PR Newswire | Nov 5, 2020 04:02PM EST

11/05 15:01 CST

STAG Industrial Announces Third Quarter 2020 Results BOSTON, Nov. 5, 2020

BOSTON, Nov. 5, 2020 /PRNewswire/ -- STAG Industrial, Inc. (the "Company") (NYSE:STAG), today announced its financial and operating results for the quarter ended September 30, 2020.

"The strength of the industrial sector continues to be reflected in STAG's performance," said Ben Butcher, Chief Executive Officer of the Company. "The execution by our team this quarter produced historic leasing levels and an acceleration in acquisition activity. We are excited with the opportunities at hand as we look into the fourth quarter and 2021."

Third Quarter 2020 Highlights

* Reported $0.15 of net income per basic and diluted common share for the third quarter of 2020, as compared to $0.07 of net income per basic and diluted common share for the third quarter of 2019. Reported $22.4 million of net income attributable to common stockholders for the third quarter of 2020 compared to net income attributable to common stockholders of $9.5 million for the third quarter of 2019. * Achieved $0.46 of Core FFO per diluted share for the third quarter of 2020, equal to the third quarter of 2019 Core FFO per diluted share. Generated Core FFO of $70.7 million for the third quarter of 2020 compared to $60.6 million for the third quarter of 2019, an increase of 16.7%. * Produced Cash NOI of $95.2 million for the third quarter of 2020, an increase of 15.4% compared to the third quarter of 2019 of $82.5 million. * Produced Same Store Cash NOI of $73.5 million for the third quarter of 2020, an increase of 0.8% compared to the third quarter of 2019 of $72.9 million. * Produced Cash Available for Distribution of $54.8 million for the third quarter of 2020, an increase of 10.1% compared to the third quarter of 2019 of $49.8 million. * Acquired five buildings in the third quarter of 2020, consisting of 629,681 square feet, for $64.7 million, with a Cash Capitalization Rate of 6.3% and a Straight-Line Capitalization Rate of 6.8%. * Sold one building in the third quarter of 2020, consisting of 425,300 square feet for $20.0 million, resulting in a gain of $9.1 million. * Achieved an Occupancy Rate of 96.3% on the total portfolio and 96.9% on the Operating Portfolio as of September 30, 2020. * Commenced Operating Portfolio leases of 5.6 million square feet for the third quarter of 2020, resulting in a Cash Rent Change and Straight-line Rent Change of 1.3% and 4.7%, respectively. * Experienced 72.1% Retention for 5.6 million square feet of leases expiring in the quarter. * As of November 5, 2020, the Company collected 98.2% of third quarter base rental billings and granted rent deferral equal to 0.60%.

Please refer to the Non-GAAP Financial Measures and Other Definitions section at the end of this release for definitions of capitalized terms used in this release.

The Company will host a conference call tomorrow, Friday, November 6, 2020 at 10:00 a.m. (Eastern Time), to discuss the quarter's results and provide information about acquisitions, operations, capital markets and corporate activities. Details of the call can be found at the end of this release.

Key Financial Measures

THIRD QUARTER 2020 KEY FINANCIAL MEASURES

Three months ended Nine months ended September 30, September 30, 2020

Metrics 2020 2019 % Change 2020 2019 % Change

(in $000s, exceptper share data)

Net incomeattributable to $22,386 $9,533 134.8 % $102,021 $27,734 267.9 %common stockholders

Net income per $0.15 $0.07 114.3 % $0.69 $0.23 200.0 %common share - basic

Net income percommon share - $0.15 $0.07 114.3 % $0.69 $0.23 200.0 %diluted

Cash NOI $95,169 $82,477 15.4 % $285,520 $235,007 21.5 %

Same Store Cash NOI $73,455 $72,895 0.8 % $220,215 $216,361 1.8 %^(1)

Adjusted EBITDAre $87,268 $75,710 15.3 % $258,539 $214,515 20.5 %

Core FFO $70,741 $60,596 16.7 % $213,156 $171,894 24.0 %

Core FFO per share / $0.47 $0.46 2.2 % $1.41 $1.36 3.7 %unit - basic

Core FFO per share / $0.46 $0.46 0.0 % $1.40 $1.36 2.9 %unit - diluted

Cash Available for $54,813 $49,786 10.1 % $179,793 $145,393 23.7 %Distribution

(1) The Same Store pool accounted for 79.1% of the total portfolio square footage as of September 30, 2020.

Definitions of the above-mentioned non-GAAP financial measures, together with reconciliations to net income (loss) in accordance with GAAP, appear at the end of this release. Please also see the Company's supplemental information package for additional disclosure.

Acquisition and Disposition Activity

For the three months ended September 30, 2020, the Company acquired five buildings for $64.7 million with an Occupancy Rate of 100.0% upon acquisition. The chart below details the acquisition activity for the quarter:

THIRD QUARTER 2020 ACQUISITION ACTIVITY

Date Purchase W.A. Lease Cash Straight-LineMarket Acquired Square Feet Buildings Price ($000s) Term (Years) Capitalization Capitalization Rate Rate

Philadelphia, 8/31/2020 112,294 1 $8,427 4.0PA

Pittsburgh, 9/3/2020 125,000 1 15,580 15.0PA

Pittsburgh, 9/24/2020 66,387 1 6,685 6.9PA

Charlotte, NC 9/28/2020 50,000 1 5,729 10.0

Cleveland, OH 9/29/2020 276,000 1 28,261 5.4

Total /weighted 629,681 5 $64,682 7.6 6.3% 6.8%average

The chart below details the 2020 acquisition activity and Pipeline through November 5, 2020:

2020 ACQUISITION ACTIVITY AND PIPELINE DETAIL

Purchase W.A. Lease Cash Straight-Line Square Feet Buildings Price ($000s) Term (Years) Capitalization Capitalization Rate Rate

Q1 1,599,389 9 $119,343 7.3 6.7% 7.2%

Q2 122,280 2 11,914 6.7 6.4% 6.8%

Q3 629,681 5 64,682 7.6 6.3% 6.8%

Total /weighted 2,351,350 16 $195,939 7.4 6.5% 7.0%average

As ofNovember 5,2020

Subsequentto 3.7 million 9 $258.0 millionquarter-endacquisitions

Pipeline 32.4 million 173 $2.8 billion

The chart below details the disposition activity for the nine months ended September 30, 2020:

2020 DISPOSITION ACTIVITY

Square Feet Buildings Sale Price ($000s)

Q1 1,182,606 3 $101,500

Q2 52,500 1 2,363

Q3 425,300 1 20,000

Total 1,660,406 5 $123,863

Leasing Activity

The chart below details the leasing activity for leases commenced during the three months ended September 30, 2020:

THIRD QUARTER 2020 OPERATING PORTFOLIO LEASING ACTIVITY

W.A. Cash SL Base LeaseLease Square Lease Rent Tenant Cash Rent SL RentType Feet Term Base Rent Commissions Improvements Change Change Retention (Years) $/SF $/SF $/SF $/SF

New 1,576,265 4.4 $4.00 $3.97 $1.08 $0.16 (4.7)% (5.2)%leases

Renewal 4,006,340 6.2 $3.86 $4.01 $0.40 $0.20 3.1% 7.9% 72.1%Leases

Total /weighted 5,582,605 5.7 $3.90 $4.00 $0.60 $0.19 1.3% 4.7%average

The chart below details the leasing activity for leases commenced during the nine months ended September 30, 2020:

2020 YEAR TO DATE OPERATING PORTFOLIO LEASING ACTIVITY

W.A. Cash SL Base Lease TenantLease Square Lease Base Rent Rent Commissions Improvements Cash Rent SL Rent RetentionType Feet Term $/SF $/SF $/SF $/SF Change Change (Years)

New 2,448,688 5.8 $3.99 $4.09 $1.36 $0.58 (4.9)% (1.2)%leases

Renewal 7,629,286 5.7 $4.13 $4.31 $0.46 $0.30 3.6% 9.8% 81.4%Leases

Total /weighted 10,077,974 5.7 $4.10 $4.26 $0.68 $0.36 1.7% 7.4%average

Additionally, for the three and nine months ended September 30, 2020, leases commenced totaling 82,420 and 564,358 square feet, respectively, related to Value Add assets and are excluded from the Operating Portfolio statistics above.

As of November 5th, 96.9% of October base rental billings have been collected. An additional 0.6% of October base rental billings yet to be received relates to investment grade tenants and tenants who pay at the end of the month, bringing the total to 97.5%. The timing of these expected payments is consistent with past practices. Of the remaining 2.5% of uncollected base rental billings, 1.0% of October base rental billings have been deferred.

Capital Market Activity

As of September 30, 2020, net debt to annualized Run Rate Adjusted EBITDAre was 4.4x and Liquidity was $567.1 million. The Company has the ability to settle the remaining $132.5 million in net proceeds from the January 13, 2020 equity offering between now and January 13, 2021.

Conference Call

The Company will host a conference call tomorrow, Friday, November 6, 2020, at 10:00 a.m. (Eastern Time) to discuss the quarter's results. The call can be accessed live over the phone toll-free by dialing (877) 407-4018, or for international callers, (201) 689-8471. A replay will be available shortly after the call and can be accessed by dialing (844) 512-2921, or for international callers, (412) 317-6671. The passcode for the replay is 13711004.

Interested parties may also listen to a simultaneous webcast of the conference call by visiting the Investor Relations section of the Company's website at www.stagindustrial.com, or by clicking on the following link:

http://ir.stagindustrial.com/QuarterlyResults

Supplemental Schedule

The Company has provided a supplemental information package to provide additional disclosure and financial information on its website (www.stagindustrial.com) under the "Quarterly Results" tab in the Investor Relations section.

Additional information is also available on the Company's website at www.stagindustrial.com.

CONSOLIDATED BALANCE SHEETS

STAG Industrial, Inc.

(unaudited, in thousands, except share data)

September 30, 2020 December 31, 2019

Assets

Rental Property:

Land $ 447,356 $ 435,923

Buildings and improvements, net ofaccumulated depreciation of $473,369 and 3,164,553 3,087,435$387,633, respectively

Deferred leasing intangibles, net ofaccumulated amortization of $264,262 and 439,046 475,149$241,304, respectively

Total rental property, net 4,050,955 3,998,507

Cash and cash equivalents 70,137 9,041

Restricted cash 4,623 2,823

Tenant accounts receivable 66,761 57,592

Prepaid expenses and other assets 49,157 38,231

Interest rate swaps - 303

Operating lease right-of-use assets 24,124 15,129

Assets held for sale, net - 43,019

Total assets $ 4,265,757 $ 4,164,645

Liabilities and Equity

Liabilities:

Unsecured credit facility $ - $ 146,000

Unsecured term loans, net 970,696 871,375

Unsecured notes, net 573,181 572,883

Mortgage notes, net 52,365 54,755

Accounts payable, accrued expenses and 74,619 53,737other liabilities

Interest rate swaps 45,812 18,819

Tenant prepaid rent and security deposits 23,413 21,993

Dividends and distributions payable 18,302 17,465

Deferred leasing intangibles, net ofaccumulated amortization of $14,176 and 24,991 26,738$12,064, respectively

Operating lease liabilities 26,414 16,989

Total liabilities 1,809,793 1,800,754

Equity:

Preferred stock, par value $0.01 pershare, 20,000,000 shares authorized atSeptember 30, 2020 and December 31, 2019,

Series C, 3,000,000 shares (liquidationpreference of $25.00 per share) issued 75,000 75,000and outstanding at September 30, 2020 andDecember 31, 2019

Common stock, par value $0.01 per share,300,000,000 shares authorized atSeptember 30, 2020 and December 31, 2019,respectively, 149,227,013 and 142,815,593 1,492 1,428shares issued and outstanding atSeptember 30, 2020 and December 31, 2019,respectively

Additional paid-in capital 3,155,271 2,970,553

Cumulative dividends in excess of (782,037) (723,027)earnings

Accumulated other comprehensive loss (45,055) (18,426)

Total stockholders' equity 2,404,671 2,305,528

Noncontrolling interest 51,293 58,363

Total equity 2,455,964 2,363,891

Total liabilities and equity $ 4,265,757 $ 4,164,645

CONSOLIDATED STATEMENTS OF OPERATIONS

STAG Industrial, Inc.

(unaudited, in thousands, except per share data)

Three months ended September 30, Nine months ended September 30,

2020 2019 2020 2019

Revenue

Rental income $ 117,247 $ 102,294 $ 353,057 $ 294,271

Other income 48 127 403 498

Total revenue 117,295 102,421 353,460 294,769

Expenses

Property 20,817 18,157 63,156 54,623

General and 9,537 8,924 29,316 26,723administrative

Depreciationand 53,921 46,908 160,215 133,844amortization

Loss on 3,172 4,413 3,172 9,757impairments

Other expenses 436 458 1,500 1,284

Total expenses 87,883 78,860 257,359 226,231

Other income(expense)

Interest and 165 12 400 30other income

Interest (15,928) (14,053) (46,125) (39,080)expense

Loss onextinguishment - - (834) -of debt

Gain oninvoluntary 1,500 - 2,157 -conversion

Gain on thesales of 9,060 1,670 56,864 3,261rentalproperty, net

Total otherincome (5,203) (12,371) 12,462 (35,789)(expense)

Net income $ 24,209 $ 11,190 $ 108,563 $ 32,749

Less: incomeattributabletononcontrolling 466 290 2,471 912interest afterpreferredstockdividends

Net incomeattributableto STAG $ 23,743 $ 10,900 $ 106,092 $ 31,837Industrial,Inc.

Less:preferred 1,289 1,289 3,867 3,867stockdividends

Less: amountallocated to 68 78 204 236participatingsecurities

Net incomeattributable $ 22,386 $ 9,533 $ 102,021 $ 27,734to commonstockholders

Weightedaverage commonshares 148,997 127,272 148,412 122,460outstanding -basic

Weightedaverage commonshares 149,905 127,469 148,865 122,720outstanding -diluted

Net income pershare - basicand diluted

Net income pershareattributable $ 0.15 $ 0.07 $ 0.69 $ 0.23to commonstockholders -basic

Net income pershareattributable $ 0.15 $ 0.07 $ 0.69 $ 0.23to commonstockholders -diluted

RECONCILIATIONS OF GAAP TO NON-GAAP MEASURES

STAG Industrial, Inc.

(unaudited, in thousands)

Three months ended September 30, Nine months ended September 30,

2020 2019 2020 2019

NET OPERATINGINCOMERECONCILIATION

Net income $ 24,209 $ 11,190 $ 108,563 $ 32,749

General and 9,537 8,924 29,316 26,723administrative

Transaction 23 94 82 247costs

Depreciationand 53,921 46,908 160,215 133,844amortization

Interest and (165) (12) (400) (30)other income

Interest 15,928 14,053 46,125 39,080expense

Loss on 3,172 4,413 3,172 9,757impairments

Gain oninvoluntary (1,500) - (2,157) -conversion

Loss onextinguishment - - 834 -of debt

Other expenses 413 364 1,418 1,037

Gain on thesales of (9,060) (1,670) (56,864) (3,261)rentalproperty, net

Net operating $ 96,478 $ 84,264 $ 290,304 $ 240,146income

Net operating $ 96,478 $ 84,264 $ 290,304 $ 240,146income

Straight-linerent (3,648) (3,029) (12,162) (8,440)adjustments,net

Straight-linetermination,solar and 862 - 3,749 (43)other incomeadjustments,net

Amortizationof above and 1,477 1,242 3,629 3,344below marketleases, net

Cash netoperating $ 95,169 $ 82,477 $ 285,520 $ 235,007income

Cash netoperating $ 95,169income

Cash NOI fromacquisitions'and 620dispositions'timing

Cashtermination, (1,011)solar andother income

Run Rate Cash $ 94,778NOI

Same StorePortfolio NOI

Total NOI $ 96,478 $ 84,264 $ 290,304 $ 240,146

Less: NOInon-same-store (22,574) (9,883) (67,224) (18,774)properties

Termination,solar andother 361 (15) (428) (104)adjustments,net

Same Store NOI $ 74,265 $ 74,366 $ 222,652 $ 221,268

Less:straight-linerent (1,632) (2,425) (5,186) (7,760)adjustments,net

Amortizationof above and 822 954 2,749 2,853below marketleases, net

Same Store $ 73,455 $ 72,895 $ 220,215 $ 216,361Cash NOI

EBITDA FORREAL ESTATE(EBITDAre)RECONCILIATION

Net income $ 24,209 $ 11,190 $ 108,563 $ 32,749

Depreciationand 53,921 46,908 160,215 133,844amortization

Interest and (165) (12) (400) (30)other income

Interest 15,928 14,053 46,125 39,080expense

Loss on 3,172 4,413 3,172 9,757impairments

Gain on thesales of (9,060) (1,670) (56,864) (3,261)rentalproperty, net

EBITDAre $ 88,005 $ 74,882 $ 260,811 $ 212,139

ADJUSTEDEBITDAreRECONCILIATION

EBITDAre $ 88,005 $ 74,882 $ 260,811 $ 212,139

Straight-linerent (3,534) (3,064) (11,919) (8,543)adjustments,net

Amortizationof above and 1,477 1,242 3,629 3,344below marketleases, net

Non-cashcompensation 2,946 2,556 8,736 7,371expense

Termination,solar and (149) - (1,477) (43)other income,net

Transaction 23 94 82 247costs

Gain oninvoluntary (1,500) - (2,157) -conversion

Loss onextinguishment - - 834 -of debt

Adjusted $ 87,268 $ 75,710 $ 258,539 $ 214,515EBITDAre

Adjusted $ 87,268EBITDAre

AdjustedEBITDAre fromacquisitions' 620anddispositions'timing

Run RateAdjusted $ 87,888EBITDAre

RECONCILIATIONS OF GAAP TO NON-GAAP MEASURES

STAG Industrial, Inc.

(unaudited, in thousands, except per share data)

Three months ended September 30, Nine months ended September 30,

2020 2019 2020 2019

CORE FUNDSFROMOPERATIONSRECONCILIATION

Net income $ 24,209 $ 11,190 $ 108,563 $ 32,749

Rentalpropertydepreciation 53,853 46,834 160,007 133,622andamortization

Loss on 3,172 4,413 3,172 9,757impairments

Gain on thesales of (9,060) (1,670) (56,864) (3,261)rentalproperty, net

Funds from $ 72,174 $ 60,767 $ 214,878 $ 172,867operations

Preferredstock (1,289) (1,289) (3,867) (3,867)dividends

Amountallocated torestrictedshares of (184) (218) (590) (697)common stockand unvestedunits

Funds fromoperationsattributableto common $ 70,701 $ 59,260 $ 210,421 $ 168,303stockholdersand unitholders

Funds fromoperationsattributableto common $ 70,701 $ 59,260 $ 210,421 $ 168,303stockholdersand unitholders

Amortizationof above and 1,477 1,242 3,629 3,344below marketleases, net

Transaction 23 94 82 247costs

Loss onextinguishment - - 834 -of debt

Gain oninvoluntary (1,500) - (2,157) -conversion

Non-recurringdead deal 40 - 347 -costs

Core fundsfrom $ 70,741 $ 60,596 $ 213,156 $ 171,894operations

Weightedaverage commonshares andunits

Weightedaverage common 148,997 127,272 148,412 122,460sharesoutstanding

Weightedaverage units 2,994 3,456 3,231 3,568outstanding

Weightedaverage common 151,991 130,728 151,643 126,028shares andunits - basic

Dilutive 908 197 453 260shares

Weightedaverage commonshares, units,and other 152,899 130,925 152,096 126,288dilutiveshares -diluted

Core fundsfromoperations per $ 0.47 $ 0.46 $ 1.41 $ 1.36share / unit -basic

Core fundsfromoperations per $ 0.46 $ 0.46 $ 1.40 $ 1.36share / unit -diluted

CASH AVAILABLEFORDISTRIBUTIONRECONCILIATION

Core fundsfrom $ 70,741 $ 60,596 $ 213,156 $ 171,894operations

Non-rentalpropertydepreciation 68 74 208 222andamortization

Straight-linerent (3,534) (3,064) (11,919) (8,543)adjustments,net

Straight-linetermination,solar and 862 - 3,749 (43)other incomeadjustments,net

Recurringcapital (502) (1,484) (973) (2,414)expenditures

Non-recurringcapital (8,848) (6,357) (19,048) (17,184)expenditures

Capitalexpenditures (349) - (3,712) -reimbursed bytenants

New leasecommissions (4,695) (1,752) (8,213) (3,214)and tenantimprovements

Renewal leasecommissions (2,626) (1,456) (4,363) (4,605)and tenantimprovements

Non-cashportion of 750 673 2,172 1,909interestexpense

Non-cashcompensation 2,946 2,556 8,736 7,371expense

Cash availablefor $ 54,813 $ 49,786 $ 179,793 $ 145,393distribution

Non-GAAP Financial Measures and Other Definitions

Acquisition Capital Expenditures:We define Acquisition Capital Expenditures as Recurring and Non-Recurring Capital Expenditures identified at the time of acquisition. Acquisition Capital Expenditures also include new lease commissions and tenant improvements for space that was not occupied under the Company's ownership.

Cash Available for Distribution: Cash Available for Distribution represents Core FFO, excluding non-rental property depreciation and amortization, straight-line rent adjustments, non-cash portion of interest expense, non-cash compensation expense, and deducts capital expenditures reimbursed by tenants, recurring and non-recurring capital expenditures, and leasing commissions and tenant improvements.

Cash Available for Distribution 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, these measurements should be compared with our reported net income or net loss in accordance with GAAP, as presented in our consolidated financial statements.

Cash Available for Distribution excludes, among other items, depreciation and amortization and capture neither the changes in the value of our buildings that result from use or market conditions of our buildings, all of which have real economic effects and could materially impact our results from operations, the utility of these measures as measures of our performance is limited. In addition, our calculation of Cash Available for Distribution may not be comparable to similarly titled measures disclosed by other REITs.

Cash Capitalization Rate: We define Cash Capitalization Rate as calculated by dividing (i) the Company's estimate of year one cash net operating income from the applicable property's operations stabilized for occupancy (post-lease-up for vacant properties), which does not include termination income, solar income, miscellaneous other income, capital expenditures, general and administrative costs, reserves, tenant improvements and leasing commissions, credit loss, or vacancy loss, by (ii) the GAAP purchase price plus estimated Acquisition Capital Expenditures. These Capitalization Rate estimates are subject to risks, uncertainties, and assumptions and are not guarantees of future performance, which may be affected by known and unknown risks, trends, uncertainties, and factors that are beyond our control, including those risk factors contained in our Annual Report on Form 10-K for the year ended December 31, 2019.

Cash Rent Change: 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.

Comparable Lease: 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.

Earnings before Interest, Taxes, Depreciation, and Amortization for Real Estate (EBITDAre), Adjusted EBITDAre, Annualized Adjusted EBITDAre, and Run Rate Adjusted EBITDAre: We define EBITDAre in accordance with the standards established by the National Association of Real Estate Investment Trusts ("NAREIT"). EBITDAre represents net income (loss) (computed in accordance with GAAP) before interest expense, interest and other income, tax, depreciation and amortization, gains or losses on the sale of rental property, and loss on impairments. Adjusted EBITDAre further excludes transaction costs, termination income, solar income, revenue associated with one-time tenant reimbursements of capital expenditures, straight-line rent adjustments, non-cash compensation expense, amortization of above and below market leases, net, gain (loss) on involuntary conversion, loss on extinguishment of debt, and other non-recurring items.

We define Annualized Adjusted EBITDAre as Adjusted EBITDAre multiplied by four.

We define Run Rate Adjusted EBITDAre as Adjusted EBITDAre plus incremental Adjusted EBITDAre adjusted for a full period of acquisitions and dispositions. Run Rate Adjusted EBITDAre does not reflect the Company's historical results and does not predict future results, which may be substantially different.

EBITDAre, Adjusted EBITDAre, and Run Rate Adjusted EBITDAre 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, EBITDAre, Adjusted EBITDAre, and Run Rate Adjusted EBITDAre should be compared with our reported net income or net loss in accordance with GAAP, as presented in our consolidated financial statements. We believe that EBITDAre, Adjusted EBITDAre, and Run Rate Adjusted EBITDAre are helpful to investors as supplemental measures of the operating performance of a real estate company because they are direct measures of the actual operating results of our properties. We also use these measures in ratios to compare our performance to that of our industry peers.

Funds from Operations (FFO) and Core FFO: We define FFO in accordance with the standards established by the National Association of Real Estate Investment Trusts ("NAREIT"). FFO represents net income (loss) (computed in accordance with GAAP), excluding gains (or losses) from sales of depreciable operating property, gains (losses) from sales of land, 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. Core FFO excludes transaction costs, amortization of above and below market leases, net, loss on extinguishment of debt, gain (loss) on involuntary conversion, gain (loss) on swap ineffectiveness, and non-recurring other expenses.

None of FFO or Core FFO should 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, these measurements should be compared with our reported net income or net loss in accordance with GAAP, as presented in our consolidated financial statements. We use 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. We and investors may use Core FFO similarly as FFO.

However, because FFO and Core FFO exclude, among other items, depreciation and amortization and capture neither the changes in the value of our buildings that result from use or market conditions of our buildings, all of which have real economic effects and could materially impact our results from operations, the utility of these measures as measures of our performance is limited. In addition, other REITs may not calculate FFO in accordance with the NAREIT definition as we do, and, accordingly, our FFO may not be comparable to such other REITs' FFO. Similarly, our calculation of Core FFO may not be comparable to similarly titled measures disclosed by other REITs.

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

Liquidity: We define Liquidity as the amount of aggregate undrawn nominal commitments the Company could immediately borrow under the Company's unsecured debt instruments, consistent with the financial covenants, plus unrestricted cash balances.

Market: We define Market as the market defined by CoStar based on the building address. If the building is located outside of a CoStar defined market, the city and state is reflected.

Net operating income (NOI), Cash NOI, and Run Rate Cash NOI: We define NOI as rental income, including reimbursements, less property expenses, which excludes depreciation, amortization, loss on impairments, general and administrative expenses, interest expense, interest income, transaction costs, gain (loss) on involuntary conversion, loss on extinguishment of debt, gain on sales of rental property, and other expenses.

We define Cash NOI as NOI less straight-line rent adjustments and less amortization of above and below market leases, net.

We define Run Rate Cash NOI as Cash NOI plus Cash NOI adjusted for a full period of acquisitions and dispositions, less cash termination income, solar income and revenue associated with one-time tenant reimbursements of capital expenditures. Run Rate Cash NOI does not reflect the Company's historical results and does not predict future results, which may be substantially different.

We consider NOI, Cash NOI and Run Rate Cash NOI to be appropriate supplemental performance measures to net income because we believe they help us, and investors understand the core operations of our buildings. None of these measures should 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, these measurements should be compared with our reported net income or net loss in accordance with GAAP, as presented in our consolidated financial statements. Further, our calculations of NOI, Cash NOI and Run Rate NOI may not be comparable to similarly titled measures disclosed by other REITs.

Non-Recurring Capital Expenditures: We define Non-Recurring Capital Expenditures as capital items for upgrades or items that previously did not exist at a building or capital items which have a longer useful life, such as roof replacements. Non-Recurring Capital Expenditures funded by parties other than the Company or capital expenditures reimbursed by tenants in lump sum and Acquisition Capital Expenditures are excluded.

Occupancy Rate: 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.

Operating Portfolio: 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, assets contained in the Value Add Portfolio, and assets classified as held for sale.

Pipeline: We define Pipeline as a point in time measure that includes all of the transactions under consideration by the Company's acquisitions group that have passed the initial screening process. The pipeline also includes transactions under contract and transactions with non-binding LOIs.

Recurring Capital Expenditures: We define Recurring Capital Expenditures as capital items required to sustain existing systems and capital items which generally have a shorter useful life. Recurring Capital Expenditures funded by parties other than the Company are excluded.

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

Retention: We define Retention as the percentage determined by taking Renewal Lease square footage commencing in the period divided by square footage of leases expiring in the period for assets included in the Operating Portfolio.

Same Store: We define Same Store properties as properties that were in the Operating Portfolio for the entirety of the comparative periods presented. Same Store GAAP NOI and Same Store Cash NOI exclude termination fees, solar income, and revenue associated with one-time tenant reimbursements of capital expenditures.

Stabilization: We define Stabilization for assets under development or redevelopment to occur as the earlier of achieving 90% occupancy or 12 months after completion. Stabilization for assets that were acquired and immediately added to the Value Add Portfolio occurs under the following:

* 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; * 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.

Straight-Line Capitalization Rate: We define Straight-Line Capitalization Rate as calculated by dividing (i) the Company's estimate of average annual net operating income from the applicable property's operations stabilized for occupancy (post-lease-up for vacant properties), which does not include termination income, solar income, miscellaneous other income, capital expenditures, general and administrative costs, reserves, tenant improvements and leasing commissions, credit loss, or vacancy loss, by (ii) the GAAP purchase price plus estimated Acquisition Capital Expenditures. These Capitalization Rate estimates are subject to risks, uncertainties, and assumptions and are not guarantees of future performance, which may be affected by known and unknown risks, trends, uncertainties, and factors that are beyond our control, including those risk factors contained in our Annual Report on Form 10-K for the year ended December 31, 2019.

Straight-Line Rent Change (SL Rent Change): 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.

Value Add Portfolio: We define the Value Add Portfolio as properties that meet any of the following criteria:

* less than 75% occupied as of the acquisition date; * will be less than 75% occupied due to known move-outs within two years of the acquisition date; * out of service with significant physical renovation of the asset; * development.

Weighted Average Lease Term: We define Weighted Average Lease Term as the contractual lease term in years as of the lease start date weighted by square footage. Weighted Average Lease Term related to acquired assets reflects the remaining lease term in years as of the acquisition date weighted by square footage.

Forward-Looking Statements

This earnings release contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. STAG Industrial, Inc. (STAG) intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and includes this statement for purposes of complying with these safe harbor provisions. Forward-looking statements, which are based on certain assumptions and describe STAG's future plans, strategies and expectations, are generally identifiable by use of the words "believe," "will," "expect," "intend," "anticipate," "estimate," "should", "project" or similar expressions. You should not rely on forward-looking statements since they involve known and unknown risks, uncertainties and other factors that are, in some cases, beyond STAG's control and which could materially affect actual results, performances or achievements. Factors that may cause actual results to differ materially from current expectations include, but are not limited to, the risk factors discussed in STAG's most recent Annual Report on Form 10-K for the year ended December 31, 2019, as updated by the Company's subsequent reports filed with the Securities and Exchange Commission. Accordingly, there is no assurance that STAG's expectations will be realized. Except as otherwise required by the federal securities laws, STAG disclaims any obligation or undertaking to publicly release any updates or revisions to any forward-looking statement contained herein (or elsewhere) to reflect any change in STAG's expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

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SOURCE STAG Industrial, Inc.