STAG Industrial, Inc. (the “Company” or “STAG”) (NYSE:STIR), a
company focused on the acquisition, ownership and management of
single-tenant industrial properties throughout the United States
today reported results for its predecessor for the first
quarter-ended March 31, 2011. On April 20, 2011, the Company closed
on its initial public offering (IPO) and the related formation
transactions to aggregate the predecessor and other funds owned by
affiliates of the Company. As a result, the Company’s quarterly
report on Form 10-Q for the first quarter 2011 only reflects
results of the predecessor and is not representative of the
Company’s consolidated future results. The Company has included in
this press release pro forma results and operating statistics which
reflect the activities of the Company (and its aggregated entities)
as if the IPO and related formation transactions had occurred on
January 1, 2011. Since the Company did not have comparable pro
forma reporting periods in 2010, comparative results for the
Company will not be available until after the second quarter of
2011, which can then be compared with the pro forma results from
the first quarter of 2011.
Recent Highlights
- Closed on the initial public
offering of common stock generating $205 million in gross
proceeds.
- Closed on a $100 million revolving
credit facility.
- Declared a second quarter dividend
of $0.2057 per share, which is an annualized rate of 8% on the IPO
price.
- Renewed 843,000 square feet of the
Company’s scheduled 2011 lease expirations at a per square foot
rent 5% higher than the expiring rent.
- Leased an additional 138,000 square
feet of existing vacant space.
Initial Public Offering
The Company’s initial public offering included 13,750,000 shares
of common stock at $13.00 per share. On May 13, 2011, the
underwriters closed on their over-allotment option to purchase an
additional 2,062,500 shares at the IPO price, resulting in total
gross proceeds to the Company of approximately $205 million. To
date, approximately $165 million of proceeds has been used for debt
repayment and related costs with the balance to be used for general
corporate purposes including acquisitions of additional
properties.
Upon completion of the IPO and related formation transactions,
the Company owns 91 industrial properties totaling 13.9 million
square feet. The Company has a full service platform that
incorporates acquisitions, asset management, credit, accounting and
legal functions.
“STAG transformed its capacity to grow with the completion of
our initial public offering in mid-April. Our investment thesis
remains constant – to target single-tenant, class B industrial
assets located primarily in secondary markets in the United States.
With access to equity capital and attractive financing, we are well
positioned to produce both growth and income for our shareholders
over the long term,” stated Benjamin Butcher, Chief Executive
Officer of STAG.
Pro Forma Financial Results for the
Three Months Ended March 31, 2011
Pro forma operating revenue for the Company for the three months
ended March 31, 2011 was $14.4 million. Included in this operating
revenue are the results of two recently closed property
acquisitions totaling 452,000 square feet. These acquisitions were
reflected in the Company’s final prospectus filed with the SEC on
April 18, 2011.
Operating expenses for the three months ended March 31, 2011
were $2.8 million for the quarter and reflected $150,000 in
non-recurring operating expenses from higher than expected utility
and snow removal costs from the harsh weather conditions this past
quarter, particularly in the Midwest.
The Company generated pro forma Net Operating Income (NOI) on a
cash basis in the first quarter of $12 million before reduction for
the non-recurring expenses mentioned above, and $11.8 million after
those expenses.
The Company produced $6.1 million of pro forma Funds from
Operations (FFO) and $6.1 million of pro forma Core FFO, which
excludes acquisition costs that are expensed for reporting
purposes. After non-controlling interest, pro forma FFO and pro
forma Core FFO attributable to common shareholders were $4.1
million and $4.1 million, respectively.
Included in the pro forma results of operations for the three
months ended March 31, 2011 were the following non-cash items:
- Straight line rental income adjustment
of $0.3 million,
- Above/below market lease amortization
of ($0.8) million,
- Gain on interest rate swaps of $0.6
million,
- Deferred financing cost amortization of
($0.3) million,
- Amortization of non-cash compensation
($0.2) million.
A reconciliation of net income to pro forma NOI and pro forma
FFO, all non-GAAP financial measures, appears at the end of this
release.
Leasing Activity
Of the lease expirations set to expire in 2011, which represent
8% of the Company’s square footage, 843,000 square feet (or all but
2%) have now been re-leased. The average square foot rent paid on
those renewed leases increased by 5% compared to the expiring rent
paid. In addition, the Company signed three leases on vacant space
representing 138,000 square feet. Occupancy for the Company’s
portfolio is currently at 90.8%. During the quarter ended March 31,
2011, the Company expended $0.1 million on a pro forma basis for
tenant improvements and renewal lease commissions.
Acquisition Activity
Since the beginning of 2011, the Company completed the
acquisition of the two industrial properties mentioned above. These
properties included a 300,000 square foot warehouse facility
located in the greater Charlotte, NC area and leased to Carolina
Beer and Beverage, Inc. and a 152,000 square foot light
manufacturing and warehouse facility located in the greater
Chattanooga, TN area and leased to Renfro Charleston, LLC. The
Company paid a total of approximately $17 million for the two
assets. The Company is also currently under contract to acquire
three properties comprising approximately 639,000 square feet for a
combined purchase price of approximately $29 million. We are at
various stages of due diligence for these properties and there are
significant conditions to closing so there can be no assurance that
these transactions will be consummated.
Balance Sheet and Financing
Activity
Concurrent with the IPO, the Company completed the following
formation transactions: (1) the Company acquired 100% of the
ownership interests in the entities that owned the predecessor and
other funds owned by affiliates of the Company in exchange for
units in the Company’s operating partnership; (2) management
contributed the management company in consideration for operating
partnership units, (3) the Company assumed $256 million of debt
secured by certain of the Company’s properties, (4) the Company
completed its extension of the maturity date to October 31, 2013 on
$141 million of secured debt, and (5) the Company closed on a $100
million secured revolving credit facility with an accordion feature
to expand to $200 million under certain conditions. As of May 23,
2011, the non-controlling interest in the Company represented
approximately 33%. On May 17, 2011, the Company used proceeds from
the exercise of the overallotment option to repay the $11.0 million
outstanding under the secured corporate revolving credit facility.
As of May 23, 2011, the Company had $245 million of debt
outstanding secured by certain of the Company’s properties.
The weighted average interest rate on the Company’s outstanding
debt balance at March 31, 2011 was 5.5%.
Dividend Declaration
On May 2, 2011, the Company declared a second quarter dividend
of $0.26 payable on July 15, 2011 to all shareholders of record on
June 30, 2011. The dividend payment will be pro-rated for the
portion of the second quarter that the Company has been in
existence as a public company. On a pro-rated basis, the dividend
will be approximately $0.2057 for the second quarter. On an
annualized basis, this dividend would be $1.04 per share, or an
annual distribution rate of 8%, based on the Company’s IPO price of
$13 per share.
About STAG Industrial, Inc.
STAG Industrial, Inc. is a newly formed, self-administered
and self-managed full-service real estate company focused on the
acquisition, ownership and management of single-tenant industrial
properties throughout the United States. STAG’s portfolio consists
of 91 properties in 26 states with approximately 13.9 million
rentable square feet.
For additional information, please visit the Company’s website
at www.stagindustrial.com.
STAG Industrial, Inc. and Subsidiaries Pro Forma
Condensed Consolidated Balance Sheet March 31, 2011
(unaudited, in millions)
March 31, 2011 Assets Rental property Land $
55.9 Building and improvements 364.6 Less: accumulated depreciation
(20.6) Total rental property 399.9 Cash and cash equivalents
17.4 Restricted cash and escrows 5.3 Rents receivable, net 4.0
Prepaid expenses and other assets 1.3 Deferred financing costs, net
1.6 Leasing commissions, net 0.1 Deferred leasing intangibles, net
87.8 Goodwill 4.8 Due from related parties 0.6
Total
assets $ 522.8
Liabilities and equity Mortgage
notes payable $ 245.3 Accounts payable and other liabilities 4.0
Interest rate swaps 2.3 Tenant security deposits 0.9 Prepaid rent
2.4 Deferred leasing intangibles 1.9 Due to related party 0.3 Total
liabilities 257.1 Owners'/shareholders' equity 178.3
Non-controlling interest in operating partnership 87.4 Total
owners'/shareholders' equity 265.7
Total liabilities and
equity $ 522.8
STAG Industrial, Inc. and Subsidiaries
Pro Forma Condensed Consolidated Statement of Operations
For the Three Months Ended March 31, 2011 (unaudited, in
millions, except per share data)
Three Months
Ended March
31, 2011
Revenues Rental income $ 12.4 Tenant recoveries 1.7 Other
0.3
Total revenues 14.4
Expenses Property 2.8 General
and administrative 2.3 Depreciation and amortization 6.6
Total
expenses 11.7
Other income (expense) Interest income -
Interest expense (3.8) Gain on interest rate swaps 0.6
Total
other income (expense) (3.2)
Net loss before
non-controlling interest (0.5) Non-controlling interest in
operating partnership (0.2) Net loss allocable to common
shareholders $ (0.3) Pro forma loss per share basic
allocable to common shareholders $ (0.02) Pro forma weighted
average outstanding shares basic 15,812,500 Pro forma loss per
share diluted allocable to common shareholders $ (0.02) Pro forma
weighted average outstanding shares diluted 15,893,309
STAG
Industrial, Inc. and Subsidiaries Reconciliation of Pro
Forma GAAP to Non-GAAP Measures For the Three Months Ended
March 31, 2011 (unaudited, in millions, except per share
data)
Three Months
Ended March
31, 2011
Net loss allocable to the Company $ (0.5) Interest
income - Other revenue (0.3) Gain on interest rate swaps (0.6)
Depreciation and amortization 6.6 Interest expense 3.8 General and
administrative expenses 2.3
Net operating income (NOI) allocable
to the Company $ 11.3 Straight line rental income adjustment
(0.3) Above/below market lease amortization 0.8
Cash net
operating income (NOI) allocable to the Company 11.8
Net loss allocable to the Company $ (0.5) Depreciation and
amortization 6.6
Funds from operations $ 6.1 Acquisition
costs 0.0
Core funds from operations (FFO) allocable to the
Company $ 6.1
STAG Industrial, Inc. and Subsidiaries
Reconciliation of Pro Forma GAAP to Non-GAAP Measures For
the Three Months Ended March 31, 2011 (unaudited, in
millions, except per share data)
Three Months Ended
March 31, 2011
Net loss allocable to common shareholders $ (0.3)
Interest income - Other revenue (0.3) Gain on interest rate swaps
(0.6) Depreciation and amortization 6.6 Interest expense 3.8
General and administrative expenses 2.3 Non-controlling interest in
the operating partnership's share of the above adjustments (3.9)
Net operating income (NOI) allocable to common shareholders
$ 7.6
Net loss allocable to common
shareholders $ (0.3) Depreciation and amortization 6.6
Non-controlling interest in the operating partnership's share of
the above adjustments (2.2)
Funds from operations $ 4.1
Acquisition costs 0.0
Core funds from operations (FFO) allocable
to common shareholders $ 4.1
Financial Measures
Net operating income (NOI) is defined as rental revenues,
including reimbursements, less property expenses and real estate
taxes, which excludes depreciation, amortization, impairment,
general and administrative expenses, interest expense, and gain
(loss) on interest rate swaps. The Company considers NOI to be an
appropriate supplemental performance measure because it reflects
the operating performance of its properties and excludes certain
items that are not considered to be controllable in connection with
the management of the property such as depreciation, amortization,
impairment, general and administrative expenses, interest income,
interest expense and gain (loss) on interest rate swaps. However
this measure should not be viewed as an alternative measure of the
Company’s financial performance since it excludes expenses which
could materially impact the Company’s results of operations.
Further, the Company’s NOI may not be comparable to that of other
real estate companies, as they may use different methodologies for
calculating NOI, same store NOI (excluding revenue from lease
terminations), and cash basis same store NOI (excluding revenue
from lease terminations).
NAREIT developed FFO as a relative measure of performance of an
equity REIT in order to recognize that the value of
income-producing real estate historically has not depreciated on
the basis determined under GAAP. FFO is generally defined as net
income (loss) attributable to common shareholders, calculated in
accordance with GAAP, plus real estate-related depreciation and
amortization. NAREIT’s definition of FFO is subject to
interpretation, and modifications to the NAREIT definition of FFO
are common. The Company presents FFO excluding acquisition costs.
The Company believes that FFO excluding acquisition costs, which is
a non-routine item, is useful supplemental information regarding
its operating performance as it provides a more meaningful and
consistent comparison of the Company’s operating performance and
allows investors to more easily compare the Company’s operating
results. Readers should note that FFO captures neither the changes
in the value of the Company’s properties that result from use or
market conditions, nor the level of capital expenditures and
leasing commissions necessary to maintain the operating performance
of the Company’s properties, all of which have real economic effect
and could materially impact the Company’s results from operations.
Accordingly, the Company’s FFO may not be comparable to other
REITs’ FFO and FFO should be considered only as a supplement to net
income (loss) attributable to common shareholders as a measure of
the Company’s performance.
Forward-Looking Statements
This press release, together with other statements and
information publicly disseminated by the Company, 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. The Company
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 the Company'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 the Company'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 the
Company’s final prospectus related to its initial public offering,
as updated by the Company’s annual and quarterly reports.
Accordingly, there is no assurance that the Company's expectations
will be realized. Except as otherwise required by the federal
securities laws, the Company 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 the Company’s expectations with regard
thereto or any change in events, conditions or circumstances on
which any such statement is based.
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