6 million of the increase relates to an increase in general and administrative expenses, primarily related to compensation expense of approximately $3.1 million related to the severance costs of a former executive officer during the year ended December 31, 2016, as well as the 2016 equity grants for employees and independent directors. These increases are partially offset by a decrease of approximately $12.4 million in loss on impairments recorded due to the impairment of 12 buildings for the year ended December 31, 2016 compared to the impairment of 14 buildings for the year ended December 31, 2015.

Total Other Income (Expense)

Total other income (expense) consists of interest income, interest expense, loss on extinguishment of debt, and gain on the sales of rental property. 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 other income (expense) increased $46.8 million or 150.3% to a net other income of $15.6 million for the year ended December 31, 2016 compared to a net other expense of $31.1 million for the year ended December 31, 2015. This increase is primarily the result of an increase in the gain on the sales of rental property of approximately $56.8 million due to the sales of 24 buildings, whereas there were six buildings sold during the year ended December 31, 2015. This was partially offset by a loss on extinguishment of debt of approximately $3.3 million for the year ended December 31, 2016, whereas there was no loss on extinguishment of debt during the year ended December 31, 2015. This was also partially offset by an increase in interest expense of approximately $6.8 million related to the increase in total average debt outstanding for the year ended December 31, 2016 compared to the year ended December 31, 2015.

Comparison of year ended December 31, 2015 to the year ended December 31, 2014

Our results of operations are affected by the acquisition and disposition activity during the 2015 and 2014 periods as described below. On January 1, 2014, we owned 209 buildings, and subsequent to the January 1, 2014, we sold 10 buildings for which the results of operations are included in dispositions in the table below are not considered partThe following discussion of our same store ~~portfolio. Therefore, there are 199~~portfolio excludes flex/office buildings, redevelopment buildings, and those classified as held for sale on the accompanying Consolidated Balance Sheets. On December 31, 2015 we owned 179 industrial buildings consisting of 35,600,752 square feet, which represented approximately 65.1% of our total portfolio, that are considered our same store portfolio in the analysis below. Same store occupancy ~~decreased approximately 0.3% to 94.2%~~remained flat at 95.2% as of December 31, 2015 compared to ~~94.5%~~95.2% as of December 31, 2014. ~~The results of operations from acquisitions relates to the 92 buildings acquired after January 1, 2014 for an aggregate cost of approximately $852.3 million.~~

The following table summarizes selected operating information for our same store portfolio and our total portfolio for the years ended December 31, 2015 and December 31, 2014 (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, 2015 and December 31, 2014 with respect to the buildings acquired and disposed of after January 1, ~~2014.~~2014 and our flex/office buildings.

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	Same Store Portfolio									Acquisitions/Dispositions				Other ⁽¹⁾				Total Portfolio											Same Store Portfolio									Acquisitions/Dispositions				Other ⁽¹⁾				Total Portfolio
	Year ended December 31,				Change					Year ended December 31,				Year ended December 31,				Year ended December 31,						Change					Year ended December 31,				Change					Year ended December 31,				Year ended December 31,				Year ended December 31,						Change
	2015		2014		$			%		2015		2014		2015		2014		2015			2014			$			%		2015		2014		$			%		2015		2014		2015		2014		2015			2014			$			%
Revenue
Operating revenue
Rental income	$	132,228	$	131,332	$	896		0.7	%	$	54,048	$	18,121	$	187	$	17	$	186,463		$	149,470		$	36,993		24.7	%	$	123,257	$	122,439	$	818		0.7	%	$	54,048	$	18,121	$	9,158	$	8,910	$	186,463		$	149,470		$	36,993		24.7	%
Tenant recoveries	20,533		20,688		(155		)	(0.7	)%	11,133		2,919		—		—		31,666			23,607			8,059			34.1	%	17,948		18,493		(545		)	(2.9	)%	11,133		2,919		2,585		2,195		31,666			23,607			8,059			34.1	%
Other income	98		110		(12		)	(10.9	)%	27		31		379		598		504			739			(235		)	(31.8	)%	92		104		(12		)	(11.5	)%	27		32		385		603		504			$	739		(235		)	(31.8	)%
Total operating revenue	152,859		152,130		729			0.5	%	65,208		21,071		566		615		218,633			173,816			44,817			25.8	%	141,297		141,036		261			0.2	%	65,208		21,072		12,128		11,708		218,633			173,816			44,817			25.8	%
Expenses
Property	30,659		29,707		952			3.2	%	11,968		3,681		—		—		42,627			33,388			9,239			27.7	%	25,942		25,734		208			0.8	%	11,968		3,681		4,717		3,973		42,627			33,388			9,239			27.7	%
Net operating income ⁽²⁾	$	122,200	$	122,423	$	(223	)	(0.2	)%	$	53,240	$	17,390	$	566	$	615	176,006			140,428			35,578			25.3	%	$	115,355	$	115,302	$	53		—	%	$	53,240	$	17,391	$	7,411	$	7,735	$	176,006		$	140,428		$	35,578		25.3	%
Other expenses
Other expenses (income)
General and administrative																		28,750			26,396			2,354			8.9	%																		28,750			26,396			2,354			8.9	%
Property acquisition costs																		4,757			4,390			367			8.4	%																		4,757			4,390			367			8.4	%
Depreciation and amortization	Depreciation and amortization																	112,545			88,057			24,488			27.8	%	Depreciation and amortization																	110,421			87,703			22,718			25.9	%
Loss on impairments																		29,272			2,840			26,432			930.7	%																		29,272			2,840			26,432			930.7	%
Other expenses																		1,048			803			245			30.5	%																		1,048			803			245			30.5	%
Total other expenses																		176,372			122,486			53,886			44.0	%																		174,248			122,132			52,116			42.7	%
Total expenses																		218,999			155,874			63,125			40.5	%																		216,875			155,520			61,355			39.5	%
Other income (expense)
Interest income																		9			15			(6		)	(40.0	)%																		9			15			(6		)	(40.0	)%
Interest expense																		(36,098		)	(25,109		)	(10,989		)	43.8	%																		(36,098		)	(25,109		)	(10,989		)	43.8	%
Loss on extinguishment of debt	Loss on extinguishment of debt																	—			(686		)	686			(100.0	)%	Loss on extinguishment of debt																	—			(686		)	686			(100.0	)%
Gain on sales of rental property																		4,986			2,799			2,187			78.1	%
Gain on the sales of rental property, net																													Gain on the sales of rental property, net																	4,986			2,799			2,187			78.1	%
Total other income (expense)	Total other income (expense)																	(31,103		)	(22,981		)	(8,122		)	35.3	%	Total other income (expense)																	(31,103		)	(22,981		)	(8,122		)	35.3	%
Net loss																		$	(31,469	)	$	(5,039	)	$	(26,430	)	524.5	%																		$	(29,345	)	$	(4,685	)	$	(24,660	)	526.4	%
Less: loss attributable to noncontrolling interest after preferred stock dividends																		(2,066		)	(1,014		)	(1,052		)	103.7	%
Net loss attributable to STAG Industrial, Inc.																		$	(29,403	)	$	(4,025	)	$	(25,378	)	630.5	%

~~Table of Contents~~

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS



Report of Independent Registered Public Accounting Firm	F-2

Consolidated Balance Sheets as of December 31, ~~2015~~2016 and ~~2014~~2015 for STAG Industrial, Inc.	F-3

Consolidated Statements of Operations for STAG Industrial, Inc. for the Years ended December 31, ~~2015,~~2016, December 31, ~~2014~~2015 and December 31, ~~2013~~2014	F-4

Consolidated Statements of Comprehensive Income (Loss) for the Years ended December 31, ~~2015,~~2016, December 31, ~~2014~~2015 and December 31, ~~2013~~2014	F-5

Consolidated Statements of Equity for STAG Industrial, Inc. for the Years ended December 31, ~~2015,~~2016, December 31, ~~2014~~2015 and December 31, ~~2013~~2014	F-6

Consolidated Statements of Cash Flows for STAG Industrial, Inc. for the Years ended December 31, ~~2015,~~2016, December 31, ~~2014~~2015 and December 31, ~~2013~~2014	F-7

Notes to Consolidated Financial Statements	F-8

Financial Statement Schedule—Schedule II	~~F-45~~F-47

Financial Statement Schedule—Schedule III	~~F-46~~F-48

~~F-1~~

~~Table of Contents~~

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of STAG Industrial, Inc.:

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, comprehensive income (loss), equity and cash flows present fairly, in all material respects, the financial position of STAG Industrial, Inc. and its subsidiaries at December 31, ~~2015~~2016 and ~~2014,~~2015, and the results of their operations and their cash flows for each of the three years in the period ended December 31, ~~2015~~2016 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedules listed in the accompanying index present fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, ~~2015,~~2016, based on criteria established in Internal Control - Integrated Framework ~~(2013)~~ (2013)issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company's management is responsible for these financial statements and financial statement schedules, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in Management's Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on these financial statements, on the financial statement schedules, and on the Company's internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ PricewaterhouseCoopers LLP

Boston, Massachusetts

February ~~25, 2016~~16, 2017

~~F-2~~

~~Table of Contents~~

Part I. Financial Information

Item 1. Financial Statements

STAG Industrial, Inc.

Consolidated Balance Sheets

(in thousands, except share data)


	December 31, 2015			December 31, 2014			December 31, 2016			December 31, 2015
Assets
Rental Property:
Land	$	228,919		$	191,238		$	272,162		$	228,919
Buildings and improvements, net of accumulated depreciation of $150,395 and $105,789, respectively	1,332,298			1,118,938
Deferred leasing intangibles, net of accumulated amortization of $200,758 and $146,026, respectively	276,272			247,904
Buildings and improvements, net of accumulated depreciation of $187,413 and $147,917, respectively							1,550,141			1,334,776
Deferred leasing intangibles, net of accumulated amortization of $237,456 and $200,758, respectively							294,533			276,272
Total rental property, net	1,837,489			1,558,080			2,116,836			1,839,967
Cash and cash equivalents	12,011			23,878			12,192			12,011
Restricted cash	8,395			6,906			9,613			8,395
Tenant accounts receivable, net	21,478			16,833			25,223			21,478
Prepaid expenses and other assets	24,996			22,661			20,821			18,064
Interest rate swaps	1,867			959			1,471			1,867
Total assets	$	1,906,236		$	1,629,317		$	2,186,156		$	1,901,782
Liabilities and Equity
Liabilities:
Unsecured credit facility	$	56,000		$	131,000		$	28,000		$	56,000
Unsecured term loans	300,000			150,000
Unsecured notes	400,000			180,000
Mortgage notes	231,180			225,347
Unsecured term loans, net							446,608			296,618
Unsecured notes, net							397,966			397,720
Mortgage notes, net							163,565			229,910
Accounts payable, accrued expenses and other liabilities	25,662			21,558			35,389			25,662
Interest rate swaps	3,766			873			2,438			3,766
Tenant prepaid rent and security deposits	14,628			11,480			15,195			14,628
Dividends and distributions payable	8,234			7,355			9,728			8,234
Deferred leasing intangibles, net of accumulated amortization of $8,536 and $6,565, respectively	11,387			10,180
Deferred leasing intangibles, net of accumulated amortization of $10,450 and $8,536, respectively							20,341			11,387
Total liabilities	1,050,857			737,793			1,119,230			1,043,925
Commitments and contingencies (Note 10)
Commitments and contingencies (Note 11)
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 December 31, 2015 and December 31, 2014	69,000			69,000
Series B, 2,800,000 shares (liquidation preference of $25.00 per share) issued and outstanding at December 31, 2015 and December 31, 2014	70,000			70,000
Common stock, par value $0.01 per share, 100,000,000 shares authorized, 68,077,333 and 64,434,825 shares issued and outstanding at December 31, 2015 and December 31, 2014, respectively	681			644
Preferred stock, par value $0.01 per share, 15,000,000 shares authorized,
Series A, no shares issued and outstanding at December 31, 2016 and 2,760,000 shares (liquidation preference of $25.00 per share) issued and outstanding at December 31, 2015							—			69,000
Series B, 2,800,000 shares (liquidation preference of $25.00 per share) issued and outstanding at December 31, 2016 and December 31, 2015							70,000			70,000
Series C, 3,000,000 shares (liquidation preference of $25.00 per share) issued and outstanding at December 31, 2016 and no shares issued and outstanding at December 31, 2015							75,000			—
Common stock, par value $0.01 per share, 150,000,000 shares authorized, 80,352,304 and 68,077,333 shares issued and outstanding at December 31, 2016 and December 31, 2015, respectively							804			681
Additional paid-in capital	1,017,394			928,242			1,293,706			1,017,397
Common stock dividends in excess of earnings	(334,623		)	(203,241		)	(410,978		)	(332,271		)
Accumulated other comprehensive loss	(2,350		)	(489		)	(1,496		)	(2,350		)
Total stockholders’ equity	820,102			864,156			1,027,036			822,457
Noncontrolling interest	35,277			27,368			39,890			35,400
Total equity	855,379			891,524			1,066,926			857,857
Total liabilities and equity	$	1,906,236		$	1,629,317		$	2,186,156		$	1,901,782

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

~~F-3~~

~~Table of Contents~~

STAG Industrial, Inc.

Consolidated Statements of Operations

(in thousands, except share data)


	Year ended December 31,									Year ended December 31,
	2015			2014			2013			2016			2015			2014
Revenue
Rental income	$	186,463		$	149,470		$	116,344		$	212,741		$	186,463		$	149,470
Tenant recoveries	31,666			23,607			16,349			37,107			31,666			23,607
Other income	504			739			1,200			395			504			739
Total revenue	218,633			173,816			133,893			250,243			218,633			173,816
Expenses
Property	42,627			33,388			24,010			48,904			42,627			33,388
General and administrative	28,750			26,396			17,867			33,395			28,750			26,396
Property acquisition costs	4,757			4,390			3,427			4,567			4,757			4,390
Depreciation and amortization	112,545			88,057			67,556			125,444			110,421			87,703
Loss on impairments	29,272			2,840			—			16,845			29,272			2,840
Other expenses	1,048			803			621			1,149			1,048			803
Total expenses	218,999			155,874			113,481			230,304			216,875			155,520
Other income (expense)
Interest income	9			15			13			10			9			15
Interest expense	(36,098		)	(25,109		)	(20,319		)	(42,923		)	(36,098		)	(25,109		)
Loss on extinguishment of debt	—			(686		)	—			(3,261		)	—			(686		)
Gain on sales of rental property	4,986			2,799			—
Gain on the sales of rental property, net										61,823			4,986			2,799
Total other income (expense)	(31,103		)	(22,981		)	(20,306		)	15,649			(31,103		)	(22,981		)
Net income (loss) from continuing operations	$	(31,469	)	$	(5,039	)	$	106
Discontinued operations
Loss attributable to discontinued operations	—			—			(509		)
Gain on sales of rental property	—			—			5,305
Total income attributable to discontinued operations	$	—		$	—		$	4,796
Net income (loss)	$	(31,469	)	$	(5,039	)	$	4,902		$	35,588		$	(29,345	)	$	(4,685	)
Less: loss attributable to noncontrolling interest after preferred stock dividends	(2,066		)	(1,014		)	(620		)
Less: income (loss) attributable to noncontrolling interest after preferred stock dividends										1,069			(1,962		)	(992		)
Net income (loss) attributable to STAG Industrial, Inc.	$	(29,403	)	$	(4,025	)	$	5,522		$	34,519		$	(27,383	)	$	(3,693	)
Less: preferred stock dividends	10,848			10,848			9,495			13,897			10,848			10,848
Less: amount allocated to unvested restricted stockholders	385			345			262
Net loss attributable to common stockholders	$	(40,636	)	$	(15,218	)	$	(4,235	)
Weighted average common shares outstanding — basic and diluted	66,307,972			54,086,345			42,364,125
Loss per share — basic and diluted
Loss from continuing operations attributable to common stockholders	$	(0.61	)	$	(0.28	)	$	(0.20	)
Income from discontinued operations attributable to common stockholders	—			—			0.10
Loss per share — basic and diluted	$	(0.61	)	$	(0.28	)	$	(0.10	)
Less: amount allocated to participating securities										384			385			345
Net income (loss) attributable to common stockholders										$	20,238		$	(38,616	)	$	(14,886	)
Weighted average common shares outstanding — basic										70,637,185			66,307,972			54,086,345
Weighted average common shares outstanding — diluted										70,852,548			66,307,972			54,086,345
Net income (loss) per share — basic and diluted
Net income (loss) per share attributable to common stockholders — basic										$	0.29		$	(0.58	)	$	(0.28	)
Net income (loss) per share attributable to common stockholders — diluted										$	0.29		$	(0.58	)	$	(0.28	)

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

~~F-4~~

~~Table of Contents~~

STAG Industrial, Inc.

Consolidated Statements of Comprehensive Income(Loss)

(in thousands)


	Year ended December 31,									Year ended December 31,
	2015			2014			2013			2016			2015			2014
Net income (loss)	$	(31,469	)	$	(5,039	)	$	4,902		$	35,588		$	(29,345	)	$	(4,685	)
Other comprehensive income (loss):
Income (loss) on interest rate swaps	(1,956		)	(4,197		)	4,405			898			(1,956		)	(4,197		)
Other comprehensive income (loss)	(1,956		)	(4,197		)	4,405			898			(1,956		)	(4,197		)
Comprehensive income (loss)	(33,425		)	(9,236		)	9,307			36,486			(31,301		)	(8,882		)
Net loss attributable to noncontrolling interest after preferred stock dividends	2,066			1,014			620
Net (income) loss attributable to noncontrolling interest after preferred stock dividends										(1,069		)	1,962			992
Other comprehensive (income) loss attributable to noncontrolling interest	95			268			(594		)	(44		)	95			268
Comprehensive income (loss) attributable to STAG Industrial, Inc.	$	(31,264	)	$	(7,954	)	$	9,333		$	35,373		$	(29,244	)	$	(7,622	)

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

~~F-5~~

~~Table of Contents~~

STAG Industrial, Inc.

Consolidated Statements of Equity

(in thousands, except share data)


	Preferred Stock			Common Stock			Additional Paid-in Capital				Common Stock Dividends in excess of Earnings			Accumulated Other Comprehensive Income (Loss)				Total Stockholders' Equity				Noncontrolling Interest - Unit holders in Operating Partnership				Total Equity			Preferred Stock			Common Stock				Additional Paid-in Capital			Common Stock Dividends in excess of Earnings			Accumulated Other Comprehensive income (loss)			Total Stockholders' Equity			Noncontrolling Interest - Unit holders in Operating Partnership			Total Equity
	Preferred Stock			Shares	Amount									Accumulated Other Comprehensive Income (Loss)			Shares								Amount				Preferred Stock							Additional Paid-in Capital			Common Stock Dividends in excess of Earnings			Accumulated Other Comprehensive income (loss)			Total Stockholders' Equity						Total Equity
Balance, December 31, 2012	$	69,000		35,698,582	$	357	Additional Paid-in Capital			$	Common Stock Dividends in excess of Earnings	419,643		$	(61,024	)		Total Stockholders' Equity	$	(371	)		$	427,605		Total Equity			$	61,855		$	489,460
Proceeds from sales of common stock	—			8,956,844	89		169,658				—			—				169,747				—				169,747
Issuance of series B preferred stock	70,000			—	—		—				—			—				70,000				—				70,000
Offering costs	—			—	—		(8,713		)		—			—				(8,713		)		—				(8,713		)
Issuance of restricted stock, net	—			96,287	1		(1		)		—			—				—				—				—
Issuance of common stock	—			10,478	—		—				—			—				—				—				—
Dividends and distributions, net	(9,495		)	—	—		—				(51,880		)	—				(61,375		)		(8,330		)		(69,705		)
Non-cash compensation	—			—	—		1,360				—			—				1,360				1,609				2,969
Issuance of units	—			—	—		—				—			—				—				11,499				11,499
Redemption of common units to common stock	—			2,186	—		23				—			—				23				(23		)		—
Rebalancing of noncontrolling interest	—			—	—		(4,931		)		—			—				(4,931		)		4,931				—
Other comprehensive income	—			—	—		—				—			3,811				3,811				594				4,405
Net income (loss)	9,495			—	—		—				(3,973		)	—				5,522				(620		)		4,902
Balance, December 31, 2013	$	139,000		44,764,377	$	447	$	577,039			$	(116,877	)	$	3,440			$	603,049			$	71,515			$	674,564		$	139,000		44,764,377		$	447	$	577,039		$	(116,877	)	$	3,440		$	603,049		$	71,515		$	674,564
Proceeds from sales of common stock	—			14,406,376	144		316,548				—			—				316,692				—				316,692			—			14,406,376		144		316,548			—			—			316,692			—			316,692
Offering costs	—			—	—		(8,899		)		—			—				(8,899		)		—				(8,899		)	—			—		—		(8,899		)	—			—			(8,899		)	—			(8,899		)
Issuance of restricted stock, net	—			101,412	1		(1		)		—			—				—				—				—			—			101,412		1		(1		)	—			—			—			—			—
Issuance of common stock	—			13,446	—		—				—			—				—				—				—			—			13,446		—		—			—			—			—			—			—
Issuance of equity pursuant to outperformance program	—			43,657	1		(1,491		)		—			—				(1,490		)		1,015				(475		)	—			43,657		1		(1,491		)	—			—			(1,490		)	1,015			(475		)
Dividends and distributions, net	(10,848		)	—	—		—				(71,491		)	—				(82,339		)		(4,361		)		(86,700		)	(10,848		)	—		—		—			(71,491		)	—			(82,339		)	(4,361		)	(86,700		)
Non-cash compensation	—			—	—		1,924				—			—				1,924				5,355				7,279			—			—		—		1,924			—			—			1,924			5,355			7,279
Redemption of common units to common stock	—			5,105,584	51		54,681				—			—				54,732				(54,732		)		—			—			5,105,584		51		54,681			—			—			54,732			(54,732		)	—
Redemption of common units for cash	—			—	—		—				—			—				—				(1,701		)		(1,701		)	—			—		—		—			—			—			—			(1,701		)	(1,701		)
Rebalancing of noncontrolling interest	—			—	—		(11,559		)		—			—				(11,559		)		11,559				—			—			—		—		(11,550		)	—			—			(11,550		)	11,550			—
Other comprehensive loss	—			—	—		—				—			(3,929		)		(3,929		)		(268		)		(4,197		)	—			—		—		—			—			(3,929		)	(3,929		)	(268		)	(4,197		)
Net income (loss)	10,848			—	—		—				(14,873		)	—				(4,025		)		(1,014		)		(5,039		)
Net loss																													10,848			—		—		—			(14,541		)	—			(3,693		)	(992		)	(4,685		)
Balance, December 31, 2014	$	139,000		64,434,852	$	644	$	928,242			$	(203,241	)	$	(489	)		$	864,156			$	27,368			$	891,524		$	139,000		64,434,852		$	644	$	928,251		$	(202,909	)	$	(489	)	$	864,497		$	27,381		$	891,878
Proceeds from sale of common stock	—			3,456,403	35		74,857				—			—				74,892				—				74,892
Proceeds from sales of common stock																													—			3,456,403		35		74,857			—			—			74,892			—			74,892
Offering costs	—			—	—		(1,229		)		—			—				(1,229		)		—				(1,229		)	—			—		—		(1,229		)	—			—			(1,229		)	—			(1,229		)
Issuance of restricted stock, net	—			79,384	1		(1		)		—			—				—				—				—			—			79,384		1		(1		)	—			—			—			—			—
Issuance of common stock	—			15,870	—		—				—			—				—				—				—			—			15,870		—		—			—			—			—			—			—
Dividends and distributions, net	(10,848		)	—	—		—				(91,131		)	—				(101,979		)		(4,772		)		(106,751		)	(10,848		)	—		—		—			(91,131		)	—			(101,979		)	(4,772		)	(106,751		)
Non-cash compensation	—			—	—		2,805				—			—				2,805				4,774				7,579			—			—		—		2,805			—			—			2,805			4,774			7,579
Redemption of common units to common stock	—			90,824	1		1,002				—			—				1,003				(1,003		)		—			—			90,824		1		1,002			—			—			1,003			(1,003		)	—
Redemption of common units for cash	—			—	—		—				—			—				—				(64		)		(64		)	—			—		—		—			—			—			—			(64		)	(64		)
Issuance of units	—			—	—		—				—			—				—				22,853				22,853			—			—		—		—			—			—			—			22,853			22,853
Rebalancing of noncontrolling interest	—			—	—		11,718				—			—				11,718				(11,718		)		—			—			—		—		11,712			—			—			11,712			(11,712		)	—
Other comprehensive loss	—			—	—		—				—			(1,861		)		(1,861		)		(95		)		(1,956		)	—			—		—		—			—			(1,861		)	(1,861		)	(95		)	(1,956		)
Net income (loss)	10,848			—	—		—				(40,251		)	—				(29,403		)		(2,066		)		(31,469		)
Net loss																													10,848			—		—		—			(38,231		)	—			(27,383		)	(1,962		)	(29,345		)
Balance, December 31, 2015	$	139,000		68,077,333	$	681	$	1,017,394			$	(334,623	)	$	(2,350	)		$	820,102			$	35,277			$	855,379		$	139,000		68,077,333		$	681	$	1,017,397		$	(332,271	)	$	(2,350	)	$	822,457		$	35,400		$	857,857
Proceeds from sales of common stock																													—			12,090,038		121		282,548			—			—			282,669			—			282,669
Issuance of series C preferred stock																													75,000			—		—		—			—			—			75,000			—			75,000
Offering costs																													—			—		—		(6,928		)	—			—			(6,928		)	—			(6,928		)
Issuance of restricted stock, net																													—			99,968		1		(1		)	—			—			—			—			—
Issuance of common stock																													—			16,473		—		—			—			—			—			—			—
Dividends and distributions, net																													(13,897		)	—		—		—			(99,329		)	—			(113,226		)	(5,707		)	(118,933		)
Non-cash compensation																													—			—		—		3,691			—			—			3,691			6,084			9,775
Redemption of series A preferred stock																													(69,000		)	—		—		—			—			—			(69,000		)	—			(69,000		)
Redemption of common units to common stock																													—			68,492		1		616			—			—			617			(617		)	—
Rebalancing of noncontrolling interest																													—			—		—		(3,617		)	—			—			(3,617		)	3,617			—
Other comprehensive income																													—			—		—		—			—			854			854			44			898
Net income																													13,897			—		—		—			20,622			—			34,519			1,069			35,588
Balance, December 31, 2016																													$	145,000		80,352,304		$	804	$	1,293,706		$	(410,978	)	$	(1,496	)	$	1,027,036		$	39,890		$	1,066,926

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

~~F-6~~

~~Table of Contents~~

STAG Industrial, Inc.

Consolidated Statements of Cash Flows

(in thousands)


	Year ended December 31,									Year ended December 31,
	2015			2014			2013			2016			2015			2014
Cash flows from operating activities:
Net income (loss)	$	(31,469	)	$	(5,039	)	$	4,902		$	35,588		$	(29,345	)	$	(4,685	)
Adjustment to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	112,545			88,057			70,597			125,444			110,421			87,703
Loss on impairments	29,272			2,840			—			16,845			29,272			2,840
Non-cash portion of interest expense	1,262			1,337			1,081			1,632			1,262			1,337
Intangible amortization in rental income, net	8,526			6,253			6,544			6,213			8,526			6,253
Straight-line rent adjustments, net	(3,134		)	(3,347		)	(2,941		)	(1,817		)	(3,134		)	(3,347		)
Dividends on forfeited equity compensation	25			128			—			3			25			128
Loss on extinguishment of debt	—			686			—			3,261			—			686
Gain on sales of rental property	(4,986		)	(2,799		)	(5,305		)
Gain on the sales of rental property, net										(61,823		)	(4,986		)	(2,799		)
Non-cash compensation expense	7,578			7,314			2,970			9,729			7,578			7,314
Change in assets and liabilities:
Tenant accounts receivable, net	(1,334		)	435			(1,515		)	(1,435		)	(1,334		)	435
Restricted cash	(40		)	(127		)	(201		)	(365		)	(40		)	(127		)
Prepaid expenses and other assets	(3,155		)	(2,588		)	(2,774		)	(4,580		)	(3,155		)	(2,588		)
Accounts payable, accrued expenses and other liabilities	3,469			1,018			6,043			6,161			3,469			1,018
Tenant prepaid rent and security deposits	3,148			2,508			3,286			567			3,148			2,508
Total adjustments	153,176			101,715			77,785			99,835			151,052			101,361
Net cash provided by operating activities	121,707			96,676			82,687			135,423			121,707			96,676
Cash flows from investing activities:
Acquisitions of land and buildings and improvements	(291,949		)	(333,983		)	(256,799		)	(377,559		)	(291,949		)	(333,983		)
Additions of land and building and improvements	(16,329		)	(11,891		)	(6,321		)	(30,485		)	(16,329		)	(11,891		)
Acquisitions of other assets	(565		)	—			—			(158		)	(565		)	—
Proceeds from sales of rental property, net	22,163			12,980			14,181			152,079			22,163			12,980
Restricted cash	(1,449		)	27			(1,108		)	(853		)	(1,449		)	27
Acquisition deposits, net	1,420			(2,020		)	(150		)	(560		)	1,420			(2,020		)
Acquisitions of deferred leasing intangibles	(85,329		)	(86,826		)	(75,034		)	(89,576		)	(85,329		)	(86,826		)
Net cash used in investing activities	(372,038		)	(421,713		)	(325,231		)	(347,112		)	(372,038		)	(421,713		)
Cash flows from financing activities:
Proceeds from sale of Series B Preferred Stock	—			—			70,000
Proceeds from sale of series C preferred stock										75,000			—			—
Redemption of series A preferred stock										(69,000		)	—			—
Redemption of common units for cash	(64		)	(1,701		)	—			—			(64		)	(1,701		)
Proceeds from unsecured credit facility	300,750			426,500			158,500			513,000			300,750			426,500
Repayment of unsecured credit facility	(375,750		)	(376,000		)	(177,300		)	(541,000		)	(375,750		)	(376,000		)
Proceeds from unsecured term loans	150,000			200,000			100,000			150,000			150,000			200,000
Repayment of unsecured term loans	—			(300,000		)	—			—			—			(300,000		)
Proceeds from unsecured notes	220,000			180,000			—			—			220,000			180,000
Repayment of mortgage notes	(20,571		)	(4,463		)	(4,219		)	(70,444		)	(20,571		)	(4,463		)
Settlement of forward swap contracts	—			(358		)	—			—			—			(358		)
Payment of loan fees and costs	(3,672		)	(4,431		)	(1,949		)	(715		)	(3,672		)	(4,431		)
Payment of loan prepayment fees and costs										(3,278		)	—			—
Dividends and distributions	(105,892		)	(84,640		)	(75,838		)	(117,441		)	(105,892		)	(84,640		)
Proceeds from sales of common stock	74,892			316,692			169,747			282,669			74,892			316,692
Offering costs	(1,229		)	(8,899		)	(8,713		)	(6,921		)	(1,229		)	(8,899		)
Withholding taxes for settlement of outperformance program	—			(475		)	—			—			—			(475		)
Net cash provided by financing activities	238,464			342,225			230,228			211,870			238,464			342,225
Increase (decrease) in cash and cash equivalents	(11,867		)	17,188			(12,316		)	181			(11,867		)	17,188
Cash and cash equivalents—beginning of period	23,878			6,690			19,006			12,011			23,878			6,690
Cash and cash equivalents—end of period	$	12,011		$	23,878		$	6,690		$	12,192		$	12,011		$	23,878
Supplemental disclosure:
Cash paid for interest	$	32,440		$	22,675		$	19,272
Cash paid for interest, net of capitalized interest										$	39,367		$	32,440		$	22,675
Supplemental schedule of non-cash investing and financing activities
Issuance of units for acquisitions of land and building and improvements and deferred leasing intangibles	$	22,853		$	—		$	11,499
Issuance of units for acquisitions of land and building and improvements and deferred lease intangibles										$	—		$	22,853		$	—
Contingent consideration for acquisition of land and building and improvements	$	(216	)	$	—		$	—		$	—		$	(216	)	$	—
Contingent consideration for acquisition of deferred leasing intangibles	$	(84	)	$	—		$	—		$	—		$	(84	)	$	—
Contingent consideration liability acquired	$	300		$	—		$	—		$	—		$	300		$	—
Additions to building and other capital improvements	$	(565	)	$	—		$	—		$	(1,175	)	$	(565	)	$	—
Transfer of other assets to building and other capital improvements	$	565		$	—		$	—		$	—		$	565		$	—
Acquisitions of land and buildings and improvements	$	(38,339	)	$	(3,743	)	$	(9,587	)	$	(3,572	)	$	(38,339	)	$	(3,743	)
Acquisitions of deferred leasing intangibles	$	(11,199	)	$	(593	)	$	(1,912	)	$	(1,008	)	$	(11,199	)	$	(593	)
Change in additions of land and building and improvements included in accounts payable, accrued expenses, and other liabilities	$	(182	)	$	(1,716	)	$	(435	)
Partial disposal of building due to involuntary conversion of building										$	779		$	—		$	—
Investing other receivables due to involuntary conversion of building										$	(779	)	$	—		$	—
Change in additions of land, building, and improvements included in accounts payable, accrued expenses, and other liabilities										$	(1,455	)	$	(182	)	$	(1,716	)
Additions to building and other capital improvements from non-cash compensation										$	(18	)	$	—		$	—
Assumption of mortgage notes	$	26,267		$	4,198		$	—		$	4,037		$	26,267		$	4,198
Fair market value adjustment to mortgage notes acquired	$	418		$	138		$	—		$	75		$	418		$	138
Change in loan fees and costs and offering costs included in accounts payable, accrued expenses, and other liabilities	$	(24	)	$	(84	)	$	—
Change in loan fees, costs, and offering costs included in accounts payable, accrued expenses, and other liabilities										$	26		$	24		$	(84	)
Dividends and distributions declared but not paid	$	8,234		$	7,355		$	5,166		$	9,728		$	8,234		$	7,355

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

~~F-7~~

~~Table of Contents~~

STAG Industrial, Inc.

Notes to Consolidated Financial Statements

1. Organization and Description of Business

STAG Industrial, Inc. (the “Company”) is an industrial real estate operating company focused on the acquisition and operation of single-tenant, industrial properties throughout the United States. The Company was formed as a Maryland corporation and has elected to be treated and intends to continue to qualify as a real estate investment trust (“REIT”) under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the “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 December 31, ~~2015~~2016 and December 31, ~~2014,~~2015, the Company owned a ~~95.1%~~95.7% and ~~96.4%~~95.1%, respectively, common equity interest in the Operating Partnership. The Company, through its wholly owned subsidiary, is the sole general partner of the Operating Partnership. As used herein, the “Company” refers to STAG Industrial, Inc. and its consolidated subsidiaries and partnerships, including the Operating Partnership, except where context otherwise requires.

As of December 31, ~~2015,~~2016, the Company owned ~~291~~314 buildings in 3837 states with approximately ~~54.7~~60.9 million rentable square feet (square feet unaudited herein and throughout Notes), consisting of ~~223~~243 warehouse/distribution buildings, 4754 light manufacturing buildings, ~~and 21~~16 flex/office ~~buildings.~~buildings, and one building in redevelopment. The Company’s buildings were approximately ~~95.6%~~94.7% leased to ~~266~~275 tenants as of December 31, ~~2015.~~2016.

2. Summary of Significant Accounting Policies

Basis of Presentation

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

F-8

Table of Contents

STAG Industrial, Inc.

Notes to Consolidated Financial Statements (Continued)

Revision of Previously Reported Consolidated Financial Statements

In connection with the preparation of the Company's consolidated financial statements for the year ended December 31, 2016, the Company identified an error in the estimated useful life of a building acquired in the fourth quarter of 2014. As a result of the error, depreciation expense had been overstated and thereby rental property, net and equity were understated. The Company concluded that the amounts were not material to any of its previously issued consolidated financial statements. Accordingly, the Company revised these balances in the accompanying consolidated financial statements as of and for the years ended December 31, 2015 and December 31, 2014 as outlined below. These adjustments do not impact the Company’s cash balances for any of the reporting periods. The effects of this revision to the consolidated financial statements are as follows (in thousands, except for per share data).



Effect of Revision As of and For the Year Ended December 31, 2015	As Previously Reported			Adjustment			As Revised
Consolidated Balance Sheet, December 31, 2015
Building and improvements, net of accumulated depreciation	$	1,332,298		$	2,478		$	1,334,776
Total assets⁽¹⁾	$	1,899,304		$	2,478		$	1,901,782
Total equity	$	855,379		$	2,478		$	857,857

Consolidated Statement of Operations, Year Ended December 31, 2015
Depreciation and amortization	$	112,545		$	(2,124	)	$	110,421
Total expenses	$	218,999		$	(2,124	)	$	216,875
Net loss	$	(31,469	)	$	2,124		$	(29,345	)
Net loss attributable to STAG Industrial, Inc.	$	(29,403	)	$	2,020		$	(27,383	)
Net loss attributable to common stockholders	$	(40,636	)	$	2,020		$	(38,616	)
Loss per share attributable to common stockholders — basic and diluted	$	(0.61	)	$	0.03		$	(0.58	)

Consolidated Statement of Comprehensive Income (Loss), Year Ended December 31, 2015
Comprehensive loss	$	(33,425	)	$	2,124		$	(31,301	)


(1)	The as previously reported balance for total assets has been retrospectively adjusted to include the effect of the change in accounting principle for the adoption of ASU 2015-03, as discussed in "New Accounting Pronouncements" below.



Effect of Revision As of and For the Year Ended December 31, 2014	As Previously Reported			Adjustment			As Revised
Consolidated Balance Sheet, December 31, 2014
Total assets⁽¹⁾	$	1,623,448		$	354		$	1,623,802
Total equity	$	891,524		$	354		$	891,878

Consolidated Statement of Operations, Year Ended December 31, 2014
Depreciation and amortization	$	88,057		$	(354	)	$	87,703
Total expenses	$	155,874		$	(354	)	$	155,520
Net loss	$	(5,039	)	$	354		$	(4,685	)
Net loss attributable to STAG Industrial, Inc.	$	(4,025	)	$	332		$	(3,693	)
Net loss attributable to common stockholders	$	(15,218	)	$	332		$	(14,886	)
Loss per share attributable to common stockholders — basic and diluted	$	(0.28	)	$	—		$	(0.28	)

Consolidated Statement of Comprehensive Income (Loss), Year Ended December 31, 2014
Comprehensive loss	$	(9,236	)	$	354		$	(8,882	)


(1)	The as previously reported balance for total assets has been retrospectively adjusted to include the effect of the change in accounting principle for the adoption of ASU 2015-03, as discussed in "New Accounting Pronouncements" below.

New Accounting Pronouncements

~~Certain prior year amounts~~

In January of 2017, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update (“ASU”) 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The new standard removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. This standard is effective for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019, with early adoption permitted for interim or goodwill impairment tests performed on testing dates after January 1, 2017. The adoption of ASU 2017-04 is not expected to materially impact the Company’s consolidated financial statements.

F-9

Table of Contents

STAG Industrial, Inc.

Notes to Consolidated Financial Statements (Continued)

In January of 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. The new standard provides a screen to determine when a set of assets and activities is not a business. The screen requires that when substantially all of the fair value of the gross assets acquired or disposed of is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not a business. This standard is effective for annual periods beginning after December 15, 2017 and interim periods within those periods, with early adoption permitted, and should be applied prospectively on or after the effective date. Upon the adoption of ASU 2017-01, it is expected that the majority of the Company's acquisitions will be accounted for as asset acquisitions, whereas under the current guidance the majority of the Company's acquisitions have been ~~reclassified~~accounted for as business combinations. The most significant difference between the two accounting models that will impact the Company's consolidated financial statements is that in an asset acquisition, property acquisition costs are generally a component of the consideration transferred to ~~conform~~acquire a group of assets and are capitalized as a component of the cost of the assets, whereas in a business combination, property acquisition costs are expensed and not included as part of the consideration transferred. The Company plans to adopt this standard effective January 1, 2018.

In November of 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash.The new standard requires that the statement of cash flows explain the changes during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. This standard is effective for fiscal years beginning after December 15, 2017 and interim periods within those years, with early adoption permitted, and should be applied using a retrospective transition method to each period presented. Upon the adoption of ASU 2016-18, the Company will reconcile both cash and cash equivalents and restricted cash in the accompanying Statements of Cash Flows, whereas under the current guidance the Company explains the changes during the period for cash and cash equivalents only.

In August of 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, which provides clarified guidance on the presentation and classification of certain cash receipts and cash payments in the statement of cash flows. This standard is effective for fiscal years beginning after December 15, 2017, and interim periods within those years, with early adoption permitted. The Company has elected to early adopt this standard effective July 1, 2016, and the effects of this standard were applied retrospectively to all prior periods presented. The effect of the change in accounting principle was an increase in net cash provided by operating activities of approximately $2.0 million for the six months ended June 30, 2016 and a corresponding increase in net cash used in financing activities for the six months ended June 30, 2016 related to the ~~current year presentation.~~payment of loan prepayment fees and costs.

In March of 2016, the FASB issued ASU 2016-09, Stock Compensation (Topic 718), which addresses certain aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, forfeitures, and classification on the statement of cash flows. This standard is effective for fiscal years beginning after December 15, 2016, and interim periods within those years, with early adoption permitted. The Company has elected to early adopt this standard effective January 1, 2016. As a result, the Company's policy is to recognize forfeitures in the period which they occur, whereas the former guidance required the Company to estimate expected forfeitures. The adoption of this standard did not have a material effect on the consolidated financial statements.

In February of 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e. lessees and lessors). Topic 842 supersedes the previous leases standard, Topic 840, Leases. The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight line basis over the term of the lease, respectively. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases today. The new standard requires lessors to account for leases using an approach that is substantially equivalent to existing guidance for sales-type leases, direct financing leases and operating leases. ASU 2016-02 is expected to impact the Company’s consolidated financial statements as the Company has certain operating and land lease arrangements for which it is the lessee, which will result in the recording of a right of use asset and the related lease liability. The standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, with early adoption permitted. The new standard must be adopted using a modified retrospective transition and will require application of the new guidance at the beginning of the earliest comparative period. The Company is currently in the process of evaluating the impact the adoption of ASU 2016-02 will have on the Company’s financial position or results of operations, and expects to adopt the standard effective January 1, 2019.

F-10

Table of Contents

STAG Industrial, Inc.

Notes to Consolidated Financial Statements (Continued)

In January of 2016, the ~~Financial Accounting Standards Board (“FASB”)~~FASB issued ~~Accounting Standards Update (“ASU”)~~ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities (Subtopic 825-10). The amendments in ASU 2016-01 address certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. The standard primarily affects the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. ASU 2016-01 is effective for the annual periods beginning after December 31, 2017 and for annual periods and interim periods within those years. Early adoption is permitted for all financial statements of fiscal years and interim periods that have not yet been issued. The adoption of ASU 2016-01 is not expected to materially impact the Company’s consolidated financial statements.

~~In September of 2015, the FASB issued ASU 2015-16,~~ ~~Simplifying the Accounting for Measurement Period Adjustments (Topic 805)~~. ASU 2015-16 requires an acquirer in a business combination to recognize provisional amounts when measurements were incomplete as of the end of a reporting period as an adjustment in the reporting period in which the provisional amount is determined. Prior to this standard, the acquirer was required to adjust such provisional amounts by restating prior period financial statements. ASU 2015-16 is effective for the annual periods beginning after December 31, 2015 and for annual periods and interim periods within those years, with early adoption permitted. The Company has elected to early adopt this standard effective with the interim period beginning July 1, 2015 and this standard did not have a material effect on the consolidated financial statements.

In April of 2015, the FASB issued ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs (Subtopic 835-30). ASU 2015-03 requires ~~incremental~~ debt issuance costs ~~paid~~related to ~~third parties other than the lender~~a recognized debt liability to be presented in the balance sheet as a direct deduction from the carrying ~~value~~amount of the associated debt liability. Prior to this standard, debt issuance costs paid to third parties other than the lender were presented as an asset on the balance sheet. ASU 2015-03 is effective for the annual periods beginning after December 31, 2015 and for annual periods and interim periods within those years, with early adoption permitted. Upon the adoption of ASU 2015-03, the Company will present debt issuance costs paid to third parties other than the lender as a

~~F-8~~

~~Table of Contents~~

~~STAG Industrial, Inc.~~

~~Notes to Consolidated Financial Statements (Continued)~~

~~direct deduction from the carrying value of the associated~~ debt liability. In August of 2015, the FASB issued ASU 2015-15, Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements (Subtopic 835-30), which clarified ~~the presentation of~~that debt issuance costs related to ~~credit facility~~line-of-credit arrangements ~~given the absence of authoritative guidance within ASU 2015-03. Under ASU 2015-15, debt issuance costs paid to third parties other than the lender related to credit facilities~~ may be presented ~~in the balance sheet~~ as an asset and amortized over the term of the line-of-credit arrangement regardless of whether there are any outstanding borrowings on the ~~credit facility. Upon the adoption of ASU 2015-15, the~~line-of-credit arrangement. The Company ~~will continue to present~~adopted this standard effective January 1, 2016. As a result, debt issuance costs ~~paid to third parties other than the lender~~ related to the debt liabilities that are not line-of-credit arrangements are included as a ~~credit facility~~direct deduction from the related debt liability and those related to line-of-credit arrangements continue to be included as an asset within prepaid expenses and other assets on the accompanying Consolidated Balance Sheets. The effects of this standard were applied retrospectively to all prior periods presented. The effect of the change in accounting principle was the reduction of unsecured term loans by approximately $3.4 million, unsecured notes by approximately $2.3 million, and mortgage notes by approximately $1.3 million and a corresponding reduction of prepaid expenses and other assets by approximately $6.9 million as of December 31, 2015.

In February of 2015, the FASB issued ASU 2015-02, Amendments to Consolidation Analysis (Topic 810), which amends the current consolidation model. ~~Amendments include~~On January 1, 2016, the ~~modification~~Company adopted this standard, modifying the analysis it must perform to determine whether it should consolidate certain types of legal entities. The guidance does not amend the ~~evaluation of whether limited partnerships are~~existing disclosure requirements for variable interest entities or voting interest ~~entities, eliminates~~model entities. The guidance, however, modified the ~~presumption that~~requirements to qualify under the voting interest model. Under the revised guidance, the Operating Partnership will be a ~~general partner should consolidate a limited partnership, and affects the consolidation analysis of reporting entities that are involved with~~ variable interest ~~entities. This standard affects all reporting entities that are required to evaluate whether they should consolidate certain~~entity of the Company. As the Operating Partnership is already consolidated in the financial statements of the Company, the identification of this entity as a variable interest entity had no impact on the consolidated financial statements of the Company. There were no other legal entities ~~and all legal~~qualifying under the scope of the revised guidance that were consolidated as a result of the adoption. In addition, there were no voting interest entities ~~are subject~~under prior existing guidance determined to ~~reevaluation~~be variable interest entities under the revised consolidation model. ASU 2015-02 is effective for the first interim period within annual reporting periods beginning after December 15, 2016, with early adoption permitted. The adoption of ASU 2015-02 is not expected to materially impact the Company’s consolidated financial statements.guidance.

In August of 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements-Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. 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 ending December 31, 2016 and for annual periods and interim periods thereafter with early adoption permitted. The ~~adoption of ASU 2014-15 is~~Company adopted this standard effective for the annual period ended December 31, 2016 and this standard did not ~~expected to materially impact~~have a material effect on the ~~Company’s~~ consolidated financial statements.

In May of 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). 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~~While lease contracts with customers, which constitute a ~~lease contract with~~vast majority of the Company's revenues, are a ~~tenant~~specific scope exception, certain of the Company's revenue streams may be impacted by the new guidance. Once the new guidance setting forth principles for the recognition, measurement, presentation and disclosure of leases (ASU 2016-02, as discussed above) goes into effect, the new revenue standard may apply to executory costs and other components of revenue due under leases that are deemed to be non-lease components (such as common area maintenance and provision of utilities), even when the revenue for such activities is not ~~within~~separately stipulated in the ~~scope~~lease. In that case, revenue from these items previously recognized on a straight-line basis under current lease guidance would be recognized under the new revenue guidance as the related services are delivered. As a result, while the total revenue recognized over time would not differ under the new guidance, the recognition pattern would be different. The Company is in the process of evaluating the significance of the difference in the recognition pattern that would result from this ~~revenue standard.~~change. In adopting ASU 2014-09, companies may use either a full retrospective or a modified retrospective approach. The Company has not decided which method of adoption it will use. 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

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Table of Contents

STAG Industrial, Inc.

Notes to Consolidated Financial Statements (Continued)

the first interim period within annual reporting periods beginning after December 15, 2017. Early adoption is permitted for the first interim period within annual reporting periods beginning after December 15, 2016. 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 of 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 earlyexpects that it will 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.~~2018.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles (“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.

Rental Property and Deferred Leasing Intangibles

The Company capitalizes 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 and depreciated commencing with the date the property is substantially completed. Such costs begin to be capitalized to the development projects from the point the Company is 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 the Company's unsecured indebtedness during the period.

For properties ~~considered~~classified as held for sale, the Company ceases depreciating and amortizing the rental property and ~~value~~values the rental property at the lower of depreciated and amortized cost or fair value, less costs to dispose. The Company presents ~~qualifying assets~~

~~F-9~~

~~Table of Contents~~

~~STAG Industrial, Inc.~~

~~Notes to Consolidated Financial Statements (Continued)~~

and liabilities and the results of operations that have been sold, or otherwise qualify as held for sale, as discontinued operations in all periods when the sale meets the definition of discontinued operations. Under GAAP, the definition of discontinued operations is a component or group of components that is disposed of or isthose properties classified as held for sale with any qualifying assets and ~~represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results. The components of~~liabilities associated with those properties as held for sale in the ~~property’s net income (loss) are reflected as discontinued operations include operating results, depreciation, amortization, and interest expense (if the property is subject to a secured loan).~~accompanying Consolidated Balance Sheets.

The Company allocates the purchase price of business combinations of properties based upon the fair value of the assets and liabilities acquired, 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 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 above and below market lease values are amortized into rental income over the remaining term plus the terms of bargain renewal options or assumed exercise of early termination options of the respective leases. The purchase price is further allocated to in-place lease values and tenant relationships based on the Company's evaluation of the specific characteristics of each tenant’s lease and its overall relationship with the respective tenant. The value of in-place lease intangibles and tenant relationships, which are included as components of deferred leasing intangibles, are amortized over the remaining lease term (and expected renewal periods of the respective lease for tenant relationships or assumed exercise of early termination options ~~of the respective~~for in-place lease ~~for tenant relationships)~~intangibles) as increases or decreases to depreciation and amortization expense. If a tenant terminates its lease, the unamortized portion of above and below market leases ~~are~~is accelerated into rental income and the in-place lease value and tenant relationships are accelerated into depreciation or amortization expense over the shortened lease term.

The purchase price allocated to deferred leasing intangible assets are included in rental property on the accompanying Consolidated Balance Sheets and the purchase price allocated to deferred leasing intangible liabilities are included in ~~the~~ deferred leasing intangibles on the accompanying Consolidated Balance Sheets under the liabilities section.

In determining the fair value of the debt assumed, the Company discounts 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.

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Table of Contents

STAG Industrial, Inc.

Notes to Consolidated Financial Statements (Continued)

Using information available at the time of acquisition, the Company allocates the total consideration to tangible assets and liabilities and identified intangible assets and liabilities. The Company may adjust the preliminary purchase price allocations after obtaining more information about asset valuations and liabilities assumed.

The Company evaluates the carrying value of all tangible and intangible rental property assets 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 asset and the ultimate sale of the asset. If such cash flows are less than the asset’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 such estimates could differ from actual results.

Depreciation and amortization expense is computed using the straight-line method based on the following ~~lives:~~lives.



Building	40 Years
Building and land improvements	~~5 -~~Up to 20 ~~Years~~years
Tenant improvements	Shorter of useful life or terms of related lease
Above and below market leases and other deferred leasing intangibles	Terms of the related lease plus terms of bargain renewal options or assumed exercise of early termination options
Tenant relationships	Terms of the related lease plus estimated renewal period
Assumed debt fair value premium/discount	Terms of the related loan

Fully depreciated or amortized assets or liabilities and the associated accumulated depreciation or amortization are written-off. The Company wrote-off tenant improvements, deferred leasing intangible assets, and deferred leasing intangible liabilities of $2.6 million, $17.9 million, $0, respectively, for the year ended December 31, 2016 and $1.2 million, $10.3 million, $0.8 million, respectively, for the year ended December 31, ~~2015 and $1.0 million, $7.6 million, $0.5 million, respectively, for the year ended December 31, 2014.~~2015.

~~F-10~~

~~Table of Contents~~

~~STAG Industrial, Inc.~~

~~Notes to Consolidated Financial Statements (Continued)~~

Cash and Cash Equivalents

Cash and cash equivalents consist of cash and highly liquid short-term investments with original maturities of three months or less. The Company maintains cash and cash equivalents in United States banking institutions that may exceed amounts insured by the Federal Deposit Insurance Corporation. While the Company monitors the cash balances in its operating accounts, these cash balances could be impacted if the underlying financial institutions fail or are subject to other adverse conditions in the financial markets. To date, the Company has experienced no loss or lack of access to cash in its operating accounts, and mitigates this risk by using ~~two different,~~ nationally recognized banking institutions.

Restricted Cash

Restricted cash may include tenant security deposits and cash held in escrow for real estate taxes and capital improvements as required in various mortgage loan agreements. Restricted cash also may include amounts held by the Company’s transfer agent for preferred stock dividends that are distributed subsequent to period end.

Tenant Accounts Receivable, net

Tenant accounts receivable, net on the accompanying 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 December 31, ~~2015~~2016 and December 31, ~~2014,~~2015, the Company had an allowance for doubtful accounts of approximately ~~$0.1~~$0.2 million and $0.1 million, respectively.

The Company accrues rental income earned, but not yet receivable, in accordance with GAAP. As of December 31, ~~2015~~2016 and December 31, ~~2014,~~2015, the Company had accrued rental income of approximately ~~$16.1~~$18.4 million and ~~$12.8~~$16.1 million, respectively. The Company maintains an allowance for estimated losses that may result from those revenues. As of December 31, ~~2015~~2016 and December 31, ~~2014,~~2015, the Company had an allowance on accrued rental income of $0 and $0, respectively.

As of December 31, ~~2015~~2016 and December 31, ~~2014,~~2015, the Company had approximately ~~$6.1~~$9.0 million and ~~$6.7~~$6.1 million, respectively, of total lease security deposits available in the form of existing letters of credit, which are not reflected on the accompanying Consolidated Balance Sheets. As of December 31, ~~2015~~2016 and December 31, ~~2014,~~2015, the Company had approximately ~~$4.1~~$5.4 million and ~~$3.1~~$4.1 million, respectively, of lease security deposits available in cash, which are included in cash and cash equivalents on the

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Table of Contents

STAG Industrial, Inc.

Notes to Consolidated Financial Statements (Continued)

accompanying Consolidated Balance Sheets, and approximately $0.4 million and $0.4 million, respectively, of lease security deposits available in cash, which are included in restricted cash on the accompanying Consolidated Balance Sheets. These funds may be used to settle tenant accounts receivables in the event of a default under the related lease. As of December 31, ~~2015~~2016 and December 31, ~~2014,~~2015, the ~~Company~~Company's total liability associated with these lease security deposits was approximately $5.8 million and $4.5 million, ~~and $3.5 million,~~ respectively, ~~and~~which is included in tenant prepaid rent and security deposits on the accompanying Consolidated Balance Sheets.

Deferred Costs

Deferred financing fees and debt issuance costs include costs incurred in obtaining debt that are capitalized and are presented as a direct deduction from the carry amount of the associated debt liability that is not a line-of-credit arrangement on the accompanying Consolidated Balance Sheets. Deferred financing fees and debt issuance costs related to line-of-credit arrangements are presented as an asset in prepaid expenses and other assets on the accompanying Consolidated Balance Sheets. The deferred financing fees and debt issuance costs are amortized through interest expense over the life of the respective loans on a basis which approximates the effective interest method. Any unamortized amounts upon early repayment of debt are written off in the period of repayment as a loss on extinguishment of debt. Fully amortized deferred financing fees and debt issuance costs are removed from the books upon maturity of the underlying debt.

Leasing commissions include commissions, compensation costs of leasing personnel, and other direct and incremental costs incurred to obtain new tenant leases as well as to renew existing tenant leases, and are presented in prepaid expenses and other assets on the accompanying Consolidated Balance Sheets. Leasing commission are capitalized and amortized over the terms of the related leases (and bargain renewal terms or assumed exercise of early termination options) using the straight-line method. If a lease terminates prior to the expiration of its initial term, any unamortized costs related to the lease are accelerated into amortization expense. Changes in leasing commissions are presented in the cash flows from operating activities section of the accompanying Consolidated Statements of Cash Flows.

Goodwill

~~F-11~~

~~Table of Contents~~

~~STAG Industrial, Inc.~~

~~Notes to Consolidated Financial Statements (Continued)~~

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. The Company takes 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. The Company has recorded no impairments to goodwill through December 31, ~~2015.~~2016.

Use of Derivative Financial Instruments

The Company records 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 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 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 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 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. The Company minimizes the credit risk in the interest rate swaps by entering into transactions with various high-quality counterparties. The Company’s exposure to credit risk at any point is generally limited to amounts recorded as assets on the accompanying Consolidated Balance Sheets.

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Table of Contents

STAG Industrial, Inc.

Notes to Consolidated Financial Statements (Continued)

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. The fair values of the cash and cash equivalents, restricted cash, tenant accounts receivable, accounts payable and accrued expenses approximate their carrying or contract values because of the short term maturity of these instruments. See Note 4 for the fair values of the Company’s debt. See Note 5 for the fair values of the Company’s interest rate swaps.

The Company adopted fair value measurement provisions for its 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.

Offering Costs

Underwriting commissions and direct offering costs have been reflected as a reduction of additional paid-in capital. Indirect costs associated with equity offerings are expensed as incurred and included in general and administrative expenses on the accompanying Consolidated Statements of Operations.

Dividends

Earnings and profits, which determine the taxability of dividends to stockholders, will differ from income reported for financial reporting purposes due to the differences for federal income tax purposes in the treatment of gains on the sale of real property, revenue and expense recognition, and in the estimated useful lives and basis used to compute depreciation. In addition, ~~our~~the Company's distributions include a return of capital. To the extent that the Company makes distributions in excess of its 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.

The Company paid approximately ~~$6.2~~$5.2 million ($~~2.25~~1.88125 per share), $6.2 million ($2.25 per share) and $6.2 million ($2.25 per share) of the 9.0% Series A Cumulative Redeemable Preferred Stock ("Series A Preferred ~~Stock~~Stock") dividends for the years ended December 31, ~~2015,~~2016, December 31, ~~2014,~~2015, and December 31, ~~2013,~~2014, respectively, that were treated as ordinary income for tax purposes.

~~F-12~~

~~Table of Contents~~

~~STAG Industrial, Inc.~~

~~Notes to Consolidated Financial Statements (Continued)~~

The Company paid approximately $4.6 million ~~(1.65625~~($1.65625 per share), $4.6 million ~~(1.65625~~($1.65625 per share) and ~~$3.3~~$4.6 million ~~(1.173175~~($1.65625 per share) of the 6.625% Series B Cumulative Redeemable Preferred Stock ("Series B Preferred ~~Stock~~Stock") dividends for the years ended December 31, 2016 and December 31, 2015, and December 31, 2014, ~~and December 31, 2013,~~ respectively, that were treated as ordinary income for tax purposes.

The Company paid approximately $4.1 million ($1.355905 per share) of the 6.875% Series C Cumulative Redeemable Preferred Stock ("Series C Preferred Stock") dividends for the year ended December 31, 2016 that were treated as ordinary income for tax purposes

The tax treatment of common dividends per share for federal income tax purposes is as ~~follows:~~follows.


	Year ended December 31,												Year ended December 31,
	2015				2014				2013				2016				2015				2014
	Per Share		%		Per Share		%		Per Share		%		Per Share		%		Per Share		%		Per Share		%
Ordinary income	$	0.777244	57.2	%	$	0.843245	65.9	%	$	0.9723	71.0	%	$	0.944038	68.0	%	$	0.777244	57.2	%	$	0.843245	65.9	%
Return of capital	0.582756		42.8	%	0.436755		34.1	%	0.3703		27.0	%	0.445125		32.0	%	0.582756		42.8	%	0.436755		34.1	%
Unrecaptured section 1250 capital gain	—		—	%	—		—	%	0.0137		1.0	%
Other capital gain	—		—	%	—		—	%	0.0137		1.0	%
Total ⁽¹⁾	$	1.36000	100.0	%	$	1.280000	100.0	%	$	1.3700	100.0	%	$	1.389163	100.0	%	$	1.36000	100.0	%	$	1.280000	100.0	%

(1)

~~The December 2013 monthly common stock dividend of $0.10 per share was included in the stockholder’s 2014 tax year.~~ The December 2014 monthly common stock dividend of $0.11 per share was included in the stockholder’s 2015 tax year. The December 2015 monthly common stock dividend of $0.115 per share ~~will be~~was included in the stockholder’s 2016 tax year. The December 2016 monthly common stock dividend of $0.115833 per share will be included in the stockholder’s 2017 tax year.

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Table of Contents

STAG Industrial, Inc.

Notes to Consolidated Financial Statements (Continued)

Revenue Recognition

All current leases are classified as operating leases and rental ~~revenue~~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 ~~revenue~~income earned and amounts due under the lease are charged or credited, as applicable, to accrued rental ~~revenue.~~income. Additional rents from expense reimbursements for insurance, real estate taxes and certain other expenses are recognized in the period in which the related expenses are incurred.

The Company earns revenue from asset management fees, which are included on the accompanying Consolidated Statements of Operations in other income. The Company recognizes revenue from asset management fees when the related fees are earned and are realized or realizable.

Tenant Recoveries

By the terms of their leases, certain tenants are obligated to pay directly the costs of their properties’ insurance, real estate taxes, ground lease payments, and certain other expenses, and these costs are not reflected on the Company’s consolidated financial statements. 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. To the extent any tenant is 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 will record a liability for such obligation. The Company estimates that real estate taxes, which are the responsibility of these certain tenants, ~~was~~were approximately $10.9 million for the year ended December 31, 2016, $10.2 million for the year ended December 31, 2015, and $10.2 million for the year ended December 31, ~~2014, and $9.4 million for the year ended December 31, 2013.~~2014. These amounts would have been the maximum real estate tax expense of the Company, excluding any penalties or interest, had the tenants not met their contractual obligations for these periods.

Termination Income

On December 21, 2016, the tenant at the Golden, CO property exercised its early lease termination option per the terms of the lease agreement. The option provided that the tenant's lease terminate effective December 31, 2017 and required the tenant to pay a termination fee of approximately $0.9 million. The termination fee is being recognized on a straight-line basis from December 21, 2016 through the relinquishment of the space on December 31, 2017. The termination fee income of approximately $0.1 million is included in rental income on the accompanying Consolidated Statements of Operations for the year ended December 31, 2016.

On October 20, 2015, the tenant at the Dayton, OH property exercised its early lease termination option per the terms of the lease agreement. The option provided that the tenant's lease terminate effective October 31, 2016 and required the tenant to pay a termination fee of approximately $0.2 million. The termination fee iswas being recognized on a straight-line basis from October 20, 2015 through the relinquishment of the space on October 31, 2016. On August 29, 2016, the Company sold the Dayton, OH property to an unaffiliated third party and recognized the remaining unamortized termination fee. The termination fee income of approximately ~~$54,000~~$0.2 million and $0.1 million is included in rental income on the accompanying Consolidated Statements of Operations for the ~~year~~years ended December 31, ~~2015.~~2016 and December 31, 2015, respectively.

On October 19, 2015, the Company entered into a lease termination agreement with the tenant located at the Southfield, MI building. The agreement provided that the tenant’s lease terminated effective October 19, 2015 and required the tenant to pay a termination fee of approximately $0.9 million. The full termination fee is included in rental income on the accompanying Consolidated Statements of Operations for the year ended December 31, 2015.

~~F-13~~

~~Table of Contents~~

~~STAG Industrial, Inc.~~

~~Notes to Consolidated Financial Statements (Continued)~~

On December 17, 2014, the Company entered into the first amendment to the lease with the tenant located at the Belfast, ME buildings. The terms of the amendment renewed 90,051 square feet of the premise and early terminated the remaining 228,928 square feet effective November 30, 2015. The tenant was required to pay a termination fee for the returned premise on or before October 31, 2015 in the amount of approximately $2.1 million, and the Company received the termination fee payment in full on September 23, 2015. This termination fee along with the reimbursement of certain miscellaneous costs per the lease amendment was being recorded on a straight-line basis from December 17, 2014 through the relinquishment of the space on November 30, 2015. On May 18, 2015, the Company entered into a second lease amendment with the tenant. The terms of the second lease amendment accelerated the termination of 35,295 square feet of the previously terminated square feet to April 30, 2015. The

F-16

Table of Contents

STAG Industrial, Inc.

Notes to Consolidated Financial Statements (Continued)

Company recognized the termination fee associated with the 35,295 square feet through the shortened lease life of April 30, 2015. The Company recognized the remaining termination fee over the shortened lease life of the remaining 193,633 square feet through November 30, 2015. The termination fee of approximately $2.0 million and $0.1 million are included in rental income on the accompanying Consolidated Statements of Operations for the years ended December 31, 2015 and December 31, 2014, respectively.

On October 29, 2014, the Company entered into a lease termination agreement with the tenant located at the Tavares, FL building. The agreement provided that the tenant’s lease terminated effective December 30, 2014 and required the tenant to pay a termination fee of approximately $2.4 million including reimbursement of costs related to the sale of the ~~property; refer to Note 3 for further details of the sale of the property. The full termination fee~~property, which is included in rental income on the accompanying Consolidated Statements of Operations for the year ended December 31, 2014.

On October 18, 2013, the Company entered into a lease termination agreement with the tenant located at the Creedmoor, NC building. The agreement provided that the tenant’s lease terminated effective October 31, 2013 and required the tenant to pay a termination fee of $2.5 million. The termination fee is included in loss attributable to discontinued operations on the accompanying Consolidated Statements of Operations for the year ended December 31, 2013 as the property was sold on October 31, 2013 to an unaffiliated third party.

Gain on the Sales of Rental Property, net

The timing of the recognition of gain on the sales of rental property, net is measured against various criteria related to the terms of the transaction and continuing involvement in the form of management or financial assistance associated with the properties. If the sales criteria for the full accrual method are not met, the Company defers some or all of the gain recognition and accounts for the continued operations of the property by applying the finance, leasing, profit sharing, deposit, installment or cost recovery methods, as appropriate, until the sales criteria are met.

Incentive and Equity-Based Employee Compensation Plans

The Company grants equity-based compensation awards to its employees and directors in the form of restricted shares of common stock, LTIP units, outperformance programs, and ~~outperformance programs.~~performance units. See Notes 6, 7 and 138 for further discussion of restricted shares of common stock, LTIP units, and the outperformance programs and performance units, respectively. The Company measures equity-based compensation expense based on the fair value of the awards on the grant date and recognizes the expense ratably over the vesting ~~period.~~period, and forfeitures are recognized in the period in which they occur.

Taxes

Federal Income Taxes

The Company elected to be taxed as a REIT under the Code commencing with its taxable year ended December 31, 2011 and intends to continue to qualify 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. 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.

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, nor will it have to comply with income, assets, or ownership restrictions inside of the TRS. Certain activities that the Company undertakes must or should 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. On June 24, 2016, the Operating Partnership, through its wholly owned subsidiary, transferred a vacant land parcel located in Burlington, NJ to the Company's TRS. On August 25, 2015, the Company's TRS acquired two vacant land parcels in connection with the Libertyville, IL acquisition. ~~During the year ended December 31, 2015, the~~The Company's TRS recognized a net loss of approximately $0.1 million and $25,000, for the years ended December 31, 2016 and December 31, 2015, respectively, which has been included on the accompanying Consolidated Statements of Operations. The TRS did not have any activity during the ~~years~~year ended December 31, ~~2014 and December 31, 2013.~~2014.

~~F-14~~F-17

Table of Contents

STAG Industrial, Inc.

Notes to Consolidated Financial Statements (Continued)

The following table reconciles net income (loss) to taxable income for the years ended December 31, ~~2015,~~2016, December 31, ~~2014~~2015 and December 31, ~~2013, respectively (in thousands):~~2014.


	Year ended December 31,									Year ended December 31,
	2015			2014			2013
Reconciliation of Net Income (Loss) to Taxable Income (in thousands)										2016			2015			2014
Net income (loss)	$	(31,469	)	$	(5,039	)	$	4,902		$	35,588		$	(29,345	)	$	(4,685	)
Book/tax differences from depreciation and amortization	63,083			50,026			46,389			66,763			60,959			49,672
Above/Below market lease amortization	8,526			6,253			6,544
Above/below market lease amortization										6,213			8,526			6,253
Loss on impairments	29,272			2,840			—			16,845			29,272			2,840
Book/tax difference on termination income	(1,815		)	1,994			—			678			(1,815		)	1,994
Offering costs	—			—			27
Book/tax difference on property acquisition costs	4,400			4,279			3,427			4,498			4,400			4,279
Loss on extinguishment of debt	—			686			—			(17		)	—			686
Book/tax difference on accrued bonus payment	(337		)	941			440			1,170			(337		)	941
Book/tax difference on bad debt expense	2			104			19			83			2			104
Book/tax difference on non-cash compensation	4,662			4,706			1,846			7,188			4,662			4,706
Book/tax difference on gain on sales of rental property	(10,653		)	(4,695		)	(3,915		)
Book/tax difference on gain on the sales of rental property, net										(53,580		)	(10,653		)	(4,695		)
Straight-line rent adjustments, net	(3,405		)	(3,255		)	(2,941		)	(2,495		)	(3,405		)	(3,255		)
Book/tax difference on non-cash portion of interest expense	1,266			979			(106		)	1,631			1,266			979
Book/tax difference on prepaid rent of Sec. 467 leases	1,887			—			—			(274		)	1,887			—
Other book/tax differences, net	180			78			28			284			180			78
Loss attributable to noncontrolling interest	(3,011		)	(3,414		)	(7,785		)	(4,069		)	(3,011		)	(3,414		)
Taxable income subject to distribution requirement⁽¹⁾	$	62,588		$	56,483		$	48,875		$	80,506		$	62,588		$	56,483


(1)	The Company distributed in excess of 100% of its taxable income to its stockholders during the years ended December 31, 2016, December 31, 2015 and December 31, 2014, ~~and December 31, 2013,~~ respectively.

State and Local Income, Excise, and Franchise Tax

The Company and certain of its subsidiaries are subject to certain state and local income, excise and franchise taxes. Taxes in the amount of ~~$0.9~~$1.0 million, ~~$0.6~~$0.9 million and $0.6 million have been recorded in other expenses on the accompanying Consolidated Statements of Operations for the years ended December 31, 2016, December 31, 2015 and December 31, 2014, ~~and December 31, 2013,~~ respectively.

Uncertain Tax Positions

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 December 31, ~~2015,~~2016, December 31, ~~2014~~2015 and December 31, ~~2013,~~2014, there were no liabilities for uncertain tax positions.

Earnings Per Share

The Company uses the two-class method of computing earnings per common share, which is an earnings allocation formula that determines earnings per share for common stock and any participating securities according to dividends declared (whether paid or unpaid) and participation rights in undistributed earnings. Under the two-class method, basic earnings per common share are computed by dividing the sum of distributed earnings to common stockholders and undistributed earnings allocated to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflect the potential dilution that could occur from shares issuable in connection with awards under incentive and equity-based compensation plans.

Segment Reporting

The Company manages its operations on an aggregated, single segment basis for purposes of assessing performance and making operating decisions and, accordingly, has only one reporting and operating segment.

~~F-15~~F-18

Table of Contents

STAG Industrial, Inc.

Notes to Consolidated Financial Statements (Continued)

Concentrations of Credit Risk

Concentrations of credit risk relevant to the Company may arise when a number of financing arrangements, including revolving credit facilities or derivatives, are entered into with the same lenders or counterparties, and have similar economic features that would cause their inability to meet contractual obligations. The Company mitigates the concentration of credit risk as it relates to financing arrangements by entering into loan syndications with multiple, reputable financial institutions and diversifying its debt counterparties. The Company also reduces exposure by diversifying its derivatives across multiple counterparties who meet established credit and capital guidelines.

Concentration of credit risk may also arise when the Company enters into leases with multiple tenants concentrated in the same industry, or into a significant lease or multiple leases with a single tenant, or tenants are located in the same geographic region, or have similar economic features that would cause their inability to meet contractual obligations, including those to the Company, to be similarly affected. The Company regularly monitors its tenant base to assess potential concentrations of credit risk through financial statement review, tenant management calls, and press releases. Management believes the current credit risk portfolio is reasonably well diversified and does not contain any unusual concentration of credit risk.

3. ~~Real Estate~~Rental Property

The following table summarizes the components of rental property, net as of December 31, ~~2015~~2016 and December 31, ~~2014 (in thousands):~~2015.

December 31, 2015 December 31, 2014
Land $ 228,919

$ 191,238
Buildings, net of accumulated depreciation of $104,297 and $75,116, respectively 1,232,360

1,042,086
Tenant improvements, net of accumulated depreciation of $26,283 and $20,943, respectively 23,586

22,619
Building and land improvements, net of accumulated depreciation of $19,815 and $9,730, respectively 76,352

54,233
Deferred leasing intangibles, net of accumulated amortization of $200,758 and $146,026, respectively 276,272

247,904
Total rental property, net $ 1,837,489

$ 1,558,080



Rental Property, net (in thousands)	December 31, 2016		December 31, 2015
Land	$	272,162	$	228,919
Buildings, net of accumulated depreciation of $125,971 and $101,819, respectively	1,408,406		1,234,838
Tenant improvements, net of accumulated depreciation of $28,388 and $26,283, respectively	24,974		23,586
Building and land improvements, net of accumulated depreciation of $33,054 and $19,815, respectively	107,463		74,694
Construction in progress	9,298		1,658
Deferred leasing intangibles, net of accumulated amortization of $237,456 and $200,758, respectively	294,533		276,272
Total rental property, net	$	2,116,836	$	1,839,967

~~F-16~~F-19

Table of Contents

STAG Industrial, Inc.

Notes to Consolidated Financial Statements (Continued)

Acquisitions

The following tables summarize the acquisitions of the Company during the years ended December 31, ~~2015~~2016 and December 31, ~~2014:~~2015.

Year ended December 31, 2015
Location of property Square Feet Buildings Purchase Price (in thousands)
Burlington, NJ 503,490
1
$ 34,883
Greenville, SC 157,500
1
4,800
North Haven, CT 824,727
3
57,400
Three months ended March 31, 2015 1,485,717
5
97,083
Plymouth, MI 125,214
1
6,000
Oakwood Village, OH 75,000
1
4,398
Stoughton, MA 250,213
2
10,675
Oklahoma City, OK 223,340
1
12,135
Clinton, TN 166,000
1
5,000
Knoxville, TN 108,400
1
4,750
Fairborn, OH 258,680
1
9,100
El Paso, TX 126,456
1
9,700
Phoenix, AZ 102,747
1
9,500
Charlotte, NC 123,333
1
7,500
Machesney Park, IL 80,000
1
5,050
Three months ended June 30, 2015 1,639,383
12
83,808
Macedonia, OH 201,519
1
12,192
Novi, MI 125,060
1
8,716
Grand Junction, CO 82,800
1
5,254
Tulsa, OK 175,000
1
13,000
Chattanooga, TN 646,200
3
21,160
Libertyville, IL 287,102
2
11,121
Greer, SC 290,000
4
9,025
Piedmont, SC 400,000
3
12,000
Belvidere, IL 100,000
1
5,938
Conyers, GA 201,403
1
9,880
Three months ended September 30, 2015 2,509,084
18
108,286
Durham, NC 80,600
1
4,200
Charlotte, NC 124,680
1
5,423
Shreveport, LA 420,259
1
11,000
Dayton, OH 205,761
1
8,803
West Allis, WI 241,977
4
9,900
Loudon, TN 104,000
1
5,375
Garland, TX 164,914
1
7,600
Laurens, SC 125,000
1
5,535
Lancaster, PA 240,529
1
9,350
Grand Rapids, MI 301,317
1
9,400
Burlington, NJ 1,048,631
1
61,500
Three months ended December 31, 2015 3,057,668
14
138,086
Year ended December 31, 2015 8,691,852
49
$ 427,263



Year ended December 31, 2016
Location of Property	Square Feet	Buildings	Purchase Price (in thousands)
Biddeford, ME	265,126	2	$	12,452
Fairfield, OH	206,448	1	5,330
Mascot, TN	130,560	1	4,500
Erlanger, KY	108,620	1	5,600
Three months ended March 31, 2016	710,754	5	27,882
West Chicago, IL	249,470	1	8,663
Visalia, CA	635,281	1	27,921
Norcross, GA	152,036	1	5,508
Reading, PA	248,000	1	9,594
Charlotte, NC	104,852	1	6,517
Three months ended June 30, 2016	1,389,639	5	58,203
Columbia, SC	185,600	1	7,300
Graniteville, SC	450,000	1	15,675
Fountain Inn, SC	168,087	1	7,025
Langhorne, PA	217,000	2	11,250
Warren, MI	268,000	1	18,700
New Castle, DE	485,987	1	27,500
Westborough, MA	121,700	1	7,885
Cedar Hill, TX	420,000	1	19,100
Forest Park, GA	799,200	2	24,915
Rock Hill, SC	315,520	1	9,850
Gardiner, ME	265,000	1	16,800
Three months ended September 30, 2016	3,696,094	13	166,000
Langhorne, PA	172,647	1	9,500
Grove City, OH	175,512	1	5,400
Olathe, KS	496,373	1	23,194
Houston, TX	223,599	1	13,444
Itasca, IL	202,000	1	20,641
Kenosha, WI	175,052	1	5,975
Oklahoma City, OK	80,400	1	3,400
San Antonio, TX	247,861	1	12,050
Wood Dale, IL	137,607	1	8,565
Hartland, WI	121,050	1	7,400
Earth City, MO	116,783	1	5,450
Spartanburg, SC	572,038	1	20,762
West Columbia, SC	119,852	1	5,725
West Chicago, IL	305,874	5	10,400
DeForest, WI	254,431	1	7,800
Montgomery, AL	332,000	1	8,750
West Chester, OH	269,868	1	11,150
West Columbia, SC	176,400	1	11,850
Brooklyn Park, MN	200,720	1	20,532
East Windsor, CT	126,111	1	7,725
Three months ended December 31, 2016	4,506,178	24	219,713
Year ended December 31, 2016	10,302,665	47	$	471,798

~~F-17~~F-20

Table of Contents

STAG Industrial, Inc.

Notes to Consolidated Financial Statements (Continued)

Year ended December 31, 2014
Location of property Square Feet Buildings
Purchase Price
(in thousands)
Allentown, PA 289,900
1
$ 11,942
Nashua, NH 337,391
1
11,575
Strongsville, OH 161,984
1
8,125
Columbus, OH 186,000
1
5,265
Three months ended March 31, 2014 975,275
4
36,907
Savannah, GA 504,200
1
16,200
Garland, TX 253,900
1
8,937
West Chester, OH 245,000
1
11,588
Calhoun, GA 151,200
1
4,100
Hebron, KY 109,000
1
6,000
Houston, TX 151,260
1
8,580
East Troy, WI 149,624
1
6,936
Jefferson City, TN 486,109
1
14,350
New Berlin, WI 80,665
1
4,275
Three months ended June 30, 2014 2,130,958
9
80,966
Savage, MN 244,050
1
9,300
Charlotte, NC 101,591
1
4,100
Charlotte, NC 166,980
1
5,000
Mountain Home, NC 146,014
1
4,340
El Paso, TX 211,091
1
12,972
El Paso, TX 183,741
1
11,461
El Paso, TX 360,134
1
20,501
El Paso, TX 239,131
1
13,305
Chester, VA 100,000
1
4,906
Mechanicsburg, PA 259,200
1
8,403
Mechanicsburg, PA 235,200
1
10,759
Mechanicsburg, PA 330,000
1
14,481
Mechanicsburg, PA 252,654
1
11,617
Mason, OH 116,200
1
7,242
Longmont, CO 159,611
1
13,850
Reno, NV 87,264
1
6,366
Lenexa, KS 276,219
2
13,000
Three months ended September 30, 2014 3,469,080
18
171,603
Yorkville, WI 98,151
1
6,175
Fort Wayne, IN 108,800
1
4,311
Murfreesboro, TN 102,505
1
4,700
Gurnee, IL 338,740
1
15,660
Germantown, WI 202,500
1
9,300
Elizabethtown, PA 206,236
1
8,250
Camarillo, CA 309,500
1
21,528
Camarillo, CA 423,106
1
32,973
Conyers, GA 145,262
1
4,360
Winston-Salem, NC 385,000
1
14,900
Houston, TX 185,000
1
7,000
Spartanburg, SC 226,140
1
6,375
Three months ended December 31, 2014 2,730,940
12
135,531
Year ended December 31, 2014 9,306,253
43
$ 425,007



Year ended December 31, 2015
Location of Property	Square Feet	Buildings	Purchase Price (in thousands)
Burlington, NJ	503,490	1	$	34,883
Greenville, SC	157,500	1	4,800
North Haven, CT	824,727	3	57,400
Three months ended March 31, 2015	1,485,717	5	97,083
Plymouth, MI	125,214	1	6,000
Oakwood Village, OH	75,000	1	4,398
Stoughton, MA	250,213	2	10,675
Oklahoma City, OK	223,340	1	12,135
Clinton, TN	166,000	1	5,000
Knoxville, TN	108,400	1	4,750
Fairborn, OH	258,680	1	9,100
El Paso, TX	126,456	1	9,700
Phoenix, AZ	102,747	1	9,500
Charlotte, NC	123,333	1	7,500
Machesney Park, IL	80,000	1	5,050
Three months ended June 30, 2015	1,639,383	12	83,808
Macedonia, OH	201,519	1	12,192
Novi, MI	125,060	1	8,716
Grand Junction, CO	82,800	1	5,254
Tulsa, OK	175,000	1	13,000
Chattanooga, TN	646,200	3	21,160
Libertyville, IL	287,102	2	11,121
Greer, SC	290,000	4	9,025
Piedmont, SC	400,000	3	12,000
Belvidere, IL	100,000	1	5,938
Conyers, GA	201,403	1	9,880
Three months ended September 30, 2015	2,509,084	18	108,286
Durham, NC	80,600	1	4,200
Charlotte, NC	124,680	1	5,423
Shreveport, LA	420,259	1	11,000
Dayton, OH	205,761	1	8,803
West Allis, WI	241,977	4	9,900
Loudon, TN	104,000	1	5,375
Garland, TX	164,914	1	7,600
Laurens, SC	125,000	1	5,535
Lancaster, PA	240,529	1	9,350
Grand Rapids, MI	301,317	1	9,400
Burlington, NJ	1,048,631	1	61,500
Three months ended December 31, 2015	3,057,668	14	138,086
Year ended December 31, 2015	8,691,852	49	$	427,263

~~F-18~~F-21

Table of Contents

STAG Industrial, Inc.

Notes to Consolidated Financial Statements (Continued)

The following table summarizes the allocation of the consideration paid at the date of acquisition during the years ended December 31, ~~2015~~2016 and December 31, ~~2014,~~2015, respectively, for the acquired assets and liabilities in connection with the acquisitions identified in the tables above.


	Year ended December 31, 2015					Year ended December 31, 2014				Year ended December 31, 2016				Year ended December 31, 2015
Acquired assets and liabilities	Purchase price (in thousands)				Weighted average amortization period (years) of intangibles at acquisition	Purchase price (in thousands)			Weighted average amortization period (years) of intangibles at acquisition
Acquired Assets and Liabilities										Purchase price (in thousands)			Weighted average amortization period (years) of intangibles at acquisition	Purchase price (in thousands)				Weighted average amortization period (years) of intangibles at acquisition
Land	$	45,117			N/A	$	58,225		N/A	$	59,630		N/A	$	45,117			N/A
Buildings	256,970				N/A	253,708			N/A	283,758			N/A	256,970				N/A
Tenant improvements	7,705				N/A	6,691			N/A	8,670			N/A	7,705				N/A
Building and land improvements	20,712				N/A	19,102			N/A	29,073			N/A	20,712				N/A
Deferred leasing intangibles - In-place leases	58,109				5.6	57,199			4.7	62,533			8.2	58,109				5.6
Deferred leasing intangibles - Tenant relationships	31,390				8.0	28,811			7.3	30,446			10.4	31,390				8.0
Deferred leasing intangibles - Above market leases	11,135				7.3	7,249			5.3	10,576			9.2	11,135				7.3
Deferred leasing intangibles - Below market leases	(4,022		)		5.2	(5,840		)	5.3	(12,971		)	8.5	(4,022		)		5.2
Above market assumed debt adjustment	(418		)		1.4	(138		)	2.8	(75		)	7.2	(418		)		1.4
Other assets	565				N/A	—			N/A	158			N/A	565				N/A
Total purchase price	427,263					425,007				471,798				427,263
Less: Mortgage notes assumed	(26,267		)			(4,198		)		(4,037		)		(26,267		)
Less: Contingent consideration	(300		)	⁽¹⁾		—				—				(300		)	⁽¹⁾
Net assets acquired	$	400,696				$	420,809			$	467,761			$	400,696



Maryland (State or other jurisdiction of incorporation or organization)	27-3099608 (IRS Employer Identification No.)
One Federal Street, 23rd Floor Boston, Massachusetts (Address of principal executive offices)	02110 (Zip Code)



Title of each class		Name of each exchange on which registered
Common Stock, $0.01 par value		New York Stock Exchange
~~9.0%~~ 6.625% Series AB Cumulative Redeemable Preferred Stock, $0.01 par value		New York Stock Exchange
~~6.625%~~6.875% Series BC Cumulative Redeemable Preferred Stock, $0.01 par value		New York Stock Exchange



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



	PART I.
Item 1.	Business	43
Item 1A.	Risk Factors	11
Item 1B.	Unresolved Staff Comments	27
Item 2.	Properties	27
Item 3.	Legal Proceedings	3435
Item 4.	Mine Safety Disclosures	3435
	PART II.
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	3536
Item 6.	Selected Financial Data	3638
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	39
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	62
Item 8.	Financial Statements and Supplementary Data	6263
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	6265
Item 9A.	Controls and Procedures	6265
Item 9B.	Other Information	6365
	PART III.
Item 10.	Directors, Executive Officers and Corporate Governance	6465
Item 11.	Executive Compensation	6466
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	6466
Item 13.	Certain Relationships and Related Transactions, and Director Independence	6466
Item 14.	Principal Accountant Fees and Services	6466
	PART IV.
Item 15.	Exhibits and Financial Statement Schedules	6466
Item 16.	Form 10-K Summary	68



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



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



		Square Footage					Annualized Base Rental Revenue
Market Type	Number of Buildings	Amount	%		Occupancy		Amount (in thousands)		%
Primary	56	11,936,855	21.8	%	98.6	%	$	49,073	23.4	%
Secondary	181	35,109,227	64.2	%	95.3	%	134,971		64.2	%
Tertiary	54	7,666,302	14.0	%	92.1	%	25,986		12.4	%
Total/weighted average	291	54,712,384	100.0	%	95.6	%	$	210,030	100.0	%



		Square Footage					Total Annualized Base Rental Revenue
Operating Portfolio Market Type	Number of Buildings	Amount	%		Occupancy		Amount (in thousands)		%
Primary (greater than 200 million net rentable square feet)	68	14,445,533	24.2	%	95.4	%	$	58,532	26.1	%
Secondary (25 million to 200 million net rentable square feet)	184	38,126,550	64.0	%	96.1	%	141,730		63.2	%
Tertiary (less than 25 million net rentable square feet)	45	7,028,220	11.8	%	93.7	%	24,066		10.7	%
Total/weighted average	297	59,600,303	100.0	%	95.7	%	$	224,328	100.0	%



Portfolio characteristics	December 31, 2015	December 31, 2014
Number of Buildings	291	248
Square Feet	54,712,384	47,024,076
Average Building Size (square feet)	188,015	189,613
Average Building Age (years)	28	29
Average Minimum and Maximum Clear Height (feet) ⁽¹⁾	25-29	26-29
Number of Tenants	266	227
Number of Leases	319	261
Average Lease Size (square feet)	163,884	170,890



Region	Total Number of States	Total Number of Buildings	Regional Occupancy		% of Total Leased Square Feet		% of Total Annualized Base Rental Revenue
Midwest	10	119	94.4	%	37.2	%	36.7	%
East	13	105	95.9	%	37.4	%	38.5	%
South	9	55	96.2	%	21.5	%	19.3	%
West	6	12	100.0	%	3.9	%	5.5	%
Total/weighted average	38	291	95.6	%	100.0	%	100.0	%



Top Ten Tenant Industries	Total Number of Leases	Total Leased Square Feet	Total Annualized Base Rental Revenue (in thousands)		% of Total Annualized Base Rental Revenue
Air Freight & Logistics	43	6,695,668	$	25,593	12.2	%
Automotive	42	6,273,103	25,066		11.9	%
Ind Equip, Component & Metals	39	5,428,365	22,563		10.8	%
Food & Beverages	26	5,019,161	19,532		9.3	%
Containers & Packaging	22	5,108,981	19,367		9.2	%
Retail	13	3,240,980	11,156		5.3	%
Personal Products	10	2,601,482	11,007		5.2	%
Household Durables	11	2,882,427	10,166		4.8	%
Non-Profit/Government	7	1,245,044	8,974		4.3	%
Office Supplies	10	2,383,405	8,725		4.2	%
Total	223	40,878,616	$	162,149	77.2	%



Top Ten Leases	Leased Square Feet	% of Total Leased Square Feet		Annualized Base Rental Revenue (in thousands)		% of Total Annualized Base Rental Revenue
General Service Administration	1,048,631	2.0	%	$	7,026	3.3	%
Solo Cup Company	1,035,249	2.0	%	3,810		1.8	%
XPO Logistics Supply Chain Inc	528,997	1.0	%	2,777		1.3	%
Generation Brands, LLC	503,490	1.0	%	2,634		1.3	%
International Paper Company	465,323	0.9	%	2,517		1.2	%
Deckers Outdoor Corporation	423,106	0.8	%	2,379		1.1	%
Spencer Gifts, LLC	491,025	0.9	%	2,252		1.1	%
Closetmaid Corporation	619,466	1.2	%	2,053		1.0	%
CareFusion 213, LLC	360,134	0.7	%	1,956		0.9	%
Archway Marketing Serv., Inc.	386,724	0.7	%	1,858		0.9	%
Total	5,862,145	11.2	%	$	29,262	13.9	%



	Square Feet	Cash Basis Rent Per Square Foot		GAAP Basis Rent Per Square Foot		Total Turnover Costs Per Square Foot ⁽¹⁾		Cash Basis Rent Growth		GAAP Basis Rent Growth⁽²⁾⁽³⁾		Weighted Average Lease Term⁽⁴⁾
	Square Feet	Cash Basis Rent Per Square Foot		GAAP Basis Rent Per Square Foot		Total Turnover Costs Per Square Foot ⁽¹⁾		Cash Basis Rent Growth		GAAP Basis Rent Growth⁽²⁾⁽³⁾		Weighted Average Lease Term⁽⁴⁾
Year ended December 31, 2015
New Leases	1,439,366	$	3.63	$	3.49	$	2.00	11.2	%	16.4	%	7.8
Renewal Leases	2,950,326	3.98		4.14		0.61		(1.0	)%	4.6	%	4.1
Total / weighted average	4,389,692	$	3.87	$	4.00	$	1.06	1.6	%	7.1	%	5.4
Temporary Leases	1,356,770
Total Leasing Activity	5,746,462
Year ended December 31, 2014
New Leases	646,452	$	4.02	$	4.13	$	1.14	6.5	%	11.5	%	5.8
Renewal Leases	4,288,760	3.79		3.84		0.72		5.0	%	8.8	%	3.6
Total / weighted average	4,935,212	$	3.82	$	3.87	$	0.78	5.1	%	9.0	%	3.9
Temporary Leases	1,058,701
Total Leasing Activity	5,993,913



	Square Feet	Rental Concessions⁽¹⁾		Weighted Average Lease Term (years)
Year ended December 31, 2015
New Leases	896,528	$	730,558	4.2
Renewal Leases	300,000	169,610		7.2
Total/weighted average	1,196,528	$	900,168	4.9
Year ended December 31, 2014
New Leases	189,252	$	125,947	2.9
Renewal Leases	690,700	246,726		4.0
Total/weighted average	879,952	$	372,673	3.8



Historical Retention	Retention ⁽¹⁾%		Expiring Square Feet	Renewal Square Feet ⁽²⁾	Cash Rollover Rent Change		GAAP Rollover Rent Change
April 20, 2011 to December 31, 2011	73.9	%	514,476	380,136	1.0	%	1.9	%
Year ended December 31, 2012	82.0	%	2,152,085	1,765,353	(0.9	)%	1.2	%
Year ended December 31, 2013	58.5	%	2,811,984	1,646,283	3.6	%	6.7	%
Year ended December 31, 2014	69.7	%	3,467,769	2,418,076	5.1	%	9.4	%
Year ended December 31, 2015	69.8	%	4,938,386	3,444,670	4.2	%	8.4	%
Total/weighted average	69.5	%	13,884,700	9,654,518	3.0	%	6.4	%


(1)	Includes flex/office buildings, redevelopment buildings, and buildings classified as held for sale, which are excluded from the same store portfolio. Also includes corporate sublease rental income and asset management fee income, which isare separated for purposes of calculating NOI.



					Contribution to NOI (in thousands)
					Year ended December 31,
Acquisitions/Dispositions	Square Feet	Buildings	Purchase/Sale Price (in thousands)		2015			2014
Acquired during the quarter ended
December 31, 2015	3,057,668	14	$	138,086	$	631		$	—
September 30, 2015	2,509,084	18	$	108,286	3,580			—
June 30, 2015	1,639,383	12	$	83,808	3,906			—
March 31, 2015	1,485,717	5	$	97,083	6,525			—
December 31, 2014	2,730,940	12	$	135,531	11,738			1,437
September 30, 2014	3,469,080	18	$	171,603	14,257			4,026
June 30, 2014	2,130,958	9	$	80,967	6,944			4,329
March 31, 2014	975,275	4	$	36,907	3,533			2,860
Disposed during the quarter ended
December 31, 2015	486,577	4	$	13,415	2,314			1,804
September 30, 2015	321,810	2	$	9,550	(189		)	(353		)
December 31, 2014	236,230	2	$	5,850	1			2,908
September 30, 2014	181,838	1	$	7,056	—			371
March 31, 2014	15,085	1	$	475	—			8
Total					$	53,240		$	17,390


~~(1)~~	~~Includes corporate sublease rental income and asset management fee income, which is separated for purposes of calculating NOI.~~


~~(2)~~	NOI for the combined same store portfolio and acquisitions and dispositions for the year ended December 31, 2014 and December 31, 2013 was $139.8 million and $111.5 million, respectively. For a detailed discussion of NOI, including the reasons management believes NOI is useful to investors, see “Non-GAAP Financial Measures” below.


~~(1)~~	~~Includes the results of discontinued operations. For the year ended December 31, 2013, excluding the results of discontinued operations, NOI was approximately $109.0 million.~~



	Year ended December 31,
Reconciliation of Net Income (Loss) to NOI (in thousands)	2016			2015			2014
Net income (loss)	$	35,588		$	(29,345	)	$	(4,685	)
Asset management fee income	(210		)	(379		)	(598		)
General and administrative	33,395			28,750			26,396
Property acquisition costs	4,567			4,757			4,390
Depreciation and amortization	125,444			110,421			87,703
Interest income	(10		)	(9		)	(15		)
Interest expense	42,923			36,098			25,109
Loss on impairments	16,845			29,272			2,840
Loss on extinguishment of debt	3,261			—			686
Other expenses	1,149			1,048			803
Gain on the sales of rental property, net	(61,823		)	(4,986		)	(2,799		)
Corporate sublease rental income	—			(187		)	(17		)
Net operating income	$	201,129		$	175,440		$	139,813



	Year ended December 31,				Change
Cash Flows (dollars in thousands)	2016		2015		$			%
Net cash provided by operating activities	$	135,423	$	121,707	$	13,716		11.3	%
Net cash used in investing activities	$	347,112	$	372,038	$	(24,926	)	(6.7	)%
Net cash provided by financing activities	$	211,870	$	238,464	$	(26,594	)	(11.2	)%


Quarter Ended 2015	Declaration Date	Series A Preferred Stock Per Share		Series B Preferred Stock Per Share		Payment Date
Quarter Ended 2016							Declaration Date		Series A Preferred Stock Per Share			Series B Preferred Stock Per Share		Series C Preferred Stock Per Share			Payment Date
December 31	October 22, 2015	$	0.5625	$	0.4140625	December 31, 2015	November 2, 2016	₍₁₎	$	0.19375	₍₁₎	$	0.4140625	$	0.4296875		December 30, 2016
September 30	July 21, 2015	0.5625		0.4140625		September 30, 2015	August 1, 2016		0.56250			0.4140625		0.4296875			September 30, 2016
June 30	May 4, 2015	0.5625		0.4140625		June 30, 2015	May 2, 2016		0.56250			0.4140625		0.4965300		₍₂₎	June 30, 2016
March 31	February 20, 2015	0.5625		0.4140625		March 31, 2015	February 22, 2016		0.56250			0.4140625		—			March 31, 2016
Total		$	2.2500	$	1.6562500				$	1.88125		$	1.6562500	$	1.3559050


(1)	On September 26, 2016 our board of directors approved the redemption of the Series A Preferred Stock. OnNovember 2, 2016, we redeemed all of the Series A Preferred Stock, at a cash redemption price of $25.00 per share, plus accrued and unpaid dividends to but excluding the redemption date, without interest.


(2)	Dividends on the Series C Preferred Stock were accrued and cumulative from and including the issuance date of March 17, 2016 to the first payment date on June 30, 2016.


Loan	Principal outstanding as of December 31, 2015			Interest Rate ⁽²⁾		Current Maturity	Prepayment Terms ⁽³⁾	Principal outstanding as of December 31, 2016 (in thousands)			Interest Rate ⁽¹⁾		Current Maturity	Prepayment Terms ⁽²⁾
Unsecured credit facility:
Unsecured Credit Facility ⁽¹⁾⁽³⁾	$	56,000		L + 1.15%		Dec-18-2019	i	$	28,000		L + 1.15%		Dec-18-2019	i
Total unsecured credit facility	56,000							28,000

Unsecured term loans:
Unsecured Term Loan C								150,000			L + 1.30%		Sep-29-2020	i
Unsecured Term Loan B								150,000			L + 1.30%		Mar-21-2021	i
Unsecured Term Loan A	150,000			L + 1.65%		Mar-31-2022	ii	150,000			L + 1.30%		Mar-31-2022	i
Unsecured Term Loan B	150,000			L + 1.70%		Mar-21-2021	ii
Unsecured Term Loan C ⁽⁴⁾	—			L + 1.30%		Sep-29-2020	i
Total unsecured term loans	300,000							450,000
Less: Total unamortized deferred financing fees and debt issuance costs								(3,392		)
Total carrying value unsecured term loans								446,608

Unsecured notes:
Series F Unsecured Notes								100,000			3.98	%	Jan-05-2023	ii
Series A Unsecured Notes	50,000			4.98	%	Oct-1-2024	ii	50,000			4.98	%	Oct-1-2024	ii
Series D Unsecured Notes								100,000			4.32	%	Feb-20-2025	ii
Series B Unsecured Notes	50,000			4.98	%	Jul-1-2026	ii	50,000			4.98	%	Jul-1-2026	ii
Series C Unsecured Notes	80,000			4.42	%	Dec-30-2026	ii	80,000			4.42	%	Dec-30-2026	ii
Series D Unsecured Notes	100,000			4.32	%	Feb-20-2025	ii
Series E Unsecured Notes	20,000			4.42	%	Feb-20-2027	ii	20,000			4.42	%	Feb-20-2027	ii
Series F Unsecured Notes	100,000			3.98	%	Jan-05-2023	ii
Total unsecured notes	400,000							400,000
Less: Total unamortized deferred financing fees and debt issuance costs								(2,034		)
Total carrying value unsecured notes								397,966

Mortgage notes (secured debt):
Sun Life Assurance Company of Canada (U.S.)	3,229		(5)	6.05	%	Jun-1-2016	iii
Webster Bank, National Association	5,513			4.22	%	Aug-4-2016	iii
National Life Insurance Company	4,775		(5)	5.75	%	Aug-10-2016	iii
Union Fidelity Life Insurance Co.	5,754		(5)	5.81	%	Apr-30-2017	iv	5,384			5.81	%	Apr-30-2017	iv
Principal Life Insurance Company	5,676		(5)	5.73	%	May-05-2017	iii
Webster Bank, National Association	2,945			3.66	%	May-29-2017	iii	2,853			3.66	%	May-29-2017	iii
Webster Bank, National Association	3,172			3.64	%	May-31-2017	iii	3,073			3.64	%	May-31-2017	iii
Wells Fargo, National Association	4,115		(5)	5.90	%	Aug-1-2017	v	4,043			5.90	%	Aug-1-2017	v
Connecticut General Life Insurance Company -1 Facility	57,171			6.50	%	Feb-1-2018	vi	35,320			6.50	%	Feb-1-2018	vi
Connecticut General Life Insurance Company -2 Facility	58,085			5.75	%	Feb-1-2018	vi	36,892			5.75	%	Feb-1-2018	vi
Connecticut General Life Insurance Company -3 Facility	16,401			5.88	%	Feb-1-2018	vi	16,141			5.88	%	Feb-1-2018	vi
Wells Fargo Bank, National Association CMBS Loan	63,897			4.31	%	Dec-1-2022	vii
Wells Fargo, National Association CMBS Loan								56,608			4.31	%	Dec-1-2022	vii
Thrivent Financial for Lutherans								4,012			4.78	%	Dec-15-2023	iii
Total mortgage notes	230,733							164,326
Total unamortized fair market value premiums	447		(6)					112
Less: Total unamortized deferred financing fees and debt issuance costs								(873		)
Total carrying value mortgage notes	231,180							163,565
Total / weighted average interest rate ⁽⁷⁾	$	987,180		4.07	%
Total / weighted average interest rate ⁽⁴⁾								$	1,036,139		3.75	%


(1)	~~On September 29, 2015, the capacity of the unsecured credit facility was increased from $300.0 million to $450.0 million.~~


~~(2)~~	Current interest rate as of December 31, ~~2015.~~2016. At December 31, ~~2015,~~2016 , the one-month LIBOR (“L”) was ~~0.42950%~~ 0.77167%. The current interest rate ~~presented in the table above are~~is not adjusted to include the amortization of deferred financing fees incurred in obtaining debt or the unamortized fair market value ~~premium.~~premiums.


~~(4)~~(3)	~~Capacity~~The capacity of ~~$150.0 million, in which we have until September 29, 2016 to draw~~ the ~~full amount.~~unsecured credit facility is currently $450.0 million.


~~(5)~~	~~The principal outstanding does not include an unamortized fair market value premiums.~~


~~(6)~~	~~Represents total unamortized fair market value premium for the mortgage notes referenced by Note (5) above.~~


~~(7)~~(4)	The weighted average interest rate was calculated using the fixed interest rate swapped on the current notional amount of ~~$300~~$450.0 million of debt, and is not adjusted to include the amortization of deferred financing fees or debt issuance costs incurred in obtaining debt or ~~the~~any unamortized fair market value premiums.



Debt Capital Structure and Financial Ratios	December 31, 2015			December 31, 2014
Total Debt (in thousands)	$	987,180		$	686,347
Weighted Average Duration	6.5 Years			6.9 Years
Weighted Average Interest Rate ⁽¹⁾	4.07		%	4.04		%
% Secured Debt	23		%	33		%
% Debt Maturing Next 12 Months	1		%	—		%
Net Debt to Real Estate Cost Basis ⁽²⁾	45		%	37		%
Total Debt to Enterprise Value ⁽³⁾	40		%	28		%



Debt Capital Structure	December 31, 2016
Total principal outstanding (in thousands)	$	1,042,326
Weighted average duration (years)	5.6
% Secured debt	15.8		%
% Debt maturing next 12 months	1.5		%
Net Debt to Real Estate Cost Basis ⁽¹⁾	41.0		%