UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the Quarterly Period Ended ~~September~~June 30, ~~2019~~2020

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

For the transition period from to .

Commission file number 1-34907

STAG Industrial, Inc.

(Exact name of registrant as specified in its charter)

Maryland

27-3099608

(State or other jurisdiction of

(IRS Employer Identification No.)

incorporation or organization)

One Federal Street

23rd Floor

Boston,

Massachusetts

02110

(Address of principal executive offices)

(Zip code)

(617) 574-4777

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common stock, $0.01 par value per share	STAG	New York Stock Exchange
6.875% Series C Cumulative Redeemable Preferred Stock ($0.01 par value)	STAG-PC	New 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 ☒ 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 ☒ 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 ☒ 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 ☒

The number of shares of common stock outstanding at ~~October 29, 2019~~July 27, 2020 was ~~132,957,164.~~149,141,565.

Table of Contents

STAG Industrial, Inc.

Table of Contents



PART I.	Financial Information	3

Item 1.	Financial Statements (unaudited)	3

	Consolidated Balance Sheets as of ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018~~2019	3

	Consolidated Statements of Operations for the Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2019~~2020 and ~~2018~~2019	4

	Consolidated Statements of Comprehensive Income for the Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2019~~2020 and ~~2018~~2019	5

	Consolidated Statements of Equity for the Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2019~~2020 and ~~2018~~2019	6

	Consolidated Statements of Cash Flows for the ~~Nine~~Six Months Ended ~~September~~June 30, ~~2019~~2020 and ~~2018~~2019	7

	Notes to Consolidated Financial Statements	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2724

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	46

Item 4.	Controls and Procedures	47

PART II.	Other Information	48

Item 3.1.	Legal Proceedings	~~Quantitative~~48

Item 1A.	Risk Factors	48

Item 2.	Unregistered Sales of Equity Securities and ~~Qualitative~~Use of Proceeds	48

Item 3.	Defaults Upon Senior Securities	49

Item 4.	Mine Safety Disclosures ~~about Market Risk~~	49

Item 5.	Other Information	49

~~Item 4.~~	~~Controls and Procedures~~	49

~~PART II.~~	~~Other Information~~	50

~~Item 1.~~	~~Legal Proceedings~~	50

~~Item 1A.~~	~~Risk Factors~~	50

~~Item 2.~~	~~Unregistered Sales of Equity Securities and Use of Proceeds~~	50

~~Item 3.~~	~~Defaults Upon Senior Securities~~	50

~~Item 4.~~	~~Mine Safety Disclosures~~	50

~~Item 5.~~	~~Other Information~~	50

Item 6.	Exhibits	5150

	SIGNATURES	5251

Table of Contents

Part I. Financial Information

Item 1. Financial Statements

STAG Industrial, Inc.

Consolidated Balance Sheets

(unaudited, in thousands, except share data)


		September 30, 2019		December 31, 2018			June 30, 2020		December 31, 2019
Assets	Assets					Assets
Rental Property:	Rental Property:					Rental Property:
Land	Land	$	420,215	$	364,023	Land	$	444,489	$	435,923
Buildings and improvements, net of accumulated depreciation of $367,088 and $316,930, respectively		2,788,766		2,285,663
Deferred leasing intangibles, net of accumulated amortization of $241,323 and $246,502, respectively		413,955		342,015
Buildings and improvements, net of accumulated depreciation of $446,361 and $387,633, respectively						Buildings and improvements, net of accumulated depreciation of $446,361 and $387,633, respectively	3,141,970		3,087,435
Deferred leasing intangibles, net of accumulated amortization of $267,553 and $241,304, respectively						Deferred leasing intangibles, net of accumulated amortization of $267,553 and $241,304, respectively	451,738		475,149
Total rental property, net	Total rental property, net	3,622,936		2,991,701		Total rental property, net	4,038,197		3,998,507
Cash and cash equivalents	Cash and cash equivalents	6,540		7,968		Cash and cash equivalents	102,097		9,041
Restricted cash	Restricted cash	2,733		14,574		Restricted cash	12,505		2,823
Tenant accounts receivable	Tenant accounts receivable	50,460		42,236		Tenant accounts receivable	65,122		57,592
Prepaid expenses and other assets	Prepaid expenses and other assets	46,707		36,902		Prepaid expenses and other assets	39,347		38,231
Interest rate swaps	Interest rate swaps	488		9,151		Interest rate swaps	—		303
Operating lease right-of-use assets	Operating lease right-of-use assets	15,425		—		Operating lease right-of-use assets	22,168		15,129

Assets held for sale, net						Assets held for sale, net	—		43,019
Total assets	Total assets	$	3,745,289	$	3,102,532	Total assets	$	4,279,436	$	4,164,645
Liabilities and Equity	Liabilities and Equity					Liabilities and Equity
Liabilities:	Liabilities:					Liabilities:
Unsecured credit facility	Unsecured credit facility	$	78,000	$	100,500	Unsecured credit facility	$	—	$	146,000
Unsecured term loans, net	Unsecured term loans, net	771,037		596,360		Unsecured term loans, net	970,282		871,375
Unsecured notes, net	Unsecured notes, net	572,783		572,488		Unsecured notes, net	573,082		572,883
Mortgage notes, net	Mortgage notes, net	55,210		56,560		Mortgage notes, net	52,827		54,755
Accounts payable, accrued expenses and other liabilities	Accounts payable, accrued expenses and other liabilities	63,572		45,507		Accounts payable, accrued expenses and other liabilities	58,783		53,737
Interest rate swaps	Interest rate swaps	24,812		4,011		Interest rate swaps	50,731		18,819
Tenant prepaid rent and security deposits	Tenant prepaid rent and security deposits	21,131		22,153		Tenant prepaid rent and security deposits	24,542		21,993
Dividends and distributions payable	Dividends and distributions payable	16,293		13,754		Dividends and distributions payable	18,301		17,465
Deferred leasing intangibles, net of accumulated amortization of $11,259 and $12,764, respectively		20,237		21,567
Deferred leasing intangibles, net of accumulated amortization of $13,117 and $12,064, respectively						Deferred leasing intangibles, net of accumulated amortization of $13,117 and $12,064, respectively	26,292		26,738
Operating lease liabilities	Operating lease liabilities	17,259		—		Operating lease liabilities	24,279		16,989
Total liabilities	Total liabilities	1,640,334		1,432,900��		Total liabilities	1,799,119		1,800,754
Commitments and contingencies (Note 11)	Commitments and contingencies (Note 11)					Commitments and contingencies (Note 11)
Equity:	Equity:					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, 2018		75,000		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, respectively		1,330		1,122
Preferred stock, par value $0.01 per share, 20,000,000 shares authorized at June 30, 2020 and December 31, 2019,						Preferred stock, par value $0.01 per share, 20,000,000 shares authorized at June 30, 2020 and December 31, 2019,
Series C, 3,000,000 shares (liquidation preference of $25.00 per share) issued and outstanding at June 30, 2020 and December 31, 2019						Series C, 3,000,000 shares (liquidation preference of $25.00 per share) issued and outstanding at June 30, 2020 and December 31, 2019	75,000		75,000
Common stock, par value $0.01 per share, 300,000,000 shares authorized at June 30, 2020 and December 31, 2019, respectively, 148,941,121 and 142,815,593 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively						Common stock, par value $0.01 per share, 300,000,000 shares authorized at June 30, 2020 and December 31, 2019, respectively, 148,941,121 and 142,815,593 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively	1,489		1,428
Additional paid-in capital	Additional paid-in capital	2,687,118		2,118,179		Additional paid-in capital	3,148,163		2,970,553
Cumulative dividends in excess of earnings	Cumulative dividends in excess of earnings	(690,324)		(584,979)		Cumulative dividends in excess of earnings	(750,770)		(723,027)
Accumulated other comprehensive income (loss)		(24,030)		4,481
Accumulated other comprehensive loss						Accumulated other comprehensive loss	(49,837)		(18,426)
Total stockholders’ equity	Total stockholders’ equity	2,049,094		1,613,803		Total stockholders’ equity	2,424,045		2,305,528
Noncontrolling interest	Noncontrolling interest	55,861		55,829		Noncontrolling interest	56,272		58,363
Total equity	Total equity	2,104,955		1,669,632		Total equity	2,480,317		2,363,891
Total liabilities and equity	Total liabilities and equity	$	3,745,289	$	3,102,532	Total liabilities and equity	$	4,279,436	$	4,164,645

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

Table of Contents

STAG Industrial, Inc.

Consolidated Statements of Operations

(unaudited, in thousands, except per share data)


		Three months ended September 30,						Nine months ended September 30,							Three months ended June 30,				Six months ended June 30,
		2019		2018		2019		2018			2020		2019		2020		2019
Revenue	Revenue									Revenue
Rental income	Rental income	$	102,294	$	88,677	$	294,271	$	256,670	Rental income	$	117,471	$	96,362	$	235,810	$	191,977
Other income	Other income	127		269		498		1,033		Other income	146		284		355		371
Total revenue	Total revenue	102,421		88,946		294,769		257,703		Total revenue	117,617		96,646		236,165		192,348
Expenses	Expenses									Expenses
Property	Property	18,157		17,112		54,623		50,735		Property	20,392		16,955		42,339		36,466
General and administrative	General and administrative	8,924		8,911		26,723		25,637		General and administrative	9,406		8,587		19,779		17,799

Depreciation and amortization	Depreciation and amortization	46,908		44,355		133,844		125,221		Depreciation and amortization	53,606		44,633		106,294		86,936
Loss on impairments	Loss on impairments	4,413		—		9,757		2,934		Loss on impairments	—		—		—		5,344

Other expenses	Other expenses	458		223		1,284		864		Other expenses	588		427		1,064		826
Total expenses	Total expenses	78,860		70,601		226,231		205,391		Total expenses	83,992		70,602		169,476		147,371
Other income (expense)	Other income (expense)									Other income (expense)
Interest and other income	Interest and other income	12		3		30		16		Interest and other income	156		2		235		18
Interest expense	Interest expense	(14,053)		(12,698)		(39,080)		(35,602)		Interest expense	(15,333)		(12,193)		(30,197)		(25,027)
Loss on extinguishment of debt	Loss on extinguishment of debt	—		(13)		—		(13)		Loss on extinguishment of debt	(834)		—		(834)		—
Gain on involuntary conversion										Gain on involuntary conversion	657		—		657		—
Gain on the sales of rental property, net	Gain on the sales of rental property, net	1,670		3,239		3,261		32,276		Gain on the sales of rental property, net	1,045		317		47,804		1,591
Total other income (expense)	Total other income (expense)	(12,371)		(9,469)		(35,789)		(3,323)		Total other income (expense)	(14,309)		(11,874)		17,665		(23,418)
Net income	Net income	$	11,190	$	8,876	$	32,749	$	48,989	Net income	$	19,316	$	14,170	$	84,354	$	21,559
Less: income attributable to noncontrolling interest after preferred stock dividends	Less: income attributable to noncontrolling interest after preferred stock dividends	290		281		912		1,589		Less: income attributable to noncontrolling interest after preferred stock dividends	407		408		2,005		622
Net income attributable to STAG Industrial, Inc.	Net income attributable to STAG Industrial, Inc.	$	10,900	$	8,595	$	31,837	$	47,400	Net income attributable to STAG Industrial, Inc.	$	18,909	$	13,762	$	82,349	$	20,937
Less: preferred stock dividends	Less: preferred stock dividends	1,289		1,289		3,867		6,315		Less: preferred stock dividends	1,289		1,289		2,578		2,578
Less: redemption of preferred stock		—		—		—		2,661

Less: amount allocated to participating securities	Less: amount allocated to participating securities	78		69		236		209		Less: amount allocated to participating securities	68		79		136		158
Net income attributable to common stockholders	Net income attributable to common stockholders	$	9,533	$	7,237	$	27,734	$	38,215	Net income attributable to common stockholders	$	17,552	$	12,394	$	79,635	$	18,201
Weighted average common shares outstanding — basic	Weighted average common shares outstanding — basic	127,272		105,783		122,460		101,095		Weighted average common shares outstanding — basic	148,663		125,251		148,116		120,015
Weighted average common shares outstanding — diluted	Weighted average common shares outstanding — diluted	127,469		106,333		122,720		101,495		Weighted average common shares outstanding — diluted	149,027		125,560		148,341		120,306
Net income per share — basic and diluted	Net income per share — basic and diluted									Net income per share — basic and diluted

Net income per share attributable to common stockholders — basic	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 — basic	$	0.12	$	0.10	$	0.54	$	0.15
Net income per share attributable to common stockholders — diluted	Net income per share attributable to common stockholders — diluted	$	0.07	$	0.07	$	0.23	$	0.38	Net income per share attributable to common stockholders — diluted	$	0.12	$	0.10	$	0.54	$	0.15

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

Table of Contents

STAG Industrial, Inc.

Consolidated Statements of Comprehensive Income (Loss)

(unaudited, in thousands)

Three months ended September 30, Nine months ended September 30,
2019 2018 2019 2018
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 June 30,						Six months ended June 30,
	2020		2019		2020		2019
Net income	$	19,316	$	14,170	$	84,354	$	21,559
Other comprehensive loss:
Loss on interest rate swaps	(2,009)		(16,028)		(32,200)		(23,006)
Other comprehensive loss	(2,009)		(16,028)		(32,200)		(23,006)
Comprehensive income (loss)	17,307		(1,858)		52,154		(1,447)
Income attributable to noncontrolling interest after preferred stock dividends	(407)		(408)		(2,005)		(622)
Other comprehensive loss attributable to noncontrolling interest	32		510		789		754
Comprehensive income (loss) attributable to STAG Industrial, Inc.	$	16,932	$	(1,756)	$	50,938	$	(1,315)

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

Table of Contents

STAG Industrial, Inc.

Consolidated Statements of Equity

(unaudited, in thousands, except share data)


		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	Preferred Stock	Common Stock							Additional Paid-in Capital		Cumulative Dividends in Excess of Earnings		Accumulated Other Comprehensive Loss			Total Stockholders’ Equity			Noncontrolling Interest - Unit Holders in Operating Partnership		Total Equity
					Shares			Amount																					Preferred Stock									Additional Paid-in Capital			Cumulative Dividends in Excess of Earnings		Accumulated Other Comprehensive Loss		Total Stockholders’ Equity	Noncontrolling Interest - Unit Holders in Operating Partnership	Total Equity
Three months ended September 30, 2019
Balance, 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
Three months ended June 30, 2020																					Three months ended June 30, 2020
Balance, March 31, 2020																					Balance, March 31, 2020	$	75,000	148,708,031	$	1,487	$	3,142,495		$	(714,799)	$	(47,860)	$	2,456,323	$	60,791		$	2,517,114
Proceeds from sales of common stock, net	Proceeds from sales of common stock, net	—		6,375,129		64			183,148		—		—		183,212		—		183,212		Proceeds from sales of common stock, net	—		—	—		(67)			—		—		(67)		—			(67)

Dividends and distributions, net	Dividends and distributions, net	—		—		—			—		(47,465)		—		(47,465)		(1,375)		(48,840)		Dividends and distributions, net	—		—	—		—			(54,880)		—		(54,880)		(2,105)			(56,985)
Non-cash compensation activity, net	Non-cash compensation activity, net	—		3,162		—			1,675		—		—		1,675		901		2,576		Non-cash compensation activity, net	—		4,750	—		1,970			—		—		1,970		978			2,948
Redemption of common units to common stock	Redemption of common units to common stock	—		207,152		2			3,001		—		—		3,003		(3,003)		—		Redemption of common units to common stock	—		228,340	2		3,656			—		—		3,658		(3,658)			—
Rebalancing of noncontrolling interest	Rebalancing of noncontrolling interest	—		—		—			(1,719)		—		—		(1,719)		1,719		—		Rebalancing of noncontrolling interest	—		—	—		109			—		—		109		(109)			—
Other comprehensive loss	Other comprehensive loss	—		—		—			—		—		(6,259)		(6,259)		(176)		(6,435)		Other comprehensive loss	—		—	—		—			—		(1,977)		(1,977)		(32)			(2,009)
Net income	Net income	—		—		—			—		10,900		—		10,900		290		11,190		Net income	—		—	—		—			18,909		—		18,909		407			19,316
Balance, 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, 2018
Balance, 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
Balance, June 30, 2020																					Balance, June 30, 2020	$	75,000	148,941,121	$	1,489	$	3,148,163		$	(750,770)	$	(49,837)	$	2,424,045	$	56,272		$	2,480,317
Three months ended June 30, 2019																					Three months ended June 30, 2019
Balance, March 31, 2019																					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
Proceeds from sales of common stock, net	Proceeds from sales of common stock, net	—		3,568,382		36			98,481		—		—		98,517		—		98,517		Proceeds from sales of common stock, net	—		8,180,794	82		236,254			—		—		236,336		—			236,336

Dividends and distributions, net	Dividends and distributions, net	—		—		—			—		(39,094)		—		(39,094)		(1,443)		(40,537)		Dividends and distributions, net	—		—	—		—			(46,296)		—		(46,296)		(2,326)			(48,622)
Non-cash compensation activity, net	Non-cash compensation activity, net	—		(757)		—			1,361		—		—		1,361		893		2,254		Non-cash compensation activity, net	—		3,190	—		1,656			—		—		1,656		899			2,555
Redemption of common units to common stock	Redemption of common units to common stock	—		20,000		—			261		—		—		261		(261)		—		Redemption of common units to common stock	—		14,859	—		207			—		—		207		(207)			—
Rebalancing of noncontrolling interest	Rebalancing of noncontrolling interest	—		—		—			(1,122)		—		—		(1,122)		1,122		—		Rebalancing of noncontrolling interest	—		—	—		(3,799)			—		—		(3,799)		3,799			—
Other comprehensive income		—		—		—			—		—		1,993		1,993		67		2,060
Other comprehensive loss																					Other comprehensive loss	—		—	—		—			—		(15,518)		(15,518)		(510)			(16,028)
Net income	Net income	—		—		—			—		8,621		—		8,621		255		8,876		Net income	—		—	—		—			13,762		—		13,762		408			14,170
Balance, 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
Balance, June 30, 2019																					Balance, 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

Nine months ended September 30, 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)
Six months ended June 30, 2020																					Six months ended June 30, 2020
Balance, December 31, 2019																					Balance, December 31, 2019	$	75,000	142,815,593	$	1,428	$	2,970,553		$	(723,027)	$	(18,426)	$	2,305,528	$	58,363		$	2,363,891
Proceeds from sales of common stock, net	Proceeds from sales of common stock, net	—		19,997,332		201			567,876		—		—		568,077		—		568,077		Proceeds from sales of common stock, net	—		5,600,000	56		172,600			—		—		172,656		—			172,656

Dividends and distributions, net	Dividends and distributions, net	—		—		—			—		(136,595)		—		(136,595)		(5,247)		(141,842)		Dividends and distributions, net	—		—	—		—			(109,702)		—		(109,702)		(3,001)			(112,703)
Non-cash compensation activity, net	Non-cash compensation activity, net	—		134,188		1			2,198		(373)		—		1,826		4,168		5,994		Non-cash compensation activity, net	—		77,798	1		1,112			(390)		—		723		3,596			4,319
Redemption of common units to common stock	Redemption of common units to common stock	—		661,082		6			9,232		—		—		9,238		(9,238)		—		Redemption of common units to common stock	—		447,730	4		7,082			—		—		7,086		(7,086)			—

Rebalancing of noncontrolling interest	Rebalancing of noncontrolling interest	—		—		—			(10,367)		—		—		(10,367)		10,367		—		Rebalancing of noncontrolling interest	—		—	—		(3,184)			—		—		(3,184)		3,184			—
Other comprehensive loss	Other comprehensive loss	—		—		—			—		—		(28,511)		(28,511)		(930)		(29,441)		Other comprehensive loss	—		—	—		—			—		(31,411)		(31,411)		(789)			(32,200)
Net income	Net income	—		—		—			—		31,837		—		31,837		912		32,749		Net income	—		—	—		—			82,349		—		82,349		2,005			84,354
Balance, 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, 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		—
Balance, June 30, 2020																					Balance, June 30, 2020	$	75,000	148,941,121	$	1,489	$	3,148,163		$	(750,770)	$	(49,837)	$	2,424,045	$	56,272		$	2,480,317
Six months ended June 30, 2019																					Six months ended June 30, 2019
Balance, December 31, 2018																					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																					Leases cumulative effect adjustment	—		—	—		—			(214)		—		(214)		—			(214)
Proceeds from sales of common stock, net	Proceeds from sales of common stock, net	—		10,387,962		104			273,224		—		—		273,328		—		273,328		Proceeds from sales of common stock, net	—		13,622,203	137		384,728			—		—		384,865		—			384,865
Redemption of preferred stock		(70,000)		—		—			5,141		(5,158)		—		(70,017)		—		(70,017)

Dividends and distributions, net	Dividends and distributions, net	—		—		—			—		(114,541)		—		(114,541)		(5,253)		(119,794)		Dividends and distributions, net	—		—	—		—			(89,130)		—		(89,130)		(3,872)			(93,002)
Non-cash compensation activity, net	Non-cash compensation activity, net	—		73,231		1			1,829		(537)		—		1,293		3,880		5,173		Non-cash compensation activity, net	—		131,026	1		523			(373)		—		151		3,267			3,418
Redemption of common units to common stock	Redemption of common units to common stock	—		352,055		3			4,398		—		—		4,401		(4,401)		—		Redemption of common units to common stock	—		453,930	4		6,231			—		—		6,235		(6,235)			—

Rebalancing of noncontrolling interest	Rebalancing of noncontrolling interest	—		—		—			(6,434)		—		—		(6,434)		6,434		—		Rebalancing of noncontrolling interest	—		—	—		(8,648)			—		—		(8,648)		8,648			—
Other comprehensive income		—		—		—			—		—		12,302		12,302		509		12,811
Other comprehensive loss																					Other comprehensive loss	—		—	—		—			—		(22,252)		(22,252)		(754)			(23,006)
Net income	Net income	—		—		—			—		47,400		—		47,400		1,589		48,989		Net income	—		—	—		—			20,937		—		20,937		622			21,559
Balance, 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
Balance, June 30, 2019																					Balance, 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

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,							Six months ended June 30,
		2019		2018			2020		2019
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net income	Net income	$	32,749	$	48,989	Net income	$	84,354	$	21,559
Adjustment to reconcile net income to net cash provided by operating activities:
Adjustments to reconcile net income to net cash provided by operating activities:						Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	Depreciation and amortization	133,844		125,221		Depreciation and amortization	106,294		86,936
Loss on impairments	Loss on impairments	9,757		2,934		Loss on impairments	—		5,344

Gain on involuntary conversion						Gain on involuntary conversion	(657)		—
Non-cash portion of interest expense	Non-cash portion of interest expense	1,909		1,698		Non-cash portion of interest expense	1,422		1,236
Amortization of above and below market leases, net	Amortization of above and below market leases, net	3,344		3,206		Amortization of above and below market leases, net	2,152		2,102
Straight-line rent adjustments, net	Straight-line rent adjustments, net	(8,586)		(8,297)		Straight-line rent adjustments, net	(5,498)		(5,522)
Dividends on forfeited equity compensation	Dividends on forfeited equity compensation	7		15		Dividends on forfeited equity compensation	—		7

Loss on extinguishment of debt	Loss on extinguishment of debt	—		13		Loss on extinguishment of debt	834		—
Gain on the sales of rental property, net	Gain on the sales of rental property, net	(3,261)		(32,276)		Gain on the sales of rental property, net	(47,804)		(1,591)
Non-cash compensation expense	Non-cash compensation expense	7,371		6,671		Non-cash compensation expense	5,790		4,815

Change in assets and liabilities:	Change in assets and liabilities:					Change in assets and liabilities:
Tenant accounts receivable	Tenant accounts receivable	509		501		Tenant accounts receivable	(475)		1,389

Prepaid expenses and other assets	Prepaid expenses and other assets	(10,525)		(9,597)		Prepaid expenses and other assets	(4,116)		(3,338)
Accounts payable, accrued expenses and other liabilities	Accounts payable, accrued expenses and other liabilities	8,834		9,249		Accounts payable, accrued expenses and other liabilities	3,243		(1,433)
Tenant prepaid rent and security deposits	Tenant prepaid rent and security deposits	(1,022)		283		Tenant prepaid rent and security deposits	2,549		(933)
Total adjustments	Total adjustments	142,181		99,621		Total adjustments	63,734		89,012
Net cash provided by operating activities	Net cash provided by operating activities	174,930		148,610		Net cash provided by operating activities	148,088		110,571
Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Acquisitions of land and buildings and improvements	Acquisitions of land and buildings and improvements	(616,647)		(382,981)		Acquisitions of land and buildings and improvements	(110,121)		(368,188)
Additions of land and building and improvements	Additions of land and building and improvements	(40,193)		(23,578)		Additions of land and building and improvements	(27,299)		(18,949)
Acquisitions of other assets	Acquisitions of other assets	(2,513)		(794)		Acquisitions of other assets	(450)		(1,049)
Acquisitions of other liabilities		—		242

Proceeds from sales of rental property, net	Proceeds from sales of rental property, net	23,700		89,407		Proceeds from sales of rental property, net	101,881		17,688

Proceeds from involuntary conversion						Proceeds from involuntary conversion	782		—
Acquisition deposits, net	Acquisition deposits, net	(1,190)		(695)		Acquisition deposits, net	660		2,142
Acquisitions of deferred leasing intangibles	Acquisitions of deferred leasing intangibles	(128,832)		(74,851)		Acquisitions of deferred leasing intangibles	(20,542)		(76,188)
Net cash used in investing activities	Net cash used in investing activities	(765,675)		(393,250)		Net cash used in investing activities	(55,089)		(444,544)
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:

Proceeds from unsecured credit facility	Proceeds from unsecured credit facility	768,000		643,000		Proceeds from unsecured credit facility	387,000		381,000
Repayment of unsecured credit facility	Repayment of unsecured credit facility	(790,500)		(819,000)		Repayment of unsecured credit facility	(533,000)		(352,500)
Proceeds from unsecured term loans	Proceeds from unsecured term loans	175,000		150,000		Proceeds from unsecured term loans	400,000		—
Repayment of unsecured term loans						Repayment of unsecured term loans	(300,000)		—

Proceeds from unsecured notes		—		175,000

Repayment of mortgage notes	Repayment of mortgage notes	(1,441)		(1,379)		Repayment of mortgage notes	(1,993)		(961)
Payment of loan fees and costs	Payment of loan fees and costs	(1,226)		(4,451)		Payment of loan fees and costs	(1,129)		(48)
Payment of defeasance fees and other costs						Payment of defeasance fees and other costs	(425)		—
Proceeds from sales of common stock, net						Proceeds from sales of common stock, net	172,626		384,913

Proceeds from sales of common stock, net		568,390		273,266
Redemption of preferred stock		—		(70,000)

Dividends and distributions	Dividends and distributions	(139,303)		(117,146)		Dividends and distributions	(111,868)		(89,934)
Repurchase and retirement of share-based compensation	Repurchase and retirement of share-based compensation	(1,444)		(1,524)		Repurchase and retirement of share-based compensation	(1,472)		(1,444)

Net cash provided by financing activities	Net cash provided by financing activities	577,476		227,766		Net cash provided by financing activities	9,739		321,026
Decrease in cash and cash equivalents and restricted cash		(13,269)		(16,874)
Increase (decrease) in cash and cash equivalents and restricted cash						Increase (decrease) in cash and cash equivalents and restricted cash	102,738		(12,947)
Cash and cash equivalents and restricted cash—beginning of period	Cash and cash equivalents and restricted cash—beginning of period	22,542		28,129		Cash and cash equivalents and restricted cash—beginning of period	11,864		22,542
Cash and cash equivalents and restricted cash—end of period	Cash and cash equivalents and restricted cash—end of period	$	9,273	$	11,255	Cash and cash equivalents and restricted cash—end of period	$	114,602	$	9,595
Supplemental disclosure:	Supplemental disclosure:					Supplemental disclosure:
Cash paid for interest, net of capitalized interest	Cash paid for interest, net of capitalized interest	$	35,372	$	31,875	Cash paid for interest, net of capitalized interest	$	28,520	$	21,965
Supplemental schedule of non-cash investing and financing activities	Supplemental schedule of non-cash investing and financing activities					Supplemental schedule of non-cash investing and financing activities

Acquisitions of land and buildings and improvements	Acquisitions of land and buildings and improvements	$	(72)	$	(232)	Acquisitions of land and buildings and improvements	$	(111)	$	(72)
Acquisitions of deferred leasing intangibles	Acquisitions of deferred leasing intangibles	$	(24)	$	(48)	Acquisitions of deferred leasing intangibles	$	(33)	$	(24)

Change in additions of land, building, and improvements included in accounts payable, accrued expenses, and other liabilities	Change in additions of land, building, and improvements included in accounts payable, accrued expenses, and other liabilities	$	(10,824)	$	(1,475)	Change in additions of land, building, and improvements included in accounts payable, accrued expenses, and other liabilities	$	683	$	(7,351)
Additions to building and other capital improvements from non-cash compensation	Additions to building and other capital improvements from non-cash compensation	$	(59)	$	(20)	Additions to building and other capital improvements from non-cash compensation	$	(17)	$	(40)

Change in loan fees, costs, and offering costs included in accounts payable, accrued expenses, and other liabilities	Change in loan fees, costs, and offering costs included in accounts payable, accrued expenses, and other liabilities	$	(314)	$	48	Change in loan fees, costs, and offering costs included in accounts payable, accrued expenses, and other liabilities	$	(1,020)	$	(62)
Reclassification of preferred stock called for redemption to liability		$	—	$	70,000
Leases cumulative effect adjustment (Note 2)		$	(214)	$	—

Leases cumulative effect adjustment						Leases cumulative effect adjustment	$	—	$	(214)
Dividends and distributions accrued	Dividends and distributions accrued	$	16,293	$	14,530	Dividends and distributions accrued	$	18,301	$	16,822

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

Table of Contents

STAG Industrial, Inc.

Notes to Consolidated Financial Statements

(unaudited)

1. Organization and Description of Business

STAG Industrial, Inc. (the “Company”) is an industrial real estate operating company focused on the acquisition and 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 ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, the Company owned a ~~97.2%~~97.7% and ~~96.5%~~97.5%, 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 ~~September~~June 30, ~~2019,~~2020, the Company owned ~~430~~457 buildings in 3738 states with approximately ~~86.0~~91.8 million rentable square feet, consisting of ~~356~~379 warehouse/distribution buildings, 6670 light manufacturing buildings, and 8 flex/office buildings.

COVID-19 Pandemic

Currently, one of the most significant risks and uncertainties facing the Company and the real estate industry generally is the potential adverse effect of the ongoing public health crisis of the novel coronavirus disease (“COVID-19”) pandemic.

The Company closely monitors the effect of the COVID-19 pandemic on all aspects of its business, including how the pandemic will affect its tenants and business partners. While the Company did not incur significant disruptions from the COVID-19 pandemic during the six months ended June 30, 2020, a number of the Company’s tenants requested rent deferral or rent abatement as a result of the pandemic and other tenants may make requests in the future. The Company entered into a limited number of rent deferral agreements during the three months ended June 30, 2020, which resulted in approximately $1.5 million of rent deferrals during the three and six months ended June 30, 2020. The Company evaluates tenant rent relief requests on an individual basis, considering a number of factors. Not all tenant requests will ultimately result in modified agreements, nor is the Company foregoing its contractual rights under its lease agreements.

The Company is unable to predict the impact that the pandemic will have on its financial condition, results of operations and cash flows due to numerous uncertainties. The extent to which the COVID-19 pandemic affects the Company’s operations and those of its tenants will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact, and the direct and indirect economic effects of the pandemic and containment measures, among others.

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.~~2019.

Table of Contents

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,~~March 2020, the Financial Accounting Standards Board ~~(“FASB”)~~ issued Accounting Standards Update (“ASU”) ~~2018-11~~2020-04, Reference Rate Reform (Topic 848). ASU 2020-04 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur. During the quarter ended March 31, 2020, the Company elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which ~~amends Topic 842,~~ ~~Leases, and provides lessors~~future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with ~~a practical expedient, by class~~past presentation. The Company continues to evaluate the impact 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 classifiedmay apply other elections 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~~applicable 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~~

~~Table of Contents~~

January 1, 2019, using the practical expedient, and it 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 resultedadditional changes in the ~~recording of a right-of-use asset and the related lease liability.~~market occur.

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 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.~~

~~Table of Contents~~

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)	Reconciliation of cash and cash equivalents and restricted cash (in thousands)	September 30, 2019		December 31, 2018		Reconciliation of cash and cash equivalents and restricted cash (in thousands)	June 30, 2020		December 31, 2019
Cash and cash equivalents	Cash and cash equivalents	$	6,540	$	7,968	Cash and cash equivalents	$	102,097	$	9,041
Restricted cash	Restricted cash	2,733		14,574		Restricted cash	12,505		2,823
Total cash and cash equivalents and restricted cash	Total cash and cash equivalents and restricted cash	$	9,273	$	22,542	Total cash and cash equivalents and restricted cash	$	114,602	$	11,864

Taxes

Federal Income Taxes

The Company’s taxable REIT subsidiaries recognized net income ~~(loss)~~ of approximately $0, $0, $0.3 million ~~$(22,000)~~ and ~~$(0.1)~~$0.3 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018,~~2019, 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 ~~$0.3~~$0.5 million, $0.9 million, ~~$0.1~~$0.4 million and $0.6 million have been recorded in other expenses on the accompanying Consolidated Statements of Operations for the three and ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018,~~2019, respectively.

Uncertain Tax Positions

As of ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, there were 0 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.

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3. Rental Property

The following table summarizes the components of rental property as of ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018.~~2019.


Rental Property (in thousands)	Rental Property (in thousands)	September 30, 2019		December 31, 2018		Rental Property (in thousands)	June 30, 2020		December 31, 2019
Land	Land	$	420,215	$	364,023	Land	$	444,489	$	435,923
Buildings, net of accumulated depreciation of $240,968 and $199,497, respectively		2,520,684		2,082,781
Tenant improvements, net of accumulated depreciation of $20,979 and $36,450, respectively		33,829		30,704
Building and land improvements, net of accumulated depreciation of $105,141 and $80,983, respectively		210,558		168,229
Buildings, net of accumulated depreciation of $292,467 and $254,458, respectively						Buildings, net of accumulated depreciation of $292,467 and $254,458, respectively	2,833,458		2,787,234
Tenant improvements, net of accumulated depreciation of $23,724 and $21,487, respectively						Tenant improvements, net of accumulated depreciation of $23,724 and $21,487, respectively	38,638		38,339
Building and land improvements, net of accumulated depreciation of $130,170 and $111,688, respectively						Building and land improvements, net of accumulated depreciation of $130,170 and $111,688, respectively	239,214		232,456
Construction in progress	Construction in progress	23,695		3,949		Construction in progress	30,660		29,406
Deferred leasing intangibles, net of accumulated amortization of $241,323 and $246,502, respectively		413,955		342,015
Deferred leasing intangibles, net of accumulated amortization of $267,553 and $241,304, respectively						Deferred leasing intangibles, net of accumulated amortization of $267,553 and $241,304, respectively	451,738		475,149
Total rental property, net	Total rental property, net	$	3,622,936	$	2,991,701	Total rental property, net	$	4,038,197	$	3,998,507

~~Table of Contents~~

Acquisitions

The following table summarizes the acquisitions of the Company during the three and ~~nine~~six months ended ~~September~~June 30, ~~2019.~~2020.

Market⁽¹⁾
Date Acquired Square Feet Buildings Purchase Price
(in thousands)
Cincinnati/Dayton, OH January 24, 2019 176,000 1 $ 9,965
Pittsburgh, PA February 21, 2019 455,000 1 28,676
Boston, MA February 21, 2019 349,870 1 26,483
Minneapolis/St Paul, MN February 28, 2019 248,816 1 21,955
Greenville/Spartanburg, SC March 7, 2019 331,845 1 24,536
Philadelphia, PA March 7, 2019 148,300 1 10,546
Omaha/Council Bluffs, NE-IA March 11, 2019 237,632 1 20,005
Houston, TX March 28, 2019 132,000 1 17,307
Baltimore, MD March 28, 2019 167,410 1 13,648
Houston, TX March 28, 2019 116,750 1 12,242
Three months ended March 31, 2019 2,363,623 10 185,363
Minneapolis/St Paul, MN April 2, 2019 100,600 1 9,045
West Michigan, MI April 8, 2019 230,200 1 15,786
Greensboro/Winston-Salem, NC April 12, 2019 129,600 1 7,771
Greenville/Spartanburg, SC April 25, 2019 319,660 2 15,432
Charleston/N Charleston, SC April 29, 2019 500,355 1 40,522
Houston, TX April 29, 2019 128,136 1 13,649
Richmond, VA May 16, 2019 109,520 1 9,467
Laredo, TX June 6, 2019 213,982 1 18,972
Baton Rouge, LA June 18, 2019 252,800 2 20,041
Philadelphia, PA June 19, 2019 187,569 2 13,645
Columbus, OH June 28, 2019 857,390 1 95,828
Three months ended June 30, 2019 3,029,812 14 260,158
Kansas City, MO July 10, 2019 304,840 1 13,450
Houston, TX July 22, 2019 199,903 1 11,287
Charleston/N Charleston, SC July 22, 2019 88,583 1 7,166
Tampa, FL August 5, 2019 78,560 1 8,168
Philadelphia, PA August 6, 2019 120,000 1 10,880
Milwaukee/Madison, WI August 16, 2019 224,940 3 13,981
Houston, TX August 19, 2019 45,000 1 6,190
West Michigan, MI August 19, 2019 210,120 1 10,407
Pittsburgh, PA August 21, 2019 410,389 1 31,219
Boston, MA August 22, 2019 80,100 1 14,253
Las Vegas, NV August 27, 2019 80,422 2 12,602
Nashville, TN August 29, 2019 348,880 1 20,267
Columbia, SC August 30, 2019 200,000 1 13,670
Pittsburgh, PA September 6, 2019 138,270 1 9,323
Omaha/Council Bluffs, NE-IA September 11, 2019 128,200 2 8,509
Pittsburgh, PA September 16, 2019 315,634 1 28,712
Memphis, TN September 19, 2019 1,135,453 1 50,941
Memphis, TN September 26, 2019 629,086 1 31,542
Three months ended September 30, 2019 4,738,380 22 302,567
Nine months ended September 30, 2019 10,131,815 46 $ 748,088



Market⁽¹⁾	Date Acquired	Square Feet	Buildings	Purchase Price (in thousands)
Detroit, MI	January 10, 2020	491,049	1	$	29,543
Rochester, NY	January 10, 2020	124,850	1	8,565
Minneapolis/St Paul, MN	February 6, 2020	139,875	1	10,460
Sacramento, CA	February 6, 2020	160,534	1	18,468
Richmond, VA	February 6, 2020	78,128	1	5,481
Milwaukee/Madison, WI	February 7, 2020	81,230	1	7,219
Detroit, MI	February 11, 2020	311,123	1	23,141
Philadelphia, PA	March 9, 2020	78,000	1	6,571
Tulsa, OK	March 9, 2020	134,600	1	9,895
Three months ended March 31, 2020		1,599,389	9	119,343
Sacramento, CA	June 11, 2020	54,463	1	5,730
Chicago, IL	June 29, 2020	67,817	1	6,184
Three months ended June 30, 2020		122,280	2	11,914
Six months ended June 30, 2020		1,721,669	11	$	131,257

(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.

~~Table of Contents~~

The following table summarizes the allocation of the consideration paid at the date of acquisition during the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 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 Acquisition

Acquired Assets and Liabilities

Purchase Price (in thousands)

Weighted Average Amortization Period (years) of Intangibles at Acquisition

Land

63,317

N/A

Land

10,498

N/A

Buildings

499,255

N/A

Buildings

92,860

N/A

Tenant improvements

6,246

N/A

Tenant improvements

1,535

N/A

Building and land improvements

45,869

N/A

Building and land improvements

4,670

N/A

Construction in progress

2,032

N/A

Construction in progress

669

N/A

Other assets

2,513

N/A

Other assets

450

N/A

Deferred leasing intangibles - In-place leases

76,628

8.9

Deferred leasing intangibles - In-place leases

14,963

7.9

Deferred leasing intangibles - Tenant relationships

36,008

11.7

Deferred leasing intangibles - Tenant relationships

7,115

11.1

Deferred leasing intangibles - Above market leases

19,449

12.8

Deferred leasing intangibles - Above market leases

1,069

6.3

Deferred leasing intangibles - Below market leases

(3,229)

6.9

Deferred leasing intangibles - Below market leases

(2,572)

5.4

Total purchase price

748,088

Total purchase price

131,257

The following table summarizes the results of operations for the three and ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 for the buildings acquired during the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 included in the Company’s Consolidated Statements of Operations from the date of acquisition.


Results of Operations (in thousands)	Results of Operations (in thousands)	Three months ended September 30, 2019		Nine months ended September 30, 2019		Results of Operations (in thousands)	Three months ended June 30, 2020		Six months ended June 30, 2020
Total revenue	Total revenue	$	10,616	$	17,307	Total revenue	$	2,807	$	4,748
Net income	Net income	$	2,173	$	2,985	Net income	$	609	$	861

Table of Contents

Dispositions

During the ~~nine~~six months ended ~~September~~June 30, ~~2019,~~2020, the Company sold 64 buildings ~~and 2 land parcels~~to third parties comprised of approximately ~~1.1~~1.2 million rentable square feet with a net book value of approximately ~~$20.4 million to third parties.~~$54.1 million. These buildings ~~and land parcels~~ contributed approximately ~~$20,000, $0.8 million, $1.5~~$0, $0, $1.1 million and ~~$5.3~~$2.5 million to revenue for the three and ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018,~~2019, respectively. These buildings ~~and land parcels~~ contributed approximately ~~$(0.1) million,~~$(49,000), $(0.2) million, ~~$0.5 million,~~$(35,000) and ~~$0.9~~$0.4 million to net income (loss) (exclusive of ~~loss on impairments and~~ gain on the sales of rental property, ~~net)~~net and loss on extinguishment of debt) for the three and ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018,~~2019, respectively. Net proceeds from the sales of rental property were approximately ~~$23.7~~$101.9 million and the Company recognized the full gain on the sales of rental property, net, of approximately ~~$3.3~~$47.8 million for the ~~nine~~six months ended ~~September~~June 30, ~~2019.~~2020.

Loss on Impairments

~~The following table summarizes~~During the ~~Company’s~~three and six months ended June 30, 2020, the Company did not recognize any loss on impairments. During the three and six months ended June 30, 2019, the Company recognized approximately $0 and $5.3 million of 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 conditions Discounted 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 entityrelated 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: 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%.~~1 building.

Gain on Involuntary Conversion

12During the three and six months ended June 30, 2020, the Company recognized a gain on involuntary conversion of approximately $0.7 million related to an eminent domain taking of a portion of a parcel of land. During the three and six months ended June 30, 2019, the Company did not recognize any gain on involuntary conversion.

~~Table of Contents~~

Deferred Leasing Intangibles

The following table summarizes the deferred leasing intangibles on the accompanying Consolidated Balance Sheets as of ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018.~~2019.


		September 30, 2019										December 31, 2018											June 30, 2020				December 31, 2019
Deferred Leasing Intangibles (in thousands)	Deferred Leasing Intangibles (in thousands)	Gross		Accumulated Amortization		Net		Gross		Accumulated Amortization		Net		Deferred Leasing Intangibles (in thousands)	Gross		Accumulated Amortization		Net		Gross		Accumulated Amortization		Net
Above market leases	Above market leases	$	88,388	$	(33,439)	$	54,949	$	73,122	$	(31,059)	$	42,063	Above market leases	$	92,793	$	(36,413)	$	56,380	$	92,607	$	(32,115)	$	60,492
Other intangible lease assets	Other intangible lease assets	566,890		(207,884)		359,006		515,395		(215,443)		299,952		Other intangible lease assets	626,498		(231,140)		395,358		623,846		(209,189)		414,657
Total deferred leasing intangible assets	Total deferred leasing intangible assets	$	655,278	$	(241,323)	$	413,955	$	588,517	$	(246,502)	$	342,015	Total deferred leasing intangible assets	$	719,291	$	(267,553)	$	451,738	$	716,453	$	(241,304)	$	475,149

Below market leases	Below market leases	$	31,496	$	(11,259)	$	20,237	$	34,331	$	(12,764)	$	21,567	Below market leases	$	39,409	$	(13,117)	$	26,292	$	38,802	$	(12,064)	$	26,738
Total deferred leasing intangible liabilities	Total deferred leasing intangible liabilities	$	31,496	$	(11,259)	$	20,237	$	34,331	$	(12,764)	$	21,567	Total deferred leasing intangible liabilities	$	39,409	$	(13,117)	$	26,292	$	38,802	$	(12,064)	$	26,738

The following table summarizes the amortization expense and the net decrease to rental income for the amortization of deferred leasing intangibles during the three and ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018.~~2019.


		Three months ended September 30,						Nine months ended September 30,							Three months ended June 30,				Six months ended June 30,
Deferred Leasing Intangibles Amortization (in thousands)	Deferred Leasing Intangibles Amortization (in thousands)	2019		2018		2019		2018		Deferred Leasing Intangibles Amortization (in thousands)	2020		2019		2020		2019
Net decrease to rental income related to above and below market lease amortization	Net decrease to rental income related to above and below market lease amortization	$	1,248	$	1,150	$	3,361	$	3,206	Net decrease to rental income related to above and below market lease amortization	$	1,174	$	1,146	$	2,164	$	2,113
Amortization expense related to other intangible lease assets	Amortization expense related to other intangible lease assets	$	18,472	$	20,361	$	53,185	$	56,698	Amortization expense related to other intangible lease assets	$	21,076	$	17,899	$	41,378	$	34,713

The following table summarizes the amortization of deferred leasing intangibles over the next five calendar years beginning with ~~2019~~2020 as of ~~September~~June 30, ~~2019.~~2020.

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 $ 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 2020	$	36,982	$	1,827
2021	$	65,116	$	2,717
2022	$	55,459	$	2,190
2023	$	46,930	$	2,395
2024	$	38,019	$	2,703

1311

Table of Contents

4. Debt

The following table summarizes the Company’s outstanding indebtedness, including borrowings under the Company’s unsecured credit facility, unsecured term loans, unsecured notes, and mortgage notes as of ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018.~~2019.


Loan	Loan	Principal 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⁾	Loan	Principal Outstanding as of June 30, 2020 (in thousands)		Principal Outstanding as of December 31, 2019 (in thousands)		Interest Rate⁽¹⁾⁽²⁾		Maturity Date	Prepayment Terms⁽³⁾
Unsecured credit facility:	Unsecured credit facility:									Unsecured credit facility:
Unsecured Credit Facility ⁽⁴⁾	Unsecured Credit Facility ⁽⁴⁾	$	78,000	$	100,500	L + 0.90%		January 15, 2023	i	Unsecured Credit Facility⁽⁴⁾	$	—	$	146,000	L + 0.90%		January 12, 2024	i
Total unsecured credit facility	Total unsecured credit facility	78,000		100,500						Total unsecured credit facility	—		146,000

Unsecured term loans:	Unsecured term loans:									Unsecured term loans:
Unsecured Term Loan C(5)	Unsecured Term Loan C(5)	150,000		150,000		2.39	%	September 29, 2020	i	Unsecured Term Loan C(5)	—		150,000		2.39	%	September 29, 2020	i
Unsecured Term Loan B(5)	Unsecured Term Loan B(5)	150,000		150,000		3.05	%	March 21, 2021	i	Unsecured Term Loan B(5)	—		150,000		3.05	%	March 21, 2021	i
Unsecured Term Loan A	Unsecured Term Loan A	150,000		150,000		2.70	%	March 31, 2022	i	Unsecured Term Loan A	150,000		150,000		3.38	%	March 31, 2022	i
Unsecured Term Loan D	Unsecured Term Loan D	150,000		150,000		2.85	%	January 4, 2023	i	Unsecured Term Loan D	150,000		150,000		2.85	%	January 4, 2023	i
Unsecured Term Loan G⁽⁶⁾										Unsecured Term Loan G⁽⁶⁾	300,000		—		3.31	%	April 18, 2023	i
Unsecured Term Loan E	Unsecured Term Loan E	175,000		—		3.92	%	January 15, 2024	i	Unsecured Term Loan E	175,000		175,000		3.92	%	January 15, 2024	i
Unsecured Term Loan F⁽⁵⁾		—		—		3.11	%	January 12, 2025	i
Unsecured Term Loan F										Unsecured Term Loan F	200,000		100,000		L + 1.00%		January 12, 2025	i
Total unsecured term loans	Total unsecured term loans	775,000		600,000						Total unsecured term loans	975,000		875,000
Less: Total unamortized deferred financing fees and debt issuance costs	Less: Total unamortized deferred financing fees and debt issuance costs	(3,963)		(3,640)						Less: Total unamortized deferred financing fees and debt issuance costs	(4,718)		(3,625)
Total carrying value unsecured term loans, net	Total carrying value unsecured term loans, net	771,037		596,360						Total carrying value unsecured term loans, net	970,282		871,375

Unsecured notes:	Unsecured notes:									Unsecured notes:
Series F Unsecured Notes	Series F Unsecured Notes	100,000		100,000		3.98	%	January 5, 2023	ii	Series F Unsecured Notes	100,000		100,000		3.98	%	January 5, 2023	ii
Series A Unsecured Notes	Series A Unsecured Notes	50,000		50,000		4.98	%	October 1, 2024	ii	Series A Unsecured Notes	50,000		50,000		4.98	%	October 1, 2024	ii
Series D Unsecured Notes	Series D Unsecured Notes	100,000		100,000		4.32	%	February 20, 2025	ii	Series D Unsecured Notes	100,000		100,000		4.32	%	February 20, 2025	ii
Series G Unsecured Notes	Series G Unsecured Notes	75,000		75,000		4.10	%	June 13, 2025	ii	Series G Unsecured Notes	75,000		75,000		4.10	%	June 13, 2025	ii
Series B Unsecured Notes	Series B Unsecured Notes	50,000		50,000		4.98	%	July 1, 2026	ii	Series B Unsecured Notes	50,000		50,000		4.98	%	July 1, 2026	ii
Series C Unsecured Notes	Series C Unsecured Notes	80,000		80,000		4.42	%	December 30, 2026	ii	Series C Unsecured Notes	80,000		80,000		4.42	%	December 30, 2026	ii
Series E Unsecured Notes	Series E Unsecured Notes	20,000		20,000		4.42	%	February 20, 2027	ii	Series E Unsecured Notes	20,000		20,000		4.42	%	February 20, 2027	ii
Series H Unsecured Notes	Series H Unsecured Notes	100,000		100,000		4.27	%	June 13, 2028	ii	Series H Unsecured Notes	100,000		100,000		4.27	%	June 13, 2028	ii
Total unsecured notes	Total unsecured notes	575,000		575,000						Total unsecured notes	575,000		575,000
Less: Total unamortized deferred financing fees and debt issuance costs	Less: Total unamortized deferred financing fees and debt issuance costs	(2,217)		(2,512)						Less: Total unamortized deferred financing fees and debt issuance costs	(1,918)		(2,117)
Total carrying value unsecured notes, net	Total carrying value unsecured notes, net	572,783		572,488						Total carrying value unsecured notes, net	573,082		572,883

Mortgage notes (secured debt):	Mortgage notes (secured debt):									Mortgage notes (secured debt):
Wells Fargo Bank, National Association CMBS Loan	Wells Fargo Bank, National Association CMBS Loan	51,861		53,216		4.31	%	December 1, 2022	iii	Wells Fargo Bank, National Association CMBS Loan	49,473		51,406		4.31	%	December 1, 2022	iii
Thrivent Financial for Lutherans	Thrivent Financial for Lutherans	3,709		3,795		4.78	%	December 15, 2023	iv	Thrivent Financial for Lutherans	3,619		3,679		4.78	%	December 15, 2023	iv
Total mortgage notes	Total mortgage notes	55,570		57,011						Total mortgage notes	53,092		55,085
Add: Total unamortized fair market value premiums	Add: Total unamortized fair market value premiums	42		50						Add: Total unamortized fair market value premiums	34		39
Less: Total unamortized deferred financing fees and debt issuance costs	Less: Total unamortized deferred financing fees and debt issuance costs	(402)		(501)						Less: Total unamortized deferred financing fees and debt issuance costs	(299)		(369)
Total carrying value mortgage notes, net	Total carrying value mortgage notes, net	55,210		56,560						Total carrying value mortgage notes, net	52,827		54,755
Total / weighted average interest rate ⁽⁶⁾		$	1,477,030	$	1,325,908	3.58	%
Total / weighted average interest rate⁽⁷⁾										Total / weighted average interest rate⁽⁷⁾	$	1,596,191	$	1,645,013	3.48	%

(1)Interest rate as of ~~September~~June 30, ~~2019.~~2020. At ~~September~~June 30, ~~2019,~~2020, the one-month LIBOR (“L”) was ~~2.01563%~~0.16225%. 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)The unsecured term loans have a stated interest rate of one-month LIBOR plus a spread of 1.0%, with the exception of the Unsecured Term Loan G which has a spread of 1.5% and is subject to a minimum rate for LIBOR of 0.25%. As of ~~September~~June 30, ~~2019,~~2020, one-month LIBOR for the Unsecured Term Loans A, ~~B, C,~~ D, E, and G was swapped to a fixed rate of 2.38%, 1.85%, 2.92%, and 1.72%, respectively. One-month LIBOR for the Unsecured Term Loan F was swapped to a fixed rate of ~~1.70%, 2.05%, 1.39%, 1.85%~~, ~~2.92%,~~2.11% effective July 15, 2020. One-month LIBOR for the Unsecured Term Loan G will be swapped to a fixed rate of 1.17% effective September 29, 2020 and ~~2.11%, respectively.~~0.28% effective March 19, 2021.

(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.

Table of Contents

(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~~$2.0 million and ~~$3.2~~$2.4 million is included in prepaid expenses and other assets on the accompanying Consolidated Balance Sheets as of ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively. The initial maturity date is January 15, 2023, which may be extended pursuant to 2 six-month extension options exercisable by the Company in its discretion upon advance written notice. Exercise of each six-month option is subject to the following conditions: (i) absence of a default immediately before the extension and immediately after giving effect to the extension, (ii) accuracy of representations and warranties as of the extension date (both immediately before and after the extension), as if made on the extension date, and (iii) payment of a fee. Neither extension option is subject to lender consent, assuming proper notice and satisfaction of the conditions.

(5)~~Capacity~~The Unsecured Term Loan B and the Unsecured Term Loan C were paid in full on April 17, 2020 in connection with the execution of ~~$200.0 million,~~the Unsecured Term Loan G.

(6)The initial maturity date is April 16, 2021, which may be extended pursuant to two one-year extension options exercisable by the Company ~~has until July 12, 2020~~in its discretion upon advance written notice. Exercise of each one-year option is subject to ~~draw.~~the following conditions: (i) absence of a default immediately before the extension and immediately after giving effect to the extension, (ii) accuracy of representations and warranties as of the extension date (both immediately before and after the extension), as if made on the extension date, and (iii) payment of a fee. Neither extension option is subject to lender consent, assuming proper notice and satisfaction of the conditions.

~~(6)~~(7)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.

~~Table of Contents~~

The aggregate undrawn nominal commitment on the unsecured credit facility ~~and unsecured term loans~~ as of ~~September~~June 30, ~~2019~~2020 was approximately ~~$616.0~~$497.0 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 ~~$7.6~~$6.1 million and ~~$5.9~~$6.3 million as of ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively, and is included in accounts payable, accrued expenses and other liabilities on the accompanying Consolidated Balance Sheets.

The following table summarizes 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~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018.~~2019.


		Three months ended September 30,						Nine months ended September 30,							Three months ended June 30,				Six months ended June 30,
Costs Included in Interest Expense (in thousands)	Costs Included in Interest Expense (in thousands)	2019		2018		2019		2018		Costs Included in Interest Expense (in thousands)	2020		2019		2020		2019
Amortization of deferred financing fees and debt issuance costs and fair market value premiums	Amortization of deferred financing fees and debt issuance costs and fair market value premiums	$	673	$	617	$	1,909	$	1,698	Amortization of deferred financing fees and debt issuance costs and fair market value premiums	$	746	$	618	$	1,422	$	1,236
Facility, unused, and other fees	Facility, unused, and other fees	$	348	$	275	$	1,118	$	928	Facility, unused, and other fees	$	316	$	387	$	680	$	770

On ~~July 25, 2019,~~April 29, 2020, the ~~Company drew $175.0~~mortgage note associated with the Wells Fargo, National Association CMBS Loan was partially defeased in the amount of approximately $1.0 million in connection with the sale of the ~~$175.0~~Johnstown, NY property, which had served as partial collateral for the mortgage note. The associated defeasance fees and unamortized deferred financing fees and debt issuance costs of approximately $0.1 million ~~Unsecured Term Loan E that was entered into~~were written off to loss on ~~July 26, 2018.~~extinguishment of debt in the accompanying Consolidated Statement of Operations during the three and six months ended June 30, 2020.

On ~~July 12, 2019,~~April 17, 2020, the Company entered into the ~~$200.0~~$300.0 million ~~unsecured~~ Unsecured Term Loan ~~F. As~~G with Wells Fargo, National Association, as administrative agent on behalf of ~~September 30, 2019,~~ the ~~interest rate on~~various lenders under the agreement. In connection with execution of the Unsecured Term Loan ~~F was~~G, the Unsecured Term Loan B and Unsecured Term Loan C were paid in full. As of June 30, 2020, the Unsecured Term Loan G bore an interest rate of LIBOR plus a spread of ~~1.00%~~1.5% based on the Company’s debt rating, as defined in the loan ~~agreement. Unless otherwise terminated pursuant~~agreement, and subject to a minimum rate for LIBOR of 0.25%. The Unsecured Term Loan G matures on April 16, 2021, subject to 2 one-year extension options at the ~~loan agreement,~~Company's discretion, and subject to certain conditions (other than lender discretion) such as the absence of default and the payment of an extension fee. The Company intends to exercise both extension options. To exercise the extension options the Company is required pay a fee equal to (i) 0.15% of the outstanding amount on the effective day of the first extension period and (ii) 0.20% of the outstanding amount on the effective day of the second extension period. In connection with the refinancing, the Company incurred approximately $2.1 million in deferred financing fees, including approximately $1.1 million of accrued extension fees, which are being amortized through the extended maturity date of April 18, 2023. In connection with the refinancing, the Company also recognized a loss on extinguishment of debt of approximately $0.7 million related to associated unamortized deferred financing fees and debt issuance costs related to the Unsecured Term Loan ~~F will mature on January 12, 2025.~~B and the Unsecured Term Loan C and other third-party costs. The Company is required to pay an annual fee of $35,000. The Unsecured Term Loan FG has aan accordion feature that allows the Company to ~~request an~~ increase ~~in the aggregate size of the unsecured term loan of up~~its borrowing capacity to ~~$400.0~~$600.0 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.G. The agreement also contains financial and other covenants substantially similar to the covenants in the Company's unsecured credit facility. As

On March 25, 2020, the Company drew the remaining $100.0 million of ~~September 30, 2019, no amounts were outstanding under~~ the $200.0 million Unsecured Term Loan F.F that was entered into on July 12, 2019.

Table of Contents

Financial Covenant Considerations

The Company was in compliance with all financial and other covenants as of ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018~~2019 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 ~~$86.0~~$82.8 million and ~~$88.2~~$85.5 million at ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively, and is limited to senior, property-level secured debt financing arrangements.

~~Table of Contents~~

Fair Value of Debt

The following table summarizes the aggregate principal outstanding under the Company’s debt arrangements and the corresponding estimate of fair value as of ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018.~~2019.


		September 30, 2019						December 31, 2018							June 30, 2020				December 31, 2019
Indebtedness (in thousands)	Indebtedness (in thousands)	Principal Outstanding		Fair Value		Principal Outstanding		Fair Value		Indebtedness (in thousands)	Principal Outstanding		Fair Value		Principal Outstanding		Fair Value
Unsecured credit facility	Unsecured credit facility	$	78,000	$	78,000	$	100,500	$	100,500	Unsecured credit facility	$	—	$	—	$	146,000	$	146,000
Unsecured term loans	Unsecured term loans	775,000		775,000		600,000		600,000		Unsecured term loans	975,000		964,497		875,000		875,000
Unsecured notes	Unsecured notes	575,000		618,594		575,000		585,292		Unsecured notes	575,000		617,073		575,000		614,493
Mortgage notes	Mortgage notes	55,570		56,627		57,011		57,289		Mortgage notes	53,092		55,227		55,085		56,021
Total principal amount	Total principal amount	1,483,570		$	1,528,221	1,332,511		$	1,343,081	Total principal amount	1,603,092		$	1,636,797	1,651,085		$	1,691,514
Add: Total unamortized fair market value premiums	Add: Total unamortized fair market value premiums	42				50				Add: Total unamortized fair market value premiums	34				39
Less: Total unamortized deferred financing fees and debt issuance costs	Less: Total unamortized deferred financing fees and debt issuance costs	(6,582)				(6,653)				Less: Total unamortized deferred financing fees and debt issuance costs	(6,935)				(6,111)
Total carrying value	Total carrying value	$	1,477,030			$	1,325,908			Total carrying value	$	1,596,191			$	1,645,013

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. 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.

1614

Table of Contents

The following table summarizes the Company’s outstanding interest rate swaps as of ~~September~~June 30, ~~2019.~~2020. All of the Company’s interest rate swaps are designated as qualifying cash flow hedges.


Interest Rate Derivative Counterparty	Interest Rate Derivative Counterparty	Trade Date	Effective Date	Notional Amount (in thousands)		Fair Value (in thousands)		Pay Fixed Interest Rate		Receive Variable Interest Rate	Maturity Date	Interest Rate Derivative Counterparty	Trade Date	Effective Date	Notional Amount (in thousands)		Fair Value (in thousands)		Pay Fixed Interest Rate		Receive Variable Interest Rate	Maturity Date
Regions Bank		Mar-01-2013	Mar-01-2013	$	25,000	$	51	1.3300	%	One-month L	Feb-14-2020
Capital One, N.A.		Jun-13-2013	Jul-01-2013	$	50,000	$	35	1.6810	%	One-month L	Feb-14-2020
Capital One, N.A.		Jun-13-2013	Aug-01-2013	$	25,000	$	16	1.7030	%	One-month L	Feb-14-2020
Regions Bank		Sep-30-2013	Feb-03-2014	$	25,000	$	(12)	1.9925	%	One-month L	Feb-14-2020
The Toronto-Dominion Bank	The Toronto-Dominion Bank	Oct-14-2015	Sep-29-2016	$	25,000	$	66	1.3830	%	One-month L	Sep-29-2020	The Toronto-Dominion Bank	Oct-14-2015	Sep-29-2016	$	25,000	$	(76)	1.3830	%	One-month L	Sep-29-2020
PNC Bank, N.A.	PNC Bank, N.A.	Oct-14-2015	Sep-29-2016	$	50,000	$	128	1.3906	%	One-month L	Sep-29-2020	PNC Bank, N.A.	Oct-14-2015	Sep-29-2016	$	50,000	$	(153)	1.3906	%	One-month L	Sep-29-2020
Regions Bank	Regions Bank	Oct-14-2015	Sep-29-2016	$	35,000	$	91	1.3858	%	One-month L	Sep-29-2020	Regions Bank	Oct-14-2015	Sep-29-2016	$	35,000	$	(106)	1.3858	%	One-month L	Sep-29-2020
U.S. Bank, N.A.	U.S. Bank, N.A.	Oct-14-2015	Sep-29-2016	$	25,000	$	63	1.3950	%	One-month L	Sep-29-2020	U.S. Bank, N.A.	Oct-14-2015	Sep-29-2016	$	25,000	$	(77)	1.3950	%	One-month L	Sep-29-2020
Capital One, N.A.	Capital One, N.A.	Oct-14-2015	Sep-29-2016	$	15,000	$	38	1.3950	%	One-month L	Sep-29-2020	Capital One, N.A.	Oct-14-2015	Sep-29-2016	$	15,000	$	(46)	1.3950	%	One-month L	Sep-29-2020
Royal Bank of Canada	Royal Bank of Canada	Jan-08-2015	Mar-20-2015	$	25,000	$	(56)	1.7090	%	One-month L	Mar-21-2021	Royal Bank of Canada	Jan-08-2015	Mar-20-2015	$	25,000	$	(280)	1.7090	%	One-month L	Mar-21-2021
The Toronto-Dominion Bank	The Toronto-Dominion Bank	Jan-08-2015	Mar-20-2015	$	25,000	$	(57)	1.7105	%	One-month L	Mar-21-2021	The Toronto-Dominion Bank	Jan-08-2015	Mar-20-2015	$	25,000	$	(280)	1.7105	%	One-month L	Mar-21-2021
The Toronto-Dominion Bank	The Toronto-Dominion Bank	Jan-08-2015	Sep-10-2017	$	100,000	$	(982)	2.2255	%	One-month L	Mar-21-2021	The Toronto-Dominion Bank	Jan-08-2015	Sep-10-2017	$	100,000	$	(1,493)	2.2255	%	One-month L	Mar-21-2021
Wells Fargo, N.A.	Wells Fargo, N.A.	Jan-08-2015	Mar-20-2015	$	25,000	$	(246)	1.8280	%	One-month L	Mar-31-2022	Wells Fargo, N.A.	Jan-08-2015	Mar-20-2015	$	25,000	$	(750)	1.8280	%	One-month L	Mar-31-2022
The Toronto-Dominion Bank	The Toronto-Dominion Bank	Jan-08-2015	Feb-14-2020	$	25,000	$	(579)	2.4535	%	One-month L	Mar-31-2022	The Toronto-Dominion Bank	Jan-08-2015	Feb-14-2020	$	25,000	$	(1,027)	2.4535	%	One-month L	Mar-31-2022
Regions Bank	Regions Bank	Jan-08-2015	Feb-14-2020	$	50,000	$	(1,181)	2.4750	%	One-month L	Mar-31-2022	Regions Bank	Jan-08-2015	Feb-14-2020	$	50,000	$	(2,072)	2.4750	%	One-month L	Mar-31-2022
Capital One, N.A.	Capital One, N.A.	Jan-08-2015	Feb-14-2020	$	50,000	$	(1,238)	2.5300	%	One-month L	Mar-31-2022	Capital One, N.A.	Jan-08-2015	Feb-14-2020	$	50,000	$	(2,121)	2.5300	%	One-month L	Mar-31-2022
The Toronto-Dominion Bank	The Toronto-Dominion Bank	Jul-20-2017	Oct-30-2017	$	25,000	$	(362)	1.8485	%	One-month L	Jan-04-2023	The Toronto-Dominion Bank	Jul-20-2017	Oct-30-2017	$	25,000	$	(1,093)	1.8485	%	One-month L	Jan-04-2023
Royal Bank of Canada	Royal Bank of Canada	Jul-20-2017	Oct-30-2017	$	25,000	$	(364)	1.8505	%	One-month L	Jan-04-2023	Royal Bank of Canada	Jul-20-2017	Oct-30-2017	$	25,000	$	(1,094)	1.8505	%	One-month L	Jan-04-2023
Wells Fargo, N.A.	Wells Fargo, N.A.	Jul-20-2017	Oct-30-2017	$	25,000	$	(364)	1.8505	%	One-month L	Jan-04-2023	Wells Fargo, N.A.	Jul-20-2017	Oct-30-2017	$	25,000	$	(1,094)	1.8505	%	One-month L	Jan-04-2023
PNC Bank, N.A.	PNC Bank, N.A.	Jul-20-2017	Oct-30-2017	$	25,000	$	(362)	1.8485	%	One-month L	Jan-04-2023	PNC Bank, N.A.	Jul-20-2017	Oct-30-2017	$	25,000	$	(1,093)	1.8485	%	One-month L	Jan-04-2023
PNC Bank, N.A.	PNC Bank, N.A.	Jul-20-2017	Oct-30-2017	$	50,000	$	(723)	1.8475	%	One-month L	Jan-04-2023	PNC Bank, N.A.	Jul-20-2017	Oct-30-2017	$	50,000	$	(2,184)	1.8475	%	One-month L	Jan-04-2023
The Toronto-Dominion Bank	The Toronto-Dominion Bank	Jul-24-2018	Jul-26-2019	$	50,000	$	(3,229)	2.9180	%	One-month L	Jan-12-2024	The Toronto-Dominion Bank	Apr-20-2020	Sep-29-2020	$	75,000	$	(290)	0.2750	%	One-month L	Apr-18-2023
Wells Fargo, N.A.												Wells Fargo, N.A.	Apr-20-2020	Sep-29-2020	$	75,000	$	(298)	0.2790	%	One-month L	Apr-18-2023
The Toronto-Dominion Bank												The Toronto-Dominion Bank	Apr-20-2020	Mar-19-2021	$	75,000	$	(251)	0.2750	%	One-month L	Apr-18-2023
Wells Fargo, N.A.												Wells Fargo, N.A.	Apr-20-2020	Mar-19-2021	$	75,000	$	(258)	0.2800	%	One-month L	Apr-18-2023
The Toronto-Dominion Bank												The Toronto-Dominion Bank	Jul-24-2018	Jul-26-2019	$	50,000	$	(4,932)	2.9180	%	One-month L	Jan-12-2024
PNC Bank, N.A.	PNC Bank, N.A.	Jul-24-2018	Jul-26-2019	$	50,000	$	(3,232)	2.9190	%	One-month L	Jan-12-2024	PNC Bank, N.A.	Jul-24-2018	Jul-26-2019	$	50,000	$	(4,932)	2.9190	%	One-month L	Jan-12-2024
Bank of Montreal	Bank of Montreal	Jul-24-2018	Jul-26-2019	$	50,000	$	(3,232)	2.9190	%	One-month L	Jan-12-2024	Bank of Montreal	Jul-24-2018	Jul-26-2019	$	50,000	$	(4,932)	2.9190	%	One-month L	Jan-12-2024
U.S. Bank, N.A.	U.S. Bank, N.A.	Jul-24-2018	Jul-26-2019	$	25,000	$	(1,616)	2.9190	%	One-month L	Jan-12-2024	U.S. Bank, N.A.	Jul-24-2018	Jul-26-2019	$	25,000	$	(2,466)	2.9190	%	One-month L	Jan-12-2024
Wells Fargo, N.A.	Wells Fargo, N.A.	May-02-2019	Jul-15-2020	$	50,000	$	(2,030)	2.2460	%	One-month L	Jan-15-2025	Wells Fargo, N.A.	May-02-2019	Jul-15-2020	$	50,000	$	(4,633)	2.2460	%	One-month L	Jan-15-2025
U.S. Bank, N.A.	U.S. Bank, N.A.	May-02-2019	Jul-15-2020	$	50,000	$	(2,029)	2.2459	%	One-month L	Jan-15-2025	U.S. Bank, N.A.	May-02-2019	Jul-15-2020	$	50,000	$	(4,632)	2.2459	%	One-month L	Jan-15-2025
Regions Bank	Regions Bank	May-02-2019	Jul-15-2020	$	50,000	$	(2,032)	2.2459	%	One-month L	Jan-15-2025	Regions Bank	May-02-2019	Jul-15-2020	$	50,000	$	(4,632)	2.2459	%	One-month L	Jan-15-2025
Bank of Montreal	Bank of Montreal	Jul-16-2019	Jul-15-2020	$	50,000	$	(886)	1.7165	%	One-month L	Jan-15-2025	Bank of Montreal	Jul-16-2019	Jul-15-2020	$	50,000	$	(3,436)	1.7165	%	One-month L	Jan-15-2025

The following table summarizes the fair value of the interest rate swaps outstanding as of ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018.~~2019.


Balance Sheet Line Item (in thousands)	Balance Sheet Line Item (in thousands)	Notional Amount September 30, 2019		Fair Value September 30, 2019		Notional Amount December 31, 2018		Fair Value December 31, 2018		Balance Sheet Line Item (in thousands)	Notional Amount June 30, 2020		Fair Value June 30, 2020		Notional Amount December 31, 2019		Fair Value December 31, 2019
Interest rate swaps-Asset	Interest rate swaps-Asset	$	250,000	$	488	$	600,000	$	9,151	Interest rate swaps-Asset	$	—	$	—	$	250,000	$	303
Interest rate swaps-Liability	Interest rate swaps-Liability	$	850,000	$	(24,812)	$	300,000	$	(4,011)	Interest rate swaps-Liability	$	1,275,000	$	(50,731)	$	850,000	$	(18,819)

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 ~~$3.8~~$17.5 million will be reclassified from accumulated other comprehensive ~~income (loss)~~loss as an increase to interest expense over the next 12 months.

1715

Table of Contents

The following table summarizes the effect of cash flow hedge accounting and the location in the consolidated financial statements for the three and ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018.~~2019.


		Three months ended September 30,						Nine months ended September 30,							Three months ended June 30,				Six months ended June 30,
Effect of Cash Flow Hedge Accounting (in thousands)	Effect of Cash Flow Hedge Accounting (in thousands)	2019		2018		2019		2018		Effect of Cash Flow Hedge Accounting (in thousands)	2020		2019		2020		2019
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
Loss recognized in accumulated other comprehensive loss on interest rate swaps										Loss recognized in accumulated other comprehensive loss on interest rate swaps	$	5,249	$	14,946	$	36,336	$	20,802
Income (loss) reclassified from accumulated other comprehensive loss into income as interest expense										Income (loss) reclassified from accumulated other comprehensive loss into income as interest expense	$	(3,240)	$	1,082	$	(4,136)	$	2,204
Total interest expense presented in the Consolidated Statements of Operations in which the effects of cash flow hedges are recorded	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	Total interest expense presented in the Consolidated Statements of Operations in which the effects of cash flow hedges are recorded	$	15,333	$	12,193	$	30,197	$	25,027

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 ~~September~~June 30, ~~2019,~~2020, 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 ~~September~~June 30, ~~2019,~~2020, 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 ~~$24.6~~$51.6 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 ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, 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 table summarizes the Company’s financial instruments that are accounted for at fair value on a recurring basis as of ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018.~~ 2019.


			Fair Value Measurements as of June 30, 2020 Using
Balance Sheet Line Item (in thousands)	Fair Value June 30, 2020		Level 1		Level 2		Level 3
Interest rate swaps-Asset	$	—	$	—	$	—	$	—
Interest rate swaps-Liability	$	(50,731)	$	—	$	(50,731)	$	—


				Fair Value Measurements as of September 30, 2019 Using													Fair Value Measurements as of December 31, 2019 Using
Balance Sheet Line Item (in thousands)	Balance Sheet Line Item (in thousands)	Fair Value September 30, 2019		Level 1		Level 2		Level 3		Balance Sheet Line Item (in thousands)	Fair Value December 31, 2019		Level 1		Level 2		Level 3
Interest rate swaps-Asset	Interest rate swaps-Asset	$	488	$	—	$	488	$	—	Interest rate swaps-Asset	$	303	$	—	$	303	$	—
Interest rate swaps-Liability	Interest rate swaps-Liability	$	(24,812)	$	—	$	(24,812)	$	—	Interest rate swaps-Liability	$	(18,819)	$	—	$	(18,819)	$	—

Fair Value Measurements as ofDecember 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) $ —

Table of Contents

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 summarizes the Company’s outstanding preferred stock issuances as of ~~September~~June 30, ~~2019.~~2020.


Preferred Stock Issuances	Issuance Date	Number of Shares	Liquidation Value Per Share		Interest Rate

6.875% Series C Cumulative Redeemable Preferred Stock ("Series C Preferred Stock")	March 17, 2016	3,000,000	$	25.00	6.875	%

The following tables summarize the dividends attributable to the Company’s outstanding preferred stock issuances during the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and the year ended December 31, ~~2018.~~2019.

Quarter Ended 2020

Declaration Date

Series C
Preferred Stock Per Share

Payment Date

June 30

April 9, 2020

0.4296875

June 30, 2020

March 31

January 8, 2020

0.4296875

March 31, 2020

Total

0.8593750

Quarter Ended 2019

Declaration Date

Series C
Preferred Stock Per Share

Payment Date

December 31

October 15, 2019

0.4296875

December 31, 2019

September 30

July 15, 2019

0.4296875

September 30, 2019

June 30

April 9, 2019

0.4296875

July 1, 2019

March 31

January 10, 2019

0.4296875

April 1, 2019

Total

~~1.2890625~~1.7187500

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)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 October 15, 2019,~~9, 2020, the Company’s board of directors declared the Series C Preferred Stock dividends for the quarter ending ~~December 31, 2019~~September 30, 2020 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 summarizes the terms of the Company’s at-the market (“ATM”) common stock offering program as of ~~September~~June 30, ~~2019.~~2020.


ATM Common Stock Offering Program	Date	Maximum Aggregate Offering Price (in thousands)		Aggregate Common Stock Available as of June 30, 2020 (in thousands)
2019 $600 million ATM	February 14, 2019	$	600,000	$	318,248

ATM Common Stock Offering Program Date Maximum 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 $ 401,137

~~Table of Contents~~

The ~~following tables summarize~~table below summarizes the activity under the ATM common stock offering ~~programs~~program during the ~~nine months ended September 30, 2019 and~~ year ended December 31, ~~2018~~2019 (in thousands, except share data). There was no activity under the ATM common stock offering program during the six months ended June 30, 2020.

Nine months ended September 30, 2019
ATM Common Stock Offering Program Shares
Sold Weighted Average Price Per Share Net
Proceeds
2019 $600 million ATM 7,022,332 $ 28.32 $ 197,074
Total/weighted average 7,022,332 $ 28.32 $ 197,074

Year ended December 31, 2018
ATM Common Stock Offering Program Shares
Sold Weighted Average Price Per Share Net
Proceeds
2017 $500 million ATM ⁽¹⁾
14,724,614 $ 26.52 $ 386,407
Total/weighted average 14,724,614 $ 26.52 $ 386,407

~~(1) This program ended in February 2019.~~


	Year ended December 31, 2019
ATM Common Stock Offering Program	Shares Sold	Weighted Average Price Per Share		Net Proceeds
2019 $600 million ATM	9,711,706	$	29.01	$	279,156
Total/weighted average	9,711,706	$	29.01	$	279,156

On ~~September 24, 2019,~~January 13, 2020, the Company completed an underwritten public offering of an aggregate ~~12,650,000~~10,062,500 shares of common stock at a price to the underwriters of ~~$28.60~~$30.9022 per share, consisting of (i) ~~5,500,000~~5,600,000 shares offered directly by the Company and (ii) ~~7,150,000~~4,462,500 shares offered by the forward dealer in connection with certain forward sale agreements (including ~~1,650,000~~1,312,500 shares offered pursuant to the underwriters’ option to purchase additional shares, which option was exercised in full). The offering closed on ~~September 27, 2019~~January 16, 2020 and the Company received net proceeds from the sale of shares offered directly by the Company of ~~$157.3~~approximately $173.1 million. Subject to the ~~Company's~~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.~~January 13, 2021.

~~On April 1, 2019, the Company completed an underwritten public offering~~

Table 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.Contents

The following tables summarize the dividends attributable to the Company’s outstanding shares of common stock that were declared during the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and the year ended December 31, ~~2018.~~2019.

Month Ended 2020

Declaration Date

Record Date

Per Share

Payment Date

June 30

April 9, 2020

June 30, 2020

0.12

July 15, 2020

May 31

April 9, 2020

May 29, 2020

0.12

June 15, 2020

April 30

April 9, 2020

April 30, 2020

0.12

May 15, 2020

March 31

January 8, 2020

March 31, 2020

0.12

April 15, 2020

February 29

January 8, 2020

February 28, 2020

0.12

March 16, 2020

January 31

January 8, 2020

January 31, 2020

0.12

February 18, 2020

Total

0.72

Month Ended 2019

Declaration Date

Record Date

Per Share

Payment Date

December 31

October 15, 2019

December 31, 2019

0.119167

January 15, 2020

November 30

October 15, 2019

November 29, 2019

0.119167

December 16, 2019

October 31

October 15, 2019

October 31, 2019

0.119167

November 15, 2019

September 30

July 15, 2019

September 30, 2019

0.119167

October 15, 2019

August 31

July 15, 2019

August 30, 2019

0.119167

September 16, 2019

July 31

July 15, 2019

July 31, 2019

0.119167

August 15, 2019

June 30

April 9, 2019

June 28, 2019

0.119167

July 15, 2019

May 31

April 9, 2019

May 31, 2019

0.119167

June 17, 2019

April 30

April 9, 2019

April 30, 2019

0.119167

May 15, 2019

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

~~1.072503~~1.430004

~~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~~

~~Table of Contents~~

On ~~October 15, 2019,~~July 9, 2020, the Company’s board of directors declared the common stock dividends for the months ending ~~October~~July 31, ~~2019, November~~2020, August 31, 2020, and September 30, ~~2019, and December 31, 2019~~2020 at a monthly rate of ~~$0.119167~~$0.12 per share of common stock.

Restricted Shares of Common Stock

Restricted shares of common stock granted on February 13, 2020 and January ~~7, 2019~~8, 2020 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.~~2021. Refer to Note 8 for a discussion of the restricted shares of common stock granted on January ~~7, 2019~~8, 2020 pursuant to the ~~March 8, 2016~~January 6, 2017 performance units. The following table summarizes activity related to the Company’s unvested restricted shares of common stock for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and the year ended December 31, ~~2018.~~2019.


Unvested Restricted Shares of Common Stock	Unvested Restricted Shares of Common Stock	Shares		Unvested Restricted Shares of Common Stock	Shares
Balance at December 31, 2017		237,207
Granted		76,659	(1)
Vested		(112,405)	(2)
Forfeited		(10,999)
Balance at December 31, 2018	Balance at December 31, 2018	190,462		Balance at December 31, 2018	190,462
Granted	Granted	110,830	(1)	Granted	110,830	(1)
Vested	Vested	(78,431)	(2)	Vested	(101,109)	(2)
Forfeited	Forfeited	(2,589)		Forfeited	(7,138)
Balance at September 30, 2019		220,272
Balance at December 31, 2019				Balance at December 31, 2019	193,045
Granted				Granted	75,419	(1)
Vested				Vested	(78,010)	(2)
Forfeited				Forfeited	(858)
Balance at June 30, 2020				Balance at June 30, 2020	189,596

(1)The fair value per share on the grant date of February 13, 2020, January 8, 2020, and January 7, 2019 was $32.64, $31.49, and ~~January 5, 2018 was~~ $24.85, ~~and $26.40,~~ respectively.

(2)The Company repurchased and retired ~~58,697~~33,119 and ~~41,975~~28,504 restricted shares of common stock that vested during the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and the year ended December 31, ~~2018,~~2019, respectively.

The weighted average grant date fair value of unvested restricted shares of common stock was $24.38 per share at January 1, 2020, $31.60 per share granted during the six months ended June 30, 2020, $23.11 per share vested during the six months ended June 30, 2020, $24.85 per share forfeited during the six months ended June 30, 2020, and $27.77 per share at June 30, 2020.

The unrecognized compensation expense associated with the Company’s restricted shares of common stock at ~~September~~June 30, ~~2019~~2020 was approximately ~~$3.4~~$4.2 million and is expected to be recognized over a weighted average period of approximately ~~2.5~~2.7 years.

Table of Contents

The following table summarizes the fair value at vesting for the restricted shares of common stock that vested during the three and ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018.~~2019.


		Three months ended September 30,						Nine months ended September 30,							Three months ended June 30,				Six months ended June 30,
Vested Restricted Shares of Common Stock	Vested Restricted Shares of Common Stock	2019		2018		2019		2018		Vested Restricted Shares of Common Stock	2020		2019		2020		2019
Vested restricted shares of common stock	Vested restricted shares of common stock	—		—		78,431		112,405		Vested restricted shares of common stock	—		—		78,010		78,431
Fair value of vested restricted shares of common stock (in thousands)	Fair value of vested restricted shares of common stock (in thousands)	$	—	$	—	$	1,951	$	3,002	Fair value of vested restricted shares of common stock (in thousands)	$	—	$	—	$	2,463	$	1,951

7. Noncontrolling Interest

The following table summarizes the activity for noncontrolling interest in the Company for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and the year ended December 31, ~~2018.~~2019.


Noncontrolling Interest	LTIP Units	Other Common Units	Total Noncontrolling Common Units	Noncontrolling Interest
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	(16,618)	—	(16,618)	N/A
Conversions from LTIP units to Other Common Units	(266,397)	266,397	—	N/A
Redemptions from Other Common Units to common stock	—	(680,137)	(680,137)	N/A

Balance at December 31, 2019	1,697,358	2,039,494	3,736,852	2.5	%
Granted/Issued	278,806	—	278,806	N/A
Forfeited	—	—	—	N/A
Conversions from LTIP units to Other Common Units	(197,775)	197,775	—	N/A
Redemptions from Other Common Units to common stock	—	(447,730)	(447,730)	N/A

Balance at June 30, 2020	1,778,389	1,789,539	3,567,928	2.3	%

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 (262,847) 262,847 — N/A
Redemptions from Other Common Units to common stock — (661,082) (661,082) N/A
Balance at September 30, 2019 1,707,318 2,054,999 3,762,317 2.8 %
The weighted average grant date fair value of outstanding LTIP units was $21.64 per unit at January 1, 2020, $29.47 per unit granted during the six months ended June 30, 2020, $18.72 per unit converted during the six months ended June 30, 2020, and $23.19 per unit at June 30, 2020.

~~Table of Contents~~

LTIP Units

LTIP units granted on January ~~7, 2019~~8, 2020 to non-employee, independent directors, subject to the recipient’s continued service, will vest on January 1, ~~2020.~~2021. LTIP units granted on January ~~7, 2019~~8, 2020 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.~~2020. Refer to Note 8 for a discussion of the LTIP units granted on January ~~7, 2019~~8, 2020 pursuant to the ~~March 8, 2016~~January 6, 2017 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 summarizes the assumptions used in valuing such LTIP units granted during the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 (excluding those LTIP units granted pursuant to the ~~March 8, 2016~~January 6, 2017 performance units; refer to Note 8 for details).


LTIP Units	Assumptions
Grant date	January ~~7, 2019~~8, 2020
Expected term (years)	10
Expected volatility	~~19.0~~18.0		%
Expected dividend yield	~~6.0~~5.75		%
Risk-free interest rate	~~2.57~~1.61		%
Fair value of LTIP units at issuance (in thousands)	$	~~3,636~~4,030
LTIP units at issuance	~~154,649~~136,741
Fair value unit price per LTIP unit at issuance	$	~~23.51~~29.47

Table of Contents

The following table summarizes activity related to the Company’s unvested LTIP units for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and the year ended December 31, ~~2018.~~2019.


Unvested LTIP Units						LTIP Units
~~Balance at December 31, 2017~~						~~300,307~~
~~Granted~~						~~324,802~~
~~Vested~~						~~(373,893)~~
~~Forfeited~~						—
Balance at December 31, 2018						251,216
Granted						364,173
Vested						~~(234,330)~~(371,423)
Forfeited						~~(10,208)~~(16,618)
Balance at ~~September 30,~~December 31, 2019						~~370,851~~227,348
Granted						278,806
Vested						(174,145)
Forfeited						—
Balance at June 30, 2020						332,009

The weighted average grant date fair value of unvested LTIP units was $23.37 per unit at January 1, 2020, $29.47 per unit granted during the six months ended June 30, 2020, $26.38 per unit vested during the six months ended June 30, 2020, and $26.92 per unit at June 30, 2020.

The unrecognized compensation expense associated with the Company’s LTIP units at ~~September~~June 30, ~~2019~~2020 was approximately ~~$5.5~~$6.5 million and is expected to be recognized over a weighted average period of approximately ~~2.3~~2.5 years.

The following table summarizes the fair value at vesting for the LTIP units that vested during the three and ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018.~~2019.


		Three months ended September 30,						Nine months ended September 30,							Three months ended June 30,				Six months ended June 30,
Vested LTIP units	Vested LTIP units	2019		2018		2019		2018		Vested LTIP units	2020		2019		2020		2019
Vested LTIP units	Vested LTIP units	29,989		30,949		234,330		342,940		Vested LTIP units	43,958		46,652		174,145		204,341
Fair value of vested LTIP units (in thousands)	Fair value of vested LTIP units (in thousands)	$	884	$	851	$	6,348	$	9,002	Fair value of vested LTIP units (in thousands)	$	1,213	$	1,401	$	5,074	$	5,464

8. Equity Incentive Plan

On January ~~7, 2019,~~8, 2020, 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~~8, 2020 are substantially the same as the terms of the performance units granted on January ~~5, 2018 and January 6, 2017,~~7, 2019, except that the measuring period ~~commences~~commenced on January 1, ~~2019~~2020 and ends on December 31, ~~2021, and the award shares are immediately vested at the end of the measuring period.~~2022.

~~Table of Contents~~

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 summarizes the assumptions used in valuing the performance units granted during the ~~nine~~six months ended ~~September~~June 30, ~~2019.~~2020.


Performance Units	Assumptions
Grant date	January ~~7, 2019~~8, 2020
Expected volatility	~~20.7~~17.4		%
Expected dividend yield	~~6.0~~5.75		%
Risk-free interest rate	~~2.56~~1.59		%
Fair value of performance units grant (in thousands)	$	~~5,620~~5,389

On December 31, ~~2018,~~2019 the ~~Company’s three year measurement~~measuring period pursuant to the ~~March 8, 2016~~January 6, 2017 performance units ~~concluded. It~~concluded and 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~~76,096 vested LTIP units and ~~74,032~~46,376 vested shares of common stock to the participants (of which ~~30,193~~18,241 shares of common stock were repurchased and retired) ~~to the participants,~~, which were issued on January ~~7, 2019.~~8, 2020. The compensation committee of the board of directors also approved the issuance of ~~107,308~~65,969 LTIP units and ~~22,678~~3,398 restricted shares of common stock that will vest on December 31, ~~2019,~~2020, which were issued on January ~~7, 2019.~~8, 2020.

The unrecognized compensation expense associated with the Company’s performance units at ~~September~~June 30, ~~2019~~2020 was approximately ~~$7.0~~$8.6 million and is expected to be recognized over a weighted average period of approximately 2.0 years.

Table of Contents

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~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018.~~2019.


		Three months ended September 30,						Nine months ended September 30,							Three months ended June 30,				Six months ended June 30,
Non-Cash Compensation Expense (in thousands)	Non-Cash Compensation Expense (in thousands)	2019		2018		2019		2018		Non-Cash Compensation Expense (in thousands)	2020		2019		2020		2019
Restricted shares of common stock	Restricted shares of common stock	$	447	$	406	$	1,318	$	1,269	Restricted shares of common stock	$	481	$	444	$	948	$	871
LTIP units	LTIP units	901		893		2,687		2,654		LTIP units	978		899		1,942		1,786
Performance units	Performance units	1,107		838		3,062		2,463		Performance units	1,341		1,096		2,648		1,955
Director compensation ⁽¹⁾	Director compensation ⁽¹⁾	101		99		304		285		Director compensation ⁽¹⁾	138		98		252		203
Total non-cash compensation expense	Total non-cash compensation expense	$	2,556	$	2,236	$	7,371	$	6,671	Total non-cash compensation expense	$	2,938	$	2,537	$	5,790	$	4,815

(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~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018.~~2019. The number of shares of common stock granted is calculated based on the trailing 10ten 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.

~~Table of Contents~~

The following table summarizes the components of rental income recognized during the three and ~~nine~~six months ended ~~September~~June 30, 2020 and 2019 included in the accompanying Consolidated Statements of Operations.


	Three months ended June 30,						Six months ended June 30,
Rental Income (in thousands)	2020		2019		2020		2019
Fixed lease payments	$	91,234	$	74,958	$	181,630	$	147,075
Variable lease payments	25,588		19,258		50,594		41,439
Straight-line rental income	1,823		3,292		5,750		5,576
Net decrease to rental income related to above and below market lease amortization	(1,174)		(1,146)		(2,164)		(2,113)
Total rental income	$	117,471	$	96,362	$	235,810	$	191,977

Three months ended September 30, Nine months ended September 30,
Rental Income (in thousands) 2019 2019
Fixed lease payments $ 80,262 $ 227,337
Variable lease payments 20,189 61,628
Straight-line rental income 3,091 8,667
Net decrease to rental income related to above and below market lease amortization (1,248) (3,361)
Total rental income $ 102,294 $ 294,271
During the three and six months ended June 30, 2020 and 2019 the Company evaluated its operating leases and determined that the future collectability of 6 leases was not reasonably assured. As a result the Company converted to the cash basis of accounting for these leases which resulted in a reduction of rental income of approximately $1.2 million, $0.9 million, $0, and $0 for three and six months ended June 30, 2020 and 2019, respectively, due to the reversal of accrued rent. Additionally, there was $0.6 million, $0.6 million, $0, and $0 of contractual rental income that was not recognized for payments that were not received from the tenants for the three and six months ended June 30, 2020 and 2019, respectively.

As of ~~September~~June 30, 2020 and December 31, 2019, the Company had accrued rental income of approximately ~~$40.2~~$51.3 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 $32.4~~and $44.3 million, ~~net of allowance for doubtful accounts of approximately $0.8 million,~~respectively, included in tenant accounts receivable on the accompanying Consolidated Balance Sheets.

As of ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, the Company had approximately ~~$20.5~~$28.2 million and ~~$18.3~~$22.6 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 ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, 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 ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, the Company’s total liability associated with these lease security deposits was approximately ~~$9.2~~$10.0 million and ~~$8.4~~$9.8 million, respectively, and is included in tenant prepaid rent and security deposits on the accompanying Consolidated Balance Sheets.

Table of Contents

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, was approximately ~~$5.1~~$4.9 million, ~~$13.1~~$9.7 million, ~~$3.8~~$4.1 million and ~~$10.9~~$8.0 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018,~~2019, 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 ~~September~~June 30, ~~2019.~~2020.


Year (as of September 30, 2019)		Maturity of Fixed Lease Payments (in thousands)
Remainder of 2019		$	82,584
2020		$	325,907
Year				Year	Maturity of Fixed Lease Payments (in thousands)
Remainder of 2020				Remainder of 2020	$	183,554
2021	2021	$	285,414	2021	$	344,763
2022	2022	$	249,287	2022	$	307,910
2023	2023	$	208,011	2023	$	265,262
2024				2024	$	221,533
Thereafter	Thereafter	$	761,469	Thereafter	$	846,338

~~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

~~Table of Contents~~

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 ~~1.5~~6.0 years to ~~47.3~~46.5 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 ~~September~~June 30, 2020 and December 31, 2019.


~~Operating Lease Term and Discount Rate~~	~~September 30, 2019~~
~~Weighted average remaining lease term (years)~~	~~35.7~~
~~Weighted average discount rate~~	~~7.1~~	%


Operating Lease Term and Discount Rate	June 30, 2020		December 31, 2019
Weighted average remaining lease term (years)	27.0		36.0
Weighted average discount rate	6.8	%	7.1	%

The following table summarizes the operating lease cost recognized during the three and ~~nine~~six months ended ~~September~~June 30, 2020 and 2019 included in the Company’s Consolidated Statements of Operations.


		Three months ended September 30,		Nine months ended September 30,			Three months ended June 30,						Six months ended June 30,
Operating Lease Cost (in thousands)	Operating Lease Cost (in thousands)	2019		2019		Operating Lease Cost (in thousands)	2020		2019		2020		2019
Operating lease cost included in property expense attributable to ground leases	Operating lease cost included in property expense attributable to ground leases	$	331	$	993	Operating lease cost included in property expense attributable to ground leases	$	331	$	331	$	662	$	662
Operating lease cost included in general and administrative expense attributable to corporate office lease	Operating lease cost included in general and administrative expense attributable to corporate office lease	266		799		Operating lease cost included in general and administrative expense attributable to corporate office lease	423		267		741		533
Total operating lease cost	Total operating lease cost	$	597	$	1,792	Total operating lease cost	$	754	$	598	$	1,403	$	1,195

The following table summarizes supplemental cash flow information related to operating leases recognized during the ~~nine~~six months ended ~~September~~June 30, 2020 and 2019 in the Company’s Consolidated Statements of Cash Flows.


	~~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~~


	Six months ended June 30,
Operating Leases (in thousands)	2020		2019
Cash paid for amounts included in the measurement of lease liabilities (operating cash flows)	$	1,143	$	1,141
Right-of-use assets obtained in exchange for new lease liabilities	$	7,718	$	—

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The following table summarizes the maturity of operating lease liabilities under the Company’s ground leases and corporate office lease as of ~~September~~June 30, ~~2019.~~2020.


Year (as of September 30, 2019)		Maturity of Operating Lease Liabilities⁽¹⁾ (in thousands)
Remainder of 2019		$	571
2020		2,294
Year				Year	Maturity of Operating Lease Liabilities⁽¹⁾ (in thousands)
Remainder of 2020				Remainder of 2020	$	1,150
2021	2021	1,400		2021	2,102
2022	2022	1,107		2022	2,975
2023	2023	1,116		2023	3,021
2024				2024	3,064
Thereafter	Thereafter	48,155		Thereafter	50,017
Total lease payments	Total lease payments	54,643		Total lease payments	62,329
Less: Imputed interest	Less: Imputed interest	(37,384)		Less: Imputed interest	(38,050)
Present value of operating lease liabilities	Present value of operating lease liabilities	$	17,259	Present value of operating lease liabilities	$	24,279

(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.

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~~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

~~(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~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018,~~2019, there were ~~220,284, 218,231, 193,117~~189,895, 185,821, 220,482 and ~~196,871,~~217,187, respectively, of unvested restricted shares of common stock on a weighted average basis that were considered participating securities.

The following table reconciles the numerators and denominators in the computation of basic and diluted earnings per common share for the three and ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018.~~2019.


		Three months ended September 30,						Nine months ended September 30,							Three months ended June 30,				Six months ended June 30,
Earnings Per Share (in thousands, except per share data)	Earnings Per Share (in thousands, except per share data)	2019		2018		2019		2018		Earnings Per Share (in thousands, except per share data)	2020		2019		2020		2019
Numerator	Numerator									Numerator
Net income attributable to common stockholders	Net income attributable to common stockholders	$	9,533	$	7,237	$	27,734	$	38,215	Net income attributable to common stockholders	$	17,552	$	12,394	$	79,635	$	18,201
Denominator	Denominator									Denominator
Weighted average common shares outstanding — basic	Weighted average common shares outstanding — basic	127,272		105,783		122,460		101,095		Weighted average common shares outstanding — basic	148,663		125,251		148,116		120,015
Effect of dilutive securities⁽¹⁾	Effect of dilutive securities⁽¹⁾									Effect of dilutive securities⁽¹⁾
Share-based compensation	Share-based compensation	178		550		254		400		Share-based compensation	364		309		225		291
Shares issuable under forward sales agreements	Shares issuable under forward sales agreements	19		—		6		—		Shares issuable under forward sales agreements	—		—		—		—
Weighted average common shares outstanding — diluted	Weighted average common shares outstanding — diluted	127,469		106,333		122,720		101,495		Weighted average common shares outstanding — diluted	149,027		125,560		148,341		120,306
Net income per share — basic and diluted	Net income per share — basic and diluted									Net income per share — basic and diluted
Net income per share attributable to common stockholders — basic	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 — basic	$	0.12	$	0.10	$	0.54	$	0.15
Net income per share attributable to common stockholders — diluted	Net income per share attributable to common stockholders — diluted	$	0.07	$	0.07	$	0.23	$	0.38	Net income per share attributable to common stockholders — diluted	$	0.12	$	0.10	$	0.54	$	0.15

(1)During the three and ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018,~~2019, there were 190, 186, 220 ~~218, 193~~ and ~~197,~~217, 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 ~~$6.0~~$3.0 million as of ~~September~~June 30, ~~2019~~2020 related to construction projects and certain other agreements. ~~As of September 30, 2019, the Company has a development commitment related to a building expansion under a tenant lease of approximately $3.1 million.~~

12. Subsequent Events

There were no recognized or non-recognized subsequent events.

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-looking statements. Furthermore, actual results may differ materially from those described in the forward-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,~~2019, 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;”

•the potential adverse effect of the ongoing public health crisis of the novel coronavirus disease (“COVID-19”) pandemic, or any future pandemic, epidemic or outbreak of infectious disease, on the financial condition, results of operations, cash flows and performance of the Company and its tenants, the real estate market and the global economy and financial markets;

•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;~~markets, and the repurposing or redevelopment of retail properties into industrial properties (in part or whole);

•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, epidemics, pandemics, and other potentially catastrophic events such as acts of war and/or terrorism;

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•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. Moreover, you should interpret many of the risks identified in this report, as well as the risks set forth above, as being heightened as a result of the ongoing and numerous adverse impacts of the COVID-19 pandemic. 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 ~~September~~June 30, ~~2019~~2020 (which differs from rent calculated in accordance with GAAP) multiplied by 12. If a tenant is in a free rent period as of ~~September~~June 30, ~~2019,~~2020, 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 12 months after completion. With respect to properties acquired and immediately added to the Value Add Portfolio, (i) if acquired with less than 75% occupancy as of the acquisition date, Stabilization will occur upon the earlier of achieving 90% occupancy or 12 months from the acquisition date; or (ii) if acquired and will be less than 75% occupied due to known move-outs within two years of the acquisition date, Stabilization will occur upon the earlier of achieving 90% occupancy after the known move-outs have occurred or 12 months after the known move-outs have occurred.

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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.~~Portfolio, and assets classified as held for sale.

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

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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 that commenced during the period compared to the Comparable Lease for assets included in the Operating Portfolio. Rent under gross or similar type leases are converted to a net rent based on an estimate of the applicable recoverable expenses, and this calculation excludes the impact of any holdover rent.

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

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

We define ~~“Renewal” Lease~~“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~~or (iii) an early renewal or workout, which ultimately does extend the original term for 12 months or more.

Overview

We are a REIT focused on the acquisition, ownership, and operation of 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~~COVID-19 Pandemic

Since initially being reported in December 2019, COVID-19 has spread around the world, including to every state in the United States. On March 11, 2020, the World Health Organization declared COVID-19 a pandemic, and on March 13, 2020, the United States declared a national emergency with respect to COVID-19. The COVID-19 pandemic has severely harmed global economic activity and caused significant volatility and negative pressure in financial markets. The global impact of the pandemic is rapidly evolving and many countries, including the United States, have reacted by instituting quarantines, mandating business and school closures and restricting travel. As a result, the COVID-19 pandemic is negatively impacting almost every industry, including the real estate industry and the industries of our tenants, directly or indirectly. The rapid development and fluidity of the COVID-19 pandemic precludes any prediction as to the ultimate adverse impact the pandemic may have on our business, financial condition, results of operations and cash flows.

While we did not incur significant disruptions from the COVID-19 pandemic during the six months ended June 30, 2020, a number of our tenants requested rent deferral or rent abatement as a result of the pandemic. We entered into a limited number of rent deferral agreements during the three months ended June 30, 2020, which resulted in approximately $1.5 million of rent deferrals during the three and six months ended June 30, 2020. We evaluate tenant rent relief requests on an individual basis,

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considering a number of factors. Not all tenant requests will ultimately result in modified agreements, nor are we foregoing our contractual rights under our lease agreements.

The ~~outlook for~~COVID-19 pandemic or a future pandemic, epidemic or outbreak of infectious disease affecting states or regions in which we or our tenants operate could have material and adverse effects on our business, ~~remains positive, albeit~~financial condition, results of operations and cash flows due to, among other factors: health or other government authorities requiring the closure of offices or other businesses or instituting quarantines of personnel as the result of, or in order to avoid, exposure to a contagious disease; disruption in supply and delivery chains; a general decline in business activity and demand for real estate; reduced economic activity, general economic decline or recession, which may impact our tenants’ businesses, financial condition and liquidity and may cause one or more of our tenants to be unable to make rent payments to us timely, or at all, or to otherwise seek modifications of lease obligations; difficulty accessing debt and equity capital on attractive terms, or at all, and a severe disruption and instability in the global financial markets or deteriorations in credit and financing conditions, which may affect our access to capital necessary to fund business operations or address maturing liabilities on a ~~moderated basis~~timely basis; and the potential negative impact on the health of our personnel, particularly if a significant number of our employees are impacted, which would result in ~~light~~a deterioration in our ability to ensure business continuity during a disruption.

The extent to which the COVID-19 pandemic or any other pandemic, epidemic or disease impacts our operations and those of ~~over ten years~~our tenants will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact, and the direct and indirect economic ~~growth,~~effects of the pandemic and containment measures, among others. Nevertheless, the COVID-19 pandemic (or a future pandemic, epidemic or disease) presents material uncertainty and risk with respect to our business, financial condition, results of operations and cash flows.

Outlook

Our business is affected by the uncertainty regarding the current COVID-19 pandemic, the effectiveness of policies introduced to neutralize the disease, and the impact of those policies on economic activity. In June, the National Bureau of Economic Research announced the United States entered into a recession in February 2020. While there has been a negative impact to our tenants, we believe we will benefit from having a well-diversified portfolio across industry, market, and lease term. Additionally, we strongly believe the current economic environment is likely to curb new industrial supply in the near term and to accelerate a number of trends that positively impact industrial demand.

The U.S. ~~presidential administration~~federal and ~~its~~state governments, as well as the Federal Reserve, responded to the uncertain economic outlook with a series of policies to ease the economic burden of COVID-19 closures on businesses and individuals. The major U.S. congressional policy ~~initiatives,~~action known as the Coronavirus, Aid, Relief and ~~continued asset appreciation. In~~Economic Security Act, or the ~~third quarter of 2019, the~~CARES Act, allocated $2 trillion in federal ~~funds target rate was lowered twice, each by 25 basis points,~~aid to ~~a target range of 1.75% to 2.0%.~~specific industries, small businesses and individuals. The Federal Reserve ~~has signaled that it will support economic growth as needed.~~ also took major actions in response to the COVID-19 pandemic, including the completion of two emergency federal funds rate cuts in March 2020 to a range between 0% to 0.25%, adding liquidity to the bond market, establishing new lending facilities, and expanding its bond buying program to include mortgage backed securities, investment grade corporate debt, and high yield corporate ETFs.

The current economic ~~growth combined with~~circumstances, while challenging, will provide an opportunity to demonstrate the ~~favorable industrial supply demand balance should translate to a net positive result for~~diversification of our ~~business.~~portfolio. Specifically, our existing portfolio should benefit from ~~rising~~competitive 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 a highly diversified portfolio, minimal floating rate debt exposure (taking into account our hedging activities), strong liquidity, strong access to capital, and that many of our competitors for the assets we purchase tend to be smaller local and regional investors who are likely to be more heavily impacted by interest ~~rates.~~rates and availability of capital.

~~Several~~

Due to the COVID-19 pandemic, we expect acceleration in a number of industrial specific trends ~~contribute~~ to ~~the expected strong~~support stronger long-term demand, including:

•the rise of e-commerce (as compared to the traditional retail store distribution model) and the concomitant demand by e-commerce industry participants for well-located, functional distribution space;

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

•the overall quality of the transportation infrastructure in the ~~U.S.~~United States.

Our portfolio continues to benefit from historically low availability throughout the national industrial market. AsWe expect a near-term reduction in demand, in the aggregate, brought on by the pandemic. Certain industries and geographies are expected to be more heavily impacted. We believe the diversification of ~~the most recent data, demand for space continues to support new supply~~our portfolio by market, tenant industry, and ~~an accommodative environment for owners. Development~~tenant credit will prove

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~~activity has steadily increased over the past several years and is now reaching material levels~~to be a strength 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~~environment. Industrial development continues to be concentrated in the larger primary ~~industrial~~ markets, ~~and we~~but it is likely to decelerate in the near-term. We have limited exposure to many of ~~these~~the most active development 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, epidemics, and other factors in these markets may affect our overall performance.

Rental Income

We receive income primarily in the form of rental income from the tenants who occupy our buildings. The amount of rental income generated by the buildings in our portfolio depends principally on occupancy and rental rates. As of ~~September~~June 30, ~~2019,~~2020, our Operating Portfolio was approximately ~~95.6%~~97.6% leased and our SL Rent Change on ~~new~~New Leases and ~~renewal leases~~Renewal Leases in our Operating Portfolio together grew approximately ~~16.5%~~9.6% and ~~20.1%~~10.2% during the three and ~~nine~~six months ended ~~September~~June 30, ~~2019,~~2020, respectively. Our Cash Rent Change on New Leases and Renewal Leases in our Operating Portfolio together grew approximately 1.6% and 2.2% during the three and six months ended June 30, 2020.

Future economic downturns or regional downturns affecting our submarkets that impair our ability to renew or re-lease space and the ability of our tenants to fulfill their lease commitments, as in the case of tenant bankruptcies, including those brought on by the COVID-19 pandemic, could adversely affect our ability to maintain or increase rental rates at our buildings. Our ability to lease our properties and the attendant rental rate is dependent upon, among other things, (i) the overall economy, (ii) the supply/demand dynamic in our markets, (iii) the quality of our properties, including age, clear height, and configuration, and (iv) our tenants’ ability to meet their contractual obligations to us.

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The following table summarizes our Operating Portfolio leases that commenced during the three and ~~nine~~six months ended ~~September~~June 30, ~~2019.~~2020. Certain leases contain rental concessions; any such rental concessions are accounted for on a straight-line basis over the term of the lease.


Operating Portfolio	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⁾		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⁾
																								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 September 30, 2019
Three months ended June 30, 2020																Three months ended June 30, 2020
New Leases	New Leases	490,935	$	4.43	$	4.58	$	1.39	19.7	%	24.7	%	5.2	$	0.69	New Leases	444,952	$	3.77	$	4.20	$	4.78		(8.3)	%		4.0	%		11.5		$	0.50
Renewal Leases	Renewal Leases	1,583,107	$	3.87	$	4.03	$	0.51	8.6	%	14.8	%	3.8	$	0.05	Renewal Leases	2,276,692	$	4.36	$	4.61	$	1.08		3.4	%		10.6	%		5.8		$	0.54

Total/weighted average	Total/weighted average	2,074,042	$	4.01	$	4.16	$	0.72	10.5	%	16.5	%	4.2	$	0.20	Total/weighted average	2,721,644	$	4.27	$	4.54	$	1.68		1.6	%		9.6	%		6.7		$	0.53
Nine months ended September 30, 2019
Six months ended June 30, 2020																Six months ended June 30, 2020
New Leases	New Leases	1,168,842	$	3.99	$	4.14	$	1.55	18.8	%	28.2	%	5.7	$	0.77	New Leases	872,423	$	3.97	$	4.29	$	3.20		(5.2)	%		4.2	%		8.3		$	0.52
Renewal Leases	Renewal Leases	6,005,521	$	4.00	$	4.16	$	0.67	10.3	%	18.9	%	4.0	$	0.01	Renewal Leases	3,622,946	$	4.44	$	4.65	$	0.92		4.0	%		11.6	%		5.1		$	0.36

Total/weighted average	Total/weighted average	7,174,363	$	3.99	$	4.16	$	0.82	11.4	%	20.1	%	4.3	$	0.14	Total/weighted average	4,495,369	$	4.35	$	4.58	$	1.36		2.2	%		10.2	%		5.7		$	0.39

(1)We define Total Costs as the costs for improvements of vacant and renewal spaces, as well as the contingent-based legal fees and commissions for leasing transactions. Total Costs per square foot represent the total costs expected to be incurred on the leases that commenced during the period and do not reflect actual expenditures for the period.

(2)We define weighted average lease term as the contractual lease term in years, assuming that tenants exercise no renewal options, purchase options, or early termination rights, weighted by square footage.

(3)Represents the total rental concessions for the entire lease term.

Additionally, for the three and six months ended June 30, 2020, leases commenced totaling 481,938 square feet related to Value Add assets and are excluded from the Operating Portfolio statistics above.

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Property Operating Expenses

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

Scheduled Lease Expirations

Our ability to re-lease space subject to expiring leases will impact our results of operations and is affected by economic and competitive conditions in our markets and by the desirability of our individual buildings. Leases that comprise approximately ~~6.6%~~9.4% of our annualized base rental revenue will expire during the period from ~~October~~July 1, ~~2019~~2020 to ~~September~~June 30, ~~2020,~~2021, excluding month-to-month leases. We assume, based upon internal renewal probability estimates that some of our tenants will renew and others will vacate and the associated space will be re-let subject to downtime assumptions. Using the aforementioned assumptions, we expect that the rental rates on the respective new leases will generally be the same as the rates under existing leases expiring during the period ~~October~~July 1, ~~2019~~2020 to ~~September~~June 30, ~~2020,~~2021, thereby resulting in approximately the same revenue from the same space.

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The following table summarizes lease expirations for leases in place as of ~~September~~June 30, ~~2019,~~2020, plus available space, for each of the ten calendar years beginning with ~~2019~~2020 and thereafter in our portfolio. The information in the table assumes that tenants exercise no renewal options and no early termination rights.


Lease Expiration Year	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		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	Available	—	4,461,560	—		—		—		Available	—	2,795,864	—		—		—
Month-to-month leases	Month-to-month leases	3	149,663	0.2	%	$	735	0.2	%	Month-to-month leases	6	793,541	0.9	%	$	2,946	0.7	%
Remainder of 2019		5	663,727	0.8	%	2,651		0.7	%
2020		44	7,300,692	8.9	%	33,663		9.6	%
Remainder of 2020										Remainder of 2020	13	3,814,198	4.3	%	17,759		4.5	%
2021	2021	74	11,654,228	14.3	%	50,740		14.3	%	2021	67	10,585,161	11.9	%	47,783		12.0	%
2022	2022	71	8,954,925	11.0	%	38,675		10.9	%	2022	77	9,295,289	10.4	%	40,975		10.3	%
2023	2023	73	11,265,564	13.8	%	43,763		12.4	%	2023	80	11,878,562	13.3	%	47,540		11.9	%
2024	2024	55	10,507,744	12.9	%	44,142		12.5	%	2024	65	11,247,169	12.6	%	48,827		12.3	%
2025	2025	33	6,486,218	8.0	%	27,023		7.6	%	2025	53	8,967,432	10.1	%	39,013		9.8	%
2026	2026	34	5,988,185	7.3	%	27,283		7.7	%	2026	44	7,047,276	7.9	%	32,518		8.2	%
2027	2027	18	2,619,630	3.2	%	12,847		3.6	%	2027	24	3,361,401	3.8	%	16,970		4.3	%
2028	2028	24	4,619,199	5.7	%	19,552		5.5	%	2028	24	4,505,880	5.1	%	19,526		4.9	%
2029										2029	22	4,055,023	4.5	%	19,959		5.0	%
Thereafter	Thereafter	47	11,322,032	13.9	%	53,187		15.0	%	Thereafter	52	13,496,702	15.2	%	64,176		16.1	%
Total	Total	481	85,993,367	100.0	%	$	354,261	100.0	%	Total	527	91,843,498	100.0	%	$	397,992	100.0	%

Portfolio Summary

The following table summarizes information relating to diversification by building type in our portfolio as of ~~September~~June 30, ~~2019.~~2020.

Square Footage Annualized Base Rental Revenue
Building Type Number of Buildings Amount % Occupancy Rate Amount
(in thousands) %
Warehouse/Distribution 352 77,360,328 90.0 % 95.4 % $ 314,988 89.0 %
Light Manufacturing 66 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 Add 4 1,082,795 1.2 % 44.5 % 2,637 0.7 %
Flex/Office 8 432,315 0.5 % 58.1 % 3,207 0.9 %
Total portfolio/weighted average 430 85,993,367 100.0 % 94.8 % $ 354,261 100.0 %


		Square Footage							Annualized Base Rental Revenue
Building Type	Number of Buildings	Amount	%		Occupancy Rate		Amount (in thousands)		%
Warehouse/Distribution	376	82,914,376	90.3	%	97.5	%	$	355,661	89.4	%
Light Manufacturing	70	7,902,777	8.6	%	98.1	%	38,299		9.6	%
Total Operating Portfolio/weighted average	446	90,817,153	98.9	%	97.6	%	$	393,960	99.0	%

Value Add/Other	3	594,030	0.6	%	39.7	%	1,158		0.3	%
Flex/Office	8	432,315	0.5	%	48.9	%	2,874		0.7	%
Total portfolio/weighted average	457	91,843,498	100.0	%	97.0	%	$	397,992	100.0	%

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Portfolio Acquisitions

The following table summarizes our acquisitions during the three and ~~nine~~six months ended ~~September~~June 30, ~~2019.~~2020.



Market⁽¹⁾	Date Acquired	Square Feet	Buildings	Purchase Price (in thousands)
Detroit, MI	January 10, 2020	491,049	1	$	29,543
Rochester, NY	January 10, 2020	124,850	1	8,565
Minneapolis/St Paul, MN	February 6, 2020	139,875	1	10,460
Sacramento, CA	February 6, 2020	160,534	1	18,468
Richmond, VA	February 6, 2020	78,128	1	5,481
Milwaukee/Madison, WI	February 7, 2020	81,230	1	7,219
Detroit, MI	February 11, 2020	311,123	1	23,141
Philadelphia, PA	March 9, 2020	78,000	1	6,571
Tulsa, OK	March 9, 2020	134,600	1	9,895
Three months ended March 31, 2020		1,599,389	9	119,343
Sacramento, CA	June 11, 2020	54,463	1	5,730
Chicago, IL	June 29, 2020	67,817	1	6,184
Three months ended June 30, 2020		122,280	2	$	11,914
Six months ended June 30, 2020		1,721,669	11	$	131,257

(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 ~~nine~~six months ended ~~September~~June 30, ~~2019,~~2020, we sold ~~six~~four buildings ~~and two land parcels~~ comprised of approximately ~~1.1~~1.2 million rentable square feet with a net book value of approximately ~~$20.4~~$54.1 million to third parties. Net proceeds from the sales of rental property were approximately ~~$23.7~~$101.9 million and we recognized the full gain on the sales of rental property, net, of approximately ~~$3.3~~$47.8 million for the ~~nine~~six months ended ~~September~~June 30, ~~2019.~~2020.

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Geographic Diversification

The following table summarizes information about the 20 largest markets in our portfolio based on total annualized base rental revenue as of ~~September~~June 30, ~~2019.~~

2020.


Top 20 Markets⁽¹⁾	% of Total Annualized Base Rental Revenue
Philadelphia, PA	~~9.0~~8.7	%
Chicago, IL	~~7.3~~7.0	%
Greenville/Spartanburg, SC	~~5.7~~5.8	%
Detroit, MI	4.6	%
Milwaukee/Madison, WI	4.3	%
Pittsburgh, PA	~~4.8~~	%
~~Milwaukee/Madison, WI~~	~~4.1~~	%
~~Detroit, MI~~	~~3.9~~4.3	%
Minneapolis/St Paul, MN	~~3.3~~4.2	%
Houston, TX	~~3.2~~3.6	%
Charlotte, NC	~~2.9~~2.7	%
Indianapolis, IN	2.5	%
Boston, MA	2.5	%
Cincinnati/Dayton, OH	~~2.7~~	%
~~Boston, MA~~	~~2.7~~2.5	%
West Michigan, MI	~~2.6~~2.4	%
Columbus, OH	~~2.5~~2.3	%
El Paso, TX	~~2.4~~2.2	%
Columbia, SC	1.8	%
Westchester/So Connecticut, CT/NY	~~1.9~~1.7	%
Raleigh/Durham, NC	~~1.7~~1.5	%
~~Cleveland, OH~~	~~1.7~~	%
~~Memphis, TN~~	~~1.6~~	%
~~Baltimore, MD~~Kansas City, MO	1.5	%
~~Dallas/Ft Worth, TX~~Memphis, TN	1.4	%
Total	~~66.9~~67.5	%

(1) As defined by CoStar.

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Industry Diversification

The following table summarizes information about the 20 largest tenant industries in our portfolio based on total annualized base rental revenue as of ~~September~~June 30, ~~2019.~~

2020.


Top 20 Tenant Industries ⁽¹⁾	% of Total Annualized Base Rental Revenue
Auto Components	~~11.9~~12.1	%
Air Freight & Logistics	~~8.6~~8.0	%
Containers & Packaging	7.3	%
Commercial Services & Supplies	~~7.5~~	%
~~Containers & Packaging~~	~~6.2~~7.3	%
Machinery	~~5.1~~4.6	%
Household Durables	~~5.0~~	%
~~Building Products~~	~~4.8~~4.6	%
Food Products	4.5	%
~~Food & Staples Retailing~~	~~3.6~~	%
~~Electrical Equipment~~	~~3.5~~	%
~~Household~~Building Products	~~3.4~~	%
~~Beverages~~	~~3.1~~4.5	%
Internet & Direct Mkt Retail	~~3.0~~3.9	%
~~Textiles, Apparel, Luxury Good~~Food & Staples Retailing	3.7	%
Electrical Equipment	3.6	%
Media	3.1	%
Beverages	2.8	%
Household Products	2.7	%
Electronic Equip, Instruments	2.3	%
Specialty Retail	2.2	%
Chemicals	2.0	%
~~Media~~Textiles, Apparel, Luxury Good	1.9	%
Metals & Mining	~~1.9~~	%
~~Electronic Equip, Instruments~~	~~1.8~~	%
~~Specialty Retail~~	~~1.8~~	%
~~Chemicals~~	1.7	%
Pharmaceuticals	~~1.7~~1.5	%
Total	~~83.0~~84.3	%

(1) Industry classification based on Global Industry Classification Standard methodology.

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Tenant Diversification

The following table summarizes information about the 20 largest tenants in our portfolio based on total annualized base rental revenue as of ~~September~~June 30, ~~2019.~~2020.


Top 20 Tenants ⁽¹⁾	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
Amazon					Amazon	4	2.5	%
General Service Administration	General Service Administration	1	2.0	%	General Service Administration	1	1.8	%
Amazon		2	1.6	%
XPO Logistics, Inc.	XPO Logistics, Inc.	4	1.3	%	XPO Logistics, Inc.	5	1.3	%
DHL Supply Chain		5	1.1	%
TriMas Corporation					TriMas Corporation	4	1.0	%
Solo Cup					Solo Cup	1	1.0	%
DS Smith North America					DS Smith North America	2	0.9	%
American Tire Distributors Inc					American Tire Distributors Inc	5	0.9	%
Ford Motor Company					Ford Motor Company	1	0.8	%
Hachette Book Group, Inc.					Hachette Book Group, Inc.	1	0.8	%
Packaging Corp of America					Packaging Corp of America	5	0.8	%
Yanfeng US Automotive Interior	Yanfeng US Automotive Interior	3	1.1	%	Yanfeng US Automotive Interior	2	0.8	%
Solo Cup		1	1.1	%
TriMas Corporation		4	1.1	%
Ford Motor Company		1	0.9	%
Schneider Electric USA, Inc.					Schneider Electric USA, Inc.	3	0.8	%
FedEx Corporation	FedEx Corporation	3	0.9	%	FedEx Corporation	3	0.8	%
WestRock Company	WestRock Company	6	0.8	%	WestRock Company	6	0.8	%
Kenco Logistic Services, LLC	Kenco Logistic Services, LLC	2	0.8	%	Kenco Logistic Services, LLC	2	0.7	%
Perrigo Company					Perrigo Company	2	0.7	%
Carolina Beverage Group					Carolina Beverage Group	2	0.7	%
Generation Brands	Generation Brands	1	0.8	%	Generation Brands	1	0.7	%
Carolina Beverage Group		2	0.8	%
Perrigo Company		2	0.8	%
DHL Supply Chain					DHL Supply Chain	4	0.7	%
Emerson Electric	Emerson Electric	2	0.7	%	Emerson Electric	2	0.6	%
Quoizel, Inc.		1	0.7	%
Schneider Electric USA, Inc.		3	0.7	%
American Tire Distributors Inc		4	0.7	%
Coca-Cola Refreshments USA Inc		2	0.6	%
Medline Industries, Inc.		1	0.6	%
Total	Total	50	19.1	%	Total	56	19.1	%

(1) Includes tenants, guarantors, and/or non-guarantor parents.

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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,~~2019, for a discussion of our critical accounting policies and estimates.

~~On January 1, 2019, we adopted Accounting 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.

We define same store properties as properties that were in the Operating Portfolio for the entirety of the comparative periods presented. Same Store excludes termination fees, solar income, and revenue associated with one-time tenant reimbursements of capital expenditures. Same store properties exclude Operating Portfolio properties with expansions placed into service after December 31, ~~2017.~~2018. On ~~September~~June 30, ~~2019,~~2020, we owned ~~317~~368 industrial buildings consisting of approximately ~~63.2~~73.4 million square feet, which represents approximately ~~73.5%~~79.9% of our total portfolio, that are considered our same store portfolio in the analysis below. Same store occupancy ~~decreased~~increased approximately ~~1.9%~~1.0% to ~~94.6%~~97.2% as of ~~September~~June 30, ~~2019~~2020 compared to ~~96.5%~~96.2% as of ~~September~~June 30, ~~2018.~~2019.

Comparison of the three months ended ~~September~~June 30, ~~2019~~2020 to the three months ended ~~September~~June 30, ~~2018~~2019

The following table summarizes selected operating information for our same store portfolio and our total portfolio for the three months ended ~~September~~June 30, ~~2019~~2020 and ~~2018~~2019 (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 ~~September~~June 30, 2020 and 2019 ~~and 2018~~ with

~~Table of Contents~~

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~~2018 and our flex/office buildings and Value Add Portfolio.

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Same Store Portfolio Acquisitions/Dispositions Other Total Portfolio
Three months ended September 30, Change Three months ended September 30, Three months ended September 30, Three months ended September 30, Change
2019 2018 $ % 2019 2018 2019 2018 2019 2018 $ %
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 income 55 255 (200) (78.4) % 72 14 — — 127 269 (142) (52.8) %
Total operating revenue 75,431 75,257 174 0.2 % 23,683 10,936 3,307 2,753 102,421 88,946 13,475 15.1 %
Expenses
Property 13,796 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 impairments 4,413 — 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 %


	Same Store Portfolio														Acquisitions/Dispositions										Other									Total Portfolio
	Three months ended June 30,						Change						Three months ended June 30,								Three months ended June 30,												Three months ended June 30,		Change
	2020		2019		$		%		2020		2019		2020		2019		2020				2019				$				%
Revenue
Operating revenue
Rental income	$	89,486	$	88,884	$	602	0.7	%	$	24,639	$	5,684	$	3,346	$	1,794	$	117,471			$	96,362			$	21,109			21.9	%
Other income	103		283		(180)		(63.6)	%	39		1		4		—		146				284				(138)				(48.6)	%
Total operating revenue	89,589		89,167		422		0.5	%	24,678		5,685		3,350		1,794		117,617				96,646				20,971				21.7	%
Expenses
Property	15,522		14,967		555		3.7	%	3,770		1,086		1,100		902		20,392				16,955				3,437				20.3	%
Net operating income ⁽¹⁾	$	74,067	$	74,200	$	(133)	(0.2)	%	$	20,908	$	4,599	$	2,250	$	892	97,225				79,691				17,534				22.0	%
Other expenses
General and administrative																			9,406				8,587				819				9.5	%

Depreciation and amortization																			53,606				44,633				8,973				20.1	%

Other expenses																			588				427				161				37.7	%
Total other expenses																			63,600				53,647				9,953				18.6	%
Total expenses																			83,992				70,602				13,390				19.0	%
Other income (expense)
Interest and other income																			156				2				154				7,700.0	%
Interest expense																			(15,333)				(12,193)				(3,140)				25.8	%
Loss on extinguishment of debt																			(834)				—				(834)				100.0	%
Gain on involuntary conversion																			657				—				657				100.0	%
Gain on the sales of rental property, net																			1,045				317				728				229.7	%
Total other income (expense)																			(14,309)				(11,874)				(2,435)				(20.5)	%
Net income																			$	19,316			$	14,170			$	5,146			36.3	%

(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 increased by ~~$2.3~~$5.1 million or ~~26.1%~~36.3% to ~~$11.2~~$19.3 million for the three months ended ~~September~~June 30, ~~2019,~~2020, compared to ~~$8.9~~$14.2 million for the three months ended ~~September~~June 30, ~~2018.~~2019.

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 ~~$0.4~~$0.6 million or ~~0.5%~~0.7% to ~~$75.4~~$89.5 million for the three months ended ~~September~~June 30, ~~2019~~2020 compared to ~~$75.0~~$88.9 million for the three months ended ~~September~~June 30, ~~2018.~~2019.

Same store lease income ~~increased~~decreased by $0.2 million or ~~0.4%~~0.3% to ~~$64.0~~$76.1 million for the three months ended ~~September~~June 30, ~~2019~~2020 compared to ~~$63.8~~$76.3 million for the three months ended ~~September~~June 30, ~~2018. Approximately $1.7 million of the increase was~~2019. The decrease is primarily attributable to the reduction of rental ~~increases due~~income of approximately $1.9 million for certain leases in which we determined that the future collectability was not reasonably assured, and accordingly we converted to ~~new leases~~the cash basis of accounting and ~~renewals of existing~~reversed any accounts receivable and accrued rent balances into rental income and did not recognize revenue for payments that were not received from the tenants. This ~~increase~~decrease was ~~partially offset by~~also attributable to an approximately ~~$1.5~~$0.6 million decrease due to a reduction of base rent due to tenants downsizing their spaces and ~~vacancies.~~vacancies, as well as approximately $0.1 million decrease due to a net increase in the amortization of net above market leases. These decreases were partially offset by an increase in rental income of approximately $2.4 million due to new leases and renewals of existing tenants.

Same store other billings increased by ~~$0.2~~$0.8 million or ~~1.1%~~6.4% to ~~$11.4~~$13.4 million for the three months ended ~~September~~June 30, ~~2019~~2020 compared to ~~$11.2~~$12.6 million for the three months ended ~~September~~June 30, ~~2018.~~2019. 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 been paid ~~its taxes and operating expenses~~by the tenant directly to ~~respective vendors~~the taxing authority of approximately $0.4 million. ~~This~~The increase was ~~partially offset by a decrease~~also attributable to an increase of approximately ~~$0.2~~$0.4 million related to ~~tenant specific billings that occurred during the three months ended September 30, 2019 that did not recur during the three months ended September 30, 2018.~~

~~Same store~~ other ~~income decreased by $0.2 million or 78.4%~~expense reimbursements due 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.new leases.

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 ~~$0.1~~$0.6 million or ~~0.6%~~3.7% to ~~$13.8~~$15.5 million for the three months ended ~~September~~June 30, ~~2019~~2020 compared to ~~$13.7~~$15.0 million for the three months ended ~~September~~June 30, ~~2018.~~2019. This increase was primarily related to ~~increases~~an increase 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~~authorities directly of approximately ~~$0.2~~$0.6 million, ~~and~~as well as an increase inof $0.1 million related to repairs and maintenance ~~expense of approximately $0.3 million.~~and snow removal expense. These increases were partially offset by ~~decreases~~an decrease in ~~insurance expense of approximately $0.3 million and utility~~utilities expense of approximately $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,~~2018, we acquired 9575 buildings consisting of approximately ~~19.6~~16.6 million square feet (excluding ~~four~~five buildings that were included in the Value Add Portfolio at ~~September~~June 30, ~~2019~~2020 or transferred from the Value Add Portfolio to the Operating Portfolio after December 31, ~~2017)~~2018), and sold 2513 buildings and two land parcels consisting of approximately ~~5.0~~2.8 million square feet. For the three months ended ~~September~~June 30, ~~2019~~2020 and ~~2018,~~2019, the buildings acquired after December 31, ~~2017~~2018 contributed approximately ~~$20.7~~$21.0 million and ~~$5.9~~$4.1 million to NOI, respectively. For the three months ended ~~September~~June 30, ~~2019~~2020 and ~~2018,~~2019, the buildings sold after December 31, ~~2017~~2018 contributed approximately $(0.1) million and ~~$2.8~~$0.5 million to NOI, ~~respectively.~~

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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.~~2018. Other NOI also includes termination, solar, and other income adjustments from buildings in our same store portfolio.

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

At ~~September~~June 30, ~~2019,~~2020, we owned eight flex/office buildings consisting of approximately 0.4 million square feet, ~~four~~three buildings in our Value Add Portfolio consisting of approximately ~~1.1~~0.6 million square feet, and ~~six~~three buildings consisting of approximately ~~1.7~~0.8 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.~~2018. These buildings contributed approximately ~~$2.0~~$1.6 million and ~~$1.9~~$0.9 million to NOI for the three months ended ~~September~~June 30, ~~2019~~2020 and ~~2018,~~2019, respectively. Additionally, there was approximately ~~$(16,000)~~$0.7 million and ~~$(0.3) million~~$24,000 of termination, solar, and other income adjustments from certain buildings in our same store portfolio for the three months ended ~~September~~June 30, ~~2019~~2020 and ~~2018,~~2019, 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 ~~$7.2~~$10.0 million or ~~13.5%~~18.6% for the three months ended ~~September~~June 30, ~~2019~~2020 to ~~$60.7~~$63.6 million compared to ~~$53.5~~$53.6 million for the three months ended ~~September~~June 30, ~~2018. This~~2019. The increase 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 ~~$2.6~~$9.0 million due to an increase in the depreciable asset base as a result of net acquisitions. Additionally, general and administrative expenses increased by approximately $0.8 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, gain on involuntary conversion, and gain on the sales of rental property, net. Interest expense includes interest incurred during the period as well as adjustments related to amortization of financing fees and debt issuance costs, and amortization of fair market value adjustments associated with the assumption of debt.

Total net other expense increased ~~$2.9~~$2.4 million or ~~30.6%~~20.5% for the three months ended ~~September~~June 30, ~~2019~~2020 to ~~$12.4~~$14.3 million compared ~~$9.5~~$11.9 million for the three months ended ~~September~~June 30, ~~2018.~~2019. This increase is primarily ~~the~~a result of an increase in interest expense of approximately $3.1 million which was primarily attributable to the funding of unsecured term loans on March 25, 2020, December 18, 2019, and July 25, 2019. Additionally we recognized a ~~decrease~~loss on extinguishment of debt of approximately $0.8 million during the three months ended June 30, 2020 that was primarily related to the refinance of the Unsecured Term Loan B and Unsecured Term Loan C on April 17, 2020, as discussed in Note 4 of the accompanying Notes to Consolidated Financial Statements. These increases were partially offset by an increase in the gain on the sales of rental property, net of approximately ~~$1.6 million. This increase is also attributable~~$0.7 million and a gain on involuntary conversion of approximately $0.7 million related to an eminent domain taking of a portion of a parcel of land that occurred during the three months ended June 30, 2020. Additionally, there was an increase of approximately $0.2 million in interest ~~expense of approximately $1.4 million which was primarily attributable~~and other income due to ~~the funding of~~ an ~~unsecured term loans on July 27, 2018~~increased cash and ~~July 25, 2019 and a higher average unsecured credit facility~~cash equivalents balance during the three months ended ~~September~~June 30, ~~2019 as~~2020 compared to the three months ended ~~September~~June 30, ~~2018.~~2019.

Comparison of the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 to the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019

The following table summarizes selected operating information for our same store portfolio and our total portfolio for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018~~2019 (dollars in thousands). This table includes a reconciliation from our same store portfolio to our total portfolio by also providing information for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018~~2019 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~~2018 and our flex/office buildings and Value Add Portfolio.

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Same Store Portfolio Acquisitions/Dispositions Other Total Portfolio
Nine months ended September 30, Change Nine months ended September 30, Nine months ended September 30, Nine months ended September 30, Change
2019 2018 $ % 2019 2018 2019 2018 2019 2018 $ %
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 income 394 787 (393) (49.9) % 104 243 — 3 498 1,033 (535) (51.8) %
Total operating revenue 227,272 223,423 3,849 1.7 % 58,064 25,570 9,433 8,710 294,769 257,703 37,066 14.4 %
Expenses
Property 42,585 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 income 30 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) %


	Same Store Portfolio														Acquisitions/Dispositions										Other									Total Portfolio
	Six months ended June 30,						Change						Six months ended June 30,								Six months ended June 30,												Six months ended June 30,		Change
	2020		2019		$		%		2020		2019		2020		2019		2020				2019				$				%
Revenue
Operating revenue
Rental income	$	181,045	$	179,748	$	1,297	0.7	%	$	48,767	$	8,912	$	5,998	$	3,317	$	235,810			$	191,977			$	43,833			22.8	%
Other income	271		332		(61)		(18.4)	%	45		39		39		—		355				371				(16)				(4.3)	%
Total operating revenue	181,316		180,080		1,236		0.7	%	48,812		8,951		6,037		3,317		236,165				192,348				43,817				22.8	%
Expenses
Property	32,352		32,608		(256)		(0.8)	%	7,560		2,080		2,427		1,778		42,339				36,466				5,873				16.1	%
Net operating income ⁽¹⁾	$	148,964	$	147,472	$	1,492	1.0	%	$	41,252	$	6,871	$	3,610	$	1,539	193,826				155,882				37,944				24.3	%
Other expenses
General and administrative																			19,779				17,799				1,980				11.1	%

Depreciation and amortization																			106,294				86,936				19,358				22.3	%
Loss on impairments																			—				5,344				(5,344)				(100.0)	%
Other expenses																			1,064				826				238				28.8	%
Total other expenses																			127,137				110,905				16,232				14.6	%
Total expenses																			169,476				147,371				22,105				15.0	%
Other income (expense)
Interest and other income																			235				18				217				1,205.6	%
Interest expense																			(30,197)				(25,027)				(5,170)				20.7	%
Loss on extinguishment of debt																			(834)				—				(834)				100.0	%
Gain on involuntary conversion																			657				—				657				100.0	%
Gain on the sales of rental property, net																			47,804				1,591				46,213				2,904.7	%
Total other income (expense)																			17,665				(23,418)				41,083				(175.4)	%
Net income																			$	84,354			$	21,559			$	62,795			291.3	%

(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~~increased by ~~$16.2~~$62.8 million or ~~33.2%~~291.3% to ~~$32.7~~$84.4 million for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 compared to ~~$49.0~~$21.6 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018.~~2019.

Same Store Total Operating Revenue

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~~$1.3 million or ~~1.9%~~0.7% to ~~$226.9~~$181.0 million for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 compared to ~~$222.6~~$179.7 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018.~~2019.

Same store lease income increased by ~~$2.0~~$1.5 million or ~~1.1%~~0.9% to ~~$191.3~~$153.5 million for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 compared to ~~$189.3~~$152.0 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018.~~2019. Approximately ~~$5.8~~$4.7 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.~~tenants. This increase was partially offset by ana reduction of rental income of approximately ~~$4.1~~$1.7 million for certain leases in which we determined that the future collectability was not reasonably assured, and accordingly we converted to the cash basis of accounting and reversed any accounts receivable and accrued rent balances into rental income and did not recognize revenue for payments that were not received from the tenants. Rental income also decreased by approximately $1.5 million decrease due to a reduction of base rent due to tenants downsizing their spaces and vacancies.

Same store other billings ~~increased~~decreased by ~~$2.2~~$0.2 million or ~~6.6%~~0.5% to ~~$35.5~~$27.5 million for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 compared to ~~$33.3~~$27.7 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018.~~2019. The ~~increase~~decrease was primarily attributable to ~~an increase~~a decrease in the reimbursement of real estate taxes of approximately $0.3 million due to a decrease 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.vacancy. This ~~increase~~decrease was partially offset by ~~a decrease~~an increase of approximately ~~$0.2 million~~$0.1 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%~~expense reimbursements due 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.new leases.

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~~decreased by ~~$2.3~~$0.3 million or ~~5.6%~~0.8% to ~~$42.6~~$32.4 million for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 compared to ~~$40.3~~$32.6 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018.~~2019. This ~~increase~~decrease 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 increasea decrease in snow removal ~~and other expenses~~expense of approximately ~~$0.5~~1.0 million, ~~and~~as well as a decrease in utility expense of approximately $0.1 million. These decreases were partially offset by an increase in repairs and maintenance expense of approximately ~~$0.4 million. These increases were partially offset by a decrease in insurance~~$0.7 million and ~~utility expenses~~real estate taxes of approximately ~~$1.4~~$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,~~2018, we acquired 9575 buildings consisting of approximately ~~19.6~~16.6 million square feet (excluding ~~four~~five buildings that were included in the Value Add Portfolio at ~~September~~June 30, ~~2019~~2020 or transferred from the Value Add Portfolio to the Operating Portfolio after December 31, ~~2017)~~2018), and sold 2513 buildings and two land parcels consisting of approximately ~~5.0~~2.8 million square feet. For the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~September~~June 30, ~~2018,~~2019, the buildings acquired after December 31, ~~2017~~2018 contributed approximately ~~$49.9~~$41.5 million and ~~$9.0~~$4.9 million to NOI, respectively. For the ~~nine~~six months ended

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~~September~~ June 30, ~~2019~~2020 and ~~September~~June 30, ~~2018,~~2019, the buildings sold after December 31, ~~2017~~2018 contributed approximately ~~$0.1~~$(0.2) million and ~~$9.8~~$2.0 million to NOI, respectively. Refer to Note 3 in the accompanying Notes to Consolidated Financial Statements for additional discussion regarding buildings acquired or sold.

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Other Net Operating Income

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

At ~~September~~June 30, ~~2019,~~2020, we owned eight flex/office buildings consisting of approximately 0.4 million square feet, ~~four~~three buildings in our Value Add Portfolio consisting of approximately ~~1.1~~0.6 million square feet, and ~~six~~three buildings consisting of approximately ~~1.7~~0.8 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.~~2018. These buildings contributed approximately ~~$5.7~~$2.8 million and ~~$5.4~~$1.4 million to NOI for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~September~~June 30, ~~2018,~~2019, respectively. Additionally, there was ~~$(0.2)~~$0.8 million and ~~$(0.3)~~$0.1 million of termination, solar, and other income adjustments from certain buildings in our same store portfolio for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~September~~June 30, ~~2018,~~2019, 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~~$16.2 million or ~~11.0%~~14.6% to ~~$171.6~~$127.1 million for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 compared to ~~$154.7~~$110.9 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018.~~2019. This is primarily a result of an increase in depreciation and amortization of approximately ~~$8.6~~$19.4 million as a result of net acquisitions that increased the depreciable asset base, as well as an increase of approximately ~~$6.8~~$2.0 million in ~~loss on impairments. General~~general and administrative ~~expenses increased by approximately $1.1 million~~expense primarily due to increases in compensation and other payroll costs. These increases were partially offset by a reduction in loss on impairments of approximately $5.3 million as there were no loss on impairments recognized during the six months June 30, 2020.

Total Other Income (Expense)

Total net other expense increased ~~$32.5~~$41.1 million or ~~977.0%~~175.4% to ~~$35.8~~a total net other income of $17.7 million for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 compared to ~~$3.3~~$23.4 million total net other expense for the ~~nine~~six months ended ~~September~~June 30, ~~2018.~~2019. This increase is primarily the result of a ~~decrease~~increase in ~~the~~ gain on the sales of rental property, net of approximately ~~$29.0 million. This~~$46.2 million and a gain on involuntary conversion of approximately $0.7 million related to an eminent domain taking of a portion of a parcel of land that occurred during the six months ended June 30, 2020. Additionally, there was an increase ~~is also attributable~~of approximately $0.2 million in interest and other income due to an increased cash and cash equivalents balance during the six months ended June 30, 2020 compared to the six months ended June 30, 2019. These increases were partially offset by an increase in interest expense of approximately ~~$3.5~~$5.2 million which was primarily attributable to the funding of unsecured term loans on March ~~28, 2018, July 27, 2018,~~25, 2020, December 18, 2019, and July 25, ~~2019,~~2019. Additionally we recognized a loss on extinguishment of debt of approximately $0.8 million during the six months ended June 30, 2020 that was primarily related to the refinance of the Unsecured Term Loan B and the ~~funding~~Unsecured Term Loan C on April 17, 2020, as discussed in Note 4 of ~~unsecured notes on June 13, 2018 during~~ the ~~nine months ended September 30, 2019 as compared the nine months ended September 30, 2018.~~accompanying Notes to Consolidated Financial Statements.

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.

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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 September 30,						Nine months ended September 30,							Three months ended June 30,				Six months ended June 30,
Reconciliation of Net Income to FFO (in thousands)	Reconciliation of Net Income to FFO (in thousands)	2019		2018		2019		2018		Reconciliation of Net Income to FFO (in thousands)	2020		2019		2020		2019
Net income	Net income	$	11,190	$	8,876	$	32,749	$	48,989	Net income	$	19,316	$	14,170	$	84,354	$	21,559
Rental property depreciation and amortization	Rental property depreciation and amortization	46,834		44,281		133,622		124,999		Rental property depreciation and amortization	53,537		44,559		106,154		86,788
Loss on impairments	Loss on impairments	4,413		—		9,757		2,934		Loss on impairments	—		—		—		5,344
Gain on the sales of rental property, net	Gain on the sales of rental property, net	(1,670)		(3,239)		(3,261)		(32,276)		Gain on the sales of rental property, net	(1,045)		(317)		(47,804)		(1,591)
FFO	FFO	60,767		49,918		172,867		144,646		FFO	71,808		58,412		142,704		112,100
Preferred stock dividends	Preferred stock dividends	(1,289)		(1,289)		(3,867)		(6,315)		Preferred stock dividends	(1,289)		(1,289)		(2,578)		(2,578)
Redemption of preferred stock		—		—		—		(2,661)

Amount allocated to restricted shares of common stock and unvested units	Amount allocated to restricted shares of common stock and unvested units	(218)		(172)		(697)		(587)		Amount allocated to restricted shares of common stock and unvested units	(196)		(232)		(406)		(479)
FFO attributable to common stockholders and unit holders	FFO attributable to common stockholders and unit holders	$	59,260	$	48,457	$	168,303	$	135,083	FFO attributable to common stockholders and unit holders	$	70,323	$	56,891	$	139,720	$	109,043

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.

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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,							Three months ended June 30,				Six months ended June 30,
Reconciliation of Net Income to NOI (in thousands)	Reconciliation of Net Income to NOI (in thousands)	2019		2018		2019		2018		Reconciliation of Net Income to NOI (in thousands)	2020		2019		2020		2019
Net income	Net income	$	11,190	$	8,876	$	32,749	$	48,989	Net income	$	19,316	$	14,170	$	84,354	$	21,559

General and administrative	General and administrative	8,924		8,911		26,723		25,637		General and administrative	9,406		8,587		19,779		17,799
Transaction costs	Transaction costs	94		94		247		170		Transaction costs	8		79		59		153
Depreciation and amortization	Depreciation and amortization	46,908		44,355		133,844		125,221		Depreciation and amortization	53,606		44,633		106,294		86,936
Interest and other income	Interest and other income	(12)		(3)		(30)		(16)		Interest and other income	(156)		(2)		(235)		(18)
Interest expense	Interest expense	14,053		12,698		39,080		35,602		Interest expense	15,333		12,193		30,197		25,027
Loss on impairments	Loss on impairments	4,413		—		9,757		2,934		Loss on impairments	—		—		—		5,344

Gain on involuntary conversion										Gain on involuntary conversion	(657)		—		(657)		—
Loss on extinguishment of debt	Loss on extinguishment of debt	—		13		—		13		Loss on extinguishment of debt	834		—		834		—
Other expenses	Other expenses	364		129		1,037		694		Other expenses	580		348		1,005		673

Gain on the sales of rental property, net	Gain on the sales of rental property, net	(1,670)		(3,239)		(3,261)		(32,276)		Gain on the sales of rental property, net	(1,045)		(317)		(47,804)		(1,591)
Net operating income	Net operating income	$	84,264	$	71,834	$	240,146	$	206,968	Net operating income	$	97,225	$	79,691	$	193,826	$	155,882

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Cash Flows

Comparison of the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 to the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019

The following table summarizes our cash flows for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 compared to the ~~nine~~six months ended ~~September~~June 30, ~~2018.~~2019.


		Nine months ended September 30,						Change							Six months ended June 30,				Change
Cash Flows (dollars in thousands)	Cash Flows (dollars in thousands)	2019		2018		$		%		Cash Flows (dollars in thousands)	2020		2019		$		%
Net cash provided by operating activities	Net cash provided by operating activities	$	174,930	$	148,610	$	26,320	17.7	%	Net cash provided by operating activities	$	148,088	$	110,571	$	37,517	33.9	%
Net cash used in investing activities	Net cash used in investing activities	$	765,675	$	393,250	$	372,425	94.7	%	Net cash used in investing activities	$	55,089	$	444,544	$	(389,455)	(87.6)	%
Net cash provided by financing activities	Net cash provided by financing activities	$	577,476	$	227,766	$	349,710	153.5	%	Net cash provided by financing activities	$	9,739	$	321,026	$	(311,287)	(97.0)	%

Net cash provided by operating activities increased ~~$26.3~~$37.5 million to ~~$174.9~~$148.1 million for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 compared to ~~$148.6~~$110.6 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018.~~2019. The increase was primarily attributable to incremental operating cash flows from property acquisitions completed after ~~September~~June 30, ~~2018,~~2019, and operating performance at existing properties. These increases were partially offset by the loss of cash flows from property dispositions completed after ~~September~~June 30, ~~2018~~2019 and fluctuations in working capital due to timing of payments and rental receipts.

Net cash used in investing activities ~~increased $372.4~~decreased $389.5 million to ~~$765.7~~$55.1 million for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 compared to ~~$393.3~~$444.5 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018.~~2019. The ~~increased cash outflow~~decrease was primarily due to the acquisition of 46 buildings for a total cash consideration of approximately $748.0 million for the nine months ended September 30, 2019 compared to the acquisition of 36 buildings for a total cash consideration of approximately $458.4 million for the nine months ended September 30, 2018. The increase is also attributable to ~~a decrease~~an increase in ~~net~~ proceeds from ~~the~~ sales of rental property, net related to the disposition of four buildings during the six months ended June 30, 2020 for net proceeds of approximately $101.9 million, compared to the six months ended June 30, 2019 where we sold five buildings and two land parcels ~~during the nine months ended September 30, 2019~~ for net proceeds of approximately ~~$23.7~~$17.7 million. The decrease was also attributable to the acquisition of 11 buildings for a total cash consideration of approximately $131.1 million for the six months ended June 30, 2020 compared to the ~~nine~~acquisition of 24 buildings for a total cash consideration of approximately $445.4 million for the six months ended ~~September~~June 30, ~~2018 where we sold 11 buildings for net proceeds of approximately $89.4 million.~~2019.

Net cash provided by financing activities ~~increased $349.7~~decreased $311.3 million to ~~$577.5~~$9.7 million for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 compared to ~~$227.8~~$321.0 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018.~~2019. The ~~increase~~decrease is primarily attributable to ~~an increase~~a decrease of net proceeds from the sales of common stock of approximately ~~$295.1~~$212.3 million, ~~and a decrease~~an increase of net cash outflow on our unsecured credit facility of approximately ~~$153.5~~$174.5 million, and an increase of approximately $21.9 million in dividends paid during the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 compared to the ~~nine~~six months ended ~~September~~June 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, and2019. These increases were partially offset by an increase ofin proceeds from unsecured term loans of approximately ~~$25.0~~$100.0 million during the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 compared to the ~~nine~~six months ended ~~September~~June 30, ~~2018. These increases were partially offset by a decrease in proceeds from unsecured term notes~~2019.

Table of ~~$175.0 million and an approximately $22.2 million increase in dividends paid during the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018.~~Contents

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.

In response to the COVID-19 pandemic, we have worked to ensure that we maintain adequate liquidity. On April 17, 2020 we refinanced the Unsecured Term Loan B and the Unsecured Term Loan C, as discussed in “Indebtedness Outstanding” below. When incorporating the remaining undrawn balance available on our unsecured credit facility, the approximately $134.4 million of forward equity proceeds available to us at our option through January 13, 2021, and unused 1031 like-kind exchange proceeds, our total liquidity as of June 30, 2020 was approximately $741.4 million, with a material amount of that liquidity comprised of cash and cash equivalents.

As of ~~September~~June 30, ~~2019,~~2020, we had total immediate liquidity of approximately ~~$622.5~~$599.1 million, comprised of ~~$6.5~~$102.1 million of cash and cash equivalents and ~~$616.0~~$497.0 million of immediate availability on our unsecured credit ~~facility and unsecured term loans.~~facility.

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 summarizes the dividends attributable to our outstanding common stock that had a record date during the ~~nine~~six months ended ~~September~~June 30, ~~2019.~~2020.

Month Ended ~~2019~~2020

Declaration Date

Record Date

Per Share

Payment Date

~~September 30~~

~~July 15, 2019~~

~~September 30, 2019~~

~~0.119167~~

~~October 15, 2019~~

~~August 31~~

~~July 15, 2019~~

~~August 30, 2019~~

~~0.119167~~

~~September 16, 2019~~

~~July 31~~

~~July 15, 2019~~

~~July 31, 2019~~

~~0.119167~~

~~August 15, 2019~~

June 30

April 9, ~~2019~~2020

June ~~28, 2019~~30, 2020

~~0.119167~~$

0.12

July 15, ~~2019~~2020

May 31

April 9, ~~2019~~2020

May ~~31, 2019~~29, 2020

~~0.119167~~0.12

June ~~17, 2019~~15, 2020

April 30

April 9, ~~2019~~2020

April 30, ~~2019~~2020

~~0.119167~~0.12

May 15, ~~2019~~2020

March 31

January ~~10, 2019~~8, 2020

March ~~29, 2019~~31, 2020

~~0.119167~~0.12

April 15, ~~2019~~2020

February 2829

January ~~10, 2019~~8, 2020

February 28, ~~2019~~2020

~~0.119167~~0.12

March ~~15, 2019~~16, 2020

January 31

January ~~10, 2019~~8, 2020

January 31, ~~2019~~2020

~~0.119167~~0.12

February ~~15, 2019~~18, 2020

Total

~~1.072503~~0.72

On ~~October 15, 2019,~~July 9, 2020, our board of directors declared the common stock dividends for the months ending ~~October~~July 31, ~~2019, November~~2020, August 31, 2020, and September 30, ~~2019, and December 31, 2019~~2020 at a monthly rate of ~~$0.119167~~$0.12 per share of common stock.

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During the ~~nine~~six months ended ~~September~~June 30, ~~2019,~~2020, 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 summarizes the dividends on the Series C Preferred Stock during the ~~nine~~six months ended ~~September~~June 30, ~~2019.~~

2020.

Quarter Ended ~~2019~~2020

Declaration Date

Series C
Preferred Stock Per Share

Payment Date

~~September~~June 30

~~July 15, 2019~~April 9, 2020

0.4296875

~~September~~June 30, ~~2019~~2020

~~June 30~~March 31

~~April 9, 2019~~January 8, 2020

0.4296875

~~July 1, 2019~~

March 31,

~~January 10, 2019~~

~~0.4296875~~

~~April 1, 2019~~ 2020

Total

~~1.2890625~~0.8593750

On ~~October 15, 2019,~~July 9, 2020, our board of directors declared the Series C Preferred Stock dividends for the quarter ending ~~December 31, 2019~~September 30, 2020 at a quarterly rate of $0.4296875 per share.

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Indebtedness Outstanding

The following table summarizes certain information with respect to our indebtedness outstanding as of ~~September~~June 30, ~~2019~~2020


Loan	Loan	Principal Outstanding as of September 30, 2019 (in thousands)		Interest Rate ⁽¹⁾⁽²⁾		Maturity Date	Prepayment Terms ⁽³⁾	Loan	Principal Outstanding as of June 30, 2020 (in thousands)		Interest Rate⁽¹⁾⁽²⁾		Maturity Date	Prepayment Terms⁽³⁾
Unsecured credit facility:	Unsecured credit facility:							Unsecured credit facility:
Unsecured Credit Facility ⁽⁴⁾	Unsecured Credit Facility ⁽⁴⁾	$	78,000	L + 0.90%		January 15, 2023	i	Unsecured Credit Facility⁽⁴⁾	$	—	L + 0.90%		January 12, 2024	i
Total unsecured credit facility	Total unsecured credit facility	78,000						Total unsecured credit facility	—

Unsecured term loans:	Unsecured term loans:							Unsecured term loans:
Unsecured Term Loan C		150,000		2.39	%	September 29, 2020	i
Unsecured Term Loan B		150,000		3.05	%	March 21, 2021	i
Unsecured Term Loan A	Unsecured Term Loan A	150,000		2.70	%	March 31, 2022	i	Unsecured Term Loan A	150,000		3.38	%	March 31, 2022	i
Unsecured Term Loan D	Unsecured Term Loan D	150,000		2.85	%	January 4, 2023	i	Unsecured Term Loan D	150,000		2.85	%	January 4, 2023	i
Unsecured Term Loan G⁽⁵⁾								Unsecured Term Loan G⁽⁵⁾	300,000		3.31	%	April 18, 2023	i
Unsecured Term Loan E	Unsecured Term Loan E	175,000		3.92	%	January 15, 2024	i	Unsecured Term Loan E	175,000		3.92	%	January 15, 2024	i
Unsecured Term Loan F ⁽⁵⁾		—		3.11	%	January 12, 2025	i
Unsecured Term Loan F								Unsecured Term Loan F	200,000		L + 1.00%		January 12, 2025	i
Total unsecured term loans	Total unsecured term loans	775,000						Total unsecured term loans	975,000
Less: Total unamortized deferred financing fees and debt issuance costs	Less: Total unamortized deferred financing fees and debt issuance costs	(3,963)						Less: Total unamortized deferred financing fees and debt issuance costs	(4,718)
Total carrying value unsecured term loans, net	Total carrying value unsecured term loans, net	771,037						Total carrying value unsecured term loans, net	970,282

Unsecured notes:	Unsecured notes:							Unsecured notes:
Series F Unsecured Notes	Series F Unsecured Notes	100,000		3.98	%	January 5, 2023	ii	Series F Unsecured Notes	100,000		3.98	%	January 5, 2023	ii
Series A Unsecured Notes	Series A Unsecured Notes	50,000		4.98	%	October 1, 2024	ii	Series A Unsecured Notes	50,000		4.98	%	October 1, 2024	ii
Series D Unsecured Notes	Series D Unsecured Notes	100,000		4.32	%	February 20, 2025	ii	Series D Unsecured Notes	100,000		4.32	%	February 20, 2025	ii
Series G Unsecured Notes	Series G Unsecured Notes	75,000		4.10	%	June 13, 2025	ii	Series G Unsecured Notes	75,000		4.10	%	June 13, 2025	ii
Series B Unsecured Notes	Series B Unsecured Notes	50,000		4.98	%	July 1, 2026	ii	Series B Unsecured Notes	50,000		4.98	%	July 1, 2026	ii
Series C Unsecured Notes	Series C Unsecured Notes	80,000		4.42	%	December 30, 2026	ii	Series C Unsecured Notes	80,000		4.42	%	December 30, 2026	ii
Series E Unsecured Notes	Series E Unsecured Notes	20,000		4.42	%	February 20, 2027	ii	Series E Unsecured Notes	20,000		4.42	%	February 20, 2027	ii
Series H Unsecured Notes	Series H Unsecured Notes	100,000		4.27	%	June 13, 2028	ii	Series H Unsecured Notes	100,000		4.27	%	June 13, 2028	ii
Total unsecured notes	Total unsecured notes	575,000						Total unsecured notes	575,000
Less: Total unamortized deferred financing fees and debt issuance costs	Less: Total unamortized deferred financing fees and debt issuance costs	(2,217)						Less: Total unamortized deferred financing fees and debt issuance costs	(1,918)
Total carrying value unsecured notes, net	Total carrying value unsecured notes, net	572,783						Total carrying value unsecured notes, net	573,082

Mortgage notes (secured debt):	Mortgage notes (secured debt):							Mortgage notes (secured debt):
Wells Fargo Bank, National Association CMBS Loan	Wells Fargo Bank, National Association CMBS Loan	51,861		4.31	%	December 1, 2022	iii	Wells Fargo Bank, National Association CMBS Loan	49,473		4.31	%	December 1, 2022	iii
Thrivent Financial for Lutherans	Thrivent Financial for Lutherans	3,709		4.78	%	December 15, 2023	iv	Thrivent Financial for Lutherans	3,619		4.78	%	December 15, 2023	iv
Total mortgage notes	Total mortgage notes	55,570						Total mortgage notes	53,092
Add: Total unamortized fair market value premiums	Add: Total unamortized fair market value premiums	42						Add: Total unamortized fair market value premiums	34
Less: Total unamortized deferred financing fees and debt issuance costs	Less: Total unamortized deferred financing fees and debt issuance costs	(402)						Less: Total unamortized deferred financing fees and debt issuance costs	(299)
Total carrying value mortgage notes, net	Total carrying value mortgage notes, net	55,210						Total carrying value mortgage notes, net	52,827
Total / weighted average interest rate ⁽⁶⁾	Total / weighted average interest rate ⁽⁶⁾	$	1,477,030	3.58	%			Total / weighted average interest rate⁽⁶⁾	$	1,596,191	3.48	%

(1)Interest rate as of ~~September~~June 30, ~~2019.~~2020. At ~~September~~June 30, ~~2019,~~2020, the one-month LIBOR (“L”) was ~~2.01563%~~0.16225%. The current interest rate is not adjusted to include the amortization of deferred financing fees or debt issuance costs incurred in obtaining debt or any unamortized fair market value premiums. The spread over the applicable rate for our unsecured credit facility and unsecured term loans is based on the our debt rating, as defined in the respective loan agreements.

(2)The unsecured term loans have a stated interest rate of one-month LIBOR plus a spread of 1.0%, with the exception of the Unsecured Term Loan G which has a spread of 1.5% and is subject to a minimum rate for LIBOR of 0.25%. As of ~~September~~June 30, ~~2019,~~2020, one-month LIBOR for the Unsecured Term Loans A, ~~B, C,~~ D E, and G was swapped to a fixed rate of 2.38%, 1.85%, 2.92%, and 1.72%, respectively. One-month LIBOR for the Unsecured Term Loan F was swapped to a fixed rate of ~~1.70%, 2.05%, 1.39%, 1.85%, 2.92%,~~2.11% effective July 15, 2020. One-month LIBOR for the Unsecured Term Loan G will be swapped to a fixed rate of 1.17% effective September 29, 2020 and ~~2.11%, respectively.~~0.28% effective March 19, 2021.

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(4)The capacity of the unsecured credit facility is $500.0 million. The initial maturity date is January 15, 2023, which may be extended pursuant to two six-month extension options exercisable at our discretion upon advance written notice. Exercise of each six-month option is subject to the following conditions: (i) absence of a default immediately before the extension and immediately after giving effect to the extension, (ii) accuracy of representations and warranties as of the extension date (both immediately before and after the extension), as if made on the extension date, and (iii) payment of a fee. Neither extension option is subject to lender consent, assuming proper notice and satisfaction of the conditions.

(5)~~Capacity~~The initial maturity date is April 16, 2021, which may be extended pursuant to two one-year extension options exercisable at our discretion upon advance written notice. Exercise of ~~$200.0 million, which we have until July 12, 2020~~each one-year option is subject to ~~draw.~~the following conditions: (i) absence of a default immediately before the extension and immediately after giving effect to the extension, (ii) accuracy of representations and warranties as of the extension date (both immediately before and after the extension), as if made on the extension date, and (iii) payment of a fee. Neither extension option is subject to lender consent, assuming proper notice and satisfaction of the conditions.

(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 ~~September~~June 30, ~~2019~~2020 was approximately ~~$616.0~~$497.0 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 ~~September~~June 30, ~~2019,~~2020, we were in compliance with the applicable financial covenants.

On April 17, 2020, we entered into the $300.0 million Unsecured Term Loan G with Wells Fargo, National Association, as administrative agent on behalf of the various lenders under the agreement. In connection with execution of the Unsecured Term Loan G, the Unsecured Term Loan B and Unsecured Term Loan C were paid in full. As of June 30, 2020, the Unsecured Term Loan G bore an interest rate of LIBOR plus a spread of 1.5% based on our debt rating, as defined in the loan agreement, and subject to a minimum rate for LIBOR of 0.25%. The Unsecured Term Loan G matures on April 16, 2021, subject to two one-year extension options at our discretion, and subject to certain conditions (other than lender discretion) such as the absence of default and the payment of an extension fee. We intend to exercise both extension options. To exercise the extension options we are required pay a fee equal to (i) 0.15% of the outstanding amount on the effective day of the first extension period and (ii) 0.20% of the outstanding amount on the effective day of the second extension period. The Unsecured Term Loan G has an accordion feature that allows us to increase its borrowing capacity to $600.0 million, subject to the satisfaction of certain conditions and lender consents. The Company and certain wholly owned subsidiaries of the Operating Partnership are guarantors of the Unsecured Term Loan G. The agreement also contains financial and other covenants substantially similar to the covenants in our unsecured credit facility.

The following table summarizes our debt capital structure as of ~~September~~June 30, ~~2019.~~2020.


Debt Capital Structure	~~September~~June 30, ~~2019~~2020
Total principal outstanding (in thousands)	$	~~1,483,570~~1,603,092
Weighted average duration (years)	~~4.0~~3.9

% Secured debt	43.3		%
% Debt maturing next 12 months	10—		%
Net Debt to Real Estate Cost Basis⁽¹⁾	3531.8		%

(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.

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Equity

Preferred Stock

The following table summarizes our outstanding preferred stock issuances as of ~~September~~June 30, ~~2019.~~

2020.


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	%

~~On 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 table summarizes our at-the-market (“ATM”) common stock offering ~~programs~~program as of ~~September~~June 30, ~~2019.~~2020. We may from time to time sell common stock through sales agents under the program.

~~On 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 summarizes the~~ There was no activity ~~for~~under the ATM common stock offering ~~programs~~program during the three ~~and nine~~ months ended ~~September~~June 30, ~~2019 (in thousands, except share data).~~2020.

Three months ended September 30, 2019
ATM Common Stock Offering Program Shares
Sold Weighted Average Price Per Share Net
Proceeds
2019 $600 million ATM 875,129 $ 30.39 $ 26,326
Total/weighted average 875,129 $ 30.39 $ 26,326


		Nine months ended September 30, 2019
ATM Common Stock Offering Program	ATM Common Stock Offering Program	Shares Sold	Weighted Average Price Per Share		Net Proceeds		ATM Common Stock Offering Program	Date	Maximum Aggregate Offering Price (in thousands)		Aggregate Common Stock Available as of June 30, 2020 (in thousands)
2019 $600 million ATM	2019 $600 million ATM	7,022,332	$	28.32	$	197,074	2019 $600 million ATM	February 14, 2019	$	600,000	$	318,248

Total/weighted average		7,022,332	$	28.32	$	197,074

On ~~September 24, 2019,~~January 13, 2020, we completed an underwritten public offering of an aggregate ~~12,650,000~~10,062,500 shares of common stock at a price to the underwriters of ~~$28.60~~$30.9022 per share, consisting of (i) ~~5,500,000~~5,600,000 shares offered directly by us and (ii) ~~7,150,000~~4,462,500 shares offered by the forward dealer in connection with certain forward sale agreements (including ~~1,650,000~~1,312,500 shares offered pursuant to the underwriters’ option to purchase additional shares, which option was exercised in full). The offering closed on ~~September 27, 2019~~January 16, 2020 and we received net proceeds from the sale of shares offered directly by us of ~~$157.3~~approximately $173.1 million. Subject to our right to elect cash or net share settlement, we ~~expect~~have the ability 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 theat any time through scheduled maturity date of the forward sale agreements of ~~September 24, 2020.~~

On April 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, 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 we received net proceeds of approximately $214.7 million.January 13, 2021.

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 ~~September~~June 30, ~~2019,~~2020, we owned approximately ~~97.2%~~97.7% 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 ~~2.8%~~2.3%.

Interest Rate Risk

We use interest rate swaps to fix the rate of our variable rate debt. As of ~~September~~June 30, ~~2019,~~2020, all of our outstanding variable rate debt, with the exception of our ~~unsecured credit facility,~~Unsecured Term Loan F was fixed with interest rate swaps through maturity. The Unsecured Term Loan F was swapped to a fixed rate effective July 15, 2020 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.

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The following table details our outstanding interest rate swaps as of ~~September~~June 30, ~~2019.~~2020.


Interest Rate Derivative Counterparty	Interest Rate Derivative Counterparty	Trade Date	Effective Date	Notional Amount (in thousands)		Fair Value (in thousands)		Pay Fixed Interest Rate		Receive Variable Interest Rate	Maturity Date	Interest Rate Derivative Counterparty	Trade Date	Effective Date	Notional Amount (in thousands)		Fair Value (in thousands)		Pay Fixed Interest Rate		Receive Variable Interest Rate	Maturity Date
Regions Bank		Mar-01-2013	Mar-01-2013	$	25,000	$	51	1.3300	%	One-month L	Feb-14-2020
Capital One, N.A.		Jun-13-2013	Jul-01-2013	$	50,000	$	35	1.6810	%	One-month L	Feb-14-2020
Capital One, N.A.		Jun-13-2013	Aug-01-2013	$	25,000	$	16	1.7030	%	One-month L	Feb-14-2020
Regions Bank		Sep-30-2013	Feb-03-2014	$	25,000	$	(12)	1.9925	%	One-month L	Feb-14-2020
The Toronto-Dominion Bank	The Toronto-Dominion Bank	Oct-14-2015	Sep-29-2016	$	25,000	$	66	1.3830	%	One-month L	Sep-29-2020	The Toronto-Dominion Bank	Oct-14-2015	Sep-29-2016	$	25,000	$	(76)	1.3830	%	One-month L	Sep-29-2020
PNC Bank, N.A.	PNC Bank, N.A.	Oct-14-2015	Sep-29-2016	$	50,000	$	128	1.3906	%	One-month L	Sep-29-2020	PNC Bank, N.A.	Oct-14-2015	Sep-29-2016	$	50,000	$	(153)	1.3906	%	One-month L	Sep-29-2020
Regions Bank	Regions Bank	Oct-14-2015	Sep-29-2016	$	35,000	$	91	1.3858	%	One-month L	Sep-29-2020	Regions Bank	Oct-14-2015	Sep-29-2016	$	35,000	$	(106)	1.3858	%	One-month L	Sep-29-2020
U.S. Bank, N.A.	U.S. Bank, N.A.	Oct-14-2015	Sep-29-2016	$	25,000	$	63	1.3950	%	One-month L	Sep-29-2020	U.S. Bank, N.A.	Oct-14-2015	Sep-29-2016	$	25,000	$	(77)	1.3950	%	One-month L	Sep-29-2020
Capital One, N.A.	Capital One, N.A.	Oct-14-2015	Sep-29-2016	$	15,000	$	38	1.3950	%	One-month L	Sep-29-2020	Capital One, N.A.	Oct-14-2015	Sep-29-2016	$	15,000	$	(46)	1.3950	%	One-month L	Sep-29-2020
Royal Bank of Canada	Royal Bank of Canada	Jan-08-2015	Mar-20-2015	$	25,000	$	(56)	1.7090	%	One-month L	Mar-21-2021	Royal Bank of Canada	Jan-08-2015	Mar-20-2015	$	25,000	$	(280)	1.7090	%	One-month L	Mar-21-2021
The Toronto-Dominion Bank	The Toronto-Dominion Bank	Jan-08-2015	Mar-20-2015	$	25,000	$	(57)	1.7105	%	One-month L	Mar-21-2021	The Toronto-Dominion Bank	Jan-08-2015	Mar-20-2015	$	25,000	$	(280)	1.7105	%	One-month L	Mar-21-2021
The Toronto-Dominion Bank	The Toronto-Dominion Bank	Jan-08-2015	Sep-10-2017	$	100,000	$	(982)	2.2255	%	One-month L	Mar-21-2021	The Toronto-Dominion Bank	Jan-08-2015	Sep-10-2017	$	100,000	$	(1,493)	2.2255	%	One-month L	Mar-21-2021
Wells Fargo, N.A.	Wells Fargo, N.A.	Jan-08-2015	Mar-20-2015	$	25,000	$	(246)	1.8280	%	One-month L	Mar-31-2022	Wells Fargo, N.A.	Jan-08-2015	Mar-20-2015	$	25,000	$	(750)	1.8280	%	One-month L	Mar-31-2022
The Toronto-Dominion Bank	The Toronto-Dominion Bank	Jan-08-2015	Feb-14-2020	$	25,000	$	(579)	2.4535	%	One-month L	Mar-31-2022	The Toronto-Dominion Bank	Jan-08-2015	Feb-14-2020	$	25,000	$	(1,027)	2.4535	%	One-month L	Mar-31-2022
Regions Bank	Regions Bank	Jan-08-2015	Feb-14-2020	$	50,000	$	(1,181)	2.4750	%	One-month L	Mar-31-2022	Regions Bank	Jan-08-2015	Feb-14-2020	$	50,000	$	(2,072)	2.4750	%	One-month L	Mar-31-2022
Capital One, N.A.	Capital One, N.A.	Jan-08-2015	Feb-14-2020	$	50,000	$	(1,238)	2.5300	%	One-month L	Mar-31-2022	Capital One, N.A.	Jan-08-2015	Feb-14-2020	$	50,000	$	(2,121)	2.5300	%	One-month L	Mar-31-2022
The Toronto-Dominion Bank	The Toronto-Dominion Bank	Jul-20-2017	Oct-30-2017	$	25,000	$	(362)	1.8485	%	One-month L	Jan-04-2023	The Toronto-Dominion Bank	Jul-20-2017	Oct-30-2017	$	25,000	$	(1,093)	1.8485	%	One-month L	Jan-04-2023
Royal Bank of Canada	Royal Bank of Canada	Jul-20-2017	Oct-30-2017	$	25,000	$	(364)	1.8505	%	One-month L	Jan-04-2023	Royal Bank of Canada	Jul-20-2017	Oct-30-2017	$	25,000	$	(1,094)	1.8505	%	One-month L	Jan-04-2023
Wells Fargo, N.A.	Wells Fargo, N.A.	Jul-20-2017	Oct-30-2017	$	25,000	$	(364)	1.8505	%	One-month L	Jan-04-2023	Wells Fargo, N.A.	Jul-20-2017	Oct-30-2017	$	25,000	$	(1,094)	1.8505	%	One-month L	Jan-04-2023
PNC Bank, N.A.	PNC Bank, N.A.	Jul-20-2017	Oct-30-2017	$	25,000	$	(362)	1.8485	%	One-month L	Jan-04-2023	PNC Bank, N.A.	Jul-20-2017	Oct-30-2017	$	25,000	$	(1,093)	1.8485	%	One-month L	Jan-04-2023
PNC Bank, N.A.	PNC Bank, N.A.	Jul-20-2017	Oct-30-2017	$	50,000	$	(723)	1.8475	%	One-month L	Jan-04-2023	PNC Bank, N.A.	Jul-20-2017	Oct-30-2017	$	50,000	$	(2,184)	1.8475	%	One-month L	Jan-04-2023
The Toronto-Dominion Bank	The Toronto-Dominion Bank	Jul-24-2018	Jul-26-2019	$	50,000	$	(3,229)	2.9180	%	One-month L	Jan-12-2024	The Toronto-Dominion Bank	Apr-20-2020	Sep-29-2020	$	75,000	$	(290)	0.2750	%	One-month L	Apr-18-2023
Wells Fargo, N.A.												Wells Fargo, N.A.	Apr-20-2020	Sep-29-2020	$	75,000	$	(298)	0.2790	%	One-month L	Apr-18-2023
The Toronto-Dominion Bank												The Toronto-Dominion Bank	Apr-20-2020	Mar-19-2021	$	75,000	$	(251)	0.2750	%	One-month L	Apr-18-2023
Wells Fargo, N.A.												Wells Fargo, N.A.	Apr-20-2020	Mar-19-2021	$	75,000	$	(258)	0.2800	%	One-month L	Apr-18-2023
The Toronto-Dominion Bank												The Toronto-Dominion Bank	Jul-24-2018	Jul-26-2019	$	50,000	$	(4,932)	2.9180	%	One-month L	Jan-12-2024
PNC Bank, N.A.	PNC Bank, N.A.	Jul-24-2018	Jul-26-2019	$	50,000	$	(3,232)	2.9190	%	One-month L	Jan-12-2024	PNC Bank, N.A.	Jul-24-2018	Jul-26-2019	$	50,000	$	(4,932)	2.9190	%	One-month L	Jan-12-2024
Bank of Montreal	Bank of Montreal	Jul-24-2018	Jul-26-2019	$	50,000	$	(3,232)	2.9190	%	One-month L	Jan-12-2024	Bank of Montreal	Jul-24-2018	Jul-26-2019	$	50,000	$	(4,932)	2.9190	%	One-month L	Jan-12-2024
U.S. Bank, N.A.	U.S. Bank, N.A.	Jul-24-2018	Jul-26-2019	$	25,000	$	(1,616)	2.9190	%	One-month L	Jan-12-2024	U.S. Bank, N.A.	Jul-24-2018	Jul-26-2019	$	25,000	$	(2,466)	2.9190	%	One-month L	Jan-12-2024
Wells Fargo, N.A.	Wells Fargo, N.A.	May-02-2019	Jul-15-2020	$	50,000	$	(2,030)	2.2460	%	One-month L	Jan-15-2025	Wells Fargo, N.A.	May-02-2019	Jul-15-2020	$	50,000	$	(4,633)	2.2460	%	One-month L	Jan-15-2025
U.S. Bank, N.A.	U.S. Bank, N.A.	May-02-2019	Jul-15-2020	$	50,000	$	(2,029)	2.2459	%	One-month L	Jan-15-2025	U.S. Bank, N.A.	May-02-2019	Jul-15-2020	$	50,000	$	(4,632)	2.2459	%	One-month L	Jan-15-2025
Regions Bank	Regions Bank	May-02-2019	Jul-15-2020	$	50,000	$	(2,032)	2.2459	%	One-month L	Jan-15-2025	Regions Bank	May-02-2019	Jul-15-2020	$	50,000	$	(4,632)	2.2459	%	One-month L	Jan-15-2025
Bank of Montreal	Bank of Montreal	Jul-16-2019	Jul-15-2020	$	50,000	$	(886)	1.7165	%	One-month L	Jan-15-2025	Bank of Montreal	Jul-16-2019	Jul-15-2020	$	50,000	$	(3,436)	1.7165	%	One-month L	Jan-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 ~~September~~June 30, ~~2019,~~2020, the fair value of ~~eight~~all of our ~~interest rate swaps were in an asset position of approximately $0.5 million and the fair value of 21 of our~~29 interest rate swaps were in a liability position of approximately ~~$24.8~~$50.7 million, including any adjustment for nonperformance risk related to these agreements.

As of ~~September~~June 30, ~~2019,~~2020, we had ~~$853.0~~$975.0 million of variable rate debt. As of ~~September~~June 30, ~~2019,~~2020, all of our outstanding variable rate debt, with the exception of our ~~unsecured credit facility,~~Unsecured Term Loan F, was fixed with interest rate swaps through maturity. The Unsecured Term Loan F was swapped to a fixed rate effective July 15, 2020 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.

~~Table of Contents~~

Off-balance Sheet Arrangements

As of ~~September~~June 30, ~~2019,~~2020, we had letters of credit related to development projects and certain other agreements of approximately ~~$6.0 million and a development commitment related to a building expansion under a tenant lease of approximately $3.1~~$3.0 million. As of ~~September~~June 30, ~~2019,~~2020, we had no other material off-balance sheet arrangements.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

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

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As of ~~September~~June 30, ~~2019,~~2020, we had ~~$853.0~~$975.0 million of variable rate debt outstanding. As of ~~September~~June 30, ~~2019,~~2020, all of our outstanding variable rate debt, with the exception of ~~$78.0~~$200.0 million outstanding under our ~~unsecured credit facility,~~Unsecured Term Loan F, was fixed with interest rate ~~swaps.~~swaps through maturity. The Unsecured Term Loan F was swapped to a fixed rate effective July 15, 2020 through maturity. To the extent we undertake additional variable rate indebtedness, if interest rates increase, then so will the interest costs on our unhedged variable rate debt, which could adversely affect our cash flow and our ability to pay principal and interest on our debt and our ability to make distributions to our security holders. Further, rising interest rates could limit our ability to refinance existing debt when it matures or significantly increase our future interest expense. From time to time, we enter into interest rate swap agreements and other interest rate hedging contracts, including swaps, caps and floors. While these agreements are intended to lessen the impact of rising interest rates on us, they also expose us to the risk that the other parties to the agreements will not perform, we could incur significant costs associated with the settlement of the agreements, the agreements will be unenforceable and the underlying transactions will fail to qualify as highly-effective cash flow hedges under GAAP. In addition, an increase in interest rates could decrease the amounts third parties are willing to pay for our assets, thereby limiting our ability to change our portfolio promptly in response to changes in economic or other conditions. If interest rates increased by 100 basis points and assuming we had an outstanding balance of ~~$78.0~~$200.0 million on our ~~unsecured credit facility~~Unsecured Term Loan F (the portion outstanding at ~~September~~June 30, ~~2019~~2020 not fixed by interest rate swaps) for the ~~nine~~six months ended ~~September~~June 30, ~~2019,~~2020, our interest expense would have increased by approximately ~~$0.6~~$1.0 million for the ~~nine~~six months ended ~~September~~June 30, ~~2019.~~2020.

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 ~~September~~June 30, ~~2019.~~2020. 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 ~~September~~June 30, ~~2019~~2020 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~~Other than the following, there have been no material changes from the risk factors disclosed in ~~the~~our Annual Report on Form 10-K for the year ended December 31, ~~2018~~2019 filed with the SEC on February ~~13, 2019.~~12, 2020.

The COVID-19 pandemic or any future pandemic, epidemic or outbreak of infectious disease could have material and adverse effects on our business, financial condition, results of operations and cash flows and the markets and communities in which we and our tenants operate.

The COVID-19 pandemic has severely impacted global economic activity and caused significant volatility and negative pressure in financial markets. The global impact of the outbreak continues to rapidly evolve and many countries, including the United States, have reacted by instituting quarantines, mandating business and school closures and restricting travel. As a result, the COVID-19 pandemic is negatively impacting almost every industry directly or indirectly. Additionally, in June, the National Bureau of Economic Research announced that the United States entered into a recession in February 2020. The rapid development and fluidity of the COVID-19 pandemic precludes any prediction as to the ultimate adverse impact of COVID-19.

The COVID-19 pandemic or any future pandemic, epidemic or outbreak of infectious disease affecting states or regions in which we or our tenants operate could have material and adverse effects on our business, financial condition, results of operations and cash flows due to, among other factors:

•health or other government authorities requiring the closure of offices or other businesses or instituting quarantines of personnel as the result of, or in order to avoid, exposure to a contagious disease;

•disruption in supply and delivery chains;

•a general decline in business activity and demand for real estate;

•the repurposing or redevelopment of retail properties made defunct by the pandemic into industrial properties;

•reduced economic activity, general economic decline or recession, which may impact our tenants’ businesses, financial condition and liquidity and may cause one or more of our tenants to be unable to make rent payments to us timely, or at all, or to otherwise seek modifications of lease obligations;

•difficulty accessing debt and equity capital on attractive terms, or at all, and a severe disruption and instability in the global financial markets or deteriorations in credit and financing conditions, which may affect our access to capital necessary to fund business operations or address maturing liabilities on a timely basis; and

•the potential negative impact on the health of our personnel, particularly if a significant number of our employees are impacted, which would result in a deterioration in our ability to ensure business continuity during a disruption.

The ultimate impact of the COVID-19 pandemic or a similar health epidemic is highly uncertain and subject to change. We do not yet know the full extent of potential impacts on our business and operations, our tenant’s business and operations or the global economy as a whole. While the spread of COVID-19 may eventually be contained or mitigated, there is no guarantee that a future outbreak or any other widespread epidemics will not occur, or that the global economy will recover, either of which could materially harm our business.

The rapid development and fluidity of this situation precludes any prediction as to the full adverse impact of the COVID-19 pandemic. The COVID-19 pandemic presents material uncertainty and risk with respect to our financial condition, results of operations, cash flows and performance. Moreover, many risk factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2019, filed with the SEC on February 12, 2020, should be interpreted as heightened risks as a result of the impact of the COVID-19 pandemic.

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

Recent Sales of Unregistered Equity Securities

During the quarter ended ~~September~~June 30, 2019, the Operating Partnership issued 45,815 common units in the Operating Partnership upon exchange of outstanding long term incentive plan units pursuant to the STAG Industrial, Inc. 2011 Equity Incentive Plan, as amended and 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 September 30, 2019,~~2020, we issued ~~207,152~~228,340 shares of common stock upon redemption of ~~207,152~~228,340 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 ~~September~~June 30, ~~2019,~~2020, if any, have previously been disclosed in filings with the SEC.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

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Item 6. Exhibits


Exhibit Number		Description of Document
10.1	*		Term Loan Agreement, dated as of ~~July 12, 2019,~~April 17, 2020, 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 *			Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2 *			Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1 **			Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS *			XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the 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 contained 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: ~~October 30, 2019~~July 28, 2020	BY:	/s/ WILLIAM R. CROOKER
		William R. Crooker
		Chief Financial Officer, Executive Vice President and Treasurer (Principal Financial Officer)

	BY:	/s/ JACLYN M. PAUL
		Jaclyn M. Paul
		Chief Accounting Officer, ~~and Principal~~Senior Vice President (Principal Accounting Officer)

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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 conditions		Discounted cash flows	(7)
Three months ended September 30, 2019								$	5,950	$	4,413
Nine months ended September 30, 2019								$	10,323	$	9,757


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


	Year ended December 31, 2018
ATM Common Stock Offering Program	Shares Sold	Weighted Average Price Per Share		Net Proceeds
2017 $500 million ATM ⁽¹⁾	14,724,614	$	26.52	$	386,407
Total/weighted average	14,724,614	$	26.52	$	386,407


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


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