STAG INDUSTRIAL, INC. ANNOUNCES THIRD QUARTER 2013 RESULTS

View all news 11/04/2013 BOSTON, Nov. 4, 2013 /PRNewswire/ -- STAG Industrial, Inc. (the "Company") (NYSE: STAG), a company focused on the acquisition, ownership and management of single-tenant industrial properties throughout the United States, today announced its financial and operating results for the third quarter 2013. (Logo: http://photos.prnewswire.com/prnh/20110907/NE63410LOGO) In the Third Quarter of 2013, the Company: Generated Cash Net Operating Income (Cash NOI) of $29.3 million compared to $19.2 million for the third quarter of 2012, an increase of 53%. Generated Core Funds from Operations (Core FFO) of $17.5 million compared to $10.9 million for the third quarter of 2012, an increase of 60%. On a per share basis, this represents $0.35 per fully diluted share compared to $0.29 per fully diluted share in the third quarter of 2012, a 21% increase. Generated Adjusted Funds from Operations (AFFO) of $17.6 million compared to $11.0 million for the third quarter of 2012, an increase of 60%. Acquired six buildings for a total all-in cost of approximately $79.5 million with a weighted average lease term of over 5 years. Achieved year to date acquisition volume of $249 million. Added approximately 1.9 million square feet to the Company's portfolio through these acquisitions, increasing the Company's square footage by 5.8% over the prior quarter. Leased approximately 469,000 square feet including approximately 149,000 square feet of new and expansion leases. Achieved occupancy on the Company's portfolio of 94.0% and same store occupancy of 92.5%. Attained a 61% retention rate on the 2.7 million square feet of leases due to expire year to date. Declared a third quarter dividend of $0.30 per share, an annualized rate of 6.0% on the quarter ended share price of $20.12. Announced the increase in frequency of the Company's common dividend payment from quarterly to monthly starting in the fourth quarter of 2013. "We continue to enjoy success in the execution of our investment thesis and the attainment of our significant external growth targets. Our leasing team has done an admirable job in filling vacancies as they occur in our owned portfolio," commented Benjamin Butcher, the Company's Chief Executive Officer. Acquisition Activity During the third quarter of 2013, the Company completed the acquisition of six industrial buildings consisting of approximately 1.9 million square feet in six individual transactions. THIRD QUARTER 2013 ACQUISITIONS STAG Industrial, Inc. Acq. Date SF Buildings CBSA Cost (mm) 07/18/13 150,000 1 Nashville-Davidson-Murfreesboro-Franklin, TN $5.7 07/31/13 100,100 1 Tulsa, OK $5.1 08/16/13 205,063 1 Milwaukee-Waukesha-West Allis, WI $9.3 08/21/13 1,035,249 1 Baltimore-Columbia-Towson, MD $44.4 09/20/13 107,348 1 Minneapolis-St. Paul-Bloomington, MN-WI $5.1 09/26/13 350,500 1 Springfield, OH $9.9 Total 1,948,260 6 $79.5 Subsequent to the end of the third quarter, the Company acquired one building containing 215,900 square feet located in Orlando, Florida for approximately $8.1 million. The Company also has entered into contracts to acquire fouradditional buildings for a combined purchase price of approximately $40 million, subject to various closing conditions. These conditions have not yet been satisfied so there can be no assurance that these transactions will be consummated. Leasing Activity and Occupancy In the third quarter the Company signed 148,852 square feet of new and expansion leases and 320,245 square feet of renewals. Tenant improvements and leasing commissions for leases signed in the third quarter were approximately $1.3 million or 4.4% of Cash NOI. Five leases consisting of 235,112 square feet expired in the third quarter of 2013. The tenant retention rate for these leases was 29%. Additionally, there was one month to month lease containing 283,000 square feet which expired in the third quarter resulting in an aggregate retention rate for the third quarter of 13% and a year to date retention rate of 61%. The rental rate on the renewed leases expiring in the third quarter increased 1.3% on a cash basis and increased 9.0% on a GAAP basis. Of the total 449,812 square feet that did not renew in the third quarter, 220,182 square feet was re-leased the next business day. Occupancy for the Company's portfolio was 94.0% at the end of the third quarter 2013 compared to 93.9% at end of the second quarter 2013. Year over year same store occupancy decreased from 95.6% to 92.5%. The quarter to date same store portfolio is defined as those properties owned July 1, 2012 that were owned throughout 2012 and through the third quarter of 2013. The same store occupancy decline for the quarter is principally the result of the previously disclosed 427,000 square foot move out in Sun Prairie, Wisconsin on May 31, 2013. Subsequent to quarter end, the Company signed a ten year lease for the entire space. Key Financial Measures Cash NOI, for the third quarter of 2013 was approximately $29.3 million, an increase of 53% compared to Cash NOI in the third quarter of 2012 of approximately $19.2 million. Cash NOI after noncontrolling interest was approximately $25.2 million for the third quarter of 2013. Core FFO for the third quarter of 2013 was approximately $17.5 million, an increase of 60% over the third quarter of 2012 of approximately $10.9 million. Core FFO attributable to common stockholders was approximately $15.1 million or $0.35 per diluted share of common stock as compared to $0.29 per diluted share of common stock in the third quarter of 2012, an increase of 21%. AFFO was approximately $17.6 million for the third quarter of 2013 compared to approximately $11.0 million for the third quarter of 2012, an increase of 60%. AFFO attributable to common stockholders was approximately $15.2 million in the third quarter of 2013. Net Income for the third quarter of 2013 was approximately $0.3 million. Net Income was reduced by depreciation and amortization expense of approximately $17.5 million. A reconciliation of Net Income to Cash NOI, Adjusted EBITDA, Core FFO, FFO, and AFFO, all non-GAAP financial measures, appears at the end of this release. The Company has included in a supplemental information package the results and operating statistics that reflect the activities of the Company for the three months ended September 30, 2013. See below regarding information for the supplemental information package. Financial Strength and Liquidity As of quarter end, the Company's net debt to annualized adjusted earnings before interest, tax, depreciation and amortization (Adjusted EBITDA) was 4.6x, interest coverage based on Adjusted EBITDA was 5.0x, and the weighted average interest rate on the outstanding debt was 3.98%. Adjusted EBITDA was calculated based on annualizing the Company's results for the three months ended September 30, 2013. The Company's total debt to total enterprise value was 29.9% as of September 30, 2013. Enterprise value of $1.7 billion is based on the September 30, 2013 closing share price of $20.12 times 51 million outstanding shares and units plus $139 million of preferred equity and total debt of $497 million. As of quarter end, the Company had approximately $497 million of debt outstanding with an average term of 5.2 years. This included $150 million under the Company's five year unsecured term loan, which was fully drawn at September 30, 2013. The interest rate on $100 million of this amount has been swapped at an all-in interest rate of 2.42%. The outstanding debt balance also included $100 million drawn under the Company's $150 million seven year unsecured term loan, which is now swapped at an all-in interest rate of 3.75%. At quarter end, there was a $20 million outstanding balance and $180 million of availability under the Company's $200 million unsecured revolving credit facility and a $100 million outstanding balance and $50 million of availability under the Company's seven year unsecured term loan. Subsequent to quarter end, the Company modified the terms of its unsecured revolving credit facility and five year term loan to further reduce borrowing spreads and unused fees. Offerings Under the "At The Market" (ATM) stock offering program, the Company issued an aggregate of approximately 1.8 million shares of common stock during the third quarter of 2013, receiving gross proceeds of approximately $36.9 million. Dividends During the quarter, the Board of Directors approved the increase in the frequency of the Company's common dividend payment from quarterly to monthly. The Company's Board of Directors then declared a monthly dividend of $0.10 per common share per month, which equates to $1.20 per share annually, and $0.30 per share quarterly, for the months of October, November, and December. The Company's Board of Directors has declared a December 13, 2013 record date for the payment of the fourth quarter preferred stock dividends for its 9.0% Series A Cumulative Redeemable Preferred Stock (NYSE: STAG Pr A) ("Series A Preferred") and its 6.625% Series B Cumulative Redeemable Preferred Stock (NYSE: STAG Pr B) ("Series B Preferred"). The Company confirmed that the dividend for the Series A Preferred is $0.5625 per share, which equates to $2.25 per share on an annualized basis, and the dividend for the Series B Preferred is $0.4140625 per share, which equates to $1.65625 per share on an annualized basis. Both preferred stock dividends will be payable on December 31, 2013. Board of Directors On November 1, 2013, the Board of Directors appointed Virgis W. Colbert to serve as a member of the Board of Directors, effective January 1, 2014. Conference Call The Company will host a conference call on Tuesday, November 5, 2013, at 11:00 a.m. (Eastern Time) to discuss the operating and financial results. The call can be accessed live over the phone by dialing (877) 407-0784 or, for international callers, (201) 689-8560. A replay will be available shortly after the call and can be accessed by dialing (877) 870-5176 or, for international callers, (858) 384-5517. The passcode for the replay is 10000694. The replay will be available until November 12, 2013. Interested parties also may listen to a simultaneous webcast of the conference call by logging on to the Company's website at www.stagindustrial.com. The on-line replay will be available for a limited time following the call. Supplemental Schedules The Company has provided a supplemental information package to provide additional disclosure and financial information for the benefit of the Company's various stakeholders. This can be found under the "Presentations" tab in the Investor Relations section of the Company's website at www.stagindustrial.com. 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, 2013 December 31, 2012 Assets Rental Property: Land $ 126,685 $ 104,656 Buildings 813,705 654,518 Tenant improvements 35,717 34,900 Building and land improvements 30,831 22,153 Less: accumulated depreciation (64,562) (46,175) Total rental property, net 942,376 770,052 Cash and cash equivalents 23,909 19,006 Restricted cash 6,810 5,497 Tenant accounts receivable, net 12,911 9,351 Prepaid expenses and other assets 3,590 1,556 Interest rate swaps 2,282 - Deferred financing fees, net 5,354 4,704 Leasing commissions, net 2,720 1,674 Goodwill 4,923 4,923 Due from related parties 180 806 Deferred leasing intangibles, net 208,097 187,555 Total assets $ 1,213,152 $ 1,005,124 Liabilities and Equity Liabilities: Mortgage notes payable $ 226,686 $ 229,915 Unsecured credit facility 20,000 99,300 Unsecured term loans 250,000 150,000 Accounts payable, accrued expenses and other liabilities 16,158 12,111 Interest rate swaps 131 480 Tenant prepaid rent and security deposits 7,956 5,686 Dividends and distributions payable 15,285 11,301 Deferred leasing intangibles, net 6,871 6,871 Total liabilities 543,087 515,664 Equity: Preferred stock, par value $0.01 per share, 10,000,000 shares authorized, Series A, 2,760,000 shares (liquidation preference of $25.00 per share) issued and outstanding at September 30, 2013 and December 31, 2012 69,000 69,000 Series B, 2,800,000 shares (liquidation preference of $25.00 per share) issued and outstanding at September 30, 2013 and no shares issued and outstanding at December 31, 2012 70,000 - Common stock, par value $0.01 per share, 100,000,000 shares authorized, 44,052,248 and 35,698,582 shares issued and outstanding at September 30, 2013 and December 31, 2012, respectively 440 357 Additional paid-in capital 562,511 419,643 Common stock dividends in excess of earnings (105,697) (61,024) Accumulated other comprehensive income (loss) 1,906 (371) Total stockholders' equity 598,160 427,605 Noncontrolling interest 71,905 61,855 Total equity 670,065 489,460 Total liabilities and equity $ 1,213,152 $ 1,005,124 CONSOLIDATED STATEMENTS OF OPERATIONS STAG Industrial, Inc. (unaudited, in thousands, except share data) Three months Ended September 30, Nine months Ended September 30, 2013 2012 2013 2012 Revenue Rental income $ 30,391 $ 18,708 $ 84,871 $ 50,797 Tenant recoveries 4,285 2,063 11,427 6,068 Other income 207 331 865 981 Total revenue 34,883 21,102 97,163 57,846 Expenses Property 2,686 1,262 7,699 4,030 General and administrative 4,376 3,656 13,358 9,962 Real estate taxes and insurance 3,622 1,603 9,518 4,574 Property acquisition costs 986 1,067 2,831 2,509 Depreciation and amortization 17,463 10,236 49,411 28,110 Loss on impairment - - - 622 Other expenses 89 86 336 145 Total expenses 29,222 17,910 83,153 49,952 Other income (expense) Interest income 3 9 9 17 Interest expense (5,370) (3,558) (14,866) (11,776) Gain on interest rate swaps - - - 215 Offering costs - - (27) (68) Loss on extinguishment of debt - (947) - (929) Total other income (expense) (5,367) (4,496) (14,884) (12,541) Net income (loss) from continuing operations $ 294 $ (1,304) $ (874) $ (4,647) Discontinued operations Income attributable to discontinued operations - 329 102 564 Loss on impairment attributable to discontinued operations - (3,941) - (3,941) Gain on sales of real estate - - 464 219 Total income (loss) attributable to discontinued operations - (3,612) 566 (3,158) Net income (loss) $ 294 $ (4,916) $ (308) $ (7,805) Less: loss attributable to noncontrolling interest after preferred stock dividends (335) (1,248) (958) (3,244) Net income (loss) attributable to STAG Industrial, Inc. $ 629 $ (3,668) $ 650 $ (4,561) Less: preferred stock dividends 2,712 1,553 6,783 4,659 Less: amount allocated to unvested restricted stockholders 64 41 197 81 Net loss attributable to common stockholders $ (2,147) $ (5,262) $ (6,330) $ (9,301) Weighted average common shares outstanding — basic and diluted 42,753,722 29,752,057 41,766,740 21,716,590 Loss per share — basic and diluted Loss from continuing operations attributable to common stockholders $ (0.05) $ (0.08) $ (0.16) $ (0.32) Income (loss) from discontinued operations attributable to common stockholders $ - $ (0.10) $ 0.01 $ (0.11) Loss per share — basic and diluted $ (0.05) $ (0.18) $ (0.15) $ (0.43) RECONCILIATIONS OF GAAP TO NON-GAAP MEASURES STAG Industrial, Inc. (unaudited, in thousands) Three months Ended September 30, Nine months Ended September 30, 2013 2012 2013 2012 Net income (loss) $ 294 $ (4,916) $ (308) $ (7,805) Asset management fee income (192) (303) (707) (924) General and administrative 4,376 3,656 13,358 9,962 Property acquisition costs 986 1,067 2,831 2,509 Depreciation and amortization 17,463 10,354 49,508 28,486 Interest income (3) (9) (9) (17) Interest expense 5,370 3,578 14,866 11,934 Gain on interest rate swaps - - - (215) Offering costs - - 27 68 Loss on impairment - 3,941 - 4,563 Loss on extinguishment of debt - 947 - 929 Other expenses 89 86 336 145 Gain on sales of real estate - - (464) (219) NET OPERATING INCOME $ 28,383 $ 18,401 $ 79,438 $ 49,416 Noncontrolling interest (3,926) (3,551) (10,726) (12,860) Net operating income after noncontrolling interest $ 24,457 $ 14,850 $ 68,712 $ 36,556 Net operating income $ 28,383 $ 18,401 $ 79,438 $ 49,416 Straight-line rent adjustments, net (632) (464) (2,139) (1,733) Intangible amortization in rental income, net 1,524 1,223 4,399 3,481 CASH NET OPERATING INCOME $ 29,275 $ 19,160 $ 81,698 $ 51,164 Noncontrolling interest (4,050) (3,698) (11,031) (13,313) Cash net operating income after noncontrolling interest $ 25,225 $ 15,462 $ 70,667 $ 37,851 Cash net operating income $ 29,275 $ 19,160 $ 81,698 $ 51,164 New property cash net operating income (12,381) (751) (37,765) (5,117) Cash net operating income from discontinued operations - (443) (160) (1,026) Termination income - (90) - (240) SAME STORE CASH NET OPERATING INCOME $ 16,894 $ 17,876 $ 43,773 $ 44,781 Net income (loss) $ 294 $ (4,916) $ (308) $ (7,805) Intangible amortization in rental income, net 1,524 1,223 4,399 3,481 Property acquisition costs 986 1,067 2,831 2,509 Depreciation and amortization 17,463 10,354 49,508 28,486 Interest income (3) (9) (9) (17) Interest expense 5,370 3,578 14,866 11,934 Gain on interest rate swaps - - - (215) Offering costs - - 27 68 Loss on impairment - 3,941 - 4,563 Loss on extinguishment of debt - 947 - 929 Gain on sales of real estate - - (464) (219) ADJUSTED EBITDA $ 25,634 $ 16,185 $ 70,850 $ 43,714 Noncontrolling interest (3,546) (3,123) (9,566) (11,376) Adjusted EBITDA after noncontrolling interest $ 22,088 $ 13,062 $ 61,284 $ 32,338 RECONCILIATIONS OF GAAP TO NON-GAAP MEASURES STAG Industrial, Inc. (unaudited, in thousands, except share data) Three months Ended September 30, Nine months Ended September 30, 2013 2012 2013 2012 Net income (loss) $ 294 $ (4,916) $ (308) $ (7,805) Depreciation and amortization 17,463 10,354 49,508 28,486 Loss on impairment - 3,941 - 4,563 Gain on sales of real estate - - (464) (219) Funds from operations $ 17,757 $ 9,379 $ 48,736 $ 25,025 Preferred stock dividends (2,712) (1,553) (6,783) (4,659) Amount allocated to unvested restricted stockholders (64) (41) (197) (81) Funds from operations attributable to common stockholders and unit holders $ 14,981 $ 7,785 $ 41,756 $ 20,285 Noncontrolling interest (2,081) (1,510) (5,665) (5,300) Funds from operations attributable to common stockholders $ 12,900 $ 6,275 $ 36,091 $ 14,985 Funds from operations attributable to common stockholders and unit holders $ 14,981 $ 7,785 $ 41,756 $ 20,285 Intangible amortization in rental income, net 1,524 1,223 4,399 3,481 Termination income - (90) - (240) Property acquisition costs 986 1,067 2,831 2,509 Gain on interest rate swaps - - - (215) Offering costs - - 27 68 Loss on extinguishment of debt - 947 - 929 CORE FUNDS FROM OPERATIONS $ 17,491 $ 10,932 $ 49,013 $ 26,817 Noncontrolling interest (2,428) (2,118) (6,644) (7,000) Core funds from operations attributable to common stockholders $ 15,063 $ 8,814 $ 42,369 $ 19,817 Weighted average shares outstanding - basic 42,753,722 29,752,057 41,766,740 21,716,590 Unvested restricted shares 77,298 43,613 94,164 63,401 Unvested outperformance plan 497,018 566,676 497,018 566,676 Weighted average shares outstanding - diluted 43,328,038 30,362,346 42,357,922 22,346,667 CORE FUNDS FROM OPERATIONS PER COMMON SHARE - BASIC $ 0.35 $ 0.30 $ 1.01 $ 0.91 CORE FUNDS FROM OPERATIONS PER COMMON SHARE - DILUTED $ 0.35 $ 0.29 $ 1.00 $ 0.89 Core funds from operations $ 17,491 $ 10,932 $ 49,013 $ 26,817 Straight-line rent adjustments, net (632) (464) (2,139) (1,733) Recurring capital expenditures (249) (65) (940) (262) Lease renewal commissions and tenant improvements (8) (133) (985) (254) Non-cash portion of interest expense 268 257 783 755 Non-cash compensation expense 742 481 2,227 1,457 ADJUSTED FUNDS FROM OPERATIONS $ 17,612 $ 11,008 $ 47,959 $ 26,780 Noncontrolling interest (2,445) (2,132) (6,501) (6,990) Adjusted funds from operations attributable to common stockholders $ 15,167 $ 8,876 $ 41,458 $ 19,790 Non-GAAP Financial Measures Net operating income (NOI) is defined as rental revenue, including reimbursements, less property expenses and real estate taxes, which excludes depreciation, amortization, general and administrative expenses, interest expense, interest income, gain on interest rate swaps, asset management fee income, property acquisition costs, offering costs, loss on impairment, loss on extinguishment of debt, gain on sales of real estate, and other expenses. The Company defines Cash NOI as NOI less straight-line rent adjustments and less intangible amortization in rental income. The Company considers NOI and Cash NOI to be appropriate supplemental performance measures because they reflect the operating performance of the Company's properties and exclude certain items that are not considered to be controllable in connection with the management of the property. However, these measures should not be viewed as alternative measures of the Company's financial performance since they exclude expenses which could materially impact the Company's results of operations. Further, the Company's NOI and Cash NOI may not be comparable to that of other real estate companies, as they may use different methodologies for calculating NOI and Cash NOI. The Company calculates 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, 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. The Company uses FFO as a supplemental performance measure because, in excluding real estate related depreciation and amortization and gains and losses from property dispositions, it provides a performance measure that, when compared year over year, captures trends in occupancy rates, rental rates and operating costs. The Company also believes that, as a widely recognized measure of the performance of REITs, FFO will be used by investors as a basis to compare the Company's operating performance with that of other REITs. The Company presents Core FFO and Adjusted FFO excluding property acquisition costs, gain on interest rate swaps, offering costs, loss on extinguishment of debt, lease termination income, and intangible amortization in rental income. Adjusted FFO of the Company also excludes straight-line rent adjustments, non-cash portion of interest expense, non-cash compensation expense and adding recurring capital expenditures and lease renewal commissions and tenant improvements. The Company believes that Core FFO and Adjusted FFO are useful supplemental measures regarding the Company's operating performance as they provide a more meaningful and consistent comparison of the Company's operating performance and allows investors to more easily compare the Company's operating results. However, because FFO, Core FFO and Adjusted FFO exclude depreciation and amortization and capture 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, the utility of FFO, Core FFO and Adjusted FFO as measures of the Company's performance is limited. Other equity REITs may not calculate FFO in accordance with the NAREIT definition as the Company does, and, accordingly, the Company's FFO, Core FFO and Adjusted FFO may not be comparable to such other REITs' FFO, Core FFO or Adjusted FFO. FFO, Core FFO and Adjusted FFO should not be used as a measure of the Company's liquidity, and are not indicative of funds available for the Company's cash needs, including its ability to pay dividends. The Company believes that EBITDA and Adjusted EBITDA 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 the Company's industrial properties. The Company also uses these measures in ratios to compare its performance to that of its industry peers. The Company presents Adjusted EBITDA excluding property acquisition costs, gain on interest rate swaps, offering costs, loss on impairment, loss on extinguishment of debt, gain on sales of real estate, and intangible amortization in rental income. In the measures above, the Company excludes certain nonrecurring items that the Company does not believe are reasonably likely to recur within two years. 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 Annual Report on Form 10-K for the year ended December 31, 2012, as updated by the Company's subsequent reports filed with the Securities and Exchange Commission. 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. SOURCE STAG Industrial, Inc. View all news