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EX-23.1 - EX-23.1 - STAG Industrial, Inc.a12-11549_3ex23d1.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 


 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported):  May 9, 2012

 

STAG INDUSTRIAL, INC.

(Exact name of registrant specified in its charter)

 

Maryland

 

1-34907

 

27-3099608

(State or other jurisdiction

 

(Commission

 

(IRS Employer

of incorporation)

 

File Number)

 

Identification No.)

 

99 High Street, 28th Floor

Boston, Massachusetts 02110

(Address of principal executive offices, zip code)

 

Registrant’s telephone number, including area code: (617) 574-4777

 

Not applicable

(Former name or former address, if changed since last report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

o            Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

o            Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

o            Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

o            Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 


 


 

ITEM 8.01.                                    OTHER EVENTS

 

In connection with its filing on or about the date hereof of a Registration Statement on Form S-3, STAG Industrial, Inc. (the “Company”) is filing this Current Report on Form 8-K to present certain additional disclosures to be incorporated by reference therein, including disclosures relating to:

 

·                  historical financial statements related to certain of the Company’s completed acquisitions and an acquisition considered probable for purposes of Regulation S-X; and

 

·                  unaudited pro forma financial information regarding the Company’s completed acquisitions and such probable acquisition.

 

There is no assurance that the Company will acquire the property considered a probable acquisition for purposes of Regulation S-X because the proposed acquisition is subject to a variety of factors, including the satisfaction of customary closing conditions.

 

ITEM 9.01.                                    FINANCIAL STATEMENTS AND EXHIBITS

 

In addition to the financial statements listed below, the Company incorporates by reference the following reports, financial statements and notes from the Company’s Amendment No. 1 to the Registration Statement on Form S-11 (No. 333-177131) filed with the Securities and Exchange Commission on October 26, 2011:

 

·                  STAG Contribution Group

 

·                  Report of Independent Auditors

·                  Combined Statements of Revenue and Certain Expenses for the period from January 1, 2011 to April 19, 2011 (unaudited) and the years ended December 31, 2010 and 2009 and the periods from July 28, 2008 to December 31, 2008 and January 1, 2008 to July 27, 2008

·                  Notes to Combined Statements of Revenue and Certain Expenses

 

1



 

·                  Mooresville Property

 

·                  Report of Independent Auditors

·                  Statements of Revenue and Certain Expenses for the period from January 1, 2011 to February 28, 2011 (unaudited) and the year ended December 31, 2010

·                  Notes to Statement of Revenue and Certain Expenses

 

·                  Cleveland Property

 

·                  Report of Independent Auditors

·                  Statements of Revenue and Certain Expenses for the period from January 1, 2011 to April 5, 2011 (unaudited) and the year ended December 31, 2010

·                  Notes to Statement of Revenue and Certain Expenses

 

·                  Lansing Property

 

·                  Report of Independent Auditors

·                  Statements of Revenue and Certain Expenses for the period from January 1, 2011 to May 25, 2011 (unaudited) and the year ended December 31, 2010

·                  Notes to Statement of Revenue and Certain Expenses

 

·                  Gresham Property

 

·                  Report of Independent Auditors

·                  Statements of Revenue and Certain Expenses for the six months ended June 30, 2011 (unaudited) and the year ended December 31, 2010

·                  Notes to Statement of Revenue and Certain Expenses

 

·                  Hazelwood Property

 

·                  Report of Independent Auditors

·                  Statements of Revenue and Certain Expenses for the six months ended June 30, 2011 (unaudited) and the year ended December 31, 2010

·                  Notes to Statement of Revenue and Certain Expenses

 

·                  Louisville Property

 

·                  Report of Independent Auditors

·                  Statements of Revenue and Certain Expenses for the six months ended June 30, 2011 (unaudited) and the year ended December 31, 2010

·                  Notes to Statement of Revenue and Certain Expenses

 

No other part or section of the Company’s Amendment No. 1 to the Registration Statement on Form S-11 (No. 333-177131) is incorporated by reference into this Current Report on Form 8-K.

 

2



 

(a)                                  Financial Statements Under Rule 3-14 of Regulation S-X

 

North Jackson Property

 

 

Report of Independent Auditors

 

4

Statements of Revenues and Certain Expenses for the period from January 1, 2011 to December 13, 2011 (unaudited) and the year ended December 31, 2010

 

5

Notes to Statements of Revenue and Certain Expenses

 

6

Rogers Property

 

 

Report of Independent Auditors

 

8

Statements of Revenues and Certain Expenses for the period from January 1, 2011 to December 21, 2011 (unaudited) and the year ended December 31, 2010

 

9

Notes to Statements of Revenue and Certain Expenses

 

10

South Bend Property

 

 

Report of Independent Auditors

 

12

Statements of Revenues and Certain Expenses for the period from January 1, 2012 to March 7, 2012 (unaudited) and the year ended December 31, 2011

 

13

Notes to Statements of Revenue and Certain Expenses

 

14

Spartanburg Property

 

 

Report of Independent Auditors

 

16

Statements of Revenues and Certain Expenses for the three months ended March 31, 2012 (unaudited) and the year ended December 31, 2011

 

17

Notes to Statements of Revenue and Certain Expenses

 

18

Reading Property

 

 

Report of Independent Auditors

 

20

Statements of Revenues and Certain Expenses for the three months ended March 31, 2012 (unaudited) and the year ended December 31, 2011

 

21

Notes to Statements of Revenue and Certain Expenses

 

22

 

(b)                                  Unaudited Pro Forma Condensed Consolidated Financial Information

 

STAG Industrial, Inc. and Subsidiaries

 

 

Unaudited Pro Forma Condensed Consolidated Balance Sheet as of March 31, 2012

 

26

Unaudited Pro Forma Condensed Consolidated Statement of Operations for the three months ended March 31, 2012

 

27

Unaudited Pro Forma Condensed Consolidated Statement of Operations for the year ended December 31, 2011

 

28

Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements

 

29

 

(d)                                  Exhibits

 

Exhibit No.

 

Description

23.1

 

Consent of PricewaterhouseCoopers LLP

 

3


 


 

Report of Independent Auditors

 

To STAG Industrial, Inc.:

 

We have audited the accompanying statement of revenue and certain expenses (the “Statement”) of the North Jackson Property (the “Property”) for the year ended December 31, 2010. This Statement is the responsibility of management. Our responsibility is to express an opinion on this Statement based on our audit.

 

We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the Statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the Statement. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the Statement. We believe that our audit provides a reasonable basis for our opinion.

 

The accompanying Statement was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission (for inclusion on Form 8-K of STAG Industrial, Inc.), as described in note 2 and is not intended to be a complete presentation of the Property’s revenue and expenses.

 

In our opinion, the Statement referred to above presents fairly, in all material respects, the revenue and certain expenses, as described in note 2, of the Property for the year ended December 31, 2010 in conformity with accounting principles generally accepted in the United States of America.

 

/s/ PricewaterhouseCoopers LLP

 

Boston, Massachusetts
May 9, 2012

 

4



 

North Jackson Property

 

Statements of Revenue and Certain Expenses

 

(dollars in thousands)

 

 

 

Period from
January 1, 2011 to
December 13, 2011

 

Year Ended
December 31,
2010

 

 

 

(unaudited)

 

 

 

Revenue

 

 

 

 

 

Rental revenue

 

$

1,259

 

$

1,326

 

Total revenue

 

1,259

 

1,326

 

 

 

 

 

 

 

Certain expenses

 

 

 

 

 

Certain expenses

 

 

 

Revenue in excess of certain expenses

 

$

1,259

 

$

1,326

 

 

The accompanying notes are an integral part to the statements of revenue and certain expenses.

 

5



 

North Jackson Property

 

Notes to Statements of Revenue and Certain Expenses

 

(dollars in thousands)

 

(1)                                 Organization

 

The North Jackson Property (the “Property”) is a single tenant industrial property located in North Jackson, OH. The accompanying statements of revenue and certain expenses (“Statements”) relate to the operations of the Property.

 

Prior to December 14, 2011, the Property was owned by an unaffiliated third party of STAG Industrial, Inc. On December 14, 2011, the Property was acquired by STAG North Jackson, LLC, a single member limited liability company wholly owned by STAG Industrial Operating Partnership, L.P., an entity consolidated by STAG Industrial Inc.

 

(2)                                 Significant Accounting Policies

 

(a)                                 Basis of Presentation

 

The accompanying Statements have been prepared for the purpose of complying with Rule 3-14 of Regulation S-X promulgated under the Securities Act of 1933, as amended, and accordingly, is not representative of the actual results of operations of the Property, due to the exclusion of the following revenue and expenses which may not be comparable to the proposed future operations of the Property:

 

·                  Depreciation and amortization

 

·                  Interest income and expense

 

·                  Amortization of above and below market leases

 

·                  Other miscellaneous revenue and expenses not directly related to the proposed future operations of the Property.

 

(b)                                 Revenue Recognition

 

Rental revenue is recognized on a straight-line basis over the term of the related leases when collectability is reasonably assured. Differences between rental revenue earned and amounts due under the leases are charged or credited, as applicable, to accrued rental revenue. The impact of the straight-line rent adjustment decreased revenue by approximately $34 for the period from January 1, 2011 to December 13, 2011 (unaudited) and increased revenue by approximately $4 for the year ended December 31, 2010. The tenant makes payments for certain expenses and costs, which have been assumed by the tenant under the terms of their respective lease, and are not reflected in the Statements.

 

(c)                                  Use of Estimates

 

Management has made a number of estimates and assumptions relating to the reporting and disclosure of revenue and certain expenses during the reporting period to prepare the Statements in conformity with accounting principles generally accepted in the United States of America. Actual results could differ from those estimates.

 

6



 

North Jackson Property

 

Notes to Statements of Revenue and Certain Expenses (Continued)

 

(dollars in thousands)

 

(d)                                 Unaudited Interim Statement

 

The statement of revenue and certain expenses for the period from January 1, 2011 to December 13, 2011 is unaudited. In the opinion of management, the statement reflects all adjustments necessary for a fair presentation of the results of the interim period. All such adjustments are of normal recurring nature.

 

(3)                                 Description of Leasing Arrangements

 

The Property is leased to one tenant under a non-cancelable operating lease which has an expiration date of August 31, 2016.

 

Future minimum base rentals over the next five years on the non-cancelable operating lease at December 31, 2010 are as follows:

 

2011

 

$

1,366

 

2012

 

1,454

 

2013

 

1,454

 

2014

 

1,454

 

2015

 

1,454

 

 

The above future minimum lease payments exclude tenant recoveries, amortization of accrued rental revenue and above/below-market lease intangibles.

 

(4)                                 Commitments and Contingencies

 

The Property is subject to legal claims and disputes in the ordinary course of business. Management believes that the ultimate settlement of any existing potential claims and disputes would not have a material impact on the Property’s revenue and certain operating expenses.

 

(5)                                 Subsequent Events

 

Management has evaluated the events and transactions that have occurred through May 9, 2012, the date which the Statements were available to be issued, and noted no items requiring adjustment of the Statements or additional disclosure.

 

7



 

Report of Independent Auditors

 

To STAG Industrial, Inc.:

 

We have audited the accompanying statement of revenue and certain expenses (the “Statement”) of the Rogers Property (the “Property”) for the year ended December 31, 2010. This Statement is the responsibility of management. Our responsibility is to express an opinion on this Statement based on our audit.

 

We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the Statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the Statement. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the Statement. We believe that our audit provides a reasonable basis for our opinion.

 

The accompanying Statement was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission (for inclusion on Form 8-K of STAG Industrial, Inc.), as described in note 2 and is not intended to be a complete presentation of the Property’s revenue and expenses.

 

In our opinion, the Statement referred to above presents fairly, in all material respects, the revenue and certain expenses, as described in note 2, of the Property for the year ended December 31, 2010 in conformity with accounting principles generally accepted in the United States of America.

 

/s/ PricewaterhouseCoopers LLP

 

Boston, Massachusetts
May 9, 2012

 

8



 

Rogers Property

 

Statements of Revenue and Certain Expenses

 

(dollars in thousands)

 

 

 

Period from
January 1, 2011 to
December 21, 2011

 

Year Ended
December 31,
 2010

 

 

 

(unaudited)

 

 

 

Revenue

 

 

 

 

 

Rental revenue

 

$

1,194

 

$

1,232

 

Tenant recoveries

 

128

 

144

 

Total revenue

 

1,322

 

1,376

 

 

 

 

 

 

 

Certain expenses

 

 

 

 

 

Property

 

32

 

30

 

Real estate taxes and insurance

 

138

 

143

 

Certain expenses

 

170

 

173

 

Revenue in excess of certain expenses

 

$

1,152

 

$

1,203

 

 

The accompanying notes are an integral part to the statements of revenue and certain expenses.

 

9



 

Rogers Property

 

Notes to Statements of Revenue and Certain Expenses

 

(dollars in thousands)

 

(1)                                 Organization

 

The Rogers Property (the “Property”), is a single tenant industrial property located in Rogers, AR. The accompanying statements of revenue and certain expenses (“Statements”) relate to the operations of the Property.

 

Prior December 22, 2011, the Property was owned by an unaffiliated third party of STAG Industrial, Inc. On December 22, 2011, the Property was acquired by STAG Rogers 2, LLC, a single member limited liability company wholly owned by STAG Industrial Operating Partnership, L.P., an entity consolidated by STAG Industrial, Inc.

 

(2)                                 Significant Accounting Policies

 

(a)                                 Basis of Presentation

 

The accompanying Statements have been prepared for the purpose of complying with Rule 3-14 of Regulation S-X promulgated under the Securities Act of 1933, as amended, and accordingly, are not representative of the actual results of operations of the Property, due to the exclusion of the following revenue and expenses which may not be comparable to the proposed future operations of the Property:

 

·                  Depreciation and amortization

 

·                  Interest income and expense

 

·                  Amortization of above and below market leases

 

·                  Other miscellaneous revenue and expenses not directly related to the proposed future operations of the Property.

 

(b)                                 Revenue Recognition

 

Rental revenue is recognized on a straight-line basis over the term of the related leases when collectability is reasonably assured. Differences between rental revenue earned and amounts due under the leases are charged or credited, as applicable, to accrued rental revenue. The impact of the straight-line rent adjustment decreased revenue by approximately $31 and $28 for the period from January 1, 2011 to December 21, 2011(unaudited) and for the year ended December 31, 2010, respectively. Tenant recoveries representing additional rents from expense reimbursements for real estate taxes, insurance and other expenses are recognized in the period in which the related expenses are incurred.

 

(c)                                  Use of Estimates

 

Management has made a number of estimates and assumptions relating to the reporting and disclosure of revenue and certain expenses during the reporting period to prepare the Statements in conformity with accounting principles generally accepted in the United States of America. Actual results could differ from those estimates.

 

10



 

Rogers Property

 

Notes to Statements of Revenue and Certain Expenses (Continued)

 

(dollars in thousands)

 

                                                (d)                                 Unaudited Interim Statement

 

The statement of revenue and certain expenses for the period from January 1, 2011 to December 21, 2011 is unaudited. In the opinion of management, the statement reflects all adjustments necessary for a fair presentation of the results of the interim period. All such adjustments are of normal recurring nature.

 

 (3)                              Description of Leasing Arrangements

 

The Property is leased to one tenant under a non-cancelable operating lease which has an expiration date of December 31, 2017.

 

Future minimum base rentals over the next five years on the non-cancelable operating lease at December 31, 2010 are as follows:

 

2011

 

$

1,260

 

2012

 

1,212

 

2013

 

1,212

 

2014

 

1,212

 

2015

 

1,236

 

 

The above future minimum lease payments exclude tenant recoveries, amortization of accrued rental revenue and above/below-market lease intangibles.

 

(4)                                 Commitments and Contingencies

 

The Property is subject to legal claims and disputes in the ordinary course of business. Management believes that the ultimate settlement of any existing potential claims and disputes would not have a material impact on the Property’s revenue and certain operating expenses.

 

(5)                                 Subsequent Events

 

Management has evaluated the events and transactions that have occurred through May 9, 2012, the date which the Statements were available to be issued, and noted no items requiring adjustment of the Statement or additional disclosure.

 

11


 


 

Report of Independent Auditors

 

To STAG Industrial, Inc.:

 

We have audited the accompanying statement of revenue and certain expenses (the “Statement”) of the South Bend Property (the “Property”) for the year ended December 31, 2011. This Statement is the responsibility of management. Our responsibility is to express an opinion on this Statement based on our audit.

 

We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the Statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the Statement. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the Statement. We believe that our audit provides a reasonable basis for our opinion.

 

The accompanying Statement was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission (for inclusion on Form 8-K of STAG Industrial, Inc.), as described in note 2 and is not intended to be a complete presentation of the Property’s revenue and expenses.

 

In our opinion, the Statement referred to above presents fairly, in all material respects, the revenue and certain expenses, as described in note 2, of the Property for the year ended December 31, 2011 in conformity with accounting principles generally accepted in the United States of America.

 

/s/ PricewaterhouseCoopers LLP

 

Boston, Massachusetts
May 9, 2012

 

12



 

South Bend Property

 

Statements of Revenue and Certain Expenses

 

(dollars in thousands)

 

 

 

Period from
January 1, 2012 to
March 7, 2012

 

Year Ended
December 31,
 2011

 

 

 

(unaudited)

 

 

 

Revenue

 

 

 

 

 

Rental revenue

 

$

109

 

$

597

 

Total revenue

 

109

 

597

 

 

 

 

 

 

 

Certain expenses

 

 

 

 

 

Certain expenses

 

 

 

Revenue in excess of certain expenses

 

$

109

 

$

597

 

 

The accompanying notes are an integral part to the statements of revenue and certain expenses.

 

13



 

South Bend Property

 

Notes to Statements of Revenue and Certain Expenses

 

(dollars in thousands)

 

(1)                                 Organization

 

The South Bend Property (the “Property”) is a single tenant industrial property located in South Bend, IN. The accompanying statements of revenue and certain expenses (“Statements”) relate to the operations of the Property.

 

Prior to March 8, 2012, the Property was owned by an unaffiliated third party of STAG Industrial, Inc. On March 8, 2012, the Property was acquired by STAG South Bend, LLC, a single member limited liability company wholly owned by STAG Industrial Operating Partnership, L.P., an entity consolidated by STAG Industrial, Inc.

 

(2)                                 Significant Accounting Policies

 

(a)                                 Basis of Presentation

 

The accompanying Statements have been prepared for the purpose of complying with Rule 3-14 of Regulation S-X promulgated under the Securities Act of 1933, as amended, and accordingly, are not representative of the actual results of operations of the Property, due to the exclusion of the following revenue and expenses which may not be comparable to the proposed future operations of the Property:

 

·                  Depreciation and amortization

 

·                  Interest income and expense

 

·                  Amortization of above and below market leases

 

·                  Other miscellaneous revenue and expenses not directly related to the proposed future operations of the Property.

 

(b)                                 Revenue Recognition

 

Rental revenue is recognized on a straight-line basis over the term of the related leases when collectability is reasonably assured. Differences between rental revenue earned and amounts due under the leases are charged or credited, as applicable, to accrued rental revenue. The impact of the straight-line rent adjustment increased revenue by approximately $4 and $9 for the period January 1, 2012 to March 7, 2012 (unaudited) and the year ended December 31, 2011, respectively. The tenant makes payments for certain expenses and costs, which have been assumed by the tenant under the terms of their respective lease, and are not reflected in the Statements.

 

(c)                                  Use of Estimates

 

Management has made a number of estimates and assumptions relating to the reporting and disclosure of revenue and certain expenses during the reporting periods to prepare the Statements in conformity with accounting principles generally accepted in the United States of America. Actual results could differ from those estimates.

 

(d)                                 Unaudited Interim Statement

 

The statement of revenue and certain expenses for the period January 1, 2012 to March 7, 2012 is unaudited. In the opinion of management, the statement reflects all adjustments necessary for a fair presentation of the results of the interim period. All such adjustments are of normal recurring nature.

 

14



 

South Bend Property

 

Notes to Statements of Revenue and Certain Expenses (Continued)

 

(dollars in thousands)

 

(3)                                 Description of Leasing Arrangements

 

The Property is leased to one tenant under a non-cancelable operating lease which has an expiration date of December 31, 2017.

 

Future minimum base rentals over the next five years on the non-cancelable operating leases at December 31, 2011 are as follows:

 

2012

 

$

576

 

2013

 

597

 

2014

 

652

 

2015

 

673

 

2016

 

673

 

 

The above future minimum lease payments exclude tenant recoveries, amortization of accrued rental revenue and above/below-market lease intangibles.

 

(4)                                 Commitments and Contingencies

 

The Property is subject to legal claims and disputes in the ordinary course of business. Management believes that the ultimate settlement of any existing potential claims and disputes would not have a material impact on the Property’s revenue and certain operating expenses.

 

(5)                                 Subsequent Events

 

Management has evaluated the events and transactions that have occurred through May 9, 2012, the date which the Statements were available to be issued, and noted no items requiring adjustment of the Statements or additional disclosure.

 

15



 

Report of Independent Auditors

 

To STAG Industrial, Inc.:

 

We have audited the accompanying statement of revenue and certain expenses (the “Statement”) of the Spartanburg Property (the “Property”) for the year ended December 31, 2011. This Statement is the responsibility of management. Our responsibility is to express an opinion on this Statement based on our audit.

 

We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the Statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the Statement. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the Statement. We believe that our audit provides a reasonable basis for our opinion.

 

The accompanying Statement was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission (for inclusion on Form 8-K of STAG Industrial, Inc.), as described in note 2 and is not intended to be a complete presentation of the Property’s revenue and expenses.

 

In our opinion, the Statement referred to above presents fairly, in all material respects, the revenue and certain expenses, as described in note 2, of the Property for the year ended December 31, 2011 in conformity with accounting principles generally accepted in the United States of America.

 

/s/ PricewaterhouseCoopers LLP

 

Boston, Massachusetts
May 9, 2012

 

16



 

Spartanburg Property

 

Statements of Revenue and Certain Expenses

 

(dollars in thousands)

 

 

 

Three Months
Ended March 31,
 2012

 

Year Ended
December 31,
2011

 

 

 

(unaudited)

 

 

 

Revenue

 

 

 

 

 

Rental revenue

 

$

261

 

$

1,028

 

Tenant recoveries

 

10

 

41

 

Total revenue

 

271

 

1,069

 

 

 

 

 

 

 

Certain expenses

 

 

 

 

 

Property

 

10

 

38

 

Real estate taxes and insurance

 

48

 

193

 

Certain expenses

 

58

 

231

 

Revenue in excess of certain expenses

 

$

213

 

$

838

 

 

The accompanying notes are an integral part to the statements of revenue and certain expenses.

 

17



 

Spartanburg Property

 

Notes to Statements of Revenue and Certain Expenses

 

(dollars in thousands)

 

(1)                                 Organization

 

The Spartanburg Property (the “Property”), consists of four single tenant industrial buildings located in Spartanburg, SC. The accompanying statements of revenue and certain expenses (“Statements”) relate to the operations of the Property.

 

Prior to April 5, 2012, the Property was owned by an unaffiliated third party of STAG Industrial, Inc. On April 5, 2012, the Property was acquired by STAG Spartanburg, LLC, a single member limited liability company wholly owned by STAG Industrial Operating Partnership, L.P., an entity consolidated by STAG Industrial, Inc.

 

(2)                                 Significant Accounting Policies

 

(a)                                 Basis of Presentation

 

The accompanying Statements have been prepared for the purpose of complying with Rule 3-14 of Regulation S-X promulgated under the Securities Act of 1933, as amended, and accordingly, are not representative of the actual results of operations of the Property, due to the exclusion of the following revenue and expenses which may not be comparable to the proposed future operations of the Property:

 

·                  Depreciation and amortization

 

·                  Interest income and expense

 

·                  Amortization of above and below market leases

 

·                  Other miscellaneous revenue and expenses not directly related to the proposed future operations of the Property.

 

(b)                                 Revenue Recognition

 

Rental revenue is recognized on a straight-line basis over the term of the related leases when collectability is reasonably assured. Differences between rental revenue earned and amounts due under the leases are charged or credited, as applicable, to accrued rental revenue. The impact of the straight-line rent adjustment increased revenue by approximately $5 for the three months ended March 31, 2012 (unaudited) and decreased revenue by approximately $26 for the year ended December 31, 2011. Tenant recoveries representing additional rents from expense reimbursements for real estate taxes are recognized in the period in which the related expenses are incurred.

 

(c)                                  Use of Estimates

 

Management has made a number of estimates and assumptions relating to the reporting and disclosure of revenue and certain expenses during the reporting periods to prepare the Statements in conformity with accounting principles generally accepted in the United States of America. Actual results could differ from those estimates.

 

18



 

Spartanburg Property

 

Notes to Statements of Revenue and Certain Expenses (Continued)

 

(dollars in thousands)

 

(d)                                 Unaudited Interim Statement

 

                                                The statement of revenue and certain expenses for three months ended March 31, 2012 is unaudited. In the opinion of management, the statement reflects all adjustments necessary for a fair presentation of the results of the interim period. All such adjustments are of normal recurring nature.

 

(3)                                 Description of Leasing Arrangements

 

The Property is leased to one tenant under a non-cancelable operating lease which has an expiration date of September 30, 2015.

 

Future minimum base rentals over the next five years on the non-cancelable operating lease at December 31, 2011 are as follows:

 

2012

 

$

1,024

 

2013

 

1,030

 

2014

 

1,056

 

2015

 

807

 

2016

 

 

 

The above future minimum lease payments exclude tenant recoveries, amortization of accrued rental revenue and above/below-market lease intangibles.

 

(4)                                 Commitments and Contingencies

 

The Property is subject to legal claims and disputes in the ordinary course of business. Management believes that the ultimate settlement of any existing potential claims and disputes would not have a material impact on the Property’s revenue and certain operating expenses.

 

(5)                                 Subsequent Events

 

Management has evaluated the events and transactions that have occurred through May 9, 2012, the date which the Statements were available to be issued, and noted no items requiring adjustment of the Statements or additional disclosure.

 

19



 

Report of Independent Auditors

 

To STAG Industrial, Inc.:

 

We have audited the accompanying statement of revenue and certain expenses (the “Statement”) of the Reading Property (the “Property”) for the year ended December 31, 2011. This Statement is the responsibility of management. Our responsibility is to express an opinion on this Statement based on our audit.

 

We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the Statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the Statement. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the Statement. We believe that our audit provides a reasonable basis for our opinion.

 

The accompanying Statement was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission (for inclusion on Form 8-K of STAG Industrial, Inc.), as described in note 2 and is not intended to be a complete presentation of the Property’s revenue and expenses.

 

In our opinion, the Statement referred to above presents fairly, in all material respects, the revenue and certain expenses, as described in note 2, of the Property for the year ended December 31, 2011 in conformity with accounting principles generally accepted in the United States of America.

 

/s/ PricewaterhouseCoopers LLP

 

Boston, Massachusetts
May 9, 2012

 

20



 

Reading Property

 

Statements of Revenue and Certain Expenses

 

(dollars in thousands)

 

 

 

Three Months
Ended March 31,
2012

 

Year Ended
December 31,
2011

 

 

 

(unaudited)

 

 

 

Revenue

 

 

 

 

 

Rental revenue

 

$

394

 

$

1,576

 

Tenant recoveries

 

137

 

545

 

Total revenue

 

531

 

2,121

 

 

 

 

 

 

 

Certain expenses

 

 

 

 

 

Property

 

56

 

223

 

Real estate taxes and insurance

 

80

 

317

 

Certain expenses

 

136

 

540

 

Revenue in excess of certain expenses

 

$

395

 

$

1,581

 

 

The accompanying notes are an integral part to the statements of revenue and certain expenses.

 

21



 

Reading Property

 

Notes to Statements of Revenue and Certain Expenses

 

(dollars in thousands)

 

(1)           Organization

 

The Reading Property (the “Property”) is a multi-tenant industrial property located in Berks County, PA. The accompanying statements of revenue and certain expenses (“Statements”) relate to the operations of the Property.

 

        For the periods presented in the Statements, the Property was owned by an unaffiliated third party of STAG Industrial, Inc. The acquisition of the Property by STAG Industrial Operating Partnership, L.P., an entity consolidated by STAG Industrial, Inc., is considered probable.

 

(2)           Significant Accounting Policies

 

(a)           Basis of Presentation

 

The accompanying Statements have been prepared for the purpose of complying with Rule 3-14 of Regulation S-X promulgated under the Securities Act of 1933, as amended, and accordingly, are not representative of the actual results of operations of the Property, due to the exclusion of the following revenue and expenses which may not be comparable to the proposed future operations of the Property:

 

·                  Depreciation and amortization

 

·                  Interest income and expense

 

·                  Amortization of above and below market leases

 

·                  Other miscellaneous revenue and expenses not directly related to the proposed future operations of the Property.

 

(b)           Revenue Recognition

 

Rental revenue is recognized on a straight-line basis over the term of the related leases when collectability is reasonably assured. Differences between rental revenue earned and amounts due under the leases are charged or credited, as applicable, to accrued rental revenue. The impact of the straight-line rent adjustment increased revenue by approximately $29 and $136 for the three months ended March 31, 2012 (unaudited) and the year ended December 31, 2011, respectively. Tenant recoveries representing additional rents from expense reimbursements for real estate taxes, insurance and other expenditures are recognized in the period in which the related expenses are incurred.

 

(c)           Use of Estimates

 

Management has made a number of estimates and assumptions relating to the reporting and disclosure of revenue and certain expenses during the reporting periods to prepare the Statements in conformity with accounting principles generally accepted in the United States of America. Actual results could differ from those estimates.

 

22



 

Reading Property

 

Notes to Statements of Revenue and Certain Expenses (Continued)

 

(dollars in thousands)

 

(d)           Unaudited Interim Statement

 

The statement of revenue and certain expenses for the three months ended March 31, 2012 is unaudited. In the opinion of management, the statement reflects all adjustments necessary for a fair presentation of the results of the interim period. All such adjustments are of normal recurring nature.

 

(3)           Description of Leasing Arrangements

 

The Property is leased to three tenants under non-cancelable operating leases which have expiration dates of March 31, 2016, June 30, 2017, and December 31, 2025, respectively.

 

Future minimum base rentals over the next five years on the non-cancelable operating leases at December 31, 2011 are as follows:

 

2012

 

$

1,470

 

2013

 

1,500

 

2014

 

1,530

 

2015

 

1,562

 

2016

 

1,416

 

 

The above future minimum lease payments exclude tenant recoveries, amortization of accrued rental revenue and above/below-market lease intangibles.

 

(4)           Commitments and Contingencies

 

The Property is subject to legal claims and disputes in the ordinary course of business. Management believes that the ultimate settlement of any existing potential claims and disputes would not have a material impact on the Property’s revenue and certain operating expenses.

 

(5)           Subsequent Events

 

Management has evaluated the events and transactions that have occurred through May 9, 2012, the date which the Statements were available to be issued, and noted no items requiring adjustment of the Statements or additional disclosure.

 

23



 

STAG Industrial, Inc. and Subsidiaries

 

Unaudited Pro Forma Condensed Consolidated Financial Statements

 

The unaudited pro forma condensed consolidated financial statements (including notes thereto) of STAG Industrial, Inc. (the “Company”) are qualified in their entirety and should be read in conjunction with the historical financial statements included in elsewhere in this Current Report on Form 8-K.

 

The unaudited pro forma condensed consolidated balance sheet as of March 31, 2012, reflects the financial position of the Company as if the acquisitions described in the notes to the unaudited pro forma condensed consolidated financial statements had been completed on March 31, 2012. The unaudited pro forma condensed consolidated statements of operations for the year ended December 31, 2011 and the three months ended March 31, 2012 are presented as if the acquisitions by the Company had occurred on January 1, 2011.

 

Such pro forma information is based upon the historical consolidated results of operations of the Company for the year ended December 31, 2011 and the three months ended March 31, 2012, giving effect to the STAG Contribution Group and the following acquisitions:

 

2011 ACQUISITIONS SUBSEQUENT TO OUR INITIAL PUBLIC OFFERING

STAG Industrial, Inc.

 

Property Description

 

Market

 

# of Buildings

 

Date Acquired

 

Square Footage

 

Acquisition Price

 

STIR Lansing, LLC

 

Lansing—East Lansing, MI

 

1

 

 

05/26/11

 

231,000

 

$

14,104,000

 

STAG Fort Worth, LP

 

Dallas—Fort Worth, TX

 

1

 

 

06/30/11

 

101,500

 

$

3,600,000

 

STAG Gresham, LLC

 

Portland, OR

 

1

 

 

07/19/11

 

420,690

 

$

14,300,000

 

STAG Hazelwood, LLC

 

St. Louis, MO—IL

 

1

 

 

07/28/11

 

305,550

 

$

10,675,000

 

STAG Norton, LLC

 

Boston—Worcester—Lawrence, MA—NH—ME—CT

 

1

 

 

08/04/11

 

200,000

 

$

11,000,000

 

STAG Conyers, LLC

 

Atlanta, GA

 

1

 

 

09/02/11

 

226,256

 

$

6,385,000

 

STAG Louisville, LLC

 

Louisville, KY

 

2

 

 

09/22/11

 

497,820

 

$

14,650,000

 

STAG Gahanna, LLC

 

Columbus, OH

 

1

 

 

10/14/11

 

383,000

 

$

7,710,500

 

STAG Smithfield, LLC

 

Raleigh—Durham—Chapel Hill, NC

 

1

 

 

11/17/11

 

191,450

 

$

8,050,000

 

STAG North Jackson, LLC

 

Cleveland—Akron, OH

 

1

 

 

12/14/11

 

307,315

 

$

12,400,000

 

STAG Chippewa Falls, LLC

 

Eau Claire, WI

 

2

 

 

12/15/11

 

97,400

 

$

4,850,000

 

STAG Rogers 2, LLC

 

Fayetteville—Springdale—Rogers, AR

 

1

 

 

12/22/11

 

400,000

 

$

12,600,000

 

STAG Georgetown, LLC

 

Lexington, KY

 

1

 

 

12/29/11

 

97,500

 

$

3,815,000

 

Totals

 

 

 

15

 

 

 

 

3,459,481

 

$

124,139,500

 

 

2012 ACQUISITIONS

STAG Industrial, Inc.

 

Property Description

 

Market

 

# of Buildings

 

Date Acquired

 

Square Footage

 

Acquisition Price

 

STAG East Windsor, LLC

 

Hartford, CT

 

1

 

 

03/01/12

 

145,000

 

$

6,000,000

 

STAG South Bend, LLC

 

South Bend, IN

 

1

 

 

03/08/12

 

225,000

 

$

6,730,000

 

STAG Lansing 2, LLC

 

Lansing—East Lansing, MI

 

1

 

 

03/21/12

 

129,325

 

$

6,600,000

 

STAG Portland, LLC

 

Portland, ME

 

1

 

 

03/27/12

 

100,600

 

$

5,760,000

 

STAG Portland 2, LLC

 

Nashville, TN

 

1

 

 

03/30/12

 

414,043

 

$

13,000,000

 

STAG Spartanburg, LLC

 

Greenville—Spartanburg—Anderson, SC

 

4

 

 

04/05/12

 

409,600

 

$

9,000,000

 

STAG Franklin, LLC

 

Indianapolis, IN

 

1

 

 

04/17/12

 

703,496

 

$

17,750,000

 

Totals

 

 

 

10

 

 

 

 

2,127,064

 

$

64,840,000

 

 

PROBABLE ACQUISITIONS

STAG Industrial, Inc.

 

Property Description

 

Market

 

# of Buildings

 

Date Acquired

 

Square Footage

 

Acquisition Price

 

STAG Reading, LLC

 

Harrisburg—Lebanon—Carlisle, PA

 

1

 

 

Probable

 

394,289

 

$

17,050,000

 

Totals

 

 

 

1

 

 

 

 

394,289

 

$

17,050,000

 

 

24



 

In management’s opinion, all adjustments necessary to reflect the above transactions have been made. The unaudited pro forma condensed consolidated statements of operations should be read in conjunction with the historical financial statements and notes thereto of the Company included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011 filed with the Securities and Exchange Commission on March 9, 2012 and  the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2012 filed with the Securities and Exchange Commission on May 9, 2012.

 

The Company’s “predecessor” for accounting purposes is STAG Predecessor Group, which is not a legal entity, but a collection of the real estate entities that were owned by STAG Investments III, LLC , an entity that contributed STAG Predecessor Group to the Company at the Company’s initial public offering on April 20, 2011. STAG Predecessor Group also was engaged in the business of owning, leasing and operating real estate consisting primarily of industrial properties located throughout the United States. The financial information contained in this report that relates to the time periods on or prior to April 19, 2011 is STAG Predecessor Group’s financial information; the financial information contained in this report for any time period on or after April 20, 2011 is the Company’s financial information.  The Company did not exist before April 20, 2011 and as a result of our formation transactions, our Company is substantially different from STAG Predecessor Group.

 

The unaudited pro forma condensed consolidated financial statements as of March 31, 2012 and for the year ended December 31, 2011 and the three months ended March 31, 2012 are not necessarily indicative of what our actual financial condition would have been at March 31, 2012 or what our actual results of operations would have been assuming the transactions had occurred as of January 1, 2011, nor do they purport to represent our financial condition or results of operations for future periods.

 

25



 

STAG Industrial, Inc. and Subsidiaries

Unaudited Pro Forma Condensed Consolidated Balance Sheet

March 31, 2012

(dollars in thousands)

 

 

 

STAG
Industrial
Inc.

 

STAG
Industrial Inc.
Acquisitions

 

Company
Pro Forma

 

 

 

(A)

 

(B)

 

 

 

Assets

 

 

 

 

 

 

 

Rental property

 

 

 

 

 

 

 

Land

 

$

74,763

 

$

3,814

 

$

78,577

 

Buildings

 

419,468

 

30,673

 

450,141

 

Tenant improvements

 

26,115

 

1,942

 

28,057

 

Building and land improvements

 

12,377

 

 

12,377

 

Less: accumulated depreciation

 

(33,792

)

 

(33,792

)

Total rental property, net

 

498,931

 

36,429

 

535,360

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

18,462

 

 

18,462

 

Restricted cash

 

8,219

 

 

8,219

 

Tenants accounts receivable, net

 

5,710

 

 

5,710

 

Prepaid expenses and other assets

 

1,490

 

 

1,490

 

Deferred financing fees, net

 

2,467

 

 

2,467

 

Leasing commissions, net

 

1,054

 

 

1,054

 

Goodwill

 

4,923

 

 

4,923

 

Due from related parties

 

309

 

 

309

 

Deferred leasing intangibles, net

 

115,640

 

9,278

 

124,918

 

Total assets

 

$

657,205

 

$

45,707

 

$

702,912

 

 

 

 

 

 

 

 

 

Liabilities and equity

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

Mortgage notes payable

 

297,253

 

 

297,253

 

Credit facility

 

40,000

 

43,800

 

83,800

 

Accounts payable, accrued expenses and other liabilities

 

4,644

 

 

4,644

 

Tenant prepaid rent and security deposits

 

4,298

 

 

4,298

 

Dividends payable

 

7,793

 

 

7,793

 

Deferred leasing intangibles, net

 

1,970

 

1,907

 

3,877

 

Total liabilities

 

355,958

 

45,707

 

401,665

 

 

 

 

 

 

 

 

 

Equity:

 

 

 

 

 

 

 

Preferred stock

 

69,000

 

 

69,000

 

Common stock

 

160

 

 

160

 

Additional paid-in capital

 

179,076

 

 

179,076

 

Common stock dividends in excess of earnings

 

(24,485

)

 

(24,485

)

Total stockholders’ and owner’s deficit

 

223,751

 

 

223,751

 

Noncontrolling interest

 

77,496

 

 

77,496

 

Total equity

 

301,247

 

 

301,247

 

Total liabilities and equity

 

$

657,205

 

$

45,707

 

$

702,912

 

 

See accompanying notes to pro forma condensed consolidated financial statements

 

26


 


 

STAG Industrial, Inc. and Subsidiaries

Unaudited Pro Forma Condensed Consolidated Statement of Operations

For the Three Months Ended March 31, 2012

(dollars in thousands, except per share data)

 

 

 

STAG Industrial
Inc.

 

STAG Industrial
Inc. Acquisitions

 

Pro Forma
Adjustments

 

 

 

 

 

Company
Pro Forma

 

 

 

(AA)

 

(BB)

 

 

 

 

 

 

 

 

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental income

 

$

15,645

 

$

1,935

 

$

 

 

 

 

 

$

17,580

 

Tenant recoveries

 

2,057

 

293

 

 

 

 

 

 

2,350

 

Other income

 

321

 

 

 

 

 

 

 

321

 

Total revenues

 

18,023

 

2,228

 

 

 

 

 

 

20,251

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

Property 

 

3,230

 

340

 

 

 

 

 

 

3,570

 

General and administrative

 

2,998

 

 

 

 

 

 

 

2,998

 

Property acquisition costs

 

293

 

 

(293

)

(CC)

 

 

 

 

Depreciation and amortization

 

8,860

 

725

 

 

 

 

 

 

9,585

 

Other expenses

 

50

 

 

 

 

 

 

 

50

 

Total expenses

 

15,431

 

1,065

 

(293

)

 

 

 

 

16,203

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense)

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

4

 

 

 

 

 

 

 

 

4

 

Interest expense

 

(4,172

)

(528

)

104

 

(DD)

 

 

 

(4,596

)

Gain (loss) on interest rate swaps

 

215

 

 

 

 

 

 

 

215

 

Total other income (expense)

 

(3,953

)

(528

)

104

 

 

 

 

 

(4,377

)

Net loss

 

$

(1,361

)

$

635

 

$

397

 

 

 

 

 

$

(329

)

Less: preferred stock dividends

 

1,553

 

 

 

 

 

 

 

1,553

 

Less: loss attributable to noncontrolling interest

 

(972

)

 

344

 

(EE)

 

 

 

(628

)

Net loss attributable to the common stockholders

 

$

(1,942

)

$

635

 

$

53

 

 

 

 

 

$

(1,254

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss per share - basic and diluted

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss per share - basic and diluted

 

$

(0.12

)

 

 

 

 

 

 

(FF)

 

$

(0.08

)

Weighted average common shares outstanding - basic and diluted

 

15,824,627

 

 

 

 

 

 

 

 

 

15,824,627

 

 

See accompanying notes to pro forma condensed consolidated financial statements

 

27



 

STAG Industrial, Inc. and Subsidiaries

Unaudited Pro Forma Condensed Consolidated Statement of Operations

For the Year Ended December 31, 2011

(dollars in thousands, except per share data)

 

 

 

For the period January 1, 2011 to April 19,
2011

 

For the period
April 20, 2011 to
December 31,
2011

 

For the period
January 1, 2011 to
December 31,
2011

 

For the period January 1, 2011 to December
31, 2011

 

 

 

STAG
Predecessor
Group

 

STAG
Contribution
Group

 

The
Management
Company

 

STAG Industrial
Inc.

 

STAG Industrial
Inc. Acquisitions

 

Pro Forma
Adjustments

 

 

 

 

 

Company
Pro Forma

 

 

 

(GG)

 

(HH)

 

(II)

 

(AA)

 

(BB)

 

 

 

 

 

 

 

 

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental income

 

$

7,027

 

$

8,008

 

$

 

$

39,184

 

$

16,431

 

$

 

 

 

 

 

$

70,650

 

Tenant recoveries

 

1,218

 

730

 

 

4,747

 

1,964

 

 

 

 

 

 

8,659

 

Other income

 

 

 

359

 

940

 

 

 

 

 

 

 

1,299

 

Total revenues

 

8,245

 

8,738

 

359

 

44,871

 

18,395

 

 

 

 

 

 

80,608

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property

 

2,075

 

1,176

 

 

7,943

 

2,286

 

 

 

 

 

 

13,480

 

General and administrative

 

322

 

 

1,532

 

8,365

 

 

667

 

(JJ)

 

 

 

10,886

 

Asset Management fees

 

175

 

 

 

 

 

 

 

 

 

 

175

 

Property acquisition costs

 

 

 

 

1,088

 

 

(1,088

)

(CC)

 

 

 

 

Depreciation and amortization

 

2,437

 

5,584

 

11

 

22,733

 

9,596

 

 

 

 

 

 

40,361

 

Other expenses

 

 

 

 

294

 

 

 

 

 

 

 

294

 

Total expenses

 

5,009

 

6,760

 

1,543

 

40,423

 

11,882

 

(421

)

 

 

 

 

65,196

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

1

 

 

 

28

 

 

 

 

 

 

 

29

 

Interest expense

 

(4,053

)

(1,921

)

(139

)

(12,182

)

(4,526

)

(265

)

(KK)

 

 

 

(22,929

)

 

 

 

 

 

 

 

 

 

 

 

 

157

 

(DD)

 

 

 

 

 

Gain (loss) on interest rate swaps

 

762

 

375

 

 

2,179

 

 

 

 

 

 

 

3,316

 

Formation transaction costs

 

 

 

 

(3,674

)

 

3,674

 

(LL)

 

 

 

 

Offering costs

 

 

 

 

(78

)

 

 

78

 

(MM)

 

 

 

 

Total other income (expense)

 

(3,290

)

(1,546

)

(139

)

(13,727

)

(4,526

)

3,644

 

 

 

 

 

(19,584

)

Net income (loss) from continuing operations

 

(54

)

432

 

(1,323

)

(9,279

)

1,987

 

4,065

 

 

 

 

 

(4,172

)

Less: preferred stock dividends

 

 

 

 

1,018

 

 

 

 

 

 

 

1,018

 

Less: loss attributable to noncontrolling interest

 

 

 

 

(3,396

)

 

1,665

 

(EE)

 

 

 

(1,731

)

Net income (loss) attributable to the common stockholders

 

$

(54

)

$

432

 

$

(1,323

)

$

(6,901

)

$

1,987

 

$

2,400

 

 

 

 

 

$

(3,459

)

Income (loss) per share - basic and diluted

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) per share - basic and diluted

 

 

 

 

 

 

 

$

(0.44

)

 

 

 

 

 

 

(FF)

 

$

(0.22

)

Weighted average common shares outstanding - basic and diluted

 

 

 

 

 

 

 

15,630,910

 

 

 

 

 

 

 

 

 

15,630,910

 

 

See accompanying notes to pro forma condensed consolidated financial statements

 

28



 

STAG Industrial, Inc. and Subsidiaries

 

Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements

 

(dollars in thousands)

 


PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

 

(A)                               Represents the unaudited consolidated balance sheet of STAG Industrial, Inc. as of March 31, 2012.

 

(B)                               Reflects the acquisition of six buildings, in three separate transactions,  that have either closed or are considered probable of closing subsequent to March 31, 2012.  These acquisitions were funded and will be funded using proceeds from the Company’s credit facility of $43,800.  The following pro forma adjustments are necessary to reflect the initial allocation of the estimated purchase price of these acquisitions.  The allocation of purchase price shown in the table below is based on the Company’s best estimates and is subject to change based on the final determination of the fair value of assets and liabilities acquired.

 

Land

 

$

3,814

 

Building

 

30,673

 

Tenant improvements

 

1,942

 

Total rental property

 

36,429

 

Deferred leasing intangibles - assets, net

 

9,278

 

Assets acquired

 

45,707

 

 

 

 

 

Deferred leasing intangibles - liabilities

 

1,907

 

Liabilities assumed

 

1,907

 

Net acquisition price

 

$

43,800

 

 

29



 

STAG Industrial, Inc. and Subsidiaries

 

Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements (continued)

 

(dollars in thousands)

 

PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

 

The adjustments to the pro forma condensed consolidated statement of operations for the three months ended March 31, 2012 and for the year ended December 31, 2011 are as follows:

 

(AA)       Reflects the unaudited historical results of STAG Industrial, Inc. for the three months ended March 31, 2012 (unaudited) and the period April 20, 2011 to December 31, 2011.

 

(BB)       For the three months ended March 31, 2012, reflects the results of operations for the acquisitions of 11 buildings, in eight separate transactions, that have either closed or are considered probable of closing subsequent to December 31, 2011.  For the year ended December 31, 2011, reflects the results of operations for acquisitions of 26 buildings, in 21 separate transactions, that have either closed or are considered probable of closing subsequent to the Company’s formation transactions and initial public offering.  The table below illustrates the adjustments to revenue and expenses for these acquisitions. Adjustments to revenue represent the impact of the amortization of the net amount of above- and below-market rents and change in straight-line rent recognition as a result of purchase accounting adjustments. Adjustments to depreciation and amortization represent the additional depreciation expense and amortization of intangibles as a result of these purchase accounting adjustments. Depreciation and amortization amounts were determined in accordance with the Company’s policies and are based on management’s evaluation of the estimated useful lives of the properties and intangibles. The amounts allocated to building are depreciated over 40 years. The amounts allocated to lease intangibles are generally amortized over the remaining life of the related leases. Interest expense represents the interest expense of the debt at the current negotiated rates as if acquired on January 1, 2011.

 

30


 


 

STAG Industrial, Inc. and Subsidiaries

 

Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements (continued)

 

(dollars in thousands)

 

STAG Industrial, Inc. Acquisitions

 

 

 

For the Three Months Ended March 31, 2012

 

 

 

Certain Revenue and Expenses (unaudited)

 

 

 

Pro Forma

 

 

 

Various (2)

 

STAG South Bend,
LLC (5)

 

STAG
Spartanburg, LLC
(6)

 

STAG Reading,
LLC (7)

 

Adjustments(1)

 

STAG Industrial
Inc.
Acquisitions

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental income

 

$

1,107

 

$

109

 

$

261

 

$

394

 

$

64

 

$

1,935

 

Tenant recoveries

 

$

146

 

$

 

$

10

 

$

137

 

$

 

$

293

 

Total revenues

 

$

1,253

 

$

109

 

$

271

 

$

531

 

$

64

 

$

2,228

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

Property

 

$

146

 

$

 

$

58

 

$

136

 

$

 

$

340

 

Depreciation and amortization

 

$

 

$

 

$

 

$

 

$

725

 

$

725

 

Interest expense

 

$

315

 

$

34

 

$

62

 

$

117

 

$

 

$

528

 

Total expense

 

$

461

 

$

34

 

$

120

 

$

253

 

$

725

 

$

1,593

 

 

 

 

For the Year Ended December 31, 2011

 

 

 

Certain Revenue and Expenses

 

 

 

Pro Forma

 

 

 

Various (2)

 

STAG North
Jackson, LLC (3)

 

STAG Rogers 2,
LLC (4)

 

STAG South Bend,
LLC (5)

 

STAG Spartanburg,
LLC (6)

 

STAG Reading,
LLC (7)

 

Adjustments(1)

 

STAG Industrial
Inc.
Acquisitions

 

 

 

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

(unaudited)

 

(unaudited)

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental income

 

$

11,187

 

$

1,259

 

$

1,194

 

$

597

 

$

1,028

 

$

1,576

 

$

(410

)

$

16,431

 

Tenant recoveries

 

$

1,250

 

$

 

$

128

 

$

 

$

41

 

$

545

 

$

 

$

1,964

 

Total revenues

 

$

12,437

 

$

1,259

 

$

1,322

 

$

597

 

$

1,069

 

$

2,121

 

$

(410

)

$

18,395

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property

 

$

1,345

 

$

 

$

170

 

$

 

$

231

 

$

540

 

$

 

$

2,286

 

Depreciation and amortization

 

$

 

$

 

$

 

$

 

$

 

$

 

$

9,596

 

$

9,596

 

Interest expense

 

$

3,185

 

$

443

 

$

 

$

184

 

$

247

 

$

467

 

$

 

$

4,526

 

Total expense

 

$

4,530

 

$

443

 

$

170

 

$

184

 

$

478

 

$

1,007

 

$

9,596

 

$

16,408

 

 


(1)             The adjustments relate to above/below market lease amortization, straight-line rent adjustments, adding depreciation and amortization and adding interest expense for the related debt.

 

(2)             Represents pro forma results for properties that were acquired by STAG Industrial, Inc. in 2011 and 2012, excluding the properties presented in the tables. For the year ended December 31, 2011, in addition to the results of operations of other properties, this column includes the results of operations of the Lansing Property, the Gresham Property, the Hazelwood Property and the Louisville Property, for which financial statements have been incorporated by reference in this report.

 

(3)            On December 14, 2011, the North Jackson Property was acquired by STAG Industrial, Inc.

 

(4)             On December 22, 2011, the Rogers Property was acquired by STAG Industrial, Inc.

 

(5)             On March 8, 2012, the South Bend Property was acquired by STAG Industrial, Inc.

 

(6)             On April 5, 2012, the Spartanburg Property was acquired by STAG Industrial, Inc.

 

(7)             This property was deemed a probable acquisition by STAG Industrial, Inc.

 

(CC)                        Reflects the add back of the Company’s property acquisition costs in 2011 and 2012.

 

(DD)                      Represents adjustment to unused fees for the credit facility in 2011 and 2012.

 

(EE)                          Reflects the allocation of net income (loss) to the noncontrolling interest for 2011 and 2012.

 

(FF)                          Pro forma loss per share—basic and diluted are calculated by dividing pro forma consolidated net loss allocable to the Company’s stockholders by the number of weighted average shares of common stock outstanding.

 

31



 

STAG Industrial, Inc. and Subsidiaries

 

Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements (continued)

 

(dollars in thousands)

 

(GG)        Reflects the historical combined statement of operations of STAG Predecessor Group for the period January 1, 2011 to April 19, 2011. Revenue and expenses to be recognized by the Company related to STAG Predecessor Group’s contributed interests are based on the historical cost basis of the related assets.

 

(HH)       Reflects the results of operations for the period January 1, 2011 to April 19, 2011 from the contribution of STAG Contribution Group, which includes the acquisitions of STAG GI Investments, LLC and STAG Investments IV, LLC, that occurred upon the formation transactions.  The table below illustrates the adjustments to revenue and expenses for STAG Contribution Group. Adjustments to revenue represent the impact of the amortization of the net amount of above- and below-market rents and change in straight-line rent recognition as a result of purchase accounting adjustments. Adjustments to depreciation and amortization represent the additional depreciation expense and amortization of intangibles as a result of these purchase accounting adjustments. Depreciation and amortization amounts were determined in accordance with the Company’s policies and are based on management’s evaluation of the estimated useful lives of the properties and intangibles. The amounts allocated to building are depreciated over 40 years. The amounts allocated to lease intangibles are generally amortized over the remaining life of the related leases. Interest expense represents the interest expense of the assumed debt at the current negotiated rates.

 

STAG Contribution Group

 

 

 

For the Period January 1, 2011 to April 19, 2011

 

 

 

Certain Revenues and Expenses

 

 

 

 

 

 

 

Historical STAG

 

Mooresville

 

Cleveland

 

 

 

 

 

 

 

Contribution
Group

 

Historical
Moorseville (2)

 

Historical
Cleveland (3)

 

Adjustments (1)

 

Pro Forma STAG
Contribution Group

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

Rental income

 

$

8,612

 

$

180

 

$

128

 

$

(912

)

$

8,008

 

Tenant recoveries

 

719

 

 

11

 

 

730

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenues

 

$

9,331

 

$

180

 

$

139

 

$

(912

)

$

8,738

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

Property

 

$

1,165

 

$

 

$

11

 

$

 

$

1,176

 

Depreciation and amortization

 

 

 

 

5,584

 

5,584

 

(Gain) loss on interest rate swaps

 

 

 

 

(375

)

(375

)

Interest expense

 

 

 

 

1,921

 

1,921

 

 

 

 

 

 

 

 

 

 

 

 

 

Total expense

 

$

1,165

 

$

 

$

11

 

$

7,130

 

$

8,306

 

 


(1)          The adjustments relate to above/below market lease amortization, straight-line rent adjustments, adding depreciation and amortization, adding interest expense for the related debt and the historical loss from the interest rate swaps.

 

(2)          On March 1, 2011, the Mooresville Property was acquired by STAG GI Investments, LLC.

 

(3)          On April 6, 2011, the Cleveland Property was acquired by STAG GI Investments, LLC.

 

32



 

STAG Industrial, Inc. and Subsidiaries

 

Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements (continued)

 

(dollars in thousands)

 

(II)                                To reflect actual revenue and expenses of the management company as follows:

 

·                              Annual third party management fee revenue of $359 for the period January 1, 2011 to April 19, 2011 based  on the annual fees to be earned by the Company following the formation transactions from certain contracts to manage industrial properties of STAG Investments II, LLC and certain properties that will continue to be owned by STAG Investments III, LLC, and administrative service agreements with STAG Investments III, LLC and STAG Investments IV, LLC.

 

·                              Actual general and administrative expenses of $1,532 for the period January 1, 2011 to April 19, 2011.

 

·                              Actual interest expense of $139 for the period January 1, 2011 to April 19, 2011 on a related party loan, which is to an affiliate of the Company.

 

(JJ)          The Company would have incurred additional general and administrative expenses as a result of becoming a public company, including but not limited to incremental salaries, board of directors’ fees and expenses, directors’ and officers’ insurance, and incremental audit and tax fees. The Company estimates that these costs would have resulted in incremental general and administrative expenses of approximately $667 for the period January 1, 2011 through April 19, 2011.

 

(KK)       Reflects the additional amortization of deferred financing costs related to the  secured corporate credit facility and other debt facilities assumed by the Company upon completion of the formation transactions that would have been recorded had formation transactions occurred on January 1, 2011.

 

(LL)         Reflects the add back of formation transaction costs related to the offering of common stock.

 

(MM)     Reflects the add back of offering costs related to the offering of Series A Cumulative Redeemable Preferred Stock.

 

33


 


 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

 

STAG INDUSTRIAL, INC.

 

 

 

By:

/s/ Gregory W. Sullivan

 

 

Gregory W. Sullivan

 

 

Chief Financial Officer, Executive Vice President and Treasurer

Dated: May 9, 2012

 

 



 

EXHIBIT INDEX

 

Exhibit No.

 

Description

 

 

 

23.1

 

Consent of PricewaterhouseCoopers LLP