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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 
FORM 10-Q

x☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the Quarterly Period Ended March 31,September 30, 2019
 
OR
 
¨☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from              to              .
 
Commission file number 1-34907
 

 
STAG INDUSTRIAL, INC.Industrial, Inc.
(Exact name of registrant as specified in its charter)


Maryland27-3099608
(State or other jurisdiction of(IRS Employer Identification No.)
incorporation or organization)
Maryland27-3099608
(State or other jurisdiction
of incorporation or organization)
(IRS Employer
Identification No.)
One Federal Street 23rd Floor
Boston, Massachusetts
02110
23rd Floor
Boston,Massachusetts02110
(Address of principal executive offices)(Zip Code)code)
             
(617) 574-4777
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading symbol(s)Name of each exchange on which registered
Common stock, $0.01 par value per shareSTAGNew York Stock Exchange
6.875% Series C Cumulative Redeemable Preferred Stock ($0.01 par value)STAG-PCNew York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes x☒  No ¨☐
 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes x☒  No ¨☐
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer x
Accelerated filer ¨
Non-accelerated filer ¨

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨☐
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes ¨☐  No x☒

Indicate theThe number of shares outstanding of each of the issuer’s classes of common and preferred stock as of the latest practicable date.
outstanding at October 29, 2019 was 132,957,164.


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STAG Industrial, Inc.
Table of Contents 
ClassOutstanding at April 29, 2019
Common Stock ($0.01 par value)125,652,464
3
6.875% Series C Cumulative Redeemable Preferred Stock ($0.01 par value)3,000,000

STAG INDUSTRIAL, INC.
Table of Contents 
Financial Information
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Item 1.
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2
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Part I. Financial Information
Item 1.  Financial Statements


STAG Industrial, Inc.
Consolidated Balance Sheets
(unaudited, in thousands, except share data)
 September 30, 2019December 31, 2018
Assets  
Rental Property:  
Land$420,215  $364,023  
Buildings and improvements, net of accumulated depreciation of $367,088 and $316,930, respectively2,788,766  2,285,663  
Deferred leasing intangibles, net of accumulated amortization of $241,323 and $246,502, respectively413,955  342,015  
Total rental property, net3,622,936  2,991,701  
Cash and cash equivalents6,540  7,968  
Restricted cash2,733  14,574  
Tenant accounts receivable50,460  42,236  
Prepaid expenses and other assets46,707  36,902  
Interest rate swaps488  9,151  
Operating lease right-of-use assets15,425  —  
Total assets$3,745,289  $3,102,532  
Liabilities and Equity      
Liabilities:      
Unsecured credit facility$78,000  $100,500  
Unsecured term loans, net771,037  596,360  
Unsecured notes, net572,783  572,488  
Mortgage notes, net55,210  56,560  
Accounts payable, accrued expenses and other liabilities63,572  45,507  
Interest rate swaps24,812  4,011  
Tenant prepaid rent and security deposits21,131  22,153  
Dividends and distributions payable16,293  13,754  
Deferred leasing intangibles, net of accumulated amortization of $11,259 and $12,764, respectively20,237  21,567  
Operating lease liabilities17,259  —  
Total liabilities1,640,334  1,432,900�� 
Commitments and contingencies (Note 11)
Equity:      
Preferred stock, par value $0.01 per share, 20,000,000 and 15,000,000 shares authorized at September 30, 2019 and December 31, 2018, respectively,      
Series C, 3,000,000 shares (liquidation preference of $25.00 per share) issued and outstanding at September 30, 2019 and December 31, 201875,000  75,000  
Common stock, par value $0.01 per share, 300,000,000 and 150,000,000 shares authorized at September 30, 2019 and December 31, 2018, respectively, 132,958,388 and 112,165,786 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively1,330  1,122  
Additional paid-in capital2,687,118  2,118,179  
Cumulative dividends in excess of earnings(690,324) (584,979) 
Accumulated other comprehensive income (loss) (24,030) 4,481  
Total stockholders’ equity2,049,094  1,613,803  
Noncontrolling interest55,861  55,829  
Total equity2,104,955  1,669,632  
Total liabilities and equity$3,745,289  $3,102,532  
 March 31, 2019
December 31, 2018
Assets   
Rental Property:   
Land$377,530

$364,023
Buildings and improvements, net of accumulated depreciation of $321,010 and $316,930, respectively2,392,547

2,285,663
Deferred leasing intangibles, net of accumulated amortization of $224,740 and $246,502, respectively348,439

342,015
Total rental property, net3,118,516

2,991,701
Cash and cash equivalents7,857

7,968
Restricted cash4,451

14,574
Tenant accounts receivable44,928

42,236
Prepaid expenses and other assets42,503

36,902
Interest rate swaps5,214

9,151
Operating lease right-of-use assets16,005
 —
Total assets$3,239,474

$3,102,532
Liabilities and Equity   
Liabilities:   
Unsecured credit facility$115,500

$100,500
Unsecured term loans, net596,642

596,360
Unsecured notes, net572,587

572,488
Mortgage notes, net56,109

56,560
Accounts payable, accrued expenses and other liabilities41,381

45,507
Interest rate swaps7,060

4,011
Tenant prepaid rent and security deposits21,254

22,153
Dividends and distributions payable15,846

13,754
Deferred leasing intangibles, net of accumulated amortization of $10,394 and $12,764, respectively20,468

21,567
Operating lease liabilities17,786
 —
Total liabilities1,464,633

1,432,900
Commitments and contingencies (Note 11)   
Equity:   
Preferred stock, par value $0.01 per share, 15,000,000 shares authorized,   
Series C, 3,000,000 shares (liquidation preference of $25.00 per share) issued and outstanding at March 31, 2019 and December 31, 201875,000

75,000
Common stock, par value $0.01 per share, 150,000,000 shares authorized, 118,174,102 and 112,165,786 shares issued and outstanding at March 31, 2019 and December 31, 2018, respectively1,182

1,122
Additional paid-in capital2,266,695

2,118,179
Cumulative dividends in excess of earnings(621,225)
(584,979)
Accumulated other comprehensive income (loss)(2,253)
4,481
Total stockholders’ equity1,719,399

1,613,803
Noncontrolling interest55,442

55,829
Total equity1,774,841

1,669,632
Total liabilities and equity$3,239,474

$3,102,532

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

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STAG Industrial, Inc.
Consolidated Statements of Operations
(unaudited, in thousands, except per share data)
 Three months ended September 30,Nine months ended September 30,
 2019201820192018
Revenue            
Rental income$102,294  $88,677  $294,271  $256,670  
Other income127  269  498  1,033  
Total revenue102,421  88,946  294,769  257,703  
Expenses         
Property18,157  17,112  54,623  50,735  
General and administrative8,924  8,911  26,723  25,637  
Depreciation and amortization46,908  44,355  133,844  125,221  
Loss on impairments4,413  —  9,757  2,934  
Other expenses458  223  1,284  864  
Total expenses78,860  70,601  226,231  205,391  
Other income (expense)         
Interest and other income12  3  30  16  
Interest expense(14,053) (12,698) (39,080) (35,602) 
Loss on extinguishment of debt—  (13) —  (13) 
Gain on the sales of rental property, net  1,670  3,239  3,261  32,276  
Total other income (expense)(12,371) (9,469) (35,789) (3,323) 
Net income  $11,190  $8,876  $32,749  $48,989  
Less: income attributable to noncontrolling interest after preferred stock dividends  290  281  912  1,589  
Net income attributable to STAG Industrial, Inc.  $10,900  $8,595  $31,837  $47,400  
Less: preferred stock dividends1,289  1,289  3,867  6,315  
Less: redemption of preferred stock—  —  —  2,661  
Less: amount allocated to participating securities78  69  236  209  
Net income attributable to common stockholders  $9,533  $7,237  $27,734  $38,215  
Weighted average common shares outstanding — basic127,272  105,783  122,460  101,095  
Weighted average common shares outstanding — diluted127,469  106,333  122,720  101,495  
Net income per share — basic and diluted           
Net income per share attributable to common stockholders — basic$0.07  $0.07  $0.23  $0.38  
Net income per share attributable to common stockholders — diluted$0.07  $0.07  $0.23  $0.38  
 Three months ended March 31,
 2019
2018
Revenue    

    
Rental income$95,615

$83,127
Other income87

156
Total revenue95,702

83,283
Expenses 

 
Property19,511

17,499
General and administrative9,212

8,748
Depreciation and amortization42,303

39,965
Loss on impairments5,344

2,934
Other expenses399

291
Total expenses76,769

69,437
Other income (expense) 

 
Interest and other income16
 6
Interest expense(12,834)
(11,392)
Gain on the sales of rental property, net1,274

22,689
Total other income (expense)(11,544)
11,303
Net income$7,389

$25,149
Less: income attributable to noncontrolling interest after preferred stock dividends214

954
Net income attributable to STAG Industrial, Inc.$7,175

$24,195
Less: preferred stock dividends1,289

2,448
Less: amount allocated to participating securities79

71
Net income attributable to common stockholders$5,807

$21,676
Weighted average common shares outstanding — basic114,721

97,021
Weighted average common shares outstanding — diluted114,993

97,323
Net income per share — basic and diluted 

 
Net income per share attributable to common stockholders — basic$0.05
 $0.22
Net income per share attributable to common stockholders — diluted$0.05
 $0.22

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

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STAG Industrial, Inc.
Consolidated Statements of Comprehensive Income
(unaudited, in thousands)
 Three months ended September 30,Nine months ended September 30,
 2019201820192018
Net income  $11,190  $8,876  $32,749  $48,989  
Other comprehensive income (loss):             
Income (loss) on interest rate swaps (6,435) 2,060  (29,441) 12,811  
Other comprehensive income (loss) (6,435) 2,060  (29,441) 12,811  
Comprehensive income  4,755  10,936  3,308  61,800  
Income attributable to noncontrolling interest after preferred stock dividends  (290) (281) (912) (1,589) 
Other comprehensive (income) loss attributable to noncontrolling interest 176  (76) 930  (509) 
Comprehensive income attributable to STAG Industrial, Inc.  $4,641  $10,579  $3,326  $59,702  
 Three months ended March 31,
 2019 2018
Net income$7,389
 $25,149
Other comprehensive income (loss):   
Income (loss) on interest rate swaps(6,978) 7,723
Other comprehensive income (loss)(6,978) 7,723
Comprehensive income411
 32,872
Income attributable to noncontrolling interest after preferred stock dividends(214) (954)
Other comprehensive (income) loss attributable to noncontrolling interest244
 (325)
Comprehensive income attributable to STAG Industrial, Inc.$441
 $31,593

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

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STAG Industrial, Inc.
ConsolidatedStatements of Equity
(unaudited, in thousands, except share data)
Preferred StockCommon StockAdditional Paid-in CapitalCumulative Dividends in Excess of EarningsAccumulated Other Comprehensive Income (Loss) Total Stockholders’ EquityNoncontrolling Interest - Unit Holders in Operating PartnershipTotal Equity
Preferred Stock Common Stock Additional Paid-in Capital Cumulative Dividends in Excess of Earnings Accumulated Other Comprehensive Income (Loss) Total Stockholders’ Equity Noncontrolling Interest - Unit Holders in Operating Partnership Total Equity SharesAmount
Three months ended September 30, 2019Three months ended September 30, 2019
Balance, June 30, 2019Balance, June 30, 2019$75,000  126,372,945  $1,264  $2,501,013  $(653,759) $(17,771) $1,905,747  $57,505  $1,963,252  
Proceeds from sales of common stock, netProceeds from sales of common stock, net—  6,375,129  64  183,148  —  —  183,212  —  183,212  
Preferred Stock Shares Amount Additional Paid-in Capital Cumulative Dividends in Excess of Earnings Accumulated Other Comprehensive Income (Loss) Total Stockholders’ Equity Noncontrolling Interest - Unit Holders in Operating Partnership Total Equity
Three months ended March 31, 2019     
Balance, December 31, 2018$75,000
 112,165,786
 $1,122
 $2,118,179
 $(584,979) $4,481
 $1,613,803
 $55,829
 $1,669,632
Leases cumulative effect adjustment (Note 2)—
 —
 —
 —
 (214) —
 (214) —
 (214)
Proceeds from sales of common stock—
 5,441,409
 55
 150,134
 —
 —
 150,189
 —
 150,189
Offering costs—
 —
 —
 (1,660) —
 —
 (1,660) —
 (1,660)
Dividends and distributions, net—
 —
 —
 —
 (42,834) —
 (42,834) (1,546) (44,380)Dividends and distributions, net—  —  —  —  (47,465) —  (47,465) (1,375) (48,840) 
Non-cash compensation activity, net—
 127,836
 1
 (1,133) (373) —
 (1,505) 2,368
 863
Non-cash compensation activity, net—  3,162  —  1,675  —  —  1,675  901  2,576  
Redemption of common units to common stock—
 439,071
 4
 6,024
 —
 —
 6,028
 (6,028) —
Redemption of common units to common stock—  207,152  2  3,001  —  —  3,003  (3,003) —  
Rebalancing of noncontrolling interest—
 —
 —
 (4,849) —
 —
 (4,849) 4,849
 —
Rebalancing of noncontrolling interest—  —  —  (1,719) —  —  (1,719) 1,719  —  
Other comprehensive loss—
 —
 —
 —
 —
 (6,734) (6,734) (244) (6,978)Other comprehensive loss  —  —  —  —  —  (6,259) (6,259) (176) (6,435) 
Net income—
 —
 —
 —
 7,175
 —
 7,175
 214
 7,389
Net income  —  —  —  —  10,900  —  10,900  290  11,190  
Balance, March 31, 2019$75,000
 118,174,102
 $1,182
 $2,266,695
 $(621,225) $(2,253) $1,719,399
 $55,442
 $1,774,841
Three months ended March 31, 2018                 
Balance, December 31, 2017$145,000
 97,012,543
 $970
 $1,725,825
 $(516,691) $3,936
 $1,359,040
 $51,267
 $1,410,307
Cash flow hedging instruments cumulative effect adjustment—
 —
 —
 —
 (258) 247
 (11) 11
 —
Offering costs—
 —
 —
 (107) —
 —
 (107) —
 (107)
Balance, September 30, 2019Balance, September 30, 2019$75,000  132,958,388  $1,330  $2,687,118  $(690,324) $(24,030) $2,049,094  $55,861  $2,104,955  
Three months ended September 30, 2018Three months ended September 30, 2018
Balance, June 30, 2018Balance, June 30, 2018$75,000  104,238,166  $1,042  $1,905,002  $(559,312) $14,492  $1,436,224  $53,403  $1,489,627  
Proceeds from sales of common stock, netProceeds from sales of common stock, net—  3,568,382  36  98,481  —  —  98,517  —  98,517  
Dividends and distributions, net—
 —
 —
 —
 (36,966) —
 (36,966) (1,813) (38,779)Dividends and distributions, net—  —  —  —  (39,094) —  (39,094) (1,443) (40,537) 
Non-cash compensation activity, net—
 71,373
 1
 (855) (537) —
 (1,391) 2,097
 706
Non-cash compensation activity, net—  (757) —  1,361  —  —  1,361  893  2,254  
Redemption of common units to common stock—
 145,672
 1
 1,823
 —
 —
 1,824
 (1,824) —
Redemption of common units to common stock—  20,000  —  261  —  —  261  (261) —  
Rebalancing of noncontrolling interest—
 —
 —
 (2,059) —
 —
 (2,059) 2,059
 —
Rebalancing of noncontrolling interest—  —  —  (1,122) —  —  (1,122) 1,122  —  
Other comprehensive income—
 —
 —
 —
 —
 7,398
 7,398
 325
 7,723
Other comprehensive income  —  —  —  —  —  1,993  1,993  67  2,060  
Net income—
 —
 —
 —
 24,195
 —
 24,195
 954
 25,149
Net income  —  —  —  —  8,621  —  8,621  255  8,876  
Balance, March 31, 2018$145,000
 97,229,588
 $972
 $1,724,627
 $(530,257) $11,581
 $1,351,923
 $53,076
 $1,404,999
Balance, September 30, 2018Balance, September 30, 2018$75,000  107,825,791  $1,078  $2,003,983  $(589,785) $16,485  $1,506,761  $54,036  $1,560,797  
Nine months ended September 30, 2019Nine months ended September 30, 2019
Balance, December 31, 2018Balance, December 31, 2018$75,000  112,165,786  $1,122  $2,118,179  $(584,979) $4,481  $1,613,803  $55,829  $1,669,632  
Leases cumulative effect adjustment (Note 2)Leases cumulative effect adjustment (Note 2)—  —  —  —  (214) —  (214) —  (214) 
Proceeds from sales of common stock, netProceeds from sales of common stock, net—  19,997,332  201  567,876  —  —  568,077  —  568,077  
Dividends and distributions, netDividends and distributions, net—  —  —  —  (136,595) —  (136,595) (5,247) (141,842) 
Non-cash compensation activity, netNon-cash compensation activity, net—  134,188  1  2,198  (373) —  1,826  4,168  5,994  
Redemption of common units to common stockRedemption of common units to common stock—  661,082  6  9,232  —  —  9,238  (9,238) —  
Rebalancing of noncontrolling interestRebalancing of noncontrolling interest—  —  —  (10,367) —  —  (10,367) 10,367  —  
Other comprehensive loss Other comprehensive loss  —  —  —  —  —  (28,511) (28,511) (930) (29,441) 
Net income Net income  —  —  —  —  31,837  —  31,837  912  32,749  
Balance, September 30, 2019Balance, September 30, 2019$75,000  132,958,388  $1,330  $2,687,118  $(690,324) $(24,030) $2,049,094  $55,861  $2,104,955  
Nine months ended September 30, 2018Nine months ended September 30, 2018
Balance, December 31, 2017Balance, December 31, 2017$145,000  97,012,543  $970  $1,725,825  $(516,691) $3,936  $1,359,040  $51,267  $1,410,307  
Cash flow hedging instruments cumulative effect adjustmentCash flow hedging instruments cumulative effect adjustment—  —  —  —  (258) 247  (11) 11  —  
Proceeds from sales of common stock, netProceeds from sales of common stock, net—  10,387,962  104  273,224  —  —  273,328  —  273,328  
Redemption of preferred stockRedemption of preferred stock(70,000) —  —  5,141  (5,158) —  (70,017) —  (70,017) 
Dividends and distributions, netDividends and distributions, net—  —  —  —  (114,541) —  (114,541) (5,253) (119,794) 
Non-cash compensation activity, netNon-cash compensation activity, net—  73,231  1  1,829  (537) —  1,293  3,880  5,173  
Redemption of common units to common stockRedemption of common units to common stock—  352,055  3  4,398  —  —  4,401  (4,401) —  
Rebalancing of noncontrolling interestRebalancing of noncontrolling interest—  —  —  (6,434) —  —  (6,434) 6,434  —  
Other comprehensive income Other comprehensive income  —  —  —  —  —  12,302  12,302  509  12,811  
Net income Net income  —  —  —  —  47,400  —  47,400  1,589  48,989  
Balance, September 30, 2018Balance, September 30, 2018$75,000  107,825,791  $1,078  $2,003,983  $(589,785) $16,485  $1,506,761  $54,036  $1,560,797  
The accompanying notes are an integral part of these consolidated financial statements.

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STAG Industrial, Inc.
Consolidated Statements of Cash Flows
(unaudited, in thousands)
 Nine months ended September 30,
 20192018
Cash flows from operating activities:        
Net income  $32,749  $48,989  
Adjustment to reconcile net income to net cash provided by operating activities:    
Depreciation and amortization133,844  125,221  
Loss on impairments9,757  2,934  
Non-cash portion of interest expense1,909  1,698  
Amortization of above and below market leases, net3,344  3,206  
Straight-line rent adjustments, net(8,586) (8,297) 
Dividends on forfeited equity compensation7  15  
Loss on extinguishment of debt—  13  
Gain on the sales of rental property, net(3,261) (32,276) 
Non-cash compensation expense7,371  6,671  
Change in assets and liabilities:  
Tenant accounts receivable509  501  
Prepaid expenses and other assets(10,525) (9,597) 
Accounts payable, accrued expenses and other liabilities8,834  9,249  
Tenant prepaid rent and security deposits(1,022) 283  
Total adjustments142,181  99,621  
Net cash provided by operating activities  174,930  148,610  
Cash flows from investing activities:  
Acquisitions of land and buildings and improvements(616,647) (382,981) 
Additions of land and building and improvements(40,193) (23,578) 
Acquisitions of other assets(2,513) (794) 
Acquisitions of other liabilities—  242  
Proceeds from sales of rental property, net23,700  89,407  
Acquisition deposits, net(1,190) (695) 
Acquisitions of deferred leasing intangibles(128,832) (74,851) 
Net cash used in investing activities  (765,675) (393,250) 
Cash flows from financing activities:  
Proceeds from unsecured credit facility768,000  643,000  
Repayment of unsecured credit facility(790,500) (819,000) 
Proceeds from unsecured term loans175,000  150,000  
Proceeds from unsecured notes—  175,000  
Repayment of mortgage notes(1,441) (1,379) 
Payment of loan fees and costs(1,226) (4,451) 
Proceeds from sales of common stock, net568,390  273,266  
Redemption of preferred stock—  (70,000) 
Dividends and distributions(139,303) (117,146) 
Repurchase and retirement of share-based compensation(1,444) (1,524) 
Net cash provided by financing activities  577,476  227,766  
Decrease in cash and cash equivalents and restricted cash  (13,269) (16,874) 
Cash and cash equivalents and restricted cash—beginning of period22,542  28,129  
Cash and cash equivalents and restricted cash—end of period$9,273  $11,255  
Supplemental disclosure:  
Cash paid for interest, net of capitalized interest$35,372  $31,875  
Supplemental schedule of non-cash investing and financing activities  
Acquisitions of land and buildings and improvements$(72) $(232) 
Acquisitions of deferred leasing intangibles$(24) $(48) 
Change in additions of land, building, and improvements included in accounts payable, accrued expenses, and other liabilities$(10,824) $(1,475) 
Additions to building and other capital improvements from non-cash compensation$(59) $(20) 
Change in loan fees, costs, and offering costs included in accounts payable, accrued expenses, and other liabilities$(314) $48  
Reclassification of preferred stock called for redemption to liability$—  $70,000  
Leases cumulative effect adjustment (Note 2)$(214) $—  
Dividends and distributions accrued$16,293  $14,530  
 Three months ended March 31,
 2019 2018
Cash flows from operating activities:         
Net income$7,389
 $25,149
Adjustment to reconcile net income to net cash provided by operating activities:   
Depreciation and amortization42,303
 39,965
Loss on impairments5,344
 2,934
Non-cash portion of interest expense618
 534
Amortization of above and below market leases, net961
 1,207
Straight-line rent adjustments, net(2,256) (2,781)
Dividends on forfeited equity compensation6
 7
Gain on the sales of rental property, net(1,274) (22,689)
Non-cash compensation expense2,278
 2,220
Change in assets and liabilities:   
Tenant accounts receivable(859) 848
Prepaid expenses and other assets(2,686) (5,531)
Accounts payable, accrued expenses and other liabilities(3,775) (2,720)
Tenant prepaid rent and security deposits(899) 2,831
Total adjustments39,761
 16,825
Net cash provided by operating activities47,150
 41,974
Cash flows from investing activities:   
Acquisitions of land and buildings and improvements(159,969) (67,077)
Additions of land and building and improvements(5,058) (6,317)
Acquisitions of other assets(1,049) —
Proceeds from sales of rental property, net16,602
 49,631
Acquisition deposits, net(2,997) (605)
Acquisitions of deferred leasing intangibles(24,345) (11,744)
Net cash used in investing activities(176,816) (36,112)
Cash flows from financing activities:   
Proceeds from unsecured credit facility208,000
 110,000
Repayment of unsecured credit facility(193,000) (163,000)
Proceeds from unsecured term loans—
 75,000
Repayment of mortgage notes(481) (462)
Payment of loan fees and costs—
 (3)
Proceeds from sales of common stock150,189
 —
Offering costs(1,544) (88)
Dividends and distributions(42,288) (36,200)
Repurchase and retirement of share-based compensation(1,444) (1,524)
Net cash provided by (used in) financing activities119,432
 (16,277)
Decrease in cash and cash equivalents and restricted cash(10,234) (10,415)
Cash and cash equivalents and restricted cash—beginning of period22,542
 28,129
Cash and cash equivalents and restricted cash—end of period$12,308
 $17,714
Supplemental disclosure:   
Cash paid for interest, net of capitalized interest$10,449
 $11,057
Supplemental schedule of non-cash investing and financing activities   
Change in additions of land, building, and improvements included in accounts payable, accrued expenses, and other liabilities$(1,094) $1,908
Additions to building and other capital improvements from non-cash compensation$(14) $(4)
Change in loan fees, costs, and offering costs included in accounts payable, accrued expenses, and other liabilities$(116) $(90)
Leases cumulative effect adjustment (Note 2)$(214) $—
Dividends and distributions accrued$15,846
 $14,460

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

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STAG Industrial, Inc.
Notes to Consolidated Financial Statements
(unaudited)
1. OrganizationandDescription of Business


STAG Industrial, Inc. (the “Company”) is an industrial real estate operating company focused on the acquisition and operation of single-tenant, industrial properties throughout the United States. The Company was formed as a Maryland corporation and has elected to be treated and intends to continue to qualify as a real estate investment trust (“REIT”) under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended. The Company is structured as an umbrella partnership REIT, commonly called an UPREIT, and owns substantially all of its assets and conducts substantially all of its business through its operating partnership, STAG Industrial Operating Partnership, L.P., a Delaware limited partnership (the “Operating Partnership”). As of March 31,September 30, 2019 and December 31, 2018, the Company owned a 96.7%97.2% and 96.5%, 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 March 31,September 30, 2019, the Company owned 395430 buildings in 3837 states with approximately 78.286.0 million rentable square feet, consisting of 328356 warehouse/distribution buildings, 5866 light manufacturing buildings, and nine8 flex/office buildings. The Company’s buildings were approximately 95.2% leased to 359 tenants as of March 31, 2019.


2. Summary of Significant Accounting Policies


Interim Financial Information
 
The accompanying interim financial statements have been presented in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and with the instructions to Form 10-Q and Regulation S-X for interim financial information. Accordingly, these statements do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, the accompanying interim financial statements include all adjustments, consisting of normal recurring items, necessary for their fair statement in conformity with GAAP. Interim results are not necessarily indicative of results for a full year. The year-end consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the Company’s consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018.


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 and restated (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.


New Accounting Standards and Reclassifications


New Accounting Standards Adopted


In July 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2018-11 which amends Topic 842, Leases, and provides lessors with a practical expedient, by class of underlying asset, to not separate non-lease components from the associated lease component and, instead, to account for those components as a single component if the non-lease components otherwise would be accounted for under the new revenue guidance and both of the following are met: i) the timing and pattern of transfer of the non-lease component(s) and associated lease component are the same; and ii) the lease component, if accounted for separately, would be classified as an operating lease. Under this new expedient, if the non-lease components associated with the lease component are the predominant component of the combined component, a company should account for the combined component in accordance with Topic 606, Revenue from Contracts with Customers. Otherwise, the company should account for the combined component as an operating lease in accordance with Topic 842. In December 2018, the FASB issued ASU 2018-20 which amends Topic 842, Leases, and allows lessors to continue to exclude from revenue the lessor costs that are paid by lessees directly to third parties. The Company adopted Topic 842 on
8
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January 1, 2019, using the practical expedient, and i

tit did not have a material impact on the Company’s consolidated financial statements. The Company determined that for all leases where the Company is the lessor, that the timing and pattern of transfer of the non-lease components and associated lease components are the same, and that the lease components, if accounted for separately, would be classified as an operating lease. Accordingly, the Company has made an accounting policy election to recognize the combined component in accordance with Topic 842 as rental income on the accompanying Consolidated Statements of Operations.


In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), and various subsequent ASU’s, which set 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 superseded 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 determines 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 are accounted for similar to the previous guidance for operating leases. The new standard requires lessors to account for leases using an approach that is substantially equivalent to the previous guidance for sales-type leases, direct financing leases and operating leases. ASU 2016-02 impacted the Company’s consolidated financial statements as the Company has ground leases and its corporate office lease for which it is the lessee, which resulted in the recording of a right-of-use asset and the related lease liability.


The Company adopted ASU 2016-02 on January 1, 2019, using the modified retrospective transition method. The adoption of this standard resulted in a cumulative effect adjustment of approximately $0.2 million recorded as an increase to cumulative dividends in excess of earnings as of January 1, 2019 in the accompanying Consolidated Statements of Equity. The cumulative effect adjustment related to initial direct costs of leases where the Company is the lessor and that, as of January 1, 2019, had not begun to amortize and are no longer allowed to be capitalized under the new standard. On January 1, 2019, the Company recognized operating lease right-of-use assets of approximately $16.3 million and related operating lease liabilities of approximately $18.0 million on the accompanying Consolidated Balance Sheets, related to the leases where the Company is the lessee. The Company adopted the new standard using the practical expedient package which allowed the Company to (i) not reassess whether any expired or existing contracts are or contain leases; (ii) not reassess the lease classification for any expired or existing leases; and (iii) not reassess initial direct costs for any existing leases. This practical expedient allows the Company to continue to account for its ground leases as operating leases. Prospectively, any new or modified ground leases may be classified as a financing lease. The adoption of this standard by the Company has been applied prospectively,as of January 1, 2019, and the comparative periods have not been restated.


For leases in which the Company is the lessee, the Company recognizes a right-of-use asset and corresponding lease liability on the accompanying Consolidated Balance Sheets equal to the present value of the fixed lease payments. In determining operating right-of-use asset and lease liability for the Company’s existing operating leases upon the adoption of the new lease guidance, the Company was required to estimate an appropriate incremental borrowing rate on a fully-collateralized basis for the terms of the leases. The Company utilized a market-based approach to estimate the incremental borrowing rate for each individual lease. Since the terms under the ground leases are significantly longer than the terms of borrowings available to the Company on a fully-collateralized basis, the estimate of this rate required significant judgment, and considered factors such as yields on outstanding public debt and other market based pricing on longer duration financing instruments.


The new leases standard requires the Company to evaluate cash basis versus accrual basis of rental income recognition based on the collectability of future lease payments.


Reclassifications


Prior period amounts have been reclassified to conform to the current year presentation due to the adoption of ASU 2016-02. Amounts previously classified as rental income and tenant recoveries in the prior period are now classified as rental income on the accompanying Consolidated Statements of Operations, as the Company has made an accounting policy election to combine these amounts that are accounted for under the new leases standard.


Certain other prior period amounts have been reclassified to conform to the current year presentation.


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Restricted Cash


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

Reconciliation of cash and cash equivalents and restricted cash (in thousands) March 31, 2019 December 31, 2018Reconciliation of cash and cash equivalents and restricted cash (in thousands)September 30, 2019December 31, 2018
Cash and cash equivalents $7,857
 $7,968
Cash and cash equivalents$6,540  $7,968  
Restricted cash 4,451
 14,574
Restricted cash2,733  14,574  
Total cash and cash equivalents and restricted cash $12,308
 $22,542
Total cash and cash equivalents and restricted cash$9,273  $22,542  


Taxes


Federal Income Taxes


The Company’s taxable REIT subsidiaries recognized a net lossincome (loss) of approximately $12,000$0, $0.3 million, $(22,000) and $36,000$(0.1) million for the three and nine months ended March 31,September 30, 2019 and 2018, respectively, which has been included on the accompanying Consolidated Statements of Operations.


State and Local Income, Excise, and Franchise Tax


State and local income, excise, and franchise taxes in the amount of $0.2$0.3 million, $0.9 million, $0.1 million and $0.2$0.6 million have been recorded in other expenses on the accompanying Consolidated Statements of Operations for the three and nine months ended March 31,September 30, 2019 and 2018, respectively.


Uncertain Tax Positions


As of March 31,September 30, 2019 and December 31, 2018, there were no0 liabilities for uncertain tax positions.


Concentrations of Credit Risk


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


3. Rental Property


The following table summarizes the components of rental property as of March 31,September 30, 2019 and December 31, 2018.

Rental Property (in thousands)September 30, 2019December 31, 2018
Land$420,215  $364,023  
Buildings, net of accumulated depreciation of $240,968 and $199,497, respectively2,520,684  2,082,781  
Tenant improvements, net of accumulated depreciation of $20,979 and $36,450, respectively33,829  30,704  
Building and land improvements, net of accumulated depreciation of $105,141 and $80,983, respectively210,558  168,229  
Construction in progress23,695  3,949  
Deferred leasing intangibles, net of accumulated amortization of $241,323 and $246,502, respectively413,955  342,015  
Total rental property, net$3,622,936  $2,991,701  

10
Rental Property (in thousands) March 31, 2019 December 31, 2018
Land $377,530
 $364,023
Buildings, net of accumulated depreciation of $211,755 and $199,497, respectively 2,180,636
 2,082,781
Tenant improvements, net of accumulated depreciation of $21,026 and $36,450, respectively 31,108
 30,704
Building and land improvements, net of accumulated depreciation of $88,229 and $80,983, respectively 173,715
 168,229
Construction in progress 7,088
 3,949
Deferred leasing intangibles, net of accumulated amortization of $224,740 and $246,502, respectively 348,439
 342,015
Total rental property, net $3,118,516
 $2,991,701
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Acquisitions


The following table summarizes the acquisitions of the Company during the three and nine months ended March 31,September 30, 2019.

Market (1)
 Date Acquired Square Feet Buildings Purchase Price
(in thousands)
Market (1)
Date AcquiredSquare FeetBuildingsPurchase Price
(in thousands)
Cincinnati/Dayton, OH January 24, 2019 176,000
 1
 $9,965
Cincinnati/Dayton, OHJanuary 24, 2019176,000  1  $9,965  
Pittsburgh, PA February 21, 2019 455,000
 1
 28,676
Pittsburgh, PAFebruary 21, 2019455,000  1  28,676  
Boston, MA February 21, 2019 349,870
 1
 26,483
Boston, MAFebruary 21, 2019349,870  1  26,483  
Minneapolis/St Paul, MN February 28, 2019 248,816
 1
 21,955
Minneapolis/St Paul, MNFebruary 28, 2019248,816  1  21,955  
Greenville/Spartanburg, SC March 7, 2019 331,845
 1
 24,536
Greenville/Spartanburg, SCMarch 7, 2019331,845  1  24,536  
Philadelphia, PA March 7, 2019 148,300
 1
 10,546
Philadelphia, PAMarch 7, 2019148,300  1  10,546  
Omaha/Council Bluffs, NE-IA March 11, 2019 237,632
 1
 20,005
Omaha/Council Bluffs, NE-IAMarch 11, 2019237,632  1  20,005  
Houston, TX March 28, 2019 132,000
 1
 17,307
Houston, TXMarch 28, 2019132,000  1  17,307  
Baltimore, MD March 28, 2019 167,410
 1
 13,648
Baltimore, MDMarch 28, 2019167,410  1  13,648  
Houston, TX March 28, 2019 116,750
 1
 12,242
Houston, TXMarch 28, 2019116,750  1  12,242  
Three months ended March 31, 2019 2,363,623
 10
 $185,363
Three months ended March 31, 20192,363,623  10  185,363  
Minneapolis/St Paul, MNMinneapolis/St Paul, MNApril 2, 2019100,600  1  9,045  
West Michigan, MIWest Michigan, MIApril 8, 2019230,200  1  15,786  
Greensboro/Winston-Salem, NCGreensboro/Winston-Salem, NCApril 12, 2019129,600  1  7,771  
Greenville/Spartanburg, SCGreenville/Spartanburg, SCApril 25, 2019319,660  2  15,432  
Charleston/N Charleston, SCCharleston/N Charleston, SCApril 29, 2019500,355  1  40,522  
Houston, TXHouston, TXApril 29, 2019128,136  1  13,649  
Richmond, VARichmond, VAMay 16, 2019109,520  1  9,467  
Laredo, TXLaredo, TXJune 6, 2019213,982  1  18,972  
Baton Rouge, LABaton Rouge, LAJune 18, 2019252,800  2  20,041  
Philadelphia, PAPhiladelphia, PAJune 19, 2019187,569  2  13,645  
Columbus, OHColumbus, OHJune 28, 2019857,390  1  95,828  
Three months ended June 30, 2019Three months ended June 30, 20193,029,812  14  260,158  
Kansas City, MOKansas City, MOJuly 10, 2019304,840  1  13,450  
Houston, TXHouston, TXJuly 22, 2019199,903  1  11,287  
Charleston/N Charleston, SCCharleston/N Charleston, SCJuly 22, 201988,583  1  7,166  
Tampa, FLTampa, FLAugust 5, 201978,560  1  8,168  
Philadelphia, PAPhiladelphia, PAAugust 6, 2019120,000  1  10,880  
Milwaukee/Madison, WIMilwaukee/Madison, WIAugust 16, 2019224,940  3  13,981  
Houston, TXHouston, TXAugust 19, 201945,000  1  6,190  
West Michigan, MIWest Michigan, MIAugust 19, 2019210,120  1  10,407  
Pittsburgh, PAPittsburgh, PAAugust 21, 2019410,389  1  31,219  
Boston, MABoston, MAAugust 22, 201980,100  1  14,253  
Las Vegas, NVLas Vegas, NVAugust 27, 201980,422  2  12,602  
Nashville, TNNashville, TNAugust 29, 2019348,880  1  20,267  
Columbia, SCColumbia, SCAugust 30, 2019200,000  1  13,670  
Pittsburgh, PAPittsburgh, PASeptember 6, 2019138,270  1  9,323  
Omaha/Council Bluffs, NE-IAOmaha/Council Bluffs, NE-IASeptember 11, 2019128,200  2  8,509  
Pittsburgh, PAPittsburgh, PASeptember 16, 2019315,634  1  28,712  
Memphis, TNMemphis, TNSeptember 19, 20191,135,453  1  50,941  
Memphis, TNMemphis, TNSeptember 26, 2019629,086  1  31,542  
Three months ended September 30, 2019Three months ended September 30, 20194,738,380  22  302,567  
Nine months ended September 30, 2019Nine months ended September 30, 201910,131,815  46  $748,088  
(1) As defined by CoStar Realty Information Inc (“CoStar”). If the building is located outside of a CoStar defined market, the city and state is reflected.



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The following table summarizes the allocation of the consideration paid at the date of acquisition during the threenine months ended March 31,September 30, 2019 for the acquired assets and liabilities in connection with the acquisitions identified in the table above.

Acquired Assets and Liabilities Purchase Price (in thousands) Weighted Average Amortization Period (years) of Intangibles at AcquisitionAcquired Assets and LiabilitiesPurchase Price (in thousands)Weighted Average Amortization Period (years) of Intangibles at Acquisition
Land $18,152
 N/ALand$63,317  N/A
Buildings 127,201
 N/ABuildings499,255  N/A
Tenant improvements 1,349
 N/ATenant improvements6,246  N/A
Building and land improvements 11,235
 N/ABuilding and land improvements45,869  N/A
Construction in progress 2,032
 N/AConstruction in progress2,032  N/A
Other assets 1,049
 N/AOther assets2,513  N/A
Deferred leasing intangibles - In-place leases 16,743
 7.9Deferred leasing intangibles - In-place leases76,628  8.9
Deferred leasing intangibles - Tenant relationships 8,404
 11.3Deferred leasing intangibles - Tenant relationships36,008  11.7
Deferred leasing intangibles - Above market leases 327
 4.3Deferred leasing intangibles - Above market leases19,449  12.8
Deferred leasing intangibles - Below market leases (1,129) 8.5Deferred leasing intangibles - Below market leases(3,229) 6.9
Total purchase price $185,363
  Total purchase price$748,088   


The following table below sets forthsummarizes the results of operations for the three and nine months ended March 31,September 30, 2019 for the buildings acquired during the threenine months ended March 31,September 30, 2019 included in the Company’s Consolidated Statements of Operations from the date of acquisition.

Results of Operations (in thousands) Three months ended March 31, 2019Results of Operations (in thousands)Three months ended September 30, 2019Nine months ended September 30, 2019
Total revenue $1,194
Total revenue$10,616  $17,307  
Net loss $145
Net income Net income  $2,173  $2,985  


Dispositions


During the threenine months ended March 31,September 30, 2019, the Company sold five6 buildings and 2 land parcels comprised of approximately 1.01.1 million rentable square feet with a net book value of approximately $15.3$20.4 million to third parties. These buildings and land parcels contributed approximately $0.1$20,000, $0.8 million, $1.5 million, and $1.1$5.3 million to revenue for the three and nine months ended March 31,September 30, 2019 and 2018, respectively. These buildings and land parcels contributed approximately $(0.1) million, $(0.2) million, $0.5 million, and $0.5$0.9 million to net income (loss) (exclusive of loss on impairments and gain on the sales of rental property, net) for the three and nine months ended March 31,September 30, 2019 and 2018, respectively. Net proceeds from the sales of rental property were approximately $16.6$23.7 million and the Company recognized the full gain on the sales of rental property, net, of approximately $1.3$3.3 million for the threenine months ended March 31,September 30, 2019.


Loss on Impairments


The following table summarizes the Company'sCompany’s loss on impairments for assets held and used during the nine months ended September 30, 2019.
Market(1)
Buildings
Event or Change in Circumstance Leading to Impairment Evaluation(2)
Valuation technique utilized to estimate fair value
Fair Value(3)
Loss on Impairments
(in thousands)
Rapid City, SD(4)
1  Change in estimated hold period(5)Discounted cash flows(6)
Three months ended March 31, 2019$4,373  $5,344  
Belfast, ME(4)
5  Market leasing conditionsDiscounted cash flows(7)
Three months ended September 30, 2019$5,950  $4,413  
Nine months ended September 30, 2019$10,323  $9,757  
(1)As defined by CoStar. If the building is located outside of a CoStar defined market, the city and state is reflected.
(2)The Company tested the asset group for impairment utilizing a probability weighted recovery analysis of certain scenarios, and it was determined that the carrying value of the property and intangibles were not recoverable from the estimated future undiscounted cash flows.
(3)The estimated fair value of the property is based on Level 3 inputs and is a non-recurring fair value measurement. Level 3 is defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.
(4)Flex/office buildings.
(5)This property was sold during the three months ended September 30, 2019.
(6)Level 3 inputs used to determine fair value for the property impaired for the three months ended March 31, 2019.2019: discount rate of 12.0% and exit capitalization rate of 12.0%.
(7)Level 3 inputs used to determine fair value for the property impaired for the three months ended September 30, 2019: discount rate of 13.0% and exit capitalization rate of 12.0%.

12
Market(1)
 Buildings 
Event or Change in Circumstance Leading to Impairment Evaluation(2)
 Valuation technique utilized to estimate fair value 
Fair Value(3)
 Loss on Impairments
(in thousands)
Rapid City, SD 1 Change in estimated hold period Discounted cash flows(4)   
Three months ended March 31, 2019   $4,373
 $5,344
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(1)As defined by CoStar. If the building is located outside of a CoStar defined market, the city and state is reflected.
(2)The Company tested the asset group for impairment utilizing a probability weighted recovery analysis of certain scenarios, and it was determined that the carrying value of the property and intangibles were not recoverable from the estimated future undiscounted cash flows.
(3)The estimated fair value of the property is based on Level 3 inputs and is a non-recurring fair value measurement. Level 3 is defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.
(4)Level 3 inputs used to determine fair value for the property impaired for the three months ended March 31, 2019: discount rate of 12.0% and exit capitalization rate of 12.0%.


Deferred Leasing Intangibles


The following table sets forthsummarizes the deferred leasing intangibles on the accompanying Consolidated Balance Sheets as of March 31,September 30, 2019 and December 31, 2018.

 March 31, 2019 December 31, 2018September 30, 2019December 31, 2018
Deferred Leasing Intangibles (in thousands) Gross Accumulated Amortization Net Gross Accumulated Amortization NetDeferred Leasing Intangibles (in thousands)Gross  Accumulated Amortization  NetGrossAccumulated AmortizationNet
Above market leases $70,961
 $(30,409) $40,552
 $73,122
 $(31,059) $42,063
Above market leases$88,388  $(33,439) $54,949  $73,122  $(31,059) $42,063  
Other intangible lease assets 502,218
 (194,331) 307,887
 515,395
 (215,443) 299,952
Other intangible lease assets566,890  (207,884) 359,006  515,395  (215,443) 299,952  
Total deferred leasing intangible assets $573,179
 $(224,740) $348,439
 $588,517
 $(246,502) $342,015
Total deferred leasing intangible assets$655,278  $(241,323) $413,955  $588,517  $(246,502) $342,015  
            
Below market leases $30,862
 $(10,394) $20,468
 $34,331
 $(12,764) $21,567
Below market leases$31,496  $(11,259) $20,237  $34,331  $(12,764) $21,567  
Total deferred leasing intangible liabilities $30,862
 $(10,394) $20,468
 $34,331
 $(12,764) $21,567
Total deferred leasing intangible liabilities$31,496  $(11,259) $20,237  $34,331  $(12,764) $21,567  


The following table sets forthsummarizes the amortization expense and the net decrease to rental income for the amortization of deferred leasing intangibles during the three and nine months ended March 31,September 30, 2019 and 2018.

 Three months ended March 31, Three months ended September 30,Nine months ended September 30,
Deferred Leasing Intangibles Amortization (in thousands) 2019 2018Deferred Leasing Intangibles Amortization (in thousands)2019201820192018
Net decrease to rental income related to above and below market lease amortization $967
 $1,207
Net decrease to rental income related to above and below market lease amortization$1,248  $1,150  $3,361  $3,206  
Amortization expense related to other intangible lease assets $16,814
 $18,100
Amortization expense related to other intangible lease assets$18,472  $20,361  $53,185  $56,698  


The following table sets forthsummarizes the amortization of deferred leasing intangibles over the next five calendar years beginning with 2019 as of March 31,September 30, 2019.

YearAmortization Expense Related to Other Intangible Lease Assets (in thousands)Net Decrease to Rental Income Related to Above and Below Market Lease Amortization (in thousands)
Remainder of 2019$18,698  $1,283  
2020$66,090  $4,870  
2021$54,264  $3,559  
2022$45,234  $2,657  
2023$37,492  $2,608  

Year Amortization Expense Related to Other Intangible Lease Assets (in thousands) Net Decrease to Rental Income Related to Above and Below Market Lease Amortization (in thousands)
Remainder of 2019 $48,278
 $2,900
2020 $54,265
 $3,546
2021 $43,369
 $2,221
2022 $35,017
 $1,361
2023 $28,732
 $1,363
13

Table of Contents

4. Debt


The following table sets forth a summary ofsummarizes the Company’s outstanding indebtedness, including borrowings under the Company’s unsecured credit facility, unsecured term loans, unsecured notes, and mortgage notes as of March 31,September 30, 2019 and December 31, 2018.

LoanPrincipal Outstanding as of September 30, 2019 (in thousands)    Principal Outstanding as of December 31, 2018 (in thousands)
Interest 
Rate (1)(2)
    Maturity Date  
Prepayment Terms (3) 
Unsecured credit facility:
Unsecured Credit Facility (4)
$78,000  
 
$100,500   L + 0.90%  January 15, 2023i
Total unsecured credit facility78,000  
 
100,500        
Unsecured term loans:   
 
    
Unsecured Term Loan C150,000  150,000  2.39 %September 29, 2020i
Unsecured Term Loan B150,000  
 
150,000   3.05 %March 21, 2021i
Unsecured Term Loan A150,000  
 
150,000   2.70 %March 31, 2022i
Unsecured Term Loan D150,000  
 
150,000   2.85 % January 4, 2023i
Unsecured Term Loan E175,000  —  3.92 %January 15, 2024i
Unsecured Term Loan F (5)
—  —  3.11 %January 12, 2025i
Total unsecured term loans775,000  600,000  
Less: Total unamortized deferred financing fees and debt issuance costs(3,963) (3,640) 
Total carrying value unsecured term loans, net771,037  
 
596,360        
Unsecured notes:   
 
    
Series F Unsecured Notes100,000  100,000  3.98 %

January 5, 2023ii
Series A Unsecured Notes50,000  
 
50,000   4.98 %October 1, 2024ii
Series D Unsecured Notes100,000  
 
100,000   4.32 %February 20, 2025ii
Series G Unsecured Notes75,000  75,000  4.10 %June 13, 2025ii
Series B Unsecured Notes50,000  
 
50,000   4.98 %July 1, 2026ii
Series C Unsecured Notes80,000  
 
80,000   4.42 %December 30, 2026ii
Series E Unsecured Notes20,000  
 
20,000   4.42 %February 20, 2027ii
Series H Unsecured Notes100,000  100,000  4.27 %June 13, 2028ii
Total unsecured notes575,000  575,000  

Less: Total unamortized deferred financing fees and debt issuance costs(2,217) (2,512) 

Total carrying value unsecured notes, net572,783  
 
572,488  
 
   

  

Mortgage notes (secured debt):      

  
Wells Fargo Bank, National Association CMBS Loan51,861  
 
53,216     4.31 %December 1, 2022iii
Thrivent Financial for Lutherans3,709  3,795  4.78 %December 15, 2023iv
Total mortgage notes55,570  
 
57,011      
Add: Total unamortized fair market value premiums42  50   
Less: Total unamortized deferred financing fees and debt issuance costs(402) (501) 
Total carrying value mortgage notes, net55,210  
 
56,560   
Total / weighted average interest rate (6)
$1,477,030  
 
$1,325,908  3.58 %
(1)Interest rate as of September 30, 2019. At September 30, 2019, the one-month LIBOR (“L”) was 2.01563%. The current interest rate is not adjusted to include the amortization of deferred financing fees or debt issuance costs incurred in obtaining debt or any unamortized fair market value premiums. The spread over the applicable rate for the Company’s unsecured credit facility and unsecured term loans is based on the Company’s debt rating, as defined in the respective loan agreements.
(2)As of September 30, 2019, one-month LIBOR for the Unsecured Term Loans A, B, C, D, E, and F was swapped to a fixed rate of 1.70%, 2.05%, 1.39%, 1.85%, 2.92%, and 2.11%, respectively.
(3)Prepayment terms consist of (i) pre-payable with no penalty; (ii) pre-payable with penalty; (iii) pre-payable without penalty three months prior to the maturity date, however can be defeased; and (iv) pre-payable without penalty three months prior to the maturity date.
(4)The capacity of the unsecured credit facility is $500.0 million. Deferred financing fees and debt issuance costs, net of accumulated amortization related to the unsecured credit facility of approximately $2.6 million and $3.2 million is included in prepaid expenses and other assets on the accompanying Consolidated Balance Sheets as of September 30, 2019 and December 31, 2018, respectively.
(5)Capacity of $200.0 million, which the Company has until July 12, 2020 to draw.
(6)The weighted average interest rate was calculated using the fixed interest rate swapped on the notional amount of $775.0 million of debt, and is not adjusted to include the amortization of deferred financing fees or debt issuance costs incurred in obtaining debt or any unamortized fair market value premiums.

14
Loan
Principal Outstanding as of March 31, 2019 (in thousands)    Principal Outstanding as of December 31, 2018 (in thousands) 
Interest 
Rate (1)(2)
    Maturity Date 
Prepayment Terms (3) 
Unsecured credit facility:

 
 




Unsecured Credit Facility (4)

$115,500
  
$100,500
 L + 0.90%

Jan-15-2023
i
Total unsecured credit facility
115,500
  
100,500
  

 
 
 

 
 




Unsecured term loans:
 
  


  

 
 
Unsecured Term Loan C
150,000
 150,000
 2.39%
Sep-29-2020
i
Unsecured Term Loan B
150,000
  
150,000
 3.05%
Mar-21-2021
i
Unsecured Term Loan A
150,000
  
150,000
 2.70%
Mar-31-2022
i
Unsecured Term Loan D 150,000
  
150,000
 2.85% Jan-04-2023 i
Unsecured Term Loan E (5)
 —
 —
 3.92% Jan-15-2024 i
Total unsecured term loans
600,000
 600,000
 





Less: Total unamortized deferred financing fees and debt issuance costs
(3,358) (3,640) 





Total carrying value unsecured term loans, net
596,642
  
596,360
  

 
 
 

 
 




Unsecured notes:
 
  


  

 
 
Series F Unsecured Notes
100,000
 100,000
 3.98%
Jan-05-2023
ii
Series A Unsecured Notes
50,000
  
50,000
 4.98%
Oct-1-2024
ii
Series D Unsecured Notes
100,000
  
100,000
 4.32%
Feb-20-2025
ii
Series G Unsecured Notes 75,000
 75,000
 4.10% Jun-13-2025 ii
Series B Unsecured Notes
50,000
  
50,000
 4.98%
Jul-1-2026
ii
Series C Unsecured Notes
80,000
  
80,000
 4.42%
Dec-30-2026
ii
Series E Unsecured Notes
20,000
  
20,000
 4.42%
Feb-20-2027
ii
Series H Unsecured Notes 100,000
 100,000
 4.27% Jun-13-2028 ii
Total unsecured notes
575,000
 575,000
 





Less: Total unamortized deferred financing fees and debt issuance costs
(2,413) (2,512) 





Total carrying value unsecured notes, net
572,587
  
572,488
  
 

 
 
 

 
 




Mortgage notes (secured debt):
 
 

  

 
 
Wells Fargo Bank, National Association CMBS Loan
52,763
  
53,216
 4.31%
Dec-1-2022
iii
Thrivent Financial for Lutherans 3,767
 3,795
 4.78% Dec-15-2023 iv
Total mortgage notes
56,530
  
57,011
  




Add: Total unamortized fair market value premiums
48
 50
  




Less: Total unamortized deferred financing fees and debt issuance costs 

(469) (501) 





Total carrying value mortgage notes, net
56,109
  
56,560
  




Total / weighted average interest rate (6)

$1,340,838
  
$1,325,908
 3.56%



Table of Contents
(1)Interest rate as of March 31, 2019. At March 31, 2019, the one-month LIBOR (“L”) was 2.49450%. The current interest rate is not adjusted to include the amortization of deferred financing fees or debt issuance costs incurred in obtaining debt or any unamortized fair market value premiums. The spread over the applicable rate for the Company’s unsecured credit facility and unsecured term loans is based on the Company’s debt rating, as defined in the respective loan agreements.
(2)As of March 31, 2019, one-month LIBOR for the unsecured term loans A, B, C, D, and E was swapped to a fixed rate of 1.70%, 2.05%, 1.39%, 1.85%, and 2.92%, respectively.
(3)Prepayment terms consist of (i) pre-payable with no penalty; (ii) pre-payable with penalty; (iii) pre-payable without penalty three months prior to the maturity date, however can be defeased; and (iv) pre-payable without penalty three months prior to the maturity date.
(4)The capacity of the unsecured credit facility is $500.0 million. Deferred financing fees and debt issuance costs, net of accumulated amortization related to the unsecured credit facility of approximately $3.0 million and $3.2 million is included in prepaid expenses and other assets on the accompanying Consolidated Balance Sheets as of March 31, 2019 and December 31, 2018, respectively.
(5)Capacity of $175.0 million, which the Company has until July 25, 2019 to draw.
(6)The weighted average interest rate was calculated using the fixed interest rate swapped on the notional amount of $600.0 million of debt, and is not adjusted to include the amortization of deferred financing fees or debt issuance costs incurred in obtaining debt or any unamortized fair market value premiums.

The aggregate undrawn nominal commitment on the unsecured credit facility and unsecured term loans as of March 31,September 30, 2019 was approximately $553.9$616.0 million, including issued letters of credit. The Company’s actual borrowing capacity at any given point in time may be less and is restricted to a maximum amount based on the Company’s debt covenant compliance. Total accrued interest for the Company’s indebtedness was approximately $7.7$7.6 million and $5.9 million as of March 31,September 30, 2019 and December 31, 2018, respectively, and is included in accounts payable, accrued expenses and other liabilities on the accompanying Consolidated Balance Sheets.


The following table below sets forthsummarizes the costs included in interest expense related to the Company’s debt arrangements on the accompanying Consolidated Statement of Operations for the three and nine months ended March 31,September 30, 2019 and 2018.

 Three months ended March 31,Three months ended September 30,Nine months ended September 30,
Costs Included in Interest Expense (in thousands) 2019 2018Costs Included in Interest Expense (in thousands)2019201820192018
Amortization of deferred financing fees and debt issuance costs and fair market value premiums $618
 $534
Amortization of deferred financing fees and debt issuance costs and fair market value premiums$673  $617  $1,909  $1,698  
Facility, unused, and other fees $383
 $339
Facility, unused, and other fees$348  $275  $1,118  $928  


On July 25, 2019, the Company drew $175.0 million of the $175.0 million Unsecured Term Loan E that was entered into on July 26, 2018.

On July 12, 2019, the Company entered into the $200.0 million unsecured Unsecured Term Loan F. As of September 30, 2019, the interest rate on the Unsecured Term Loan F was LIBOR plus a spread of 1.00% based on the Company’s debt rating, as defined in the loan agreement. Unless otherwise terminated pursuant to the loan agreement, the Unsecured Term Loan F will mature on January 12, 2025. The Unsecured Term Loan F has a feature that allows the Company to request an increase in the aggregate size of the unsecured term loan of up to $400.0 million, subject to the satisfaction of certain conditions and lender consents. The agreement includes a delayed draw feature that allows the Company to draw up to 6 advances of at least $25.0 million each until July 12, 2020. To the extent that the Company does not request advances of the $200.0 million of aggregate commitments by July 12, 2020, the unadvanced commitments terminate. The Unsecured Term Loan F has an unused commitment fee equal to 0.15% of its unused commitments, which began to accrue on October 10, 2019 and is due and payable monthly until the earlier of (i) the date that aggregate commitments of $200.0 million have been fully advanced, (ii) July 12, 2020, and (iii) the date that aggregate commitments have been reduced to zero pursuant to the terms of the agreement. The Company is required to pay an annual administrative agent fee of $35,000. The Company and certain wholly owned subsidiaries of the Operating Partnership are guarantors of the Unsecured Term Loan F. The agreement also contains financial and other covenants substantially similar to the covenants in the Company's unsecured credit facility. As of September 30, 2019, no amounts were outstanding under the Unsecured Term Loan F.

Financial Covenant Considerations


The Company was in compliance with all financial and other covenants as of March 31,September 30, 2019 and December 31, 2018 related to its unsecured credit facility, unsecured term loans, unsecured notes, and mortgage notes. The real estate net book value of the properties that are collateral for the Company’s debt arrangements was approximately $87.2$86.0 million and $88.2 million at March 31,September 30, 2019 and December 31, 2018, respectively, and is limited to senior, property-level secured debt financing arrangements.


15
Table of Contents
Fair Value of Debt


The following table presentssummarizes the aggregate principal outstanding under the Company’s debt arrangements and the corresponding estimate of fair value as of March 31,September 30, 2019 and December 31, 2018 (in thousands).2018.

September 30, 2019December 31, 2018
 March 31, 2019 December 31, 2018
 Principal Outstanding Fair Value Principal Outstanding Fair Value
Indebtedness (in thousands)Indebtedness (in thousands)Principal OutstandingFair ValuePrincipal OutstandingFair Value
Unsecured credit facility $115,500
 $115,500
 $100,500
 $100,500
Unsecured credit facility$78,000  $78,000  $100,500  $100,500  
Unsecured term loans 600,000
 600,000
 600,000
 600,000
Unsecured term loans775,000  775,000  600,000  600,000  
Unsecured notes 575,000
 596,833
 575,000
 585,292
Unsecured notes575,000  618,594  575,000  585,292  
Mortgage notes 56,530
 57,494
 57,011
 57,289
Mortgage notes55,570  56,627  57,011  57,289  
Total principal amount 1,347,030
 $1,369,827
 1,332,511
 $1,343,081
Total principal amount1,483,570  $1,528,221  1,332,511  $1,343,081  
Add: Total unamortized fair market value premiums 48
   50
  Add: Total unamortized fair market value premiums42  50  
Less: Total unamortized deferred financing fees and debt issuance costs (6,240)   (6,653)  Less: Total unamortized deferred financing fees and debt issuance costs(6,582) (6,653) 
Total carrying value $1,340,838
   $1,325,908
  Total carrying value$1,477,030  $1,325,908  


The applicable fair value 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. The fair value of the Company’s debt is based on Level 3 inputs.


5. Use of Derivative Financial Instruments


Risk Management Objective of Using Derivatives


The Company’s use of derivative instruments is limited to the utilization of interest rate swaps to manage interest rate risk exposure on existing and future liabilities and not for speculative purposes. The principal objective of such arrangements is to minimize the risks and related costs associated with the Company’s operating and financial structure.



16
Table of Contents
The following table detailssummarizes the Company’s outstanding interest rate swaps as of March 31,September 30, 2019. All of the Company’s interest rate swaps are designated as qualifying cash flow hedges.

Interest Rate
Derivative Counterparty		 Trade Date     Effective Date Notional Amount
(in thousands)		 Fair Value
(in thousands)		 Pay Fixed Interest Rate Receive Variable Interest Rate Maturity DateInterest Rate
Derivative Counterparty		Trade Date    Effective DateNotional Amount
(in thousands)		 Fair Value
(in thousands)		Pay Fixed Interest RateReceive Variable Interest RateMaturity Date
Regions Bank Mar-01-2013 Mar-01-2013 $25,000
 $235
 1.3300% One-month L Feb-14-2020 Regions BankMar-01-2013Mar-01-2013  $25,000  $51  1.3300 %One-month LFeb-14-2020 
Capital One, N.A. Jun-13-2013 Jul-01-2013 $50,000
 $316
 1.6810% One-month L Feb-14-2020 Capital One, N.A.Jun-13-2013Jul-01-2013  $50,000  $35  1.6810 %One-month LFeb-14-2020 
Capital One, N.A. Jun-13-2013 Aug-01-2013 $25,000
 $153
 1.7030% One-month L Feb-14-2020 Capital One, N.A.Jun-13-2013Aug-01-2013  $25,000  $16  1.7030 %One-month LFeb-14-2020 
Regions Bank Sep-30-2013 Feb-03-2014 $25,000
 $90
 1.9925% One-month L Feb-14-2020 Regions BankSep-30-2013Feb-03-2014  $25,000  $(12) 1.9925 %One-month LFeb-14-2020 
The Toronto-Dominion Bank Oct-14-2015 Sep-29-2016 $25,000
 $342
 1.3830% One-month L Sep-29-2020The Toronto-Dominion BankOct-14-2015Sep-29-2016  $25,000  $66  1.3830 %One-month LSep-29-2020
PNC Bank, N.A. Oct-14-2015 Sep-29-2016 $50,000
 $678
 1.3906% One-month L Sep-29-2020PNC Bank, N.A.Oct-14-2015Sep-29-2016  $50,000  $128  1.3906 %One-month LSep-29-2020
Regions Bank Oct-14-2015 Sep-29-2016 $35,000
 $477
 1.3858% One-month L Sep-29-2020Regions BankOct-14-2015Sep-29-2016  $35,000  $91  1.3858 %One-month LSep-29-2020
U.S. Bank, N.A. Oct-14-2015 Sep-29-2016 $25,000
 $338
 1.3950% One-month L Sep-29-2020U.S. Bank, N.A.Oct-14-2015Sep-29-2016  $25,000  $63  1.3950 %One-month LSep-29-2020
Capital One, N.A. Oct-14-2015 Sep-29-2016 $15,000
 $202
 1.3950% One-month L Sep-29-2020Capital One, N.A.Oct-14-2015Sep-29-2016  $15,000  $38  1.3950 %One-month LSep-29-2020
Royal Bank of Canada Jan-08-2015 Mar-20-2015 $25,000
 $256
 1.7090% One-month L Mar-21-2021Royal Bank of CanadaJan-08-2015Mar-20-2015  $25,000  $(56) 1.7090 %One-month LMar-21-2021
The Toronto-Dominion Bank Jan-08-2015 Mar-20-2015 $25,000
 $255
 1.7105% One-month L Mar-21-2021The Toronto-Dominion BankJan-08-2015Mar-20-2015  $25,000  $(57) 1.7105 %One-month LMar-21-2021
The Toronto-Dominion Bank Jan-08-2015 Sep-10-2017 $100,000
 $18
 2.2255% One-month L Mar-21-2021The Toronto-Dominion BankJan-08-2015Sep-10-2017  $100,000  $(982) 2.2255 %One-month LMar-21-2021
Wells Fargo, N.A. Jan-08-2015 Mar-20-2015 $25,000
 $243
 1.8280% One-month L Mar-31-2022Wells Fargo, N.A.Jan-08-2015Mar-20-2015  $25,000  $(246) 1.8280 %One-month LMar-31-2022
The Toronto-Dominion Bank Jan-08-2015 Feb-14-2020 $25,000
 $(204) 2.4535% One-month L Mar-31-2022The Toronto-Dominion BankJan-08-2015Feb-14-2020  $25,000  $(579) 2.4535 %One-month LMar-31-2022
Regions Bank Jan-08-2015 Feb-14-2020 $50,000
 $(430) 2.4750% One-month L Mar-31-2022Regions BankJan-08-2015Feb-14-2020  $50,000  $(1,181) 2.4750 %One-month LMar-31-2022
Capital One, N.A. Jan-08-2015 Feb-14-2020 $50,000
 $(487) 2.5300% One-month L Mar-31-2022Capital One, N.A.Jan-08-2015Feb-14-2020  $50,000  $(1,238) 2.5300 %One-month LMar-31-2022
The Toronto-Dominion Bank Jul-20-2017 Oct-30-2017 $25,000
 $269
 1.8485% One-month L Jan-04-2023The Toronto-Dominion BankJul-20-2017Oct-30-2017  $25,000  $(362) 1.8485 %One-month LJan-04-2023
Royal Bank of Canada Jul-20-2017 Oct-30-2017 $25,000
 $267
 1.8505% One-month L Jan-04-2023Royal Bank of CanadaJul-20-2017Oct-30-2017  $25,000  $(364) 1.8505 %One-month LJan-04-2023
Wells Fargo, N.A. Jul-20-2017 Oct-30-2017 $25,000
 $267
 1.8505% One-month L Jan-04-2023Wells Fargo, N.A.Jul-20-2017Oct-30-2017  $25,000  $(364) 1.8505 %One-month LJan-04-2023
PNC Bank, N.A. Jul-20-2017 Oct-30-2017 $25,000
 $269
 1.8485% One-month L Jan-04-2023PNC Bank, N.A.Jul-20-2017Oct-30-2017  $25,000  $(362) 1.8485 %One-month LJan-04-2023
PNC Bank, N.A. Jul-20-2017 Oct-30-2017 $50,000
 $539
 1.8475% One-month L Jan-04-2023PNC Bank, N.A.Jul-20-2017Oct-30-2017  $50,000  $(723) 1.8475 %One-month LJan-04-2023
The Toronto-Dominion Bank Jul-24-2018 Jul-26-2019 $50,000
 $(1,696) 2.9180% One-month L Jan-12-2024The Toronto-Dominion BankJul-24-2018Jul-26-2019  $50,000  $(3,229) 2.9180 %One-month LJan-12-2024
PNC Bank, N.A. Jul-24-2018 Jul-26-2019 $50,000
 $(1,699) 2.9190% One-month L Jan-12-2024PNC Bank, N.A.Jul-24-2018Jul-26-2019  $50,000  $(3,232) 2.9190 %One-month LJan-12-2024
Bank of Montreal Jul-24-2018 Jul-26-2019 $50,000
 $(1,696) 2.9190% One-month L Jan-12-2024Bank of MontrealJul-24-2018Jul-26-2019  $50,000  $(3,232) 2.9190 %One-month LJan-12-2024
U.S. Bank, N.A. Jul-24-2018 Jul-26-2019 $25,000
 $(848) 2.9190% One-month L Jan-12-2024U.S. Bank, N.A.Jul-24-2018Jul-26-2019  $25,000  $(1,616) 2.9190 %One-month LJan-12-2024
Wells Fargo, N.A.Wells Fargo, N.A.May-02-2019Jul-15-2020  $50,000  $(2,030) 2.2460 %One-month LJan-15-2025
U.S. Bank, N.A.U.S. Bank, N.A.May-02-2019Jul-15-2020  $50,000  $(2,029) 2.2459 %One-month LJan-15-2025
Regions BankRegions BankMay-02-2019Jul-15-2020  $50,000  $(2,032) 2.2459 %One-month LJan-15-2025
Bank of MontrealBank of MontrealJul-16-2019Jul-15-2020  $50,000  $(886) 1.7165 %One-month LJan-15-2025


The following table summarizes the fair value of the interest rate swaps outstanding as of March 31,September 30, 2019 and December 31, 2018 was as follows.2018.

Balance Sheet Line Item (in thousands) Notional Amount March 31, 2019 Fair Value
March 31, 2019		 Notional Amount December 31, 2018 Fair Value December 31, 2018Balance Sheet Line Item (in thousands)Notional Amount September 30, 2019Fair Value September 30, 2019Notional Amount December 31, 2018Fair Value December 31, 2018
Interest rate swaps-Asset $600,000
 $5,214
 $600,000
 $9,151
Interest rate swaps-Asset$250,000  $488  $600,000  $9,151  
Interest rate swaps-Liability $300,000
 $(7,060) $300,000
 $(4,011)Interest rate swaps-Liability$850,000  $(24,812) $300,000  $(4,011) 


Cash Flow Hedges of Interest Rate Risk


The Company’s objectives in using interest rate swaps are to add stability to interest expense and to manage its exposure to interest rate movements. 


For derivatives designated and that qualify as cash flow hedges of interest rate risk, the gain or loss on the derivative is recorded in accumulated other comprehensive income (loss) and subsequently reclassified into interest expense in the same periods during which the hedged transaction affects earnings.


Amounts reported in accumulated other comprehensive income (loss) related to derivatives designated as qualifying cash flow hedges will be reclassified to interest expense as interest payments are made on the Company’s variable rate debt. The Company estimates that approximately $3.0$3.8 million will be reclassified from accumulated other comprehensive income (loss) as a decreasean increase to interest expense over the next 12 months.


17
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The following table below presentssummarizes the effect of cash flow hedge accounting and the location in the consolidated financial statements for the three and nine months ended March 31,September 30, 2019 and 2018.
  Three months ended March 31,
Effect of Cash Flow Hedge Accounting (in thousands) 2019 2018
Income (loss) recognized in accumulated other comprehensive income (loss) on interest rate swaps $(5,856) $7,493
Income (loss) reclassified from accumulated other comprehensive income into income (loss) as interest expense $1,122
 $(230)
Total interest expense presented in the Consolidated Statements of Operations in which the effects of cash flow hedges are recorded
 $12,834
 $11,392


 Three months ended September 30,Nine months ended September 30,
Effect of Cash Flow Hedge Accounting (in thousands)2019201820192018
Income (loss) recognized in accumulated other comprehensive income (loss) on interest rate swaps $(5,913) $2,572  $(26,715) $13,349  
Income reclassified from accumulated other comprehensive income (loss) into income as interest expense$522  $512  $2,726  $538  
Total interest expense presented in the Consolidated Statements of Operations in which the effects of cash flow hedges are recorded
$14,053  $12,698  $39,080  $35,602  


Credit-risk-related Contingent Features


The Company has agreements with each of its derivative counterparties that contain a provision where the Company could be declared in default on its derivative obligations if repayment of the underlying indebtedness is accelerated by the lender due to the Company’s default on the indebtedness.


As of March 31, 2019, derivatives that were in a net liability position by counterparty and subject to credit-risk-related contingent features had a termination value of approximately $3.5 million, which includes accrued interest but excludes any adjustment for nonperformance risk. As of March 31,September 30, 2019, the Company had not breached the provisions of these agreements and had not posted any collateral related to these agreements. If the Company had breached any of these provisions at March 31,September 30, 2019, it could have been required to settle its obligations under the agreement of the interest rate swaps in a net liability position by counterparty plus accrued interest for approximately $3.5$24.6 million.


Fair Value of Interest Rate Swaps


The Company’s valuation of the interest rate swaps is determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs including interest rate curves.


The Company incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Company has considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts, and guarantees.


Although the Company has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by itself and its counterparties. However, as of March 31,September 30, 2019 and December 31, 2018, the Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation of its derivatives. As a result, the Company has determined that its derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy.


The following sets forthtable summarizes the Company’s financial instruments that are accounted for at fair value on a recurring basis as of March 31,September 30, 2019 and December 31, 2018. 

  Fair Value Measurements as of September 30, 2019 Using
Balance Sheet Line Item (in thousands)Fair Value September 30, 2019Level 1Level 2Level 3
Interest rate swaps-Asset$488  $—  $488  $—  
Interest rate swaps-Liability$(24,812) $—  $(24,812) $—  

  Fair Value Measurements as ofDecember 31, 2018 Using
Balance Sheet Line Item (in thousands)Fair Value December 31, 2018Level 1Level 2Level 3
Interest rate swaps-Asset$9,151  $—  $9,151  $—  
Interest rate swaps-Liability$(4,011) $—  $(4,011) $—  

    Fair Value Measurements as of
March 31, 2019 Using
Balance Sheet Line Item (in thousands) Fair Value
March 31, 2019		 Level 1 Level 2 Level 3
Interest rate swaps-Asset $5,214
 $—
 $5,214
 $—
Interest rate swaps-Liability $(7,060) $—
 $(7,060) $—

18
    Fair Value Measurements as of
December 31, 2018 Using
Balance Sheet Line Item (in thousands) Fair Value December 31, 2018 Level 1 Level 2 Level 3
Interest rate swaps-Asset $9,151
 $—
 $9,151
 $—
Interest rate swaps-Liability $(4,011) $—
 $(4,011) $—
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6. Equity


Preferred Stock


On April 30, 2019, the Company filed Articles of Amendment to its Articles of Amendment and Restatement to increase the number of authorized shares of preferred stock from 15,000,000 to 20,000,000.

The following table below sets forthsummarizes the Company’s outstanding preferred stock issuances as of March 31,September 30, 2019.

Preferred Stock Issuances Issuance Date Number of Shares Liquidation Value Per Share Interest RatePreferred Stock IssuancesIssuance DateNumber of SharesLiquidation Value Per ShareInterest Rate
6.875% Series C Cumulative Redeemable Preferred Stock ("Series C Preferred Stock") March 17, 2016 3,000,000
 $25.00
 6.875%6.875% Series C Cumulative Redeemable Preferred Stock ("Series C Preferred Stock")March 17, 20163,000,000  $25.00  6.875 %



The following tables below set forthsummarize the dividends attributable to the Company’s outstanding preferred stock issuances during the threenine months ended March 31,September 30, 2019 and the year ended December 31, 2018.

Quarter Ended 2019 Declaration Date Series C
Preferred Stock Per Share		 Payment Date
March 31 January 10, 2019 $0.4296875
 April 1, 2019
Total  
$0.4296875

 
Quarter Ended 2018 Declaration Date Series B
Preferred Stock Per Share		 Series C
Preferred Stock Per Share		 Payment Date
December 31 October 10, 2018 $—
 $0.4296875
 December 31, 2018
September 30 July 11, 2018 0.0460069
(1) 
0.4296875
 October 1, 2018
June 30 April 10, 2018 0.4140625
 0.4296875
 July 2, 2018
March 31 February 14, 2018 0.4140625
 0.4296875
 April 2, 2018
Total   $0.8741319
 $1.7187500
  
(1)Quarter Ended 2019On June 11, 2018, the Company gave notice to redeem all 2,800,000 issued and outstanding shares of the 6.625% Declaration DateSeries B Cumulative Redeemable C
Preferred Stock (“Series B Preferred Stock”). On Per Share		Payment Date
September 30July 11, 2018, the Company redeemed all of the Series B 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.15, 2019$0.4296875 September 30, 2019
June 30April 9, 20190.4296875 July 1, 2019
March 31January 10, 20190.4296875 April 1, 2019
Total$1.2890625 


Quarter Ended 2018Declaration DateSeries B
Preferred Stock Per Share		Series C
Preferred Stock Per Share		Payment Date
December 31October 10, 2018$—  $0.4296875  December 31, 2018
September 30July 11, 20180.0460069  
(1)
0.4296875  October 1, 2018
June 30April 10, 20180.4140625  0.4296875  July 2, 2018
March 31February 14, 20180.4140625  0.4296875  April 2, 2018
Total $0.8741319  $1.7187500   
(1)On June 11, 2018, the Company gave notice to redeem all 2,800,000 issued and outstanding shares of the 6.625% Series B Cumulative Redeemable Preferred Stock (“Series B Preferred Stock”). On July 11, 2018, the Company redeemed all of the Series B 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.

On April 9,October 15, 2019, the Company’s board of directors declared the Series C Preferred Stock dividends for the quarter ending June 30,December 31, 2019 at a quarterly rate of $0.4296875 per share.


Common Stock


On April 30, 2019, the Company filed Articles of Amendment to its Articles of Amendment and Restatement to increase the number of authorized shares of the Company’s common stock from 150,000,000 to 300,000,000.

The following table sets forthsummarizes the terms of the Company’s at-the market (“ATM”) common stock offering program as of March 31,September 30, 2019.

ATM Common Stock Offering ProgramDateMaximum Aggregate Offering Price (in thousands)Aggregate Common Stock Available as of September 30, 2019 (in thousands)
2019 $600 million ATMFebruary 14, 2019$600,000  $401,137  

19
ATM Common Stock Offering Program Date Maximum Aggregate Offering Price (in thousands)
Aggregate Common Stock Available as of
March 31, 2019 (in thousands)
2019 $600 million ATM February 14, 2019 $600,000
 $449,811
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The following tables below set forthsummarize the activity under the ATM common stock offering programs during the threenine months ended March 31,September 30, 2019 and year ended December 31, 2018 (in thousands, except share data).

 Three months ended March 31, 2019 Nine months ended September 30, 2019
ATM Common Stock Offering Program Shares
Sold		 Weighted Average Price Per Share Gross
Proceeds		 Sales
Agents’ Fee		 Net
Proceeds		ATM Common Stock Offering ProgramShares
Sold		Weighted Average Price Per ShareNet
Proceeds
2019 $600 million ATM 5,441,409
 $27.60
 $150,189
 $1,302
 $148,887
2019 $600 million ATM7,022,332  $28.32  $197,074  
Total/weighted average 5,441,409
 $27.60
 $150,189
 $1,302
 $148,887
Total/weighted average7,022,332  $28.32  $197,074  

 Year ended December 31, 2018 Year ended December 31, 2018
ATM Common Stock Offering Program Shares
Sold		 Weighted Average Price Per Share Gross
Proceeds		 Sales
Agents’ Fee		 Net
Proceeds		ATM Common Stock Offering ProgramShares
Sold		Weighted Average Price Per ShareNet
Proceeds
2017 $500 million ATM (1)
 14,724,614
 $26.52
 $390,447
 $4,040
 $386,407
2017 $500 million ATM (1)
14,724,614  $26.52  $386,407  
Total/weighted average 14,724,614
 $26.52
 $390,447
 $4,040
 $386,407
Total/weighted average14,724,614  $26.52  $386,407  
(1) This program ended before March 31,in February 2019.



On September 24, 2019, the Company completed an underwritten public offering of an aggregate 12,650,000 shares of common stock at a price to the underwriters of $28.60 per share, consisting of (i) 5,500,000 shares offered directly by the Company and (ii) 7,150,000 shares offered by the forward dealer in connection with certain forward sale agreements (including 1,650,000 shares offered pursuant to the underwriters’ option to purchase additional shares, which option was exercised in full). The offering closed on September 27, 2019 and the Company received net proceeds from the sale of shares offered directly by the Company of $157.3 million. Subject to the Company's right to elect cash or net share settlement, the Company has the ability to settle the forward sales agreements at any time through scheduled maturity date of the forward sale agreements of September 24, 2020.

On April 1, 2019, the Company completed an underwritten public offering of 7,475,000 shares of common stock (including 975,000 shares issued pursuant to the underwriters’ option to purchase additional shares, which option was exercised in full) at a price to the underwriters of $28.72 per share. The offering closed on April 4, 2019 and the Company received net proceeds of approximately $214.7 million.

The following tables below sets forthsummarize the dividends attributable to the Company’s outstanding shares of common stock that were declared during the threenine months ended March 31,September 30, 2019 and the year ended December 31, 2018.
Month Ended 2019
Declaration Date Record Date Per Share Payment Date
March 31
January 10, 2019
March 29, 2019
$0.119167

April 15, 2019
February 28
January 10, 2019
February 28, 2019
0.119167

March 15, 2019
January 31
January 10, 2019
January 31, 2019
0.119167

February 15, 2019
Total
   
$0.357501

 

Month Ended 2018 Declaration Date Record Date Per Share Payment Date
December 31 October 10, 2018 December 31, 2018 $0.118333
 January 15, 2019
November 30 October 10, 2018 November 30, 2018 0.118333
 December 17, 2018
October 31 October 10, 2018 October 31, 2018 0.118333
 November 15, 2018
September 30 July 11, 2018 September 28, 2018 0.118333
 October 15, 2018
August 31 July 11, 2018 August 31, 2018 0.118333
 September 17, 2018
July 31 July 11, 2018 July 31, 2018 0.118333
 August 15, 2018
June 30 April 10, 2018 June 29, 2018 0.118333
 July 16, 2018
May 31 April 10, 2018 May 31, 2018 0.118333
 June 15, 2018
April 30 April 10, 2018 April 30, 2018 0.118333
 May 15, 2018
March 31 November 2, 2017 March 29, 2018 0.118333
 April 16, 2018
February 28 November 2, 2017 February 28, 2018 0.118333
 March 15, 2018
January 31 November 2, 2017 January 31, 2018 0.118333
 February 15, 2018
Total     $1.419996
  
Month Ended 2019Declaration DateRecord DatePer SharePayment Date
September 30July 15, 2019September 30, 2019$0.119167 October 15, 2019
August 31July 15, 2019August 30, 20190.119167 September 16, 2019
July 31July 15, 2019July 31, 20190.119167 August 15, 2019
June 30April 9, 2019June 28, 20190.119167 July 15, 2019
May 31April 9, 2019May 31, 20190.119167 June 17, 2019
April 30April 9, 2019April 30, 20190.119167 May 15, 2019
March 31January 10, 2019March 29, 20190.119167 April 15, 2019
February 28January 10, 2019February 28, 20190.119167 March 15, 2019
January 31January 10, 2019January 31, 20190.119167 February 15, 2019
Total$1.072503 

Month Ended 2018Declaration DateRecord DatePer SharePayment Date
December 31October 10, 2018December 31, 2018$0.118333 January 15, 2019
November 30October 10, 2018November 30, 20180.118333 December 17, 2018
October 31October 10, 2018October 31, 20180.118333 November 15, 2018
September 30July 11, 2018September 28, 20180.118333 October 15, 2018
August 31July 11, 2018August 31, 20180.118333 September 17, 2018
July 31July 11, 2018July 31, 20180.118333 August 15, 2018
June 30April 10, 2018June 29, 20180.118333 July 16, 2018
May 31April 10, 2018May 31, 20180.118333 June 15, 2018
April 30April 10, 2018April 30, 20180.118333 May 15, 2018
March 31November 2, 2017March 29, 20180.118333 April 16, 2018
February 28November 2, 2017February 28, 20180.118333 March 15, 2018
January 31November 2, 2017January 31, 20180.118333 February 15, 2018
Total$1.419996 

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On April 9,October 15, 2019, the Company’s board of directors declared the common stock dividends for the months ending AprilOctober 31, 2019, November 30, 2019, Mayand December 31, 2019 and June 30, 2019 at a monthly rate of $0.119167 per share of common stock.


Restricted Shares of Common Stock


Restricted shares of common stock granted on January 7, 2019 to certain employees of the Company, subject to the recipient’s continued employment, will vest in four equal installments on January 1 of each year beginning in 2020. Refer to Note 8 for a discussion of the restricted shares of common stock granted on January 7, 2019 pursuant to the March 8, 2016 performance units. The following table summarizes activity related to the Company’s unvested restricted shares of common stock for the threenine months ended March 31,September 30, 2019 and the year ended December 31, 2018.

Unvested Restricted Shares of Common Stock Shares    Unvested Restricted Shares of Common StockShares    
Balance at December 31, 2017 237,207
 Balance at December 31, 2017237,207   
Granted 76,659
(1)Granted76,659  (1) 
Vested (112,405)(2)Vested(112,405) (2) 
Forfeited (10,999) Forfeited(10,999)  
Balance at December 31, 2018 190,462
 Balance at December 31, 2018190,462   
Granted 110,830
(1)Granted110,830  (1) 
Vested (78,431)(2)Vested(78,431) (2) 
Forfeited (2,320) Forfeited(2,589)  
Balance at March 31, 2019 220,541
 
Balance at September 30, 2019Balance at September 30, 2019220,272   
(1)The fair value per share on the grant date of January 7, 2019 and January 5, 2018 was $24.85 and $26.40, respectively.
(2)The Company repurchased and retired 58,697 and 41,975 restricted shares of common stock that vested during the three months ended March 31, 2019 and the year ended December 31, 2018, respectively.

(1)The fair value per share on the grant date of January 7, 2019 and January 5, 2018 was $24.85 and $26.40, respectively.
(2)The Company repurchased and retired 58,697 and 41,975 restricted shares of common stock that vested during the nine months ended September 30, 2019 and the year ended December 31, 2018, respectively.

The unrecognized compensation expense associated with the Company’s restricted shares of common stock at March 31,September 30, 2019 was approximately $4.4$3.4 million and is expected to be recognized over a weighted average period of approximately 2.92.5 years.


The following table summarizes the fair value at vesting for the restricted shares of common stock that vested during the three and nine months ended March 31,September 30, 2019 and 2018.
  Three months ended March 31,
Vested Restricted Shares of Common Stock 2019 2018
Vested restricted shares of common stock 78,431
 112,405
Fair value of vested restricted shares of common stock (in thousands) $1,951
 $3,002


 Three months ended September 30,Nine months ended September 30,
Vested Restricted Shares of Common Stock2019201820192018
Vested restricted shares of common stock—  —  78,431  112,405  
Fair value of vested restricted shares of common stock (in thousands)$—  $—  $1,951  $3,002  

7. Noncontrolling Interest


The following table below summarizes the activity for noncontrolling interest in the Company for the threenine months ended March 31,September 30, 2019 and the year ended December 31, 2018.

Noncontrolling InterestLTIP UnitsOther
Common Units		Total
Noncontrolling Common Units		Noncontrolling Interest
Balance at December 31, 20171,457,070  2,639,617  4,096,687  4.1 %
Granted/Issued324,802  —  324,802  N/A
Forfeited—  —  —  N/A
Conversions from LTIP units to Other Common Units(165,672) 165,672  —  N/A
Redemptions from Other Common Units to common stock—  (352,055) (352,055) N/A
Balance at December 31, 20181,616,200  2,453,234  4,069,434  3.5 %
Granted/Issued364,173  —  364,173  N/A
Forfeited(10,208) —  (10,208) N/A
Conversions from LTIP units to Other Common Units(262,847) 262,847  —  N/A
Redemptions from Other Common Units to common stock—  (661,082) (661,082) N/A
Balance at September 30, 20191,707,318  2,054,999  3,762,317  2.8 %

21
Noncontrolling Interest LTIP Units 
Other
Common Units
 
Total
Noncontrolling Common Units
 Noncontrolling Interest
Balance at December 31, 2017 1,457,070
 2,639,617
 4,096,687
 4.1%
Granted/Issued 324,802
 —
 324,802
 N/A
Forfeited —
 —
 —
 N/A
Conversions from LTIP units to Other Common Units (165,672) 165,672
 —
 N/A
Redemptions from Other Common Units to common stock —
 (352,055) (352,055) N/A
Balance at December 31, 2018 1,616,200
 2,453,234
 4,069,434
 3.5%
Granted/Issued 364,173
 —
 364,173
 N/A
Forfeited (10,208) —
 (10,208) N/A
Conversions from LTIP units to Other Common Units (202,173) 202,173
 —
 N/A
Redemptions from Other Common Units to common stock —
 (439,071) (439,071) N/A
Balance at March 31, 2019 1,767,992
 2,216,336
 3,984,328
 3.3%
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LTIP Units


LTIP units granted on January 7, 2019 to non-employee, independent directors, subject to the recipient’s continued service, will vest on January 1, 2020. LTIP units granted on January 7, 2019 to certain senior executive officers and senior employees, subject to the recipient’s continued employment, will vest quarterly over four years, with the first vesting date having been March 31, 2019. Refer to Note 8 for a discussion of the LTIP units granted on January 7, 2019 pursuant to the March 8, 2016 performance units.


The fair value of the LTIP units at the date of grant was determined by a lattice-binomial option-pricing model based on a Monte Carlo simulation. The fair value of the LTIP units are based on Level 3 inputs and are non-recurring fair value measurements. The following table below sets forthsummarizes the assumptions used in valuing such LTIP units granted during the threenine months ended March 31,September 30, 2019 (excluding those LTIP units granted pursuant to the March 8, 2016 performance units; refer to Note 8 for details).

LTIP Units Assumptions
Grant date January 7, 2019
Expected term (years) 10
Expected volatility 19.0%
Expected dividend yield 6.0%
Risk-free interest rate 2.57%
Fair value of LTIP units at issuance (in thousands) $3,636
LTIP units at issuance 154,649
Fair value unit price per LTIP unit at issuance $23.51
LTIP UnitsAssumptions
Grant dateJanuary 7, 2019
Expected term (years)10
Expected volatility19.0 %
Expected dividend yield6.0 %
Risk-free interest rate2.57 %
Fair value of LTIP units at issuance (in thousands)$3,636 
LTIP units at issuance154,649 
Fair value unit price per LTIP unit at issuance$23.51 


The following table summarizes activity related to the Company’s unvested LTIP units for the threenine months ended March 31,September 30, 2019 and the year ended December 31, 2018.

Unvested LTIP UnitsLTIP Units
Balance at December 31, 2017300,307
Granted324,802
Vested(373,893(373,893))
Forfeited—
Balance at December 31, 2018251,216
Granted364,173
Vested(157,689(234,330))
Forfeited(10,208(10,208))
Balance at March 31,September 30, 2019447,492370,851 


The unrecognized compensation expense associated with the Company’s LTIP units at March 31,September 30, 2019 was approximately $7.3$5.5 million and is expected to be recognized over a weighted average period of approximately 2.62.3 years.



The following table summarizes the fair value at vesting for the LTIP units that vested during the three and nine months ended March 31,September 30, 2019 and 2018.

 Three months ended March 31, Three months ended September 30,Nine months ended September 30,
Vested LTIP units 2019 2018Vested LTIP units2019201820192018
Vested LTIP units 157,689
 231,041
Vested LTIP units29,989  30,949  234,330  342,940  
Fair value of vested LTIP units (in thousands) $4,063
 $6,035
Fair value of vested LTIP units (in thousands)$884  $851  $6,348  $9,002  


8. Equity Incentive Plan


On January 7, 2019, the Company granted performance units approved by the compensation committee of the board of directors under the 2011 Plan to certain key employees of the Company. The terms of the performance units granted on January 7, 2019 are substantially the same as the terms of the performance units granted on January 5, 2018 and January 6, 2017, except that the measuring period commences on January 1, 2019 and ends on December 31, 2021, and the award shares are immediately vested at the end of the measuring period.


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The fair value of the performance units at the date of grant was determined by a lattice-binomial option-pricing model based on a Monte Carlo simulation. The fair value of the performance units are based on Level 3 inputs and are non-recurring fair value measurements. The performance unit equity compensation expense is recognized ratably from the grant date into earnings over the vesting period. The following table below sets forthsummarizes the assumptions used in valuing the performance units granted during the threenine months ended March 31,September 30, 2019.

Performance Units Assumptions
Grant date January 7, 2019
Expected volatility 20.7%
Expected dividend yield 6.0%
Risk-free interest rate 2.56%
Fair value of performance units grant (in thousands) $5,620
Performance UnitsAssumptions
Grant dateJanuary 7, 2019
Expected volatility20.7 %
Expected dividend yield6.0 %
Risk-free interest rate2.56 %
Fair value of performance units grant (in thousands)$5,620 


On December 31, 2018, the Company’s three year measurement period pursuant to the March 8, 2016 performance units concluded. It was determined that the Company’s total stockholder return exceeded the threshold percentage and return hurdle. The compensation committee of the board of directors approved the issuance of 102,216 vested LTIP units and 74,032 vested shares of common stock (of which 30,193 shares of common stock were repurchased and retired) to the participants, which were issued on January 7, 2019. The compensation committee of the board of directors also approved the issuance of 107,308 LTIP units and 22,678 restricted shares of common stock that will vest on December 31, 2019, which were issued on January 7, 2019.


The unrecognized compensation expense associated with the Company’s performance units at March 31,September 30, 2019 was approximately $9.2$7.0 million and is expected to be recognized over a weighted average period of approximately 2.42.0 years.


Non-cash Compensation Expense


The following table summarizes the amount recorded in general and administrative expenses in the accompanying Consolidated Statements of Operations for the amortization of restricted shares of common stock, LTIP units, performance units, and the Company’s director compensation for the three and nine months ended March 31,September 30, 2019 and 2018.

 
Three months ended March 31,
Non-Cash Compensation Expense (in thousands)
2019    2018
Restricted shares of common stock
$427
  $434
LTIP units
887

871
Performance units
859

829
Director compensation (1)

105

86
Total non-cash compensation expense
$2,278
 $2,220
(1)All of the Company’s independent directors elected to receive shares of common stock in lieu of cash for their service during the three months ended March 31, 2019 and 2018. The number of shares of common stock granted is calculated based on the trailing 10 days average common stock price ending on the third business day preceding the grant date.

 Three months ended September 30,Nine months ended September 30,
Non-Cash Compensation Expense (in thousands)2019    201820192018
Restricted shares of common stock$447  $406  $1,318  $1,269  
LTIP units901  

893  2,687  

2,654  
Performance units1,107  838  3,062  2,463  
Director compensation (1)
101  

99  304  285  
Total non-cash compensation expense$2,556  $2,236  $7,371  $6,671  

(1)All of the Company’s independent directors elected to receive shares of common stock in lieu of cash for their service during the three and nine months ended September 30, 2019 and 2018. The number of shares of common stock granted is calculated based on the trailing 10 days average common stock price ending on the third business day preceding the grant date.

9. Leases


Lessor Leases


The Company has operating leases in which it is the lessor for its rental property. Certain leases contain variable lease payments based upon changes in the Consumer Price Index (“CPI”). Certain leases contain options to renew or terminate the lease, and options for the lessee to purchase the rental property, all of which are predominately at the sole discretion of the lessee.


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The following table summarizes the components of rental income recognized during the three and nine months ended March 31,September 30, 2019 included in the accompanying Consolidated Statements of Operations.

 Three months ended March 31, Three months ended September 30,Nine months ended September 30,
Rental Income (in thousands) 2019Rental Income (in thousands)2019    2019
Fixed lease payments $72,117
Fixed lease payments$80,262    $227,337  
Variable lease payments 22,181
Variable lease payments20,189  61,628  
Straight-line rental income 2,284
Straight-line rental income3,091  8,667  
Net decrease to rental income related to above and below market lease amortization (967)Net decrease to rental income related to above and below market lease amortization(1,248) (3,361) 
Total rental income $95,615
Total rental income$102,294  $294,271  


As of March 31,September 30, 2019, andthe Company had accrued rental income of approximately $40.2 million included in tenant accounts receivable on the accompanying Consolidated Balance Sheets. As of December 31, 2018, the Company had accrued rental income of approximately $34.2 million and $32.4 million, respectively,net of allowance for doubtful accounts of approximately $0.8 million, included in tenant accounts receivable on the accompanying Consolidated Balance Sheets.


As of March 31,September 30, 2019 and December 31, 2018, the Company had approximately $18.4$20.5 million and $18.3 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 March 31,September 30, 2019 and December 31, 2018, the Company had approximately $0.7 million and $0.7 million, respectively, of lease security deposits available in cash, which are included in restricted cash on the accompanying Consolidated Balance Sheets. The Company’s remaining lease security deposits are commingled in cash and cash equivalents. These funds may be used to settle tenant accounts receivables in the event of a default under the related lease. As of March 31,September 30, 2019 and December 31, 2018, the Company’s total liability associated with these lease security deposits was approximately $8.7$9.2 million and $8.4 million, respectively, and is included in tenant prepaid rent and security deposits on the accompanying Consolidated Balance Sheets.


The Company estimates that billings for real estate taxes, which are the responsibility of certain tenants under the terms of their leases and are not reflected on the Company’s consolidated financial statements, werewas approximately $3.9$5.1 million, $13.1 million, $3.8 million and $3.1$10.9 million for the three and nine months ended March 31,September 30, 2019 and 2018, respectively. 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.


The following table summarizes the maturity of fixed lease payments under the Company’s leases as of March 31,September 30, 2019.

Year (as of March 31, 2019) Maturity of Fixed Lease Payments (in thousands)
Year (as of September 30, 2019)Year (as of September 30, 2019)Maturity of Fixed Lease Payments (in thousands) 
Remainder of 2019 $240,185
Remainder of 2019$82,584  
2020 $288,787
2020$325,907  
2021 $243,992
2021$285,414  
2022 $203,368
2022$249,287  
2023 $165,946
2023$208,011  
Thereafter $578,495
Thereafter$761,469  


The following table summarizes the minimum contractual lease payments under the superseded leases standard, Topic 840, as of December 31, 2018.

Year (as of December 31, 2018)Future Minimum Rents (in thousands) 
2019$299,978  
2020$271,936  
2021$226,970  
2022$188,707  
2023$152,814  
Thereafter$535,192  



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Lessee Leases


The Company has operating leases in which it is the lessee for ground leases and its corporate office lease. These leases have remaining lease terms of approximately 2.01.5 years to 47.847.3 years. Certain ground leases contain options to extend the leases for ten years to 20 years, all of which are reasonably certain to be exercised, and are included in the computation of the Company’s right-of-use assets and operating lease liabilities.


The following table summarizes supplemental information related to operating lease right-of-use assets and operating lease liabilities recognized in the Company’s Consolidated Balance Sheets as of March 31,September 30, 2019.

Operating Lease Term and Discount RateMarch 31,September 30, 2019
Weighted average remaining lease term (years)35.1
35.7
Weighted average discount rate7.1%


The following table summarizes the operating lease cost recognized during the three and nine months ended March 31,September 30, 2019 included in the Company’s Consolidated Statements of Operations.

 Three months ended March 31, Three months ended September 30,Nine months ended September 30,
Operating Lease Cost (in thousands) 2019Operating Lease Cost (in thousands)2019    2019
Operating lease cost included in property expense attributable to ground leases $331
Operating lease cost included in property expense attributable to ground leases$331    $993  
Operating lease cost included in general and administrative expense attributable to corporate office lease 266
Operating lease cost included in general and administrative expense attributable to corporate office lease266  799  
Total operating lease cost $597
Total operating lease cost$597  $1,792  


The following table summarizes supplemental cash flow information related to operating leases recognized during the threenine months ended March 31,September 30, 2019 in the Company’s Consolidated Statements of Cash Flows.

  Three months ended March 31,
Operating Leases (in thousands) 2019
Cash paid for amounts included in the measurement of lease liabilities (operating cash flows) $569
Nine months ended September 30,
Operating Leases (in thousands)2019
Cash paid for amounts included in the measurement of lease liabilities (operating cash flows)$1,711 


The following table summarizes the maturity of operating lease liabilities under the Company’s ground leases and corporate office lease as of March 31,September 30, 2019.

Year (as of September 30, 2019)
Maturity of Operating Lease Liabilities(1)
(in thousands)
Remainder of 2019$571  
20202,294  
20211,400  
20221,107  
20231,116  
Thereafter48,155  
Total lease payments54,643  
Less: Imputed interest(37,384) 
Present value of operating lease liabilities$17,259  
(1)Operating lease liabilities do not include estimates of CPI rent changes required by certain ground lease agreements. Therefore, actual payments may differ than those presented.

25
Year (as of March 31, 2019) 
Maturity of Operating Lease Liabilities(1)
(in thousands)
Remainder of 2019 $1,712
2020 2,294
2021 1,400
2022 1,107
2023 1,116
Thereafter 48,155
Total lease payments 55,784
Less: Imputed interest (37,998)
Present value of operating lease liabilities $17,786
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(1)Operating lease liabilities do not include estimates of CPI rent changes required by certain ground lease agreements. Therefore, actual payments may differ than those presented.

The following table summarizes the minimum contractual lease payments under the superseded leases standard, Topic 840, as of December 31, 2018.
Year (as of December 31, 2018)
Future Minimum Rental Payments (1)
(in thousands)
2019$2,110  
2020$2,122  
2021$1,227  
2022$935  
2023$944  
Thereafter$45,580  
Year (as of December 31, 2018) 
Future Minimum Rental Payments (1)
(in thousands)
2019 $2,110
2020 $2,122
2021 $1,227
2022 $935
2023 $944
Thereafter $45,580
(1)Future minimum rental payments do not include estimates of CPI rent changes required by certain lease agreements. Therefore, actual minimum rental payments may differ than those presented.

(1)Future minimum rental payments do not include estimates of CPI rent changes required by certain lease agreements. Therefore, actual minimum rental payments may differ than those presented.


10. Earnings Per Share


During the three and nine months ended March 31,September 30, 2019 and 2018, there were 213,856220,284, 218,231, 193,117 and 201,650,196,871, respectively, of unvested restricted shares of common stock on a weighted average basis that were considered participating securities.


The following table sets forthreconciles the numerators and denominators in the computation of basic and diluted earnings per common share for the three and nine months ended March 31,September 30, 2019 and 2018.

 Three months ended March 31,
Earnings Per Share (in thousands, except per share data)2019 2018
Numerator   
Net income$7,389
 $25,149
Less: preferred stock dividends1,289
 2,448
Less: amount allocated to participating securities79
 71
Less: income attributable to noncontrolling interest after preferred stock dividends214
 954
Net income attributable to common stockholders$5,807

$21,676
Denominator 
  
Weighted average common shares outstanding — basic114,721
 97,021
Effect of dilutive securities(1)
   
Share-based compensation272
 302
Weighted average common shares outstanding — diluted114,993
 97,323
Net income per share — basic and diluted   
Net income per share attributable to common stockholders — basic$0.05
 $0.22
Net income per share attributable to common stockholders — diluted$0.05
 $0.22
(1)During the three months ended March 31, 2019 and 2018, there were 214 and 202, unvested shares of restricted common stock, respectively, on a weighted average basis that were not included in the computation of diluted earnings per share because the allocation of income under the two-class method was more dilutive.

Three months ended September 30,Nine months ended September 30,
Earnings Per Share (in thousands, except per share data)2019201820192018
Numerator 
Net income attributable to common stockholders  $9,533  $7,237  $27,734  $38,215  
Denominator 
Weighted average common shares outstanding — basic127,272  105,783  122,460  101,095  
Effect of dilutive securities(1)
Share-based compensation  178  550  254  400  
Shares issuable under forward sales agreements  19  —  6  —  
Weighted average common shares outstanding — diluted  127,469  106,333  122,720  101,495  
Net income per share — basic and diluted  
Net income per share attributable to common stockholders — basic  $0.07  $0.07  $0.23  $0.38  
Net income per share attributable to common stockholders — diluted  $0.07  $0.07  $0.23  $0.38  
(1)During the three and nine months ended September 30, 2019 and 2018, there were 220, 218, 193 and 197, unvested shares of restricted common stock, respectively, on a weighted average basis that were not included in the computation of diluted earnings per share because the allocation of income under the two-class method was more dilutive.

11. Commitments and Contingencies


The Company is subject to various legal proceedings and claims that arise in the ordinary course of business. These matters are generally covered by insurance subject to deductible requirements. Management believes that the ultimate settlement of these actions will not have a material adverse effect on the Company’s financial position, results of operations, or cash flows.


The Company has letters of credit of approximately $5.6$6.0 million as of March 31,September 30, 2019 related to construction projects and certain other agreements. As of March 31,September 30, 2019, the Company has a development commitment related to a building expansion under a tenant lease of approximately $9.8$3.1 million.


12. Subsequent Events


The followingThere were no recognized or non-recognized subsequent events were noted.events.

On April 1, 2019, the Company completed an underwritten public offering of 7,475,000 shares of common stock (including 975,000 shares issued pursuant to the underwriters’ option to purchase additional shares) at a price to the underwriters of $28.72 per share. The offering closed on April 4, 2019 and the Company received net proceeds of approximately $214.7 million.

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On April 30, 2019, the Company filed Articles of Amendment to its Articles of Amendment and Restatement to increase the number of authorized shares of the Company’s common stock from 150,000,000 to 300,000,000 and the number of authorized shares of preferred stock from 15,000,000 to 20,000,000.



Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
 
You should read the following discussion with the financial statements and related notes included elsewhere in Item 1 of this report and the audited financial statements and related notes thereto included in our most recent Annual Report on Form 10-K.
 
As used herein, except where the context otherwise requires, “Company,” “we,” “our” and “us,” refer to STAG Industrial, Inc. and our consolidated subsidiaries and partnerships, including our operating partnership,STAG Industrial Operating Partnership, L.P. (the “Operating Partnership”). 


Forward-Looking Statements
 
This report contains “forward-looking statements” within the meaning of the safe harbor from civil liability provided for such statements by the Private Securities Litigation Reform Act of 1995 (set forth in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). You can identify forward-looking statements by the use of words such as “anticipates,” “believes,” “estimates,” “expects,” “intends,” “may,” “plans,” “projects,” “seeks,” “should,” “will,” and variations of such words or similar expressions. Forward-looking statements in this report include, among others, statements about our future financial condition, results of operations, capitalization rates on future acquisitions, our business strategy and objectives, including our acquisition strategy, occupancy and leasing rates and trends, and expected liquidity needs and sources (including capital expenditures and the ability to obtain financing or raise capital). Our forward-looking statements reflect our current views about our plans, intentions, expectations, strategies and prospects, which are based on the information currently available to us and on assumptions we have made. Although we believe that our plans, intentions, expectations, strategies and prospects as reflected in or suggested by our forward-looking statements are reasonable, we can give no assurance that our plans, intentions, expectations, strategies or prospects will be attained or achieved and you should not place undue reliance on these forward‑lookingforward-looking statements. Furthermore, actual results may differ materially from those described in the forward‑lookingforward-looking statements and may be affected by a variety of risks and factors including, without limitation:


•the factors included in our Annual Report on Form 10-K for the year ended December 31, 2018, as updated elsewhere in this report, including those set forth under the headings “Business,” “Risk Factors,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations;”


•our ability to raise equity capital on attractive terms;


•the competitive environment in which we operate;


•real estate risks, including fluctuations in real estate values and the general economic climate in local markets and competition for tenants in such markets;


•decreased rental rates or increased vacancy rates;


•potential defaults (including bankruptcies or insolvency) on or non-renewal of leases by tenants;


•acquisition risks, including our ability to identify and complete accretive acquisitions and/or failure of such acquisitions to perform in accordance with projections;


•the timing of acquisitions and dispositions;


•technological developments, particularly those affecting supply chains and logistics;


•potential natural disasters and other potentially catastrophic events such as acts of war and/or terrorism;


•international, national, regional and local economic conditions;


•the general level of interest rates and currencies;


•potential changes in the law or governmental regulations and interpretations of those laws and regulations, including changes in real estate and zoning laws or real estate investment trust (“REIT”) or corporate income tax laws, and potential increases in real property tax rates; 


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•financing risks, including the risks that our cash flows from operations may be insufficient to meet required payments of principal and interest and we may be unable to refinance our existing debt upon maturity or obtain new financing on attractive terms or at all; 


•credit risk in the event of non-performance by the counterparties to the interest rate swaps and revolving and unfunded debt;


•how and when pending forward equity sales may settle;

•lack of or insufficient amounts of insurance;


•our ability to maintain our qualification as a REIT;


•our ability to retain key personnel; 


•litigation, including costs associated with prosecuting or defending claims and any adverse outcomes; and


•possible environmental liabilities, including costs, fines or penalties that may be incurred due to necessary remediation of contamination of properties presently owned or previously owned by us.


Any forward-looking statement speaks only as of the date on which it is made. New risks and uncertainties arise over time, and it is not possible for us to predict those events or how they may affect us. Except as required by law, we are not obligated to, and do not intend to, update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.


Certain Definitions


In this report:


We define “GAAP” as generally accepted accounting principles in the United States.


We define “total annualized base rental revenue” as the contractual monthly base rent as of March 31,September 30, 2019 (which differs from rent calculated in accordance with GAAP) multiplied by 12. If a tenant is in a free rent period as of March 31,September 30, 2019, the total annualized base rental revenue is calculated based on the first contractual monthly base rent amount multiplied by 12.


We define “occupancy rate” as the percentage of total leasable square footage for which either revenue recognition has commenced in accordance with GAAP or the lease term has commenced as of the close of the reporting period, whichever occurs earlier.


We define the “Value Add Portfolio” as properties that meet any of the following criteria: (i) less than 75% occupied as of the acquisition date; (ii) will be less than 75% occupied due to known move-outs within two years of the acquisition date; (iii) out of service with significant physical renovation of the asset; or (iv)development.


We define “Stabilization” for properties under development or being redeveloped as the earlier of achieving 90% occupancy or twelve12 months after completion. With respect to properties acquired and immediately added to the Value Add Portfolio, (i) if acquired with less than 75% occupancy as of the acquisition date, Stabilization will occur upon the earlier of achieving 90% occupancy or twelve12 months from the acquisition date; or (ii) if acquired and will be less than 75% occupied due to known move-outs within two years of the acquisition date, Stabilization will occur upon the earlier of achieving 90% occupancy after the known move-outs have occurred or twelve12 months after the known move-outs have occurred.


We define the “Operating Portfolio” as all warehouse and light manufacturing assets that were acquired stabilized or have achieved Stabilization. The Operating Portfolio excludes non-core flex/office assets and assets contained in the Value Add Portfolio.


We define a “Comparable Lease” as a lease in the same space with a similar lease structure as compared to the previous in-place lease, excluding new leases for space that was not occupied under our ownership.


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We define “SL Rent Change” as the percentage change in the average monthly base rent over the term of the lease calculated on a straight-line basis, of the leasethat commenced during the period compared to the Comparable Lease for assets included in the Operating Portfolio. Rent under gross or similar type leases are converted to a net rent based on an estimate of the applicable recoverable expenses, and this calculation excludes the impact of any holdover rent.



We define “Cash Rent Change” as the percentage change in the base rent of the lease commenced during the period compared to the base rent of the Comparable Lease for assets included in the Operating Portfolio. The calculation compares the first base rent payment due after the lease commencement date compared to the base rent of the last monthly payment due prior to the termination of the lease, excluding holdover rent. Rent under gross or similar type leases are converted to a net rent based on an estimate of the applicable recoverable expenses.


We define a “New Lease” as any lease that is signed for an initial term equal to or greater than 12 months for any vacant space, including a lease signed by a new tenant or an existing tenant that is expanding into new (additional) space.

We define “Renewal” Lease as a lease signed by an existing tenant to extend the term for 12 months or more, including (i) a renewal of the same space as the current lease at lease expiration, (ii) a renewal of only a portion of the current space at lease expiration and (iii) an early renewal or workout, which ultimately does extend the original term for 12 months or more.

Overview


We are a REIT focused on the acquisition, ownership, and operation of single-tenant, industrial properties throughout the United States. We are a Maryland corporation and our common stock is publicly traded on the New York Stock Exchange under the symbol “STAG.”


We are organized and conduct our operations to qualify as a REIT under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended, 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.


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 over nineten years of economic growth, some uncertainty regarding the current U.S. presidential administration and its policy initiatives, and continued asset appreciation. In the firstthird quarter of 2019, the federal funds target rate was unchanged atlowered twice, each by 25 basis points, to a target range of 2.25%1.75% to 2.50%2.0%. This target rate range supports continuedThe Federal Reserve has signaled that it will support economic growth and is expected to remain unchanged throughout 2019. We believeas needed. The current economic growth combined with the currently favorable industrial supply demand balance should translate to a net positive result for our business. Specifically, we expect our existing portfolio willshould benefit from rising rental rates and strong occupancy. Furthermore, we believe certain characteristics of our business should position us well in an uncertain 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 and regional investors who are likely to be more heavily impacted by interest rates.
Several industrial specific trends contribute to the expected strong demand, including:


•the rise of e-commerce (as compared to the traditional retail store distribution model) and the concomitant demand by e-commerce industry participants for well-located, functional distribution space;
•the increasing attractiveness of the 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); and
•the overall quality of the transportation infrastructure in the U.S.


Our portfolio continues to benefit from historically low availability throughout the national industrial market. At the endAs of the first quarter,most recent data, demand for space has continuedcontinues to outpacesupport new supply supportingand an accommodative environment for owners. Development
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activity has steadily increased over the past several years and is now reaching material levels in a growing number of primary industrial markets. Though availability remains historically low, this is a trend we will monitor closely. In addition, currently, the supply remains fairly concentrated in the larger primary industrial markets and we have limited exposure to many of these markets. On the demand side, we note that the quality and availability of labor remains a key focus of tenants making occupancy decisions. We will continue to monitor the supply and demand fundamentals for industrial real estate and assess its impact on our business.
Conditions in Our Markets


The buildings in our portfolio are located in markets throughout the United States. Positive or negative changes in economic or other conditions, new supply, adverse weather conditions and natural disasters, and other factors in these markets may affect our overall performance.



Rental Income


We receive income primarily in the form of rental income from the tenants who occupy our buildings. The amount of rental income generated by the buildings in our portfolio depends principally on occupancy and rental rates. As of March 31,September 30, 2019, our Operating Portfolio was approximately 95.7%95.6% leased and our SL Rent Change on new and renewal leases together grew approximately 24.3%16.5% and 20.1% during the three and nine months ended March 31, 2019.September 30, 2019, 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 ofsummarizes our Operating Portfolio leases that commenced during the three and nine months ended March 31,September 30, 2019. Certain leases contain rental concessions; any such rental concessions are accounted for on a straight-line basis over the term of the lease.

Operating PortfolioSquare FeetCash
Basis Rent Per
Square Foot		SL Rent Per
Square Foot
Total Costs Per
Square
Foot(1)
Cash
Rent Change		SL Rent Change
Weighted Average Lease
Term(2)
(years)
Rental Concessions per Square Foot(3)
Three months ended September 30, 2019
New Leases490,935  $4.43  $4.58  $1.39  19.7 %24.7 %5.2  $0.69  
Renewal Leases1,583,107  $3.87  $4.03  $0.51  8.6 %14.8 %3.8  $0.05  
Total/weighted average2,074,042  $4.01  $4.16  $0.72  10.5 %16.5 %4.2  $0.20  
Nine months ended September 30, 2019
New Leases1,168,842  $3.99  $4.14  $1.55  18.8 %28.2 %5.7  $0.77  
Renewal Leases6,005,521  $4.00  $4.16  $0.67  10.3 %18.9 %4.0  $0.01  
Total/weighted average7,174,363  $3.99  $4.16  $0.82  11.4 %20.1 %4.3  $0.14  
(1)We define Total Costs as the costs for improvements of vacant and renewal spaces, as well as the contingent-based legal fees and commissions for leasing transactions. Total Costs per square foot represent the total costs expected to be incurred on the leases that commenced during the period and do not reflect actual expenditures for the period.
(2)We define weighted average lease term as the contractual lease term in years, assuming that tenants exercise no renewal options, purchase options, or early termination rights, weighted by square footage.
(3)Represents the total rental concessions for the entire lease term.

Operating Portfolio Square Feet Cash
Basis Rent Per
Square Foot		 SL Rent Per
Square Foot		 
Total Costs Per
Square
Foot(1)
 Cash
Rent Change		 SL Rent Change 
Weighted Average Lease
Term(2)
(years)
 
Rental Concessions per Square Foot(3)
        
Three months ended March 31, 2019                
New Leases(4)
 123,190
 $4.15
 $4.32
 $1.97
 3.5% 17.1% 6.5
 $1.07
Renewal Leases(5)
 2,468,163
 $3.94
 $4.10
 $0.58
 15.6% 24.7% 4.1
 $—
Total/weighted average 2,591,353
 $3.95
 $4.11
 $0.64
 14.9% 24.3% 4.2
 $0.05
30
(1)We define Total Costs as the costs for improvements of vacant and renewal spaces, as well as the contingent-based legal fees and commissions for leasing transactions. Total Costs per square foot represent the total costs expected to be incurred on the leases that commenced during the period and do not reflect actual expenditures for the period.
(2)We define weighted average lease term as the contractual lease term in years, assuming that tenants exercise no renewal options, purchase options, or early termination rights, weighted by square footage.
(3)Represents the total rental concessions for the entire lease term.
(4)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.
(5)
We define 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.
Property Operating Expenses


Our property operating expenses generally consist of utilities, real estate taxes, management fees, insurance, and site repair and maintenance costs. For the majority of our tenants, our property operating expenses are controlled, in part, by the triple net provisions in tenant leases. In our triple net leases, the tenant is responsible for all aspects of and costs related to the building and its operation during the lease term, including utilities, taxes, insurance and maintenance costs, but typically excluding roof and building structure. However, we also have modified gross leases and gross leases in our building portfolio. The terms of those leases vary and on some occasions we may absorb certain building related expenses of our tenants. In our modified gross leases, we are responsible for some building related expenses during the lease term, but the cost of most of the expenses is passed through to the tenant for reimbursement to us. In our gross leases, we are responsible for all costs related to the building and its operation during the lease term. Our overall performance will be affected by the extent to which we are able to pass-through property operating expenses to our tenants.


Scheduled Lease Expirations


Our ability to re-lease space subject to expiring leases will impact our results of operations and is affected by economic and competitive conditions in our markets and by the desirability of our individual buildings. Leases that comprise approximately 7.8%6.6% of our annualized base rental revenue will expire during the period from AprilOctober 1, 2019 to March 31,September 30, 2020, excluding month to monthmonth-to-month leases. We assume, based upon internal renewal probability estimates that some of our tenants will renew and others will vacate and the associated space will be re-let subject to downtime assumptions. Using the aforementioned assumptions, we expect that the rental rates on the respective new leases will generally be the same as the rates under existing leases expiring during the period AprilOctober 1, 2019 to March 31,September 30, 2020, thereby resulting in approximately the same revenue from the same space.



The following table sets forth a summary ofsummarizes lease expirations for leases in place as of March 31,September 30, 2019, plus available space, for each of the ten calendar years beginning with 2019 and thereafter in our portfolio. The information in the table assumes that tenants exercise no renewal options and no early termination rights.
Lease Expiration YearNumber
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—  4,461,560  —  —  —  
Month-to-month leases3  149,663  0.2 %$735  0.2 %
Remainder of 20195  663,727  0.8 %2,651  0.7 %
202044  7,300,692  8.9 %33,663  9.6 %
202174  11,654,228  14.3 %50,740  14.3 %
202271  8,954,925  11.0 %38,675  10.9 %
202373  11,265,564  13.8 %43,763  12.4 %
202455  10,507,744  12.9 %44,142  12.5 %
202533  6,486,218  8.0 %27,023  7.6 %
202634  5,988,185  7.3 %27,283  7.7 %
202718  2,619,630  3.2 %12,847  3.6 %
202824  4,619,199  5.7 %19,552  5.5 %
Thereafter47  11,322,032  13.9 %53,187  15.0 %
Total481  85,993,367  100.0 %$354,261  100.0 %
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 — 3,775,161
 —
 —
 —
Month-to-month leases 8 1,221,972
 1.6% $5,344
 1.7%
Remainder of 2019 28 3,927,415
 5.3% 17,748
 5.6%
2020 51 9,880,651
 13.3% 42,428
 13.3%
2021 70 11,047,758
 14.9% 48,112
 15.1%
2022 62 7,608,265
 10.2% 33,244
 10.4%
2023 54 9,337,406
 12.5% 35,890
 11.2%
2024 40 7,031,305
 9.4% 30,315
 9.5%
2025 26 4,445,385
 6.0% 19,295
 6.0%
2026 25 4,729,214
 6.4% 20,533
 6.4%
2027 13 1,961,418
 2.6% 9,915
 3.1%
2028 23 4,589,199
 6.2% 19,178
 6.0%
Thereafter 34 8,631,314
 11.6% 37,311
 11.7%
Total 434 78,186,463
 100.0% $319,313
 100.0%


Portfolio Summary


The following table sets forthsummarizes information relating to diversification by building type in our portfolio as of March 31,September 30, 2019.
Square FootageAnnualized Base Rental Revenue
Building TypeNumber of BuildingsAmount%Occupancy RateAmount
(in thousands)		%
Warehouse/Distribution352  77,360,328  90.0 %95.4 %$314,988  89.0 %
Light Manufacturing66  7,117,929  8.3 %97.9 %33,429  9.4 %
Total Operating Portfolio/weighted average 418  84,478,257  98.3 %95.6 %$348,417  98.4 %
Value Add4  1,082,795  1.2 %44.5 %2,637  0.7 %
Flex/Office8  432,315  0.5 %58.1 %3,207  0.9 %
Total portfolio/weighted average 430  85,993,367  100.0 %94.8 %$354,261  100.0 %

31
    Square Footage   Annualized Base Rental Revenue
Building Type Number of Buildings Amount % Occupancy Rate 
Amount
(in thousands)
 %
Warehouse/Distribution 323
 70,079,150
 89.6% 95.3% $282,191
 88.3%
Light Manufacturing 58
 6,484,331
 8.3% 100.0% 29,363
 9.2%
Total Operating Portfolio/weighted average 
 381
 76,563,481
 97.9% 95.7% $311,554
 97.5%
             
Value Add 5
 1,058,302
 1.4% 70.8% 3,074
 1.0%
Flex/Office 9
 564,680
 0.7% 67.9% 4,685
 1.5%
Total portfolio/weighted average 
 395
 78,186,463
 100.0% 95.2% $319,313
 100.0%

Portfolio Acquisitions


The following table summarizes our acquisitions during the three and nine months endedMarch 31,September 30, 2019.

Market (1)
 Date Acquired Square Feet Buildings Purchase Price
(in thousands)
Market (1)
Date AcquiredSquare FeetBuildingsPurchase Price
(in thousands)
Cincinnati/Dayton, OH January 24, 2019 176,000
 1
 $9,965
Cincinnati/Dayton, OHJanuary 24, 2019176,000  1  $9,965  
Pittsburgh, PA February 21, 2019 455,000
 1
 28,676
Pittsburgh, PAFebruary 21, 2019455,000  1  28,676  
Boston, MA February 21, 2019 349,870
 1
 26,483
Boston, MAFebruary 21, 2019349,870  1  26,483  
Minneapolis/St Paul, MN February 28, 2019 248,816
 1
 21,955
Minneapolis/St Paul, MNFebruary 28, 2019248,816  1  21,955  
Greenville/Spartanburg, SC March 7, 2019 331,845
 1
 24,536
Greenville/Spartanburg, SCMarch 7, 2019331,845  1  24,536  
Philadelphia, PA March 7, 2019 148,300
 1
 10,546
Philadelphia, PAMarch 7, 2019148,300  1  10,546  
Omaha/Council Bluffs, NE-IA March 11, 2019 237,632
 1
 20,005
Omaha/Council Bluffs, NE-IAMarch 11, 2019237,632  1  20,005  
Houston, TX March 28, 2019 132,000
 1
 17,307
Houston, TXMarch 28, 2019132,000  1  17,307  
Baltimore, MD March 28, 2019 167,410
 1
 13,648
Baltimore, MDMarch 28, 2019167,410  1  13,648  
Houston, TX March 28, 2019 116,750
 1
 12,242
Houston, TXMarch 28, 2019116,750  1  12,242  
Three months ended March 31, 2019 2,363,623
 10
 $185,363
Three months ended March 31, 20192,363,623  10  185,363  
Minneapolis/St Paul, MNMinneapolis/St Paul, MNApril 2, 2019100,600  1  9,045  
West Michigan, MIWest Michigan, MIApril 8, 2019230,200  1  15,786  
Greensboro/Winston-Salem, NCGreensboro/Winston-Salem, NCApril 12, 2019129,600  1  7,771  
Greenville/Spartanburg, SCGreenville/Spartanburg, SCApril 25, 2019319,660  2  15,432  
Charleston/N Charleston, SCCharleston/N Charleston, SCApril 29, 2019500,355  1  40,522  
Houston, TXHouston, TXApril 29, 2019128,136  1  13,649  
Richmond, VARichmond, VAMay 16, 2019109,520  1  9,467  
Laredo, TXLaredo, TXJune 6, 2019213,982  1  18,972  
Baton Rouge, LABaton Rouge, LAJune 18, 2019252,800  2  20,041  
Philadelphia, PAPhiladelphia, PAJune 19, 2019187,569  2  13,645  
Columbus, OHColumbus, OHJune 28, 2019857,390  1  95,828  
Three months ended June 30, 2019Three months ended June 30, 20193,029,812  14  260,158  
Kansas City, MOKansas City, MOJuly 10, 2019304,840  1  13,450  
Houston, TXHouston, TXJuly 22, 2019199,903  1  11,287  
Charleston/N Charleston, SCCharleston/N Charleston, SCJuly 22, 201988,583  1  7,166  
Tampa, FLTampa, FLAugust 5, 201978,560  1  8,168  
Philadelphia, PAPhiladelphia, PAAugust 6, 2019120,000  1  10,880  
Milwaukee/Madison, WIMilwaukee/Madison, WIAugust 16, 2019224,940  3  13,981  
Houston, TXHouston, TXAugust 19, 201945,000  1  6,190  
West Michigan, MIWest Michigan, MIAugust 19, 2019210,120  1  10,407  
Pittsburgh, PAPittsburgh, PAAugust 21, 2019410,389  1  31,219  
Boston, MABoston, MAAugust 22, 201980,100  1  14,253  
Las Vegas, NVLas Vegas, NVAugust 27, 201980,422  2  12,602  
Nashville, TNNashville, TNAugust 29, 2019348,880  1  20,267  
Columbia, SCColumbia, SCAugust 30, 2019200,000  1  13,670  
Pittsburgh, PAPittsburgh, PASeptember 6, 2019138,270  1  9,323  
Omaha/Council Bluffs, NE-IAOmaha/Council Bluffs, NE-IASeptember 11, 2019128,200  2  8,509  
Pittsburgh, PAPittsburgh, PASeptember 16, 2019315,634  1  28,712  
Memphis, TNMemphis, TNSeptember 19, 20191,135,453  1  50,941  
Memphis, TNMemphis, TNSeptember 26, 2019629,086  1  31,542  
Three months ended September 30, 2019Three months ended September 30, 20194,738,380  22  302,567  
Nine months ended September 30, 2019Nine months ended September 30, 201910,131,815  46  $748,088  
(1) As defined by CoStar Realty Information Inc (“CoStar”). If the building is located outside of a CoStar defined market, the city and state is reflected.


Portfolio Dispositions


During the threenine months ended March 31,September 30, 2019, we sold fivesix buildings and two land parcels comprised of approximately 1.01.1 million rentable square feet with a net book value of approximately $15.3$20.4 million to third parties. Net proceeds from the sales of rental property were approximately $16.6$23.7 million and we recognized the full gain on the sales of rental property, net, of approximately $1.3$3.3 million for the threenine months ended March 31,September 30, 2019.

32
Geographic Diversification

The following table sets forthsummarizes information about the 20 largest markets in our portfolio based on total annualized base rental revenue as of March 31,September 30, 2019.

Top 20 Markets (1)
% of Total Annualized Base Rental Revenue
Philadelphia, PA9.39.0 %
Chicago, IL7.67.3 %
Greenville/Spartanburg, SC5.95.7 %
Detroit, MIPittsburgh, PA4.34.8 %
Milwaukee/Madison, WI4.24.1 %
Pittsburgh, PADetroit, MI3.93.9 %
Minneapolis/St Paul, MN3.53.3 %
Houston, TX3.43.2 %
Charlotte, NC3.22.9 %
Cincinnati/Dayton, OH3.02.7 %
Boston, MA2.7 %
West Michigan, MI2.6 %
Columbus, OH2.5 %
El Paso, TX2.52.4 %
Boston, MA2.4%
West Michigan, MI2.3%
Westchester/So Connecticut, CT/NY2.11.9 %
Raleigh/Durham, NC1.91.7 %
Cleveland, OH1.71.7 %
Memphis, TN1.6 %
Baltimore, MD1.5 %
Dallas/Ft Worth, TX1.71.4 %
Baltimore, MDTotal1.6%
Atlanta, GA1.4%
Columbus, OH66.9 1.2%
Total67.1%
(1) As defined by CoStar.


Industry Diversification


The following table sets forthsummarizes information about the 20 largest tenant industries in our portfolio based on total annualized base rental revenue as of March 31,September 30, 2019.

Top 20 Tenant Industries (1)
% of Total Annualized Base Rental Revenue
Auto Components12.211.9 %
Air Freight & Logistics8.88.6 %
Commercial Services & Supplies7.77.5 %
Containers & Packaging6.56.2 %
Household DurablesMachinery4.95.1 %
MachineryHousehold Durables4.85.0 %
Building Products4.64.8 %
Food Products4.44.5 %
Electrical Equipment4.0%
Food & Staples Retailing3.93.6 %
Household ProductsElectrical Equipment3.93.5 %
BeveragesHousehold Products3.13.4 %
Textiles, Apparel, Luxury GoodsBeverages2.83.1 %
Chemicals1.9%
Energy Equipment & Services1.8%
Pharmaceuticals1.7%
Specialty Retail1.7%
Internet & Direct Mkt Retail1.73.0 %
Textiles, Apparel, Luxury Good2.0 %
Media1.9 %
Metals & Mining1.61.9 %
MediaElectronic Equip, Instruments1.51.8 %
TotalSpecialty Retail83.51.8 %
Chemicals1.7 %
Pharmaceuticals1.7 %
Total83.0 %
(1) Industry classification based on Global Industry Classification Standard methodology.



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Table of Contents
Tenant Diversification


The following table sets forthsummarizes information about the 20 largest tenants in our portfolio based on total annualized base rental revenue as of March 31,September 30, 2019.

Top 20 Tenants (1)
 Number of Leases % of Total Annualized Base Rental Revenue
Top 20 Tenants (1)
Number of Leases% of Total Annualized Base Rental Revenue
General Service Administration 1
 2.2%General Service Administration12.0 %
XPO Logistics 3
 1.4%
AmazonAmazon21.6 %
XPO Logistics, Inc.XPO Logistics, Inc.41.3 %
DHL Supply ChainDHL Supply Chain51.1 %
Yanfeng US Automotive Interior 3
 1.2%Yanfeng US Automotive Interior31.1 %
Solo Cup 1
 1.2%Solo Cup11.1 %
TriMas Corporation 4
 1.2%TriMas Corporation41.1 %
Deckers Outdoor 1
 1.0%
Ford Motor Company
Ford Motor Company
10.9 %
FedEx CorporationFedEx Corporation30.9 %
WestRock Company 6
 0.9%WestRock Company60.8 %
Kenco Logistic Services, LLCKenco Logistic Services, LLC20.8 %
Generation Brands 1
 0.8%Generation Brands10.8 %
Carolina Beverage Group 2
 0.8%Carolina Beverage Group20.8 %
Perrigo CompanyPerrigo Company20.8 %
Emerson ElectricEmerson Electric20.7 %
Quoizel, Inc.Quoizel, Inc.10.7 %
Schneider Electric USA, Inc. 4
 0.8%Schneider Electric USA, Inc.30.7 %
Emerson Electric 2
 0.8%
FedEx 2
 0.8%
Perrigo 2
 0.8%
American Tire Distributors Inc 4
 0.7%American Tire Distributors Inc40.7 %
Sunland Logistics 1
 0.7%
Armacell, LLC  3
 0.7%
Northern Tool & Equipment Co. 2
 0.7%
Packaging Corp of America 4
 0.7%
Coca-Cola Company 2
 0.6%
DHL Supply Chain  3
 0.6%
Coca-Cola Refreshments USA IncCoca-Cola Refreshments USA Inc20.6 %
Medline Industries, Inc.Medline Industries, Inc.10.6 %
Total 51
 18.6%Total5019.1 %
(1) Includes tenants, guarantors, and/or non-guarantor parents.


Critical Accounting Policies


See “Critical Accounting Policies” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2018, for a discussion of our critical accounting policies and estimates.


On January 1, 2019, we adopted ASUAccounting Standards Update 2016-02, Leases (Topic 842); see Note 2 in the accompanying Notes to Consolidated Financial Statements under “New Accounting Standards and Reclassifications.”


Results of Operations


The following discussion of our results of our same store (as defined below) net operating income (“NOI”) should be read in conjunction with our Consolidated Financial Statements. For a detailed discussion of NOI, including the reasons management believes NOI is useful to investors, see “Non-GAAP Financial Measures” below. Same store results are considered to be useful to investors in evaluating our performance because they provide information relating to changes in building-level operating performance without taking into account the effects of acquisitions or dispositions. We encourage the reader to not only look at our same store results, but also our total portfolio results, due to historic and future growth.


Comparison of the three months ended March 31, 2019 to the three months ended March 31, 2018

We define same store properties as properties that were in the Operating Portfolio for the entirety of the comparative periods presented. Same store properties exclude Operating Portfolio properties with expansions placed into service after December 31, 2017. On March 31,September 30, 2019, we owned 317 industrial buildings consisting of approximately 63.2 million square feet, which represents approximately 80.8%73.5% of our total portfolio, that are considered our same store portfolio in the analysis below. Same store occupancy decreased approximately 0.7%1.9% to 95.5%94.6% as of March 31,September 30, 2019 compared to 96.2%96.5% as of March 31,September 30, 2018.


Comparison of the three months ended September 30, 2019 to the three months ended September 30, 2018

The following table summarizes selected operating information for our same store portfolio and our total portfolio for the three months ended March 31,September 30, 2019 and 2018 (dollars in thousands). This table includes a reconciliation from our same store portfolio to our total portfolio by also providing information for the three months ended March 31,September 30, 2019 and 2018 with
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respect to the buildings acquired and disposed of and Operating Portfolio buildings with expansions placed into service or transferred from the Value Add Portfolio to the Operating Portfolio after December 31, 2017 and our flex/office buildings and Value Add Portfolio.


35
Table of Contents
 Same Store Portfolio Acquisitions/Dispositions Other Total Portfolio
 Three months ended March 31, Change Three months ended March 31, Three months ended March 31, Three months ended March 31, Change
 2019 2018 $ % 2019 2018 2019 2018 2019 2018 $ %
Revenue                       
Operating revenue                       
Rental income$76,787
 $73,772
 $3,015
 4.1 % $15,247
 $5,792
 $3,581
 $3,563
 $95,615
 $83,127
 $12,488
 15.0 %
Other income68
 153
 (85) (55.6)% 19
 1
 —
 2
 87
 156
 (69) (44.2)%
Total operating revenue76,855
 73,925
 2,930
 4.0 % 15,266
 5,793
 3,581
 3,565
 95,702
 83,283
 12,419
 14.9 %
Expenses                     
  
Property15,512
 13,960
 1,552
 11.1 % 2,410
 1,928
 1,589
 1,611
 19,511
 17,499
 2,012
 11.5 %
Net operating income (1)
$61,343
 $59,965
 $1,378
 2.3 % $12,856
 $3,865
 $1,992
 $1,954
 76,191
 65,784
 10,407
 15.8 %
Other expenses                       
General and administrative               9,212
 8,748
 464
 5.3 %
Depreciation and amortization               42,303
 39,965
 2,338
 5.9 %
Loss on impairments               5,344
 2,934
 2,410
 82.1 %
Other expenses               399
 291
 108
 37.1 %
Total other expenses               57,258
 51,938
 5,320
 10.2 %
Total expenses               76,769
 69,437
 7,332
 10.6 %
Other income (expense)                      
Interest and other income               16
 6
 10
 166.7 %
Interest expense               (12,834) (11,392) (1,442) 12.7 %
Gain on the sales of rental property, net               1,274
 22,689
 (21,415) (94.4)%
Total other income (expense)               (11,544) 11,303
 (22,847) (202.1)%
Net income               $7,389
 $25,149
 $(17,760) (70.6)%
(1)For a detailed discussion of NOI, including the reasons management believes NOI is useful to investors, see “Non-GAAP Financial Measures” below.

 Same Store PortfolioAcquisitions/DispositionsOtherTotal Portfolio
 Three months ended September 30,ChangeThree months ended September 30,Three months ended September 30,Three months ended September 30,Change
 20192018$%201920182019201820192018$%
Revenue          
Operating revenue          
Rental income$75,376  $75,002  $374  0.5 %$23,611  $10,922  $3,307  $2,753  $102,294  $88,677  $13,617  15.4 %
Other income55  255  (200) (78.4)%72  14  —  —  127  269  (142) (52.8)%
Total operating revenue75,431  75,257  174  0.2 %23,683  10,936  3,307  2,753  102,421  88,946  13,475  15.1 %
Expenses                 
Property13,796  13,713  83  0.6 %3,078  2,235  1,283  1,164  18,157  17,112  1,045  6.1 %
Net operating income (1)
$61,635  $61,544  $91  0.1 %$20,605  $8,701  $2,024  $1,589  84,264  71,834  12,430  17.3 %
Other expenses                  
General and administrative     8,924  8,911  13  0.1 %
Depreciation and amortization     46,908  44,355  2,553  5.8 %
Loss on impairments4,413  —  4,413  100.0 %
Other expenses     458  223  235  105.4 %
Total other expenses     60,703  53,489  7,214  13.5 %
Total expenses     78,860  70,601  8,259  11.7 %
Other income (expense)                 
Interest and other income     12  3  9  300.0 %
Interest expense     (14,053) (12,698) (1,355) 10.7 %
Loss on extinguishment of debt—  (13) 13  (100.0)%
Gain on the sales of rental property, net     1,670  3,239  (1,569) (48.4)%
Total other income (expense)     (12,371) (9,469) (2,902) 30.6 %
Net income       $11,190  $8,876  $2,314  26.1 %

(1)For a detailed discussion of NOI, including the reasons management believes NOI is useful to investors, see “Non-GAAP Financial Measures” below.

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Net Income


Net income for our total portfolio decreasedincreased by $17.8$2.3 million or 70.6%26.1% to $7.4$11.2 million for the three months ended March 31,September 30, 2019, compared to $25.1$8.9 million for the three months ended March 31,September 30, 2018.


Same Store Total Operating Revenue


Same store total operating revenue consists primarily of rental income consisting of (i) fixed lease payments, variable lease payments, straight-line rental income, and above and below market lease amortization from our properties (“lease income”), and (ii) other tenant billings for insurance, real estate taxes and certain other expenses (“other billings”).


For a detailed reconciliation of our same store total operating revenue to net income, see the table above.


Same store rental income, which is comprised of lease income and other billings as discussed below, increased by $3.0$0.4 million or 4.1%0.5% to $76.8$75.4 million for the three months ended March 31,September 30, 2019 compared to $73.8$75.0 million for the three months ended March 31,September 30, 2018.


Same store lease income increased by $1.3$0.2 million or 2.1%0.4% to $63.7$64.0 million for the three months ended March 31,September 30, 2019 compared to $62.4$63.8 million for the three months ended March 31,September 30, 2018. Approximately $2.4$1.7 million of the increase was attributable to rental increases due to new leases and renewals of existing tenants and approximately $0.2 million due to a net decrease in the amortization of net above market leases.tenants. This increase was partially offset by an approximately $1.3$1.5 million decrease due to a reduction of base rent due to tenants downsizing their spaces and vacancies.


Same store other billings increased by $1.7$0.2 million or 14.9% to $13.1 million for the three months ended March 31, 2019 compared1.1% to $11.4 million for the three months ended March 31,September 30, 2019 compared to $11.2 million for the three months ended September 30, 2018. The increase was primarily attributable to an increase in real estate taxes levied by the taxing authority and 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 of approximately $2.0$0.4 million. This increase was partially offset by a decrease of approximately $0.3$0.2 million related to tenant specific billings that occurred during the three months ended March 31,September 30, 2019 that did not recur during the three months ended March 31,September 30, 2018.


Same store other income decreased by $0.2 million or 78.4% to $0.1 million for the three months ended September 30, 2019 compared to $0.3 million for the three months ended September 30, 2018. This decrease is primarily the result of income received in 2018 for settlements or other sums received from former tenants which did not recur in 2019.

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 operating expenses to net income, see the table above.


Total same store property operating expenses increased by $1.6$0.1 million or 11.1%0.6% to $15.5$13.8 million for the three months ended March 31,September 30, 2019 compared to $14.0$13.7 million for the three months ended March 31,September 30, 2018. This increase was primarily related to increases in 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 of approximately $1.7$0.2 million and an increase in snow removalrepairs and maintenance expense of approximately $0.4$0.3 million. These increases were partially offset by a decreasedecreases in insurance expense of approximately $0.3 million and utility expense of approximately $0.6$0.1 million.


Acquisitions and Dispositions Net Operating Income


For a detailed reconciliation of our acquisitions and dispositions NOI to net income, see the table above.


Subsequent to December 31, 2017, we acquired 5995 buildings consisting of approximately 11.919.6 million square feet (excluding four buildings that were included in the Value Add Portfolio at March 31,September 30, 2019 or transferred from the Value Add Portfolio to the Operating Portfolio after December 31, 2017), and sold 2425 buildings and two land parcels consisting of approximately 4.95.0 million square feet. For the three months ended March 31,September 30, 2019 and 2018, the buildings acquired after December 31, 2017 contributed approximately $13.0$20.7 million and $0.7$5.9 million to NOI, respectively. For the three months ended March 31,September 30, 2019 and 2018, the buildings sold after December 31, 2017 contributed approximately $(0.1) million and $3.2$2.8 million to NOI, respectively.
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Refer to Note 3 in the accompanying Notes to Consolidated Financial Statements for additional discussion regarding buildings acquired or sold.


Other Net Operating Income


Our other assets include our flex/office buildings, Value Add Portfolio, and Operating Portfolio buildings with expansions placed in service or transferred from the Value Add Portfolio to the Operating Portfolio after December 31, 2017. Other NOI also includes termination incomeadjustments from buildings in our same store portfolio.


For a detailed reconciliation of our other NOI to net income, see the table above.


At March 31,September 30, 2019, we owned nineeight flex/office buildings consisting of approximately 0.60.4 million square feet, fivefour buildings in our Value Add Portfolio consisting of approximately 1.1 million square feet, and fivesix buildings consisting of approximately 1.41.7 million square feet that were Operating Portfolio buildings with expansions placed in service or transferred from the Value Add Portfolio to the Operating Portfolio after December 31, 2017. These buildings contributed approximately $1.9$2.0 million and $1.9 million to NOI for the three months ended March 31,September 30, 2019 and 2018, respectively. Additionally, there was approximately $43,000$(16,000) and $20,000$(0.3) million of termination fee incomeadjustments from certain buildings in our same store portfolio for the three months ended March 31,September 30, 2019 and 2018, respectively.


Total Other Expenses


Total other expenses consist of general and administrative expenses, depreciation and amortization, loss on impairments, and other expenses.


Total other expenses increased $5.3$7.2 million or 10.2%13.5% for the three months ended March 31,September 30, 2019 to $57.3$60.7 million compared to $51.9$53.5 million for the three months ended March 31,September 30, 2018. This is primarily a result of an increase in loss on impairments of approximately $4.4 million related to the property in Belfast, ME that is in our flex/office building portfolio, as well as an increase in depreciation and amortization of approximately $2.3$2.6 million due to an increase in the depreciable asset base as a result of acquisitions, as well as an increase in loss on impairments of approximately $2.4 million. Additionally, general and administrative expenses increased by approximately $0.5 million due to increases in compensation and other payroll costs.net acquisitions.


Total Other Income (Expense)


Total other income (expense) consists of interest and other income, interest expense, loss on extinguishment of debt, and gain on the sales of rental property, net. Interest expense includes interest incurred during the period as well as adjustments related to amortization of financing fees and debt issuance costs, and amortization of fair market value adjustments associated with the assumption of debt.


Total other income (expense) decreased $22.8expense increased $2.9 million or 202.1%30.6% for the three months ended September 30, 2019 to a total other expense position of $11.5$12.4 million compared $9.5 million for the three months ended March 31, 2019 compared a total other income of $11.3 million for the three months ended March 31,September 30, 2018. This decreaseincrease is primarily the result of a decrease in the gain on the sales of rental property, net of approximately $21.4$1.6 million. This decreaseincrease is also attributable to an increase in interest expense of approximately $1.4 million which was primarily attributable to the funding of a newan unsecured term loanloans on July 27, 2018 and July 25, 2019 and a higher average unsecured credit facility balance during the three months ended September 30, 2019 as compared the three months ended September 30, 2018.

Comparison of the nine months ended September 30, 2019 to the nine months ended September 30, 2018

The following table summarizes selected operating information for our same store portfolio and our total portfolio for the nine months ended September 30, 2019 and 2018 (dollars in thousands). This table includes a reconciliation from our same store portfolio to our total portfolio by also providing information for the nine months ended September 30, 2019 and 2018 with respect to the buildings acquired and disposed of and Operating Portfolio buildings with expansions placed into service or transferred from the Value Add Portfolio to the Operating Portfolio after December 31, 2017 and our flex/office buildings and Value Add Portfolio.


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 Same Store PortfolioAcquisitions/DispositionsOtherTotal Portfolio
 Nine months ended September 30,ChangeNine months ended September 30,Nine months ended September 30,Nine months ended September 30,Change
 20192018$%201920182019201820192018$%
Revenue                                     
Operating revenue          
Rental income$226,878  $222,636  $4,242  1.9 %$57,960  $25,327  $9,433  $8,707  $294,271  $256,670  $37,601  14.6 %
Other income394  787  (393) (49.9)%104  243  —  3  498  1,033  (535) (51.8)%
Total operating revenue227,272  223,423  3,849  1.7 %58,064  25,570  9,433  8,710  294,769  257,703  37,066  14.4 %
Expenses         
Property42,585  40,326  2,259  5.6 %8,080  6,752  3,958  3,657  54,623  50,735  3,888  7.7 %
Net operating income (1)
$184,687  $183,097  $1,590  0.9 %$49,984  $18,818  $5,475  $5,053  240,146  206,968  33,178  16.0 %
Other expenses          
General and administrative     26,723  25,637  1,086  4.2 %
Depreciation and amortization     133,844  125,221  8,623  6.9 %
Loss on impairments     9,757  2,934  6,823  232.5 %
Other expenses     1,284  864  420  48.6 %
Total other expenses     171,608  154,656  16,952  11.0 %
Total expenses     226,231  205,391  20,840  10.1 %
Other income (expense)           
Interest and other income30  16  14  87.5 %
Interest expense     (39,080) (35,602) (3,478) 9.8 %
Loss on extinguishment of debt     —  (13) 13  (100.0)%
Gain on the sales of rental property, net     3,261  32,276  (29,015) (89.9)%
Total other income (expense)     (35,789) (3,323) (32,466) 977.0 %
Net income       $32,749  $48,989  $(16,240) (33.2)%
(1)For a detailed discussion of NOI, including the reasons management believes NOI is useful to investors, see “Non-GAAP Financial Measures” below.


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Net Income

Net income for our total portfolio decreased by $16.2 million or 33.2% to $32.7 million for the nine months ended September 30, 2019 compared to $49.0 million for the nine months ended September 30, 2018.

Same Store Total Operating Revenue

Same store total operating revenue consists primarily of rental income consisting of (i) fixed lease payments, variable lease payments, straight-line rental income, and above and below market lease amortization from our properties (“lease income”), and (ii) other tenant billings for insurance, real estate taxes and certain other expenses (“other billings”).

For a detailed reconciliation of our same store total operating revenue to net income, see the table above.

Same store rental income, which is comprised of lease income and other billings as discussed below, increased by $4.2 million or 1.9% to $226.9 million for the nine months ended September 30, 2019 compared to $222.6 million for the nine months ended September 30, 2018.

Same store lease income increased by $2.0 million or 1.1% to $191.3 million for the nine months ended September 30, 2019 compared to $189.3 million for the nine months ended September 30, 2018. Approximately $5.8 million of the increase was attributable to rental increases due to new leases and renewals of existing tenants and approximately $0.3 million due to a net decrease in the amortization of net above market leases. This increase was partially offset by an approximately $4.1 million decrease due to a reduction of base rent due to tenants downsizing their spaces and vacancies.

Same store other billings increased by $2.2 million or 6.6% to $35.5 million for the nine months ended September 30, 2019 compared to $33.3 million for the nine months ended September 30, 2018. The increase was primarily attributable to an increase in real estate taxes levied by the taxing authority and 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 of approximately $2.4 million. This increase was partially offset by a decrease of approximately $0.2 million related to tenant specific billings that occurred during the nine months ended September 30, 2019 that did not recur during the nine months ended September 30, 2018.

Same store other income decreased by $0.4 million or 49.9% to $0.4 million for the nine months ended September 30, 2019 compared to $0.8 million for the nine months ended September 30, 2018. This decrease is primarily the result of income received in 2018 for settlements or other sums received from former tenants which did not recur in 2019.

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 operating expenses to net income, see the table above.

Total same store operating expenses increased by $2.3 million or 5.6% to $42.6 million for the nine months ended September 30, 2019 compared to $40.3 million for the nine months ended September 30, 2018. This increase was primarily related to increases in 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 of approximately $2.8 million, an increase in snow removal and other expenses of approximately $0.5 million, and an increase in repairs and maintenance expense of approximately $0.4 million. These increases were partially offset by a decrease in insurance and utility expenses of approximately $1.4 million.

Acquisitionsand DispositionsNet Operating Income

For a detailed reconciliation of our acquisitions and dispositions NOI to net income, see the table above.

Subsequent to December 31, 2017, we acquired 95 buildings consisting of approximately 19.6 million square feet (excluding four buildings that were included in the Value Add Portfolio at September 30, 2019 or transferred from the Value Add Portfolio to the Operating Portfolio after December 31, 2017), and sold 25 buildings and two land parcels consisting of approximately 5.0 million square feet. For the nine months ended September 30, 2019 and September 30, 2018, the buildings acquired after December 31, 2017 contributed approximately $49.9 million and $9.0 million to NOI, respectively. For the nine months ended
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September 30, 2019 and September 30, 2018, the buildings sold after December 31, 2017 contributed approximately $0.1 million and $9.8 million to NOI, respectively. Refer to Note 3 in the accompanying Notes to Consolidated Financial Statements for additional discussion regarding buildings acquired or sold.

Other Net Operating Income

Our other assets include our flex/office buildings, Value Add Portfolio, and Operating Portfolio buildings with expansions placed in service or transferred from the Value Add Portfolio to the Operating Portfolio after December 31, 2017. Other NOI also includes termination adjustments from buildings in our same store portfolio.

For a detailed reconciliation of our other NOI to net income, see the table above.

At September 30, 2019, we owned eight flex/office buildings consisting of approximately 0.4 million square feet, four buildings in our Value Add Portfolio consisting of approximately 1.1 million square feet, and six buildings consisting of approximately 1.7 million square feet that were Operating Portfolio buildings with expansions placed in service or transferred from the Value Add Portfolio to the Operating Portfolio after December 31, 2017. These buildings contributed approximately $5.7 million and $5.4 million to NOI for the nine months ended September 30, 2019 and September 30, 2018, respectively. Additionally, there was $(0.2) million and $(0.3) million of termination adjustments from certain buildings in our same store portfolio for the nine months ended September 30, 2019 and September 30, 2018, respectively.

Total Other Expenses

Total other expenses consist of general and administrative expenses, depreciation and amortization, loss on impairments, and other expenses.

Total other expenses increased $17.0 million or 11.0% to $171.6 million for the nine months ended September 30, 2019 compared to $154.7 million for the nine months ended September 30, 2018. This is primarily a result of an increase in depreciation and amortization of approximately $8.6 million as a result of net acquisitions that increased the depreciable asset base, as well as an increase of approximately $6.8 million in loss on impairments. General and administrative expenses increased by approximately $1.1 million primarily due to increases in compensation and other payroll costs.

Total Other Income (Expense)

Total other income (expense) consists of interest and other income, interest expense, loss on extinguishment of debt, and gain on the sales of rental property, net. Interest expense includes interest incurred during the period as well as adjustments related to amortization of financing fees and debt issuance costs, and amortization of fair market value adjustments associated with the assumption of debt.

Total other expense increased $32.5 million or 977.0% to $35.8 million for the nine months ended September 30, 2019 compared to $3.3 million for the nine months ended September 30, 2018. This increase is primarily the result of a decrease in the gain on the sales of rental property, net of approximately $29.0 million. This increase is also attributable to an increase in interest expense of approximately $3.5 million which was primarily attributable to the funding of unsecured term loans on March 28, 2018, and July 27, 2018, and July 25, 2019, and the funding of unsecured notes on June 13, 2018 during the nine months ended September 30, 2019 as compared the nine months ended September 30, 2018.


Non-GAAP Financial Measures


In this report, we disclose funds from operations (“FFO”) and NOI, which meet the definition of “non-GAAP financial measures” as set forth in Item 10(e) of Regulation S-K promulgated by the Securities and Exchange Commission (“SEC”). As a result, we are required to include in this report a statement of why management believes that presentation of these measures provides useful information to investors.


Funds From Operations


FFO should not be considered as an alternative to net income (determined in accordance with GAAP) as an indication of our performance, and we believe that to understand our performance further, FFO should be compared with our reported net income (loss) in accordance with GAAP, as presented in our consolidated financial statements included in this report.


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We calculate FFO in accordance with the standards established by the National Association of Real Estate Investment Trusts (“NAREIT”). FFO represents GAAP net income (loss), excluding gains (or losses) from sales of depreciable operating buildings, land sales, impairment write-downs of depreciable real estate, real estate related depreciation and amortization (excluding amortization of deferred financing costs and fair market value of debt adjustment) and after adjustments for unconsolidated partnerships and joint ventures.


Management uses FFO as a supplemental performance measure because it is a widely recognized measure of the performance of REITs. FFO may be used by investors as a basis to compare our operating performance with that of other REITs.


However, because FFO excludes depreciation and amortization and captures neither the changes in the value of our buildings that result from use or market conditions nor the level of capital expenditures and leasing commissions necessary to maintain the

operating performance of our buildings, all of which have real economic effects and could materially impact our results from operations, the utility of FFO as a measure of our performance is limited. In addition, other REITs may not calculate FFO in accordance with the NAREIT definition, and, accordingly, our FFO may not be comparable to such other REITs’ FFO. FFO should not be used as a measure of our liquidity, and is not indicative of funds available for our cash needs, including our ability to pay dividends.


The following table sets forth a reconciliation of our FFO attributable to common stockholders and unit holders for the periods presented to net income, the nearest GAAP equivalent.

 Three months ended March 31,Three months ended September 30,Nine months ended September 30,
Reconciliation of Net Income to FFO (in thousands) 2019 2018Reconciliation of Net Income to FFO (in thousands) 2019201820192018
Net income $7,389
 $25,149
Net income  $11,190  $8,876  $32,749  $48,989  
Rental property depreciation and amortization 42,229
 39,892
Rental property depreciation and amortization46,834  44,281  133,622  124,999  
Loss on impairments 5,344
 2,934
Loss on impairments4,413  —  9,757  2,934  
Gain on the sales of rental property, net (1,274) (22,689)Gain on the sales of rental property, net(1,670) (3,239) (3,261) (32,276) 
FFO 53,688
 45,286
FFO60,767  49,918  172,867  144,646  
Preferred stock dividends (1,289) (2,448)Preferred stock dividends(1,289) (1,289) (3,867) (6,315) 
Redemption of preferred stockRedemption of preferred stock—  —  —  (2,661) 
Amount allocated to restricted shares of common stock and unvested units (247) (217)Amount allocated to restricted shares of common stock and unvested units(218) (172) (697) (587) 
FFO attributable to common stockholders and unit holders $52,152
 $42,621
FFO attributable to common stockholders and unit holders  $59,260  $48,457  $168,303  $135,083  


Net Operating Income


We consider NOI to be an appropriate supplemental performance measure to net income (loss) because we believe it helps investors and management understand the core operations of our buildings. NOI is defined as rental income, which includes billings for common area maintenance, real estate taxes and insurance, less property expenses and real estate taxes and insurance. NOI should not be viewed as an alternative measure of our financial performance since it excludes expenses which could materially impact our results of operations. Further, our NOI may not be comparable to that of other real estate companies, as they may use different methodologies for calculating NOI.


The following table sets forth a reconciliation of our NOI for the periods presented to net income, the nearest GAAP equivalent.

Three months ended September 30,Nine months ended September 30,
Reconciliation of Net Income to NOI (in thousands)2019201820192018
Net income  $11,190  $8,876  $32,749  $48,989  
General and administrative8,924  8,911  26,723  25,637  
Transaction costs94  94  247  170  
Depreciation and amortization46,908  44,355  133,844  125,221  
Interest and other income(12) (3) (30) (16) 
Interest expense14,053  12,698  39,080  35,602  
Loss on impairments4,413  —  9,757  2,934  
Loss on extinguishment of debt—  13  —  13  
Other expenses364  129  1,037  694  
Gain on the sales of rental property, net(1,670) (3,239) (3,261) (32,276) 
Net operating income $84,264  $71,834  $240,146  $206,968  

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  Three months ended March 31,
Reconciliation of Net Income to NOI (in thousands) 2019 2018
Net income $7,389
 $25,149
General and administrative 9,212
 8,748
Transaction costs 74
 —
Depreciation and amortization 42,303
 39,965
Interest and other income (16) (6)
Interest expense 12,834
 11,392
Loss on impairments 5,344
 2,934
Other expenses 325
 291
Gain on the sales of rental property, net (1,274) (22,689)
Net operating income  $76,191
 $65,784
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Cash Flows


Comparison of the threenine months ended March 31,September 30, 2019 to the threenine months ended March 31,September 30, 2018


The following table summarizes our cash flows for the threenine months ended March 31,September 30, 2019 compared to the threenine months ended March 31,September 30, 2018.

 Three months ended March 31, Change Nine months ended September 30,Change
Cash Flows (dollars in thousands) 2019 2018 $ %  Cash Flows (dollars in thousands)20192018$%  
Net cash provided by operating activities $47,150
 $41,974
 $5,176
 12.3%Net cash provided by operating activities  $174,930  $148,610  $26,320  17.7 %
Net cash used in investing activities $176,816
 $36,112
 $140,704
 389.6%Net cash used in investing activities  $765,675  $393,250  $372,425  94.7 %
Net cash provided by (used in) financing activities $119,432
 $(16,277) $135,709
 833.7%
Net cash provided by financing activities Net cash provided by financing activities  $577,476  $227,766  $349,710  153.5 %
 
Net cash provided by operating activities increased $5.2$26.3 million to $47.2$174.9 million for the threenine months ended March 31,September 30, 2019 compared to $42.0$148.6 million for the threenine months ended March 31,September 30, 2018. The increase was primarily attributable to incremental operating cash flows from property acquisitions completed after March 31,September 30, 2018, and operating performance at existing properties.

These increases were partially offset by the loss of cash flows from property dispositions completed after March 31,September 30, 2018 and fluctuations in working capital due to timing of payments and rental receipts.


Net cash used in investing activities increased $140.7$372.4 million to $176.8$765.7 million for the threenine months ended March 31,September 30, 2019 compared to $36.1$393.3 million for the threenine months ended March 31,September 30, 2018. The increased cash outflow was primarily due to the acquisition of ten46 buildings for a total cash consideration of approximately $185.4$748.0 million for the threenine months ended March 31,September 30, 2019 compared to the acquisition of 636 buildings for a total cash consideration of approximately $78.8$458.4 million for the threenine months ended March 31,September 30, 2018. The increase is also attributable to a decrease in net proceeds from the sales of rental property, net related to the disposition of 5six buildings and two land parcels during the threenine months ended March 31,September 30, 2019 for net proceeds of approximately $16.6$23.7 million, compared to the threenine months ended March 31,September 30, 2018 where we sold two11 buildings for net proceeds of approximately $49.6$89.4 million.


Net cash provided by (used in) financing activities increased $135.7$349.7 million to $119.4$577.5 million for the threenine months ended March 31,September 30, 2019 compared to $(16.3)$227.8 million for the threenine months ended March 31,September 30, 2018. The increase is primarily attributable to an increase of net proceeds from the sales of common stock of approximately $150.2$295.1 million and an increasea decrease of net cash inflowoutflow on our unsecured credit facility of approximately $68.0$153.5 million during the threenine months ended March 31,September 30, 2019 compared to the threenine months ended March 31,September 30, 2018. Additionally, the increase is also attributable to a decrease in cash used for the redemption of preferred stock of $70.0 million during the nine months ended September 30, 2018 which did not recur during the nine months ended September 30, 2019, and an increase of proceeds from unsecured term loans of approximately $25.0 million during the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018. These increases were partially offset by a decrease in proceeds from unsecured term loansnotes of approximately $75.0$175.0 million and an approximately $6.1$22.2 million increase in dividends paid during the threenine months ended March 31,September 30, 2019 compared to the threenine months ended March 31,September 30, 2018.


Liquidity and Capital Resources


We believe that our liquidity needs will be satisfied through cash flows generated by operations, disposition proceeds, and financing activities. Operating cash flow is primarily rental income, expense recoveries from tenants, and other income from operations and is our principal source of funds that we use to pay operating expenses, debt service, recurring capital expenditures and the distributions required to maintain our REIT qualification. We look to the capital markets (common equity, preferred equity, and debt) to primarily fund our acquisition activity. We seek to increase cash flows from our properties by maintaining quality standards for our buildings that promote high occupancy rates and permit increases in rental rates while reducing tenant turnover and controlling operating expenses. We believe that our revenue, together with proceeds from building sales and debt and equity financings, will continue to provide funds for our short-term and medium-term liquidity needs.


Our short-term liquidity requirements consist primarily of funds to pay for operating expenses and other expenditures directly associated with our buildings, including interest expense, interest rate swap payments, scheduled principal payments on outstanding indebtedness, funding of property acquisitions under contract, general and administrative expenses, and capital expenditures for tenant improvements and leasing commissions.


Our long-term liquidity needs, in addition to recurring short-term liquidity needs as discussed above, consist primarily of funds necessary to pay for acquisitions, non-recurring capital expenditures, and scheduled debt maturities. We intend to satisfy our
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long-term liquidity needs through cash flow from operations, the issuance of equity or debt securities, other borrowings, property dispositions, or, in connection with acquisitions of certain additional buildings, the issuance of common units in the Operating Partnership.
 
As of March 31,September 30, 2019, we had total immediate liquidity of approximately $561.8$622.5 million, comprised of $7.9$6.5 million of cash and cash equivalents and $553.9$616.0 million of immediate availability on our unsecured credit facility and unsecured term loans.


In addition, we require funds for future dividends to be paid to our common and preferred stockholders and unit holders in the Operating Partnership. These distributions on our common stock are voluntary (at the discretion of our board of directors), to the extent we have satisfied distribution requirements in order to maintain our REIT status for federal income tax purposes, and may be reduced or stopped if needed to fund other liquidity requirements or for other reasons. The following table below sets forthsummarizes the dividends attributable to our outstanding common stock that had a record date during the threenine months ended March 31,September 30, 2019.

Month Ended 2019 Declaration Date Record Date Per Share Payment Date
March 31 January 10, 2019 March 29, 2019 $0.119167
 April 15, 2019
February 28 January 10, 2019 February 28, 2019 0.119167
 March 15, 2019
January 31 January 10, 2019 January 31, 2019 0.119167
 February 15, 2019
Total     $0.357501
  
Month Ended 2019Declaration DateRecord DatePer SharePayment Date
September 30July 15, 2019September 30, 2019$0.119167 October 15, 2019
August 31July 15, 2019August 30, 20190.119167 September 16, 2019
July 31July 15, 2019July 31, 20190.119167 August 15, 2019
June 30April 9, 2019June 28, 20190.119167 July 15, 2019
May 31April 9, 2019May 31, 20190.119167 June 17, 2019
April 30April 9, 2019April 30, 20190.119167 May 15, 2019
March 31January 10, 2019March 29, 20190.119167 April 15, 2019
February 28January 10, 2019February 28, 20190.119167 March 15, 2019
January 31January 10, 2019January 31, 20190.119167 February 15, 2019
Total$1.072503 


On April 9,October 15, 2019, our board of directors declared the common stock dividends for the months ending AprilOctober 31, 2019, November 30, 2019, Mayand December 31, 2019 and June 30, 2019 at a monthly rate of $0.119167 per share of common stock.



During the threenine months ended March 31,September 30, 2019, we declared quarterly cumulative dividends on the 6.875% Series C Cumulative Redeemable Preferred Stock (“Series C Preferred Stock”) at a rate equivalent to the fixed annual rate of $1.71875 per share. The following table below sets forthsummarizes the dividends on the Series C Preferred Stock during the threenine months ended March 31,September 30, 2019.

Quarter Ended 2019 Declaration Date Series C
Preferred Stock Per Share		 Payment Date
March 31 January 10, 2019 $0.4296875
 April 1, 2019
Total   $0.4296875
  
Quarter Ended 2019Declaration DateSeries C
Preferred Stock Per Share		Payment Date
September 30July 15, 2019$0.4296875 September 30, 2019
June 30April 9, 20190.4296875 July 1, 2019
March 31January 10, 20190.4296875 April 1, 2019
Total$1.2890625 


On April 9,October 15, 2019, our board of directors declared the Series C Preferred Stock dividends for the quarter ending June 30,December 31, 2019 at a quarterly rate of $0.4296875 per share.


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Indebtedness Outstanding


The following table sets forthsummarizes certain information with respect to our indebtedness outstanding as of March 31,September 30, 2019

LoanPrincipal Outstanding as of September 30, 2019 (in thousands)
Interest 
Rate (1)(2)
Maturity Date  
Prepayment Terms (3) 
Unsecured credit facility:
Unsecured Credit Facility (4)
$78,000  L + 0.90%  January 15, 2023i
Total unsecured credit facility78,000  
Unsecured term loans:
Unsecured Term Loan C150,000  2.39 %September 29, 2020i
Unsecured Term Loan B150,000  3.05 %March 21, 2021i
Unsecured Term Loan A150,000  2.70 %March 31, 2022i
Unsecured Term Loan D150,000  2.85 %January 4, 2023i
Unsecured Term Loan E175,000  3.92 %January 15, 2024i
Unsecured Term Loan F (5)
—  3.11 %January 12, 2025i
Total unsecured term loans775,000  
Less: Total unamortized deferred financing fees and debt issuance costs(3,963) 
Total carrying value unsecured term loans, net771,037  
Unsecured notes:
Series F Unsecured Notes100,000  3.98 %

January 5, 2023ii
Series A Unsecured Notes50,000  4.98 %October 1, 2024ii
Series D Unsecured Notes100,000  4.32 %February 20, 2025ii
Series G Unsecured Notes75,000  4.10 %June 13, 2025ii
Series B Unsecured Notes50,000  4.98 %July 1, 2026ii
Series C Unsecured Notes80,000  4.42 %December 30, 2026ii
Series E Unsecured Notes20,000  4.42 %February 20, 2027ii
Series H Unsecured Notes100,000  4.27 %June 13, 2028ii
Total unsecured notes575,000  

Less: Total unamortized deferred financing fees and debt issuance costs(2,217) 

Total carrying value unsecured notes, net572,783  


Mortgage notes (secured debt):

Wells Fargo Bank, National Association CMBS Loan51,861  4.31 %December 1, 2022iii
Thrivent Financial for Lutherans3,709  4.78 %December 15, 2023iv
Total mortgage notes55,570  
Add: Total unamortized fair market value premiums42  
Less: Total unamortized deferred financing fees and debt issuance costs(402) 
Total carrying value mortgage notes, net55,210  
Total / weighted average interest rate (6)
$1,477,030  3.58 %

(1)Interest rate as of September 30, 2019. At September 30, 2019, the one-month LIBOR (“L”) was 2.01563%. The current interest rate is not adjusted to include the amortization of deferred financing fees or debt issuance costs incurred in obtaining debt or any unamortized fair market value premiums. The spread over the applicable rate for our unsecured credit facility and unsecured term loans is based on the our debt rating, as defined in the respective loan agreements.
(2)As of September 30, 2019, one-month LIBOR for the Unsecured Term Loans A, B, C, D, E, and F was swapped to a fixed rate of 1.70%, 2.05%, 1.39%, 1.85%, 2.92%, and 2.11%, respectively.
Loan Principal Outstanding (in thousands) 
Interest 
Rate (1)(2)
    Maturity Date 
Prepayment Terms (3) 
Unsecured credit facility:        
Unsecured Credit Facility (4)
 $115,500
 L + 0.90%
 Jan-15-2023 i
Total unsecured credit facility 115,500
  
    
         
Unsecured term loans:  
  
    
Unsecured Term Loan C 150,000
 2.39% Sep-29-2020 i
Unsecured Term Loan B 150,000
 3.05% Mar-21-2021 i
Unsecured Term Loan A 150,000
 2.70% Mar-31-2022 i
Unsecured Term Loan D 150,000
 2.85% Jan-04-2023 i
Unsecured Term Loan E (5)
 —
 3.92% Jan-15-2024 i
Total unsecured term loans 600,000
      
Less: Total unamortized deferred financing fees and debt issuance costs (3,358)      
Total carrying value unsecured term loans, net 596,642
  
    
         
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
Series D Unsecured Notes 100,000
 4.32% Feb-20-2025 ii
Series G Unsecured Notes 75,000
 4.10% Jun-13-2025 ii
Series B Unsecured Notes 50,000
 4.98% Jul-1-2026 ii
Series C Unsecured Notes 80,000
 4.42% Dec-30-2026 ii
Series E Unsecured Notes 20,000
 4.42% Feb-20-2027 ii
Series H Unsecured Notes 100,000
 4.27% Jun-13-2028 ii
Total unsecured notes 575,000
      
Less: Total unamortized deferred financing fees and debt issuance costs (2,413)      
Total carrying value unsecured notes, net 572,587
  
 
    
         
Mortgage notes (secured debt):  
  
    
Wells Fargo Bank, National Association CMBS Loan 52,763
 4.31% Dec-1-2022 iii
Thrivent Financial for Lutherans 3,767
 4.78% Dec-15-2023 iv
Total mortgage notes 56,530
  
    
Add: Total unamortized fair market value premiums 48
  
    
Less: Total unamortized deferred financing fees and debt issuance costs 
 (469)      
Total carrying value mortgage notes, net 56,109
  
    
Total / weighted average interest rate (6)
 $1,340,838
 3.56%    
(1)Interest rate as of March 31, 2019. At March 31, 2019, the one-month LIBOR (“L”) was 2.49450%. The interest rate is not adjusted to include the amortization of deferred financing fees or debt issuance costs incurred in obtaining debt or any unamortized fair market value premiums. The spread over the applicable rate for our unsecured credit facility and unsecured term loans is based on our debt rating, as defined in the respective loan agreements.
(2)As of March 31, 2019, one-month LIBOR for the unsecured term loans A, B, C, D, and E was swapped to a fixed rate of 1.70%, 2.05%, 1.39%, 1.85%, and 2.92%, respectively.
(3)Prepayment terms consist of (i) pre-payable with no penalty; (ii) pre-payable with penalty; (iii) pre-payable without penalty three months prior to the maturity date, however can be defeased; and (iv) pre-payable without penalty three months prior to the maturity date.
(4)The capacity of the unsecured credit facility is $500.0 million.
(5)Capacity of $175.0 million, which we have until July 25, 2019 to draw.
(6)The weighted average interest rate was calculated using the fixed interest rate swapped on the notional amount of $600.0 million of debt that was in effect as of March 31, 2019, and is not adjusted to include the amortization of deferred financing fees or debt issuance costs incurred in obtaining debt or any unamortized fair market value premiums.

(3)Prepayment terms consist of (i) pre-payable with no penalty; (ii) pre-payable with penalty; (iii) pre-payable without penalty three months prior to the maturity date, however can be defeased; and (iv) pre-payable without penalty three months prior to the maturity date.

(4)The capacity of the unsecured credit facility is $500.0 million.
(5)Capacity of $200.0 million, which we have until July 12, 2020 to draw.
(6)The weighted average interest rate was calculated using the fixed interest rate swapped on the notional amount of $775.0 million of debt, and is not adjusted to include the amortization of deferred financing fees or debt issuance costs incurred in obtaining debt or any unamortized fair market value premiums.

The aggregate undrawn nominal commitments on the unsecured credit facility and unsecured term loans as of March 31,September 30, 2019 was approximately $553.9$616.0 million, including issued letters of credit. Our actual borrowing capacity at any given point in time may be less and is restricted to a maximum amount based on our debt covenant compliance.


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On July 25, 2019, we drew $175.0 million of the $175.0 million Unsecured Term Loan E that was entered into on July 26, 2018.

On July 12, 2019, we entered into the $200.0 million Unsecured Term Loan F. As of September 30, 2019, the interest rate on the Unsecured Term Loan F was LIBOR plus a spread of 1.00% based on the Company's debt rating, as defined in the loan agreement. Unless otherwise terminated pursuant to the loan agreement, the Unsecured Term Loan F will mature on January 12, 2025. The Unsecured Term Loan F has a feature that allows us to request an increase in the aggregate size of the unsecured term loan of up to $400.0 million, subject to the satisfaction of certain conditions and lender consents. The agreement includes a delayed draw feature that allows us to draw up to six advances of at least $25.0 million each until July 12, 2020. To the extent that we do not request advances of the $200.0 million of aggregate commitments by July 12, 2020, the unadvanced commitments terminate. The Unsecured Term Loan F has an unused commitment fee equal to 0.15% of its unused commitments, which began to accrue on October 10, 2019 and is due and payable monthly until the earlier of (i) the date that commitments of $200.0 million have been fully advanced, (ii) July 12, 2020, and (iii) the date that commitments of $200.0 million have been reduced to zero pursuant to the terms of the agreement. We are required to pay an annual fee of $35,000. We and certain wholly owned subsidiaries of the Operating Partnership are guarantors of the Unsecured Term Loan F. The agreement also contains financial and other covenants substantially similar to the covenants in our unsecured credit facility. As of September 30, 2019, there were no amounts outstanding under the Unsecured Term Loan F.

Our unsecured credit facility, unsecured term loans, unsecured notes, and mortgage notes are subject to ongoing compliance with a number of financial and other covenants. As of March 31,September 30, 2019, we were in compliance with the applicable financial covenants.


The chart below detailsfollowing table summarizes our debt capital structure as of March 31,September 30, 2019.

Debt Capital Structure March 31, 2019
Total principal outstanding (in thousands) $1,347,030
Weighted average duration (years) 4.4
% Secured debt 4%
% Debt maturing next 12 months —%
Net Debt to Real Estate Cost Basis (1)
 37%
(1)Debt Capital StructureSeptember 30, 2019
Total principal outstanding (in thousands)$1,483,570 
Weighted average duration (years)4.0 
% Secured debt4 %
% Debt maturing next 12 months10 %
We define Net Debt as our amounts outstanding under our unsecured credit facility, unsecured term loans, unsecured notes, and mortgage notes, less cash and cash equivalents. We defineto Real Estate Cost Basis as the book value of rental property and deferred leasing intangibles, exclusive of the related accumulated depreciation and amortization.(1)
35 %

(1)We define Net Debt as our amounts outstanding under our unsecured credit facility, unsecured term loans, unsecured notes, and mortgage notes, less cash and cash equivalents. We define Real Estate Cost Basis as the book value of rental property and deferred leasing intangibles, exclusive of the related accumulated depreciation and amortization.

We regularly pursue new financing opportunities to ensure an appropriate balance sheet position. As a result of these dedicated efforts, we are confident in our ability to meet future debt maturities and building acquisition funding needs. We believe that our current balance sheet is in an adequate position at the date of this filing, despite possible volatility in the credit markets.


Our interest rate exposure as it relates to interest expense payments on our floating rate debt is managed through our use of interest rate swaps, which fix the rate of our long term floating rate debt. For a detailed discussion on our use of interest rate swaps, see “Interest Rate Risk” below.


Equity


Preferred Stock


The following table below sets forthsummarizes our outstanding preferred stock issuances as of March 31,September 30, 2019.

Preferred Stock IssuancesPreferred Stock IssuancesIssuance DateNumber of SharesLiquidation Value Per ShareInterest Rate
Preferred Stock Issuances Issuance Date Number of Shares Liquidation Value Per Share Interest Rate
Series C Preferred Stock March 17, 2016 3,000,000
 $25.00
 6.875%Series C Preferred StockMarch 17, 20163,000,000  $25.00  6.875 %


The Series C Preferred Stock ranks senior to our common stock with respect to dividend rights and rights upon the liquidation, dissolution or winding up of our affairs. The Series C Preferred Stock has no stated maturity date and is not subject to mandatory redemption or any sinking fund. Generally, we are not permitted to redeem the Series C Preferred Stock prior to March 17, 2021, except in limited circumstances relating to our ability to qualify as a REIT and in certain other circumstances related to a change of control.

Subsequent to March 31, 2019, onOn April 30, 2019, we filed Articles of Amendment to our Articles of Amendment and Restatement to increase the number of authorized shares of our preferred stock from 15,000,000 to 20,000,000.


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Common Stock


The following sets forthtable summarizes our at-the-market (“ATM”) common stock offering programs as of March 31,September 30, 2019. We may from time to time sell common stock through sales agents under the program.

ATM Common Stock Offering Program Date Maximum Aggregate Offering Price (in thousands) Aggregate Common Stock Available as of
March 31, 2019 (in thousands)		ATM Common Stock Offering ProgramDateMaximum Aggregate Offering Price (in thousands)Aggregate Common Stock Available as of September 30, 2019 (in thousands)
2019 $600 million ATM February 14, 2019 $600,000
 $449,811
2019 $600 million ATMFebruary 14, 2019$600,000  $401,137  


Subsequent to March 31, 2019, onOn April 30, 2019, we filed Articles of Amendment to our Articles of Amendment and Restatement to increase the number of authorized shares of our common stock from 150,000,000 to 300,000,000.



The following table below sets forthsummarizes the activity for the ATM common stock offering programs during the three and nine months ended March 31,September 30, 2019 (in thousands, except share data).

 Three months ended March 31, 2019 Three months ended September 30, 2019
ATM Common Stock Offering Program Shares
Sold		 Weighted Average Price Per Share Gross
Proceeds		 Sales
Agents’ Fee		 Net
Proceeds		ATM Common Stock Offering ProgramShares
Sold		Weighted Average Price Per ShareNet
Proceeds
2019 $600 million ATM 5,441,409
 $27.60
 $150,189
 $1,302
 $148,887
2019 $600 million ATM875,129  $30.39  $26,326  
Total/weighted average 5,441,409
 $27.60
 $150,189
 $1,302
 $148,887
Total/weighted average875,129  $30.39  $26,326  


Subsequent
 Nine months ended September 30, 2019
ATM Common Stock Offering ProgramShares
Sold		Weighted Average Price Per ShareNet
Proceeds
2019 $600 million ATM7,022,332  $28.32  $197,074  
Total/weighted average7,022,332  $28.32  $197,074  

On September 24, 2019, we completed an underwritten public offering of an aggregate 12,650,000 shares of common stock at a price to March 31,the underwriters of $28.60 per share, consisting of (i) 5,500,000 shares offered directly by us and (ii) 7,150,000 shares offered by the forward dealer in connection with certain forward sale agreements (including 1,650,000 shares offered pursuant to the underwriters’ option to purchase additional shares, which option was exercised in full). The offering closed on September 27, 2019 onand we received net proceeds from the sale of shares offered directly by us of $157.3 million. Subject to our right to elect cash or net share settlement, we expect to settle the forward sales agreements and receive proceeds, subject to certain adjustments, from the sale of the those shares of common stock upon one or more such physical settlements within approximately six months from the date of the prospectus supplement relating to the offering, earlier than the scheduled maturity date of the forward sale agreements of September 24, 2020.

On April 4,1, 2019, we completed an underwritten public offering of 7,475,000 shares of common stock (including 975,000 shares issued pursuant to the underwriters’ option to purchase additional shares)shares, which option was exercised in full) at a price to the underwriters of $28.72 per share. WeThe offering closed on April 4, 2019 and we received net proceeds from the sale of common stock in the offering of approximately $214.7 million.


Noncontrolling Interest


We own our interests in all of our properties and conduct substantially all of our business through the Operating Partnership. We are the sole member of the sole general partner of the Operating Partnership. As of March 31,September 30, 2019, we owned approximately 96.7%97.2% of the 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 units in our Operating Partnership, owned the remaining 3.3%2.8%.


Interest Rate Risk


We use interest rate swaps to fix the rate of our variable rate debt. As of March 31,September 30, 2019, all of our outstanding variable rate debt, with the exception of our unsecured credit facility, was fixed with interest rate swaps through maturity.


We recognize all derivatives on the balance sheet at fair value. If the derivative is designated as a hedge, depending on the nature of the hedge, changes in the fair value of derivatives are either offset against the change in fair value of the hedged
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assets, liabilities, or firm commitments through earnings or recognized in other comprehensive income (loss), which is a component of equity. Derivatives that are not designated as hedges must be adjusted to fair value and the changes in fair value must be reflected as income or expense.


We have established criteria for suitable counterparties in relation to various specific types of risk. We only use counterparties that have a credit rating of no lower than investment grade at swap inception from Moody’s Investor Services, Standard & Poor’s, or Fitch Ratings or other nationally recognized rating agencies.



The following table details our outstanding interest rate swaps as of March 31,September 30, 2019.

Interest Rate
Derivative Counterparty		 Trade Date     Effective Date Notional Amount
(in thousands)		 Fair Value
(in thousands)		 Pay Fixed Interest Rate Receive Variable Interest Rate Maturity DateInterest Rate
Derivative Counterparty		Trade Date    Effective DateNotional Amount
(in thousands)		 Fair Value
(in thousands)		Pay Fixed Interest RateReceive Variable Interest RateMaturity Date
Regions Bank Mar-01-2013 Mar-01-2013 $25,000
 $235
 1.3300% One-month L Feb-14-2020 Regions BankMar-01-2013Mar-01-2013  $25,000  $51  1.3300 %One-month LFeb-14-2020 
Capital One, N.A. Jun-13-2013 Jul-01-2013 $50,000
 $316
 1.6810% One-month L Feb-14-2020 Capital One, N.A.Jun-13-2013Jul-01-2013  $50,000  $35  1.6810 %One-month LFeb-14-2020 
Capital One, N.A. Jun-13-2013 Aug-01-2013 $25,000
 $153
 1.7030% One-month L Feb-14-2020 Capital One, N.A.Jun-13-2013Aug-01-2013  $25,000  $16  1.7030 %One-month LFeb-14-2020 
Regions Bank Sep-30-2013 Feb-03-2014 $25,000
 $90
 1.9925% One-month L Feb-14-2020 Regions BankSep-30-2013Feb-03-2014  $25,000  $(12) 1.9925 %One-month LFeb-14-2020 
The Toronto-Dominion Bank Oct-14-2015 Sep-29-2016 $25,000
 $342
 1.3830% One-month L Sep-29-2020The Toronto-Dominion BankOct-14-2015Sep-29-2016  $25,000  $66  1.3830 %One-month LSep-29-2020
PNC Bank, N.A. Oct-14-2015 Sep-29-2016 $50,000
 $678
 1.3906% One-month L Sep-29-2020PNC Bank, N.A.Oct-14-2015Sep-29-2016  $50,000  $128  1.3906 %One-month LSep-29-2020
Regions Bank Oct-14-2015 Sep-29-2016 $35,000
 $477
 1.3858% One-month L Sep-29-2020Regions BankOct-14-2015Sep-29-2016  $35,000  $91  1.3858 %One-month LSep-29-2020
U.S. Bank, N.A. Oct-14-2015 Sep-29-2016 $25,000
 $338
 1.3950% One-month L Sep-29-2020U.S. Bank, N.A.Oct-14-2015Sep-29-2016  $25,000  $63  1.3950 %One-month LSep-29-2020
Capital One, N.A. Oct-14-2015 Sep-29-2016 $15,000
 $202
 1.3950% One-month L Sep-29-2020Capital One, N.A.Oct-14-2015Sep-29-2016  $15,000  $38  1.3950 %One-month LSep-29-2020
Royal Bank of Canada Jan-08-2015 Mar-20-2015 $25,000
 $256
 1.7090% One-month L Mar-21-2021Royal Bank of CanadaJan-08-2015Mar-20-2015  $25,000  $(56) 1.7090 %One-month LMar-21-2021
The Toronto-Dominion Bank Jan-08-2015 Mar-20-2015 $25,000
 $255
 1.7105% One-month L Mar-21-2021The Toronto-Dominion BankJan-08-2015Mar-20-2015  $25,000  $(57) 1.7105 %One-month LMar-21-2021
The Toronto-Dominion Bank Jan-08-2015 Sep-10-2017 $100,000
 $18
 2.2255% One-month L Mar-21-2021The Toronto-Dominion BankJan-08-2015Sep-10-2017  $100,000  $(982) 2.2255 %One-month LMar-21-2021
Wells Fargo, N.A. Jan-08-2015 Mar-20-2015 $25,000
 $243
 1.8280% One-month L Mar-31-2022Wells Fargo, N.A.Jan-08-2015Mar-20-2015  $25,000  $(246) 1.8280 %One-month LMar-31-2022
The Toronto-Dominion Bank Jan-08-2015 Feb-14-2020 $25,000
 $(204) 2.4535% One-month L Mar-31-2022The Toronto-Dominion BankJan-08-2015Feb-14-2020  $25,000  $(579) 2.4535 %One-month LMar-31-2022
Regions Bank Jan-08-2015 Feb-14-2020 $50,000
 $(430) 2.4750% One-month L Mar-31-2022Regions BankJan-08-2015Feb-14-2020  $50,000  $(1,181) 2.4750 %One-month LMar-31-2022
Capital One, N.A. Jan-08-2015 Feb-14-2020 $50,000
 $(487) 2.5300% One-month L Mar-31-2022Capital One, N.A.Jan-08-2015Feb-14-2020  $50,000  $(1,238) 2.5300 %One-month LMar-31-2022
The Toronto-Dominion Bank Jul-20-2017 Oct-30-2017 $25,000
 $269
 1.8485% One-month L Jan-04-2023The Toronto-Dominion BankJul-20-2017Oct-30-2017  $25,000  $(362) 1.8485 %One-month LJan-04-2023
Royal Bank of Canada Jul-20-2017 Oct-30-2017 $25,000
 $267
 1.8505% One-month L Jan-04-2023Royal Bank of CanadaJul-20-2017Oct-30-2017  $25,000  $(364) 1.8505 %One-month LJan-04-2023
Wells Fargo, N.A. Jul-20-2017 Oct-30-2017 $25,000
 $267
 1.8505% One-month L Jan-04-2023Wells Fargo, N.A.Jul-20-2017Oct-30-2017  $25,000  $(364) 1.8505 %One-month LJan-04-2023
PNC Bank, N.A. Jul-20-2017 Oct-30-2017 $25,000
 $269
 1.8485% One-month L Jan-04-2023PNC Bank, N.A.Jul-20-2017Oct-30-2017  $25,000  $(362) 1.8485 %One-month LJan-04-2023
PNC Bank, N.A. Jul-20-2017 Oct-30-2017 $50,000
 $539
 1.8475% One-month L Jan-04-2023PNC Bank, N.A.Jul-20-2017Oct-30-2017  $50,000  $(723) 1.8475 %One-month LJan-04-2023
The Toronto-Dominion Bank Jul-24-2018 Jul-26-2019 $50,000
 $(1,696) 2.9180% One-month L Jan-12-2024The Toronto-Dominion BankJul-24-2018Jul-26-2019  $50,000  $(3,229) 2.9180 %One-month LJan-12-2024
PNC Bank, N.A. Jul-24-2018 Jul-26-2019 $50,000
 $(1,699) 2.9190% One-month L Jan-12-2024PNC Bank, N.A.Jul-24-2018Jul-26-2019  $50,000  $(3,232) 2.9190 %One-month LJan-12-2024
Bank of Montreal Jul-24-2018 Jul-26-2019 $50,000
 $(1,696) 2.9190% One-month L Jan-12-2024Bank of MontrealJul-24-2018Jul-26-2019  $50,000  $(3,232) 2.9190 %One-month LJan-12-2024
U.S. Bank, N.A. Jul-24-2018 Jul-26-2019 $25,000
 $(848) 2.9190% One-month L Jan-12-2024U.S. Bank, N.A.Jul-24-2018Jul-26-2019  $25,000  $(1,616) 2.9190 %One-month LJan-12-2024
Wells Fargo, N.A.Wells Fargo, N.A.May-02-2019Jul-15-2020  $50,000  $(2,030) 2.2460 %One-month LJan-15-2025
U.S. Bank, N.A.U.S. Bank, N.A.May-02-2019Jul-15-2020  $50,000  $(2,029) 2.2459 %One-month LJan-15-2025
Regions BankRegions BankMay-02-2019Jul-15-2020  $50,000  $(2,032) 2.2459 %One-month LJan-15-2025
Bank of MontrealBank of MontrealJul-16-2019Jul-15-2020  $50,000  $(886) 1.7165 %One-month LJan-15-2025


The swaps outlined in the above table were all designated as cash flow hedges of interest rate risk, and all are valued as Level 2 financial instruments. Level 2 financial instruments are defined as significant other observable inputs. As of March 31,September 30, 2019, the fair value of 18eight of our interest rate swaps were in an asset position of approximately $5.2$0.5 million and the fair value of seven21 of our interest rate swaps were in a liability position of approximately $7.1$24.8 million, including any adjustment for nonperformance risk related to these agreements.


As of March 31,September 30, 2019, we had $715.5$853.0 million of variable rate debt. As of March 31,September 30, 2019, all of our outstanding variable rate debt, with the exception of our unsecured credit facility, was fixed with interest rate swaps through maturity. To the extent interest rates increase, interest costs on our floating rate debt not fixed with interest rate swaps will increase, which could adversely affect our cash flow and our ability to pay principal and interest on our debt and our ability to make distributions to our security holders. From time to time, we may enter into interest rate swap agreements and other interest rate hedging contracts, including swaps, caps and floors. In addition, an increase in interest rates could decrease the amounts third parties are willing to pay for our assets, thereby limiting our ability to change our portfolio promptly in response to changes in economic or other conditions.


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Off-balance Sheet Arrangements


As of March 31,September 30, 2019, we had letters of credit related to development projects and certain other agreements of approximately $5.6$6.0 million and a development commitment related to a building expansion under a tenant lease of approximately $9.8$3.1 million. As of March 31,September 30, 2019, we had no other material off-balance sheet arrangements.


Item 3.  Quantitativeand Qualitative Disclosures about Market Risk


Our future income, cash flows and fair values relevant to financial instruments are dependent upon prevailing market interest rates. Market risk refers to the risk of loss from adverse changes in market prices and interest rates. The primary market risk we are exposed to is interest rate risk.  We have used derivative financial instruments to manage, or hedge, interest rate risks related to our borrowings, primarily through interest rate swaps.


As of March 31,September 30, 2019, we had $715.5$853.0 million of variable rate debt outstanding. As of March 31,September 30, 2019, all of our outstanding variable rate debt, with the exception of $115.5$78.0 million outstanding under our unsecured credit facility, was fixed with interest rate swaps. To the extent we undertake additional variable rate indebtedness, if interest rates increase, then so will the interest costs

on our unhedged variable rate debt, which could adversely affect our cash flow and our ability to pay principal and interest on our debt and our ability to make distributions to our security holders. Further, rising interest rates could limit our ability to refinance existing debt when it matures or significantly increase our future interest expense. From time to time, we enter into interest rate swap agreements and other interest rate hedging contracts, including swaps, caps and floors. While these agreements are intended to lessen the impact of rising interest rates on us, they also expose us to the risk that the other parties to the agreements will not perform, we could incur significant costs associated with the settlement of the agreements, the agreements will be unenforceable and the underlying transactions will fail to qualify as highly-effective cash flow hedges under GAAP. In addition, an increase in interest rates could decrease the amounts third parties are willing to pay for our assets, thereby limiting our ability to change our portfolio promptly in response to changes in economic or other conditions. If interest rates increased by 100 basispoints and assuming we had an outstanding balance of $115.5$78.0 million on our unsecured credit facility (the portion outstanding at March 31,September 30, 2019 not fixed by interest rate swaps) for the threenine months ended March 31,September 30, 2019, our interest expense would have increased by approximately $0.3$0.6 million for the threenine months ended March 31,September 30, 2019.


Item 4.  Controls and Procedures


Evaluation of Disclosure Controls and Procedures


As required by SEC Rule 13a-15(b), we have evaluated, under the supervision of and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act, as of March 31,September 30, 2019. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures for the periods covered by this report were effective to provide reasonable assurance that information required to be disclosed by our Company in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.


Changes in Internal Controls


There was no change to our internal control over financial reporting during the quarter ended March 31,September 30, 2019 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.



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PART II. Other Information


Item 1.  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, 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 1A.  Risk Factors
There have been no material changes from the risk factors disclosed in the Annual Report on Form 10-K for the year ended December 31, 2018 filed with the SEC on February 13, 2019.


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


Recent Sales of Unregistered Equity Securities


During the quarter ended March 31,September 30, 2019, the Operating Partnership issued (i) 364,17345,815 common units in the Operating Partnership upon exchange of outstanding long term incentive plan units (“LTIP units”) pursuant to the STAG Industrial, Inc. 2011 Equity Incentive Plan, as amended and restated (the “2011 Plan”), and (ii) 202,173 common units in the Operating Partnership upon exchange of outstanding LTIP units.restated. Subject to certain restrictions, common units in the Operating Partnership may be redeemed for cash in an amount equal to the value of a share of common stock or, at our election, for a share of common stock on a one-for-one basis.


During the quarter ended March 31,September 30, 2019, we issued 439,071207,152 shares of common stock upon redemption of 439,071207,152 common units in the Operating Partnership held by various limited partners.  The issuance of such shares of common stock was either registered under the Securities Act or effected in reliance upon an exemption from registration provided by Section 4(a)(2) under the Securities Act and the rules and regulations promulgated thereunder. We relied on the exemption based on representations given by the holders of the common units.


All other issuances of unregistered securities during the quarter ended March 31,September 30, 2019, if any, have previously been disclosed in filings with the SEC.


Issuer Purchases of Equity Securities
Period 
Total Number of Shares Purchased(1)
 
Average Price Paid per Share(1)
 Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs
January 1, 2019 - January 31, 2019 58,697
 $24.60
 —
 $—
February 1, 2019 - February 28, 2019 —
 $—
 —
 $—
March 1, 2019 - March 31, 2019 —
 $—
 —
 $—
Total/weighted average 58,697
 $24.60
 —
 $—
(1)Reflects shares surrendered to the Company for payment of tax withholdings obligations in connection with the vesting of shares of common stock issued pursuant to the 2011 Plan, as amended and restated. The average price paid reflects the average market value of shares withheld for tax purposes.

Item 3. Defaults Upon Senior Securities


None.


Item 4.  Mine SafetyDisclosures
Not applicable.



Item 5.  Other Information


AsNone.
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Table of the quarter ended March 31, 2019, all items required to be disclosed in a Current Report on Form 8-K were reported under Form 8-K.Contents

Amendment to Articles of Incorporation or Bylaws; Change in Fiscal Year

Articles of Amendment

On April 30, 2019, we filed Articles of Amendment to our Articles of Amendment and Restatement with the State Department of Assessments and Taxation of the State of Maryland, increasing the number of authorized shares of our common stock from 150,000,000 to 300,000,000 and the number of authorized shares of our preferred stock from 15,000,000 to 20,000,000. A copy of the Articles of Amendment is filed as Exhibit 3.1 to this report and is incorporated herein by reference. The summary set forth above is qualified in its entirety by reference to Exhibit 3.1.

Item 6.  Exhibits
Exhibit 
Number		Description of Document
3.1 *10.1 
10.1 *
ConsultingTerm Loan Agreement, with Peter S. Fearey, dated as of February 21,July 12, 2019, by and among STAG Industrial Operating Partnership, L.P., STAG Industrial, Inc., Wells Fargo Bank, National Association, and the other lenders party thereto (1)
31.1 * 
31.2 * 
32.1 ** 
101101.INS *The following materials from STAG Industrial, Inc.’s Quarterly Report on Form 10-Q forXBRL Instance Document - the quarter ended March 31, 2019 formattedinstance document does not appear in the Interactive Data File because its XBRL (eXtensible Business Reporting Language): (i)tags are embedded within the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statements of Comprehensive Income (Loss), (iv) the Consolidated Statements of Equity, (v) the Consolidated Statements of Cash Flows,Inline XBRL document
101.SCH * XBRL Taxonomy Extension Schema Document
101.CAL * XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF * XBRL Taxonomy Extension Definition Linkbase Document
101.LAB * XBRL Taxonomy Extension Label Linkbase Document
101.PRE * XBRL Taxonomy Extension Presentation Linkbase Document
104 * Cover Page Interactive Date File (formatted as Inline XBRL and (vi) related notes to Consolidated Financial Statementscontained in Exhibit 101)
*
* Filed herewith.


** Furnished herewith.

(1) Incorporated by reference to STAG Industrial, Inc.’s Current Report on Form 8-K filed with the SEC on July 30, 2019.





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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
STAG INDUSTRIAL, INC.
Date: AprilOctober 30, 2019BY:
/s/ WILLIAM R. CROOKER
William R. Crooker
Chief Financial Officer, Executive Vice President and Treasurer (Principal Financial Officer and Principal Accounting Officer)





















































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