STAG Industrial, Inc. 10-Q

Item 1. Financial Statements STAG Industrial, Inc. Consolidated Balance Sheets (unaudited, in thousands, except share data) September 30, 2020 December 31, 2019 Assets Rental Property: Land $ 447,356 $ 435,923 Buildings and improvements, net of accumulated depreciation of $ 473,369 and $ 387,633 , respectively 3,164,553 3,087,435 Deferred leasing intangibles, net of accumulated amortization of $ 264,262 and $ 241,304 , respectively 439,046 475,149 Total rental property, net 4,050,955 3,998,507 Cash and cash equivalents 70,137 9,041 Restricted cash 4,623 2,823 Tenant accounts receivable 66,761 57,592 Prepaid expenses and other assets 49,157 38,231 Interest rate swaps — 303 Operating lease right-of-use assets 24,124 15,129 Assets held for sale, net — 43,019 Total assets $ 4,265,757 $ 4,164,645 Liabilities and Equity Liabilities: Unsecured credit facility $ — $ 146,000 Unsecured term loans, net 970,696 871,375 Unsecured notes, net 573,181 572,883 Mortgage notes, net 52,365 54,755 Accounts payable, accrued expenses and other liabilities 74,619 53,737 Interest rate swaps 45,812 18,819 Tenant prepaid rent and security deposits 23,413 21,993 Dividends and distributions payable 18,302 17,465 Deferred leasing intangibles, net of accumulated amortization of $ 14,176 and $ 12,064 , respectively 24,991 26,738 Operating lease liabilities 26,414 16,989 Total liabilities 1,809,793 1,800,754 Commitments and contingencies (Note 11) Equity: Preferred stock, par value $ 0.01 per share, 20,000,000 shares authorized at September 30, 2020 and December 31, 2019, Series C, 3,000,000 shares (liquidation preference of $ 25.00 per share) issued and outstanding at September 30, 2020 and December 31, 2019 75,000 75,000 Common stock, par value $ 0.01 per share, 300,000,000 shares authorized at September 30, 2020 and December 31, 2019, respectively, 149,227,013 and 142,815,593 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively 1,492 1,428 Additional paid-in capital 3,155,271 2,970,553 Cumulative dividends in excess of earnings ( 782,037 ) ( 723,027 ) Accumulated other comprehensive loss ( 45,055 ) ( 18,426 ) Total stockholders’ equity 2,404,671 2,305,528 Noncontrolling interest 51,293 58,363 Total equity 2,455,964 2,363,891 Total liabilities and equity $ 4,265,757 $ 4,164,645 The accompanying notes are an integral part of these consolidated financial statements. 3 Table of Contents STAG Industrial, Inc. Consolidated Statements of Operations (unaudited, in thousands, except per share data) Three months ended September 30, Nine months ended September 30, 2020 2019 2020 2019 Revenue Rental income $ 117,247 $ 102,294 $ 353,057 $ 294,271 Other income 48 127 403 498 Total revenue 117,295 102,421 353,460 294,769 Expenses Property 20,817 18,157 63,156 54,623 General and administrative 9,537 8,924 29,316 26,723 Depreciation and amortization 53,921 46,908 160,215 133,844 Loss on impairments 3,172 4,413 3,172 9,757 Other expenses 436 458 1,500 1,284 Total expenses 87,883 78,860 257,359 226,231 Other income (expense) Interest and other income 165 12 400 30 Interest expense ( 15,928 ) ( 14,053 ) ( 46,125 ) ( 39,080 ) Loss on extinguishment of debt — — ( 834 ) — Gain on involuntary conversion 1,500 — 2,157 — Gain on the sales of rental property, net 9,060 1,670 56,864 3,261 Total other income (expense) ( 5,203 ) ( 12,371 ) 12,462 ( 35,789 ) Net income $ 24,209 $ 11,190 $ 108,563 $ 32,749 Less: income attributable to noncontrolling interest after preferred stock dividends 466 290 2,471 912 Net income attributable to STAG Industrial, Inc. $ 23,743 $ 10,900 $ 106,092 $ 31,837 Less: preferred stock dividends 1,289 1,289 3,867 3,867 Less: amount allocated to participating securities 68 78 204 236 Net income attributable to common stockholders $ 22,386 $ 9,533 $ 102,021 $ 27,734 Weighted average common shares outstanding — basic 148,997 127,272 148,412 122,460 Weighted average common shares outstanding — diluted 149,905 127,469 148,865 122,720 Net income per share — basic and diluted Net income per share attributable to common stockholders — basic $ 0.15 $ 0.07 $ 0.69 $ 0.23 Net income per share attributable to common stockholders — diluted $ 0.15 $ 0.07 $ 0.69 $ 0.23 The accompanying notes are an integral part of these consolidated financial statements. 4 Table of Contents STAG Industrial, Inc. Consolidated Statements of Comprehensive Income (unaudited, in thousands) Three months ended September 30, Nine months ended September 30, 2020 2019 2020 2019 Net income $ 24,209 $ 11,190 $ 108,563 $ 32,749 Other comprehensive income (loss): Income (loss) on interest rate swaps 4,927 ( 6,435 ) ( 27,273 ) ( 29,441 ) Other comprehensive income (loss) 4,927 ( 6,435 ) ( 27,273 ) ( 29,441 ) Comprehensive income 29,136 4,755 81,290 3,308 Income attributable to noncontrolling interest after preferred stock dividends ( 466 ) ( 290 ) ( 2,471 ) ( 912 ) Other comprehensive (income) loss attributable to noncontrolling interest ( 145 ) 176 644 930 Comprehensive income attributable to STAG Industrial, Inc. $ 28,525 $ 4,641 $ 79,463 $ 3,326 The accompanying notes are an integral part of these consolidated financial statements. 5 Table of Contents STAG Industrial, Inc. Consolidated Statements of Equity (unaudited, in thousands, except share data) Preferred Stock Common Stock Additional Paid-in Capital Cumulative Dividends in Excess of Earnings Accumulated Other Comprehensive Loss Total Stockholders’ Equity Noncontrolling Interest - Unit Holders in Operating Partnership Total Equity Shares Amount Three months ended September 30, 2020 Balance, June 30, 2020 $ 75,000 148,941,121 $ 1,489 $ 3,148,163 $ ( 750,770 ) $ ( 49,837 ) $ 2,424,045 $ 56,272 $ 2,480,317 Proceeds from sales of common stock, net — — — ( 21 ) — — ( 21 ) — ( 21 ) Dividends and distributions, net — — — — ( 55,010 ) — ( 55,010 ) ( 1,411 ) ( 56,421 ) Non-cash compensation activity, net — 3,518 — 1,972 — — 1,972 981 2,953 Redemption of common units to common stock — 282,374 3 4,453 — — 4,456 ( 4,456 ) — Rebalancing of noncontrolling interest — — — 704 — — 704 ( 704 ) — Other comprehensive income — — — — — 4,782 4,782 145 4,927 Net income — — — — 23,743 — 23,743 466 24,209 Balance, September 30, 2020 $ 75,000 149,227,013 $ 1,492 $ 3,155,271 $ ( 782,037 ) $ ( 45,055 ) $ 2,404,671 $ 51,293 $ 2,455,964 Three months ended September 30, 2019 Balance, June 30, 2019 $ 75,000 126,372,945 $ 1,264 $ 2,501,013 $ ( 653,759 ) $ ( 17,771 ) $ 1,905,747 $ 57,505 $ 1,963,252 Proceeds from sales of common stock, net — 6,375,129 64 183,148 — — 183,212 — 183,212 Dividends and distributions, net — — — — ( 47,465 ) — ( 47,465 ) ( 1,375 ) ( 48,840 ) Non-cash compensation activity, net — 3,162 — 1,675 — — 1,675 901 2,576 Redemption of common units to common stock — 207,152 2 3,001 — — 3,003 ( 3,003 ) — Rebalancing of noncontrolling interest — — — ( 1,719 ) — — ( 1,719 ) 1,719 — Other comprehensive loss — — — — — ( 6,259 ) ( 6,259 ) ( 176 ) ( 6,435 ) Net income — — — — 10,900 — 10,900 290 11,190 Balance, September 30, 2019 $ 75,000 132,958,388 $ 1,330 $ 2,687,118 $ ( 690,324 ) $ ( 24,030 ) $ 2,049,094 $ 55,861 $ 2,104,955 Nine months ended September 30, 2020 Balance, December 31, 2019 $ 75,000 142,815,593 $ 1,428 $ 2,970,553 $ ( 723,027 ) $ ( 18,426 ) $ 2,305,528 $ 58,363 $ 2,363,891 Proceeds from sales of common stock, net — 5,600,000 56 172,579 — — 172,635 — 172,635 Dividends and distributions, net — — — — ( 164,712 ) — ( 164,712 ) ( 4,412 ) ( 169,124 ) Non-cash compensation activity, net — 81,316 1 3,084 ( 390 ) — 2,695 4,577 7,272 Redemption of common units to common stock — 730,104 7 11,535 — — 11,542 ( 11,542 ) — Rebalancing of noncontrolling interest — — — ( 2,480 ) — — ( 2,480 ) 2,480 — Other comprehensive loss — — — — — ( 26,629 ) ( 26,629 ) ( 644 ) ( 27,273 ) Net income — — — — 106,092 — 106,092 2,471 108,563 Balance, September 30, 2020 $ 75,000 149,227,013 $ 1,492 $ 3,155,271 $ ( 782,037 ) $ ( 45,055 ) $ 2,404,671 $ 51,293 $ 2,455,964 Nine months ended September 30, 2019 Balance, December 31, 2018 $ 75,000 112,165,786 $ 1,122 $ 2,118,179 $ ( 584,979 ) $ 4,481 $ 1,613,803 $ 55,829 $ 1,669,632 Leases cumulative effect adjustment — — — — ( 214 ) — ( 214 ) — ( 214 ) Proceeds from sales of common stock, net — 19,997,332 201 567,876 — — 568,077 — 568,077 Dividends and distributions, net — — — — ( 136,595 ) — ( 136,595 ) ( 5,247 ) ( 141,842 ) Non-cash compensation activity, net — 134,188 1 2,198 ( 373 ) — 1,826 4,168 5,994 Redemption of common units to common stock — 661,082 6 9,232 — — 9,238 ( 9,238 ) — Rebalancing of noncontrolling interest — — — ( 10,367 ) — — ( 10,367 ) 10,367 — Other comprehensive loss — — — — — ( 28,511 ) ( 28,511 ) ( 930 ) ( 29,441 ) Net income — — — — 31,837 — 31,837 912 32,749 Balance, September 30, 2019 $ 75,000 132,958,388 $ 1,330 $ 2,687,118 $ ( 690,324 ) $ ( 24,030 ) $ 2,049,094 $ 55,861 $ 2,104,955 The accompanying notes are an integral part of these consolidated financial statements. 6 Table of Contents STAG Industrial, Inc . Consolidated Statements of Cash Flows (unaudited, in thousands) Nine months ended September 30, 2020 2019 Cash flows from operating activities: Net income $ 108,563 $ 32,749 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 160,215 133,844 Loss on impairments 3,172 9,757 Gain on involuntary conversion ( 2,157 ) — Non-cash portion of interest expense 2,172 1,909 Amortization of above and below market leases, net 3,629 3,344 Straight-line rent adjustments, net ( 8,170 ) ( 8,586 ) Dividends on forfeited equity compensation — 7 Loss on extinguishment of debt 834 — Gain on the sales of rental property, net ( 56,864 ) ( 3,261 ) Non-cash compensation expense 8,736 7,371 Change in assets and liabilities: Tenant accounts receivable 1,181 509 Prepaid expenses and other assets ( 13,638 ) ( 10,525 ) Accounts payable, accrued expenses and other liabilities 15,038 8,834 Tenant prepaid rent and security deposits 1,420 ( 1,022 ) Total adjustments 115,568 142,181 Net cash provided by operating activities 224,131 174,930 Cash flows from investing activities: Acquisitions of land and buildings and improvements ( 162,086 ) ( 616,647 ) Additions of land and building and improvements ( 39,687 ) ( 40,193 ) Acquisitions of other assets ( 450 ) ( 2,513 ) Acquisitions of operating lease right-of-use assets ( 2,321 ) — Proceeds from sales of rental property, net 121,339 23,700 Proceeds from involuntary conversion 782 — Acquisition deposits, net ( 1,124 ) ( 1,190 ) Acquisitions of deferred leasing intangibles ( 32,815 ) ( 128,832 ) Acquisitions of operating lease liabilities 2,321 — Net cash used in investing activities ( 114,041 ) ( 765,675 ) Cash flows from financing activities: Proceeds from unsecured credit facility 387,000 768,000 Repayment of unsecured credit facility ( 533,000 ) ( 790,500 ) Proceeds from unsecured term loans 400,000 175,000 Repayment of unsecured term loans ( 300,000 ) — Repayment of mortgage notes ( 2,485 ) ( 1,441 ) Payment of loan fees and costs ( 1,129 ) ( 1,226 ) Payment of defeasance fees and other costs ( 425 ) — Proceeds from sales of common stock, net 172,605 568,390 Dividends and distributions ( 168,288 ) ( 139,303 ) Repurchase and retirement of share-based compensation ( 1,472 ) ( 1,444 ) Net cash provided by (used in) financing activities ( 47,194 ) 577,476 Increase (decrease) in cash and cash equivalents and restricted cash 62,896 ( 13,269 ) Cash and cash equivalents and restricted cash—beginning of period 11,864 22,542 Cash and cash equivalents and restricted cash—end of period $ 74,760 $ 9,273 Supplemental disclosure: Cash paid for interest, net of capitalized interest $ 41,797 $ 35,372 Supplemental schedule of non-cash investing and financing activities Acquisitions of land and buildings and improvements $ ( 482 ) $ ( 72 ) Acquisitions of deferred leasing intangibles $ ( 106 ) $ ( 24 ) Change in additions of land, building, and improvements included in accounts payable, accrued expenses, and other liabilities $ ( 3,970 ) $ ( 10,824 ) Additions to building and other capital improvements from non-cash compensation $ ( 24 ) $ ( 59 ) Change in loan fees, costs, and offering costs included in accounts payable, accrued expenses, and other liabilities $ ( 1,020 ) $ ( 314 ) Leases cumulative effect adjustment $ — $ ( 214 ) Dividends and distributions accrued $ 18,302 $ 16,293 The accompanying notes are an integral part of these consolidated financial statements. 7 Table of Contents STAG Industrial, Inc. Notes to Consolidated Financial Statements (unaudited) 1. Organization and Description of Business STAG Industrial, Inc. (the “Company”) is an industrial real estate operating company focused on the acquisition and operation of single-tenant, industrial properties throughout the United States. The Company was formed as a Maryland corporation and has elected to be treated and intends to continue to qualify as a real estate investment trust (“REIT”) under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended. The Company is structured as an umbrella partnership REIT, commonly called an UPREIT, and owns substantially all of its assets and conducts substantially all of its business through its operating partnership, STAG Industrial Operating Partnership, L.P., a Delaware limited partnership (the “Operating Partnership”). As of September 30, 2020 and December 31, 2019, the Company owned a 97.8 % and 97.5 %, respectively, common equity interest in the Operating Partnership. The Company, through its wholly owned subsidiary, is the sole general partner of the Operating Partnership. As used herein, the “Company” refers to STAG Industrial, Inc. and its consolidated subsidiaries and partnerships, including the Operating Partnership, except where context otherwise requires. As of September 30, 2020, the Company owned 462 buildings in 38 states with approximately 92.3 million rentable square feet, consisting of 384 warehouse/distribution buildings, 70 light manufacturing buildings, and eight flex/office buildings. COVID-19 Pandemic Currently, one of the most significant risks and uncertainties facing the Company and the real estate industry generally is the potential adverse effect of the ongoing public health crisis of the novel coronavirus disease (“COVID-19”) pandemic. The Company closely monitors the effect of the COVID-19 pandemic on all aspects of its business, including how the pandemic will affect its tenants and business partners. While the Company did not incur significant disruptions from the COVID-19 pandemic during the nine months ended September 30, 2020, a number of the Company’s tenants requested rent deferral or rent abatement as a result of the pandemic and other tenants may make requests in the future. The Company entered into a limited number of rent deferral agreements during the three and nine months ended September 30, 2020, which resulted in the recognition of approximately $ 0.4 million and $ 1.9 million of rent deferrals during the three and nine months ended September 30, 2020, respectively. The Company evaluates tenant rent relief requests on an individual basis, considering a number of factors. Not all tenant requests will ultimately result in modified agreements, nor is the Company foregoing its contractual rights under its lease agreements. The Company remains unable to predict the ultimate impact that the pandemic will have on its financial condition, results of operations and cash flows due to numerous uncertainties. The extent to which the COVID-19 pandemic affects the Company’s operations and those of its tenants will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact, and the direct and indirect economic effects of the pandemic and containment measures, among others. 2. Summary of Significant Accounting Policies Interim Financial Information The accompanying interim financial statements have been presented in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and with the instructions to Form 10-Q and Regulation S-X for interim financial information. Accordingly, these statements do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, the accompanying interim financial statements include all adjustments, consisting of normal recurring items, necessary for their fair statement in conformity with GAAP. Interim results are not necessarily indicative of results for a full year. The year-end consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the Company’s consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019. 8 Table of Contents Basis of Presentation The Company’s consolidated financial statements include the accounts of the Company, the Operating Partnership, and their subsidiaries. Interests in the Operating Partnership not owned by the Company are referred to as “Noncontrolling Common Units.” These Noncontrolling Common Units are held by other limited partners in the form of common units (“Other Common Units”) and long term incentive plan units (“LTIP units”) issued pursuant to the STAG Industrial, Inc. 2011 Equity Incentive Plan, as amended and restated (the “2011 Plan”). All significant intercompany balances and transactions have been eliminated in the consolidation of entities. The financial statements of the Company are presented on a consolidated basis for all periods presented. New Accounting Standards In March 2020, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) 2020-04, Reference Rate Reform (Topic 848) . ASU 2020-04 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur. During the quarter ended March 31, 2020, the Company elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation. The Company continues to evaluate the impact of the guidance and may apply other elections as applicable as additional changes in the market occur. We have not modified any contracts to date, however, we will evaluate any debt, derivative and lease contracts that are modified in the future to ensure they are eligible for modification relief and apply the practical expedients as needed. Restricted Cash The following table presents a reconciliation of cash and cash equivalents and restricted cash reported on the accompanying Consolidated Balance Sheets to amounts reported on the accompanying Consolidated Statements of Cash Flows. Reconciliation of cash and cash equivalents and restricted cash (in thousands) September 30, 2020 December 31, 2019 Cash and cash equivalents $ 70,137 $ 9,041 Restricted cash 4,623 2,823 Total cash and cash equivalents and restricted cash $ 74,760 $ 11,864 Taxes Federal Income Taxes The Company’s taxable REIT subsidiary recognized net income of approximately $ 0 , $ 0 , $ 0 and $ 0.3 million for the three and nine months ended September 30, 2020 and 2019, respectively, which has been included on the accompanying Consolidated Statements of Operations. State and Local Income, Excise, and Franchise Tax State and local income, excise, and franchise taxes in the amount of $ 0.4 million, $ 1.3 million, $ 0.3 million and $ 0.9 million have been recorded in other expenses on the accompanying Consolidated Statements of Operations for the three and nine months ended September 30, 2020 and 2019, respectively. Uncertain Tax Positions As of September 30, 2020 and December 31, 2019, there were no liabilities for uncertain tax positions. Concentrations of Credit Risk Management believes the current credit risk of the Company’s portfolio is reasonably well diversified and does not contain any unusual concentration of credit risk. 9 Table of Contents 3. Rental Property The following table summarizes the components of rental property as of September 30, 2020 and December 31, 2019. Rental Property (in thousands) September 30, 2020 December 31, 2019 Land $ 447,356 $ 435,923 Buildings, net of accumulated depreciation of $ 311,326 and $ 254,458 , respectively 2,862,026 2,787,234 Tenant improvements, net of accumulated depreciation of $ 23,641 and $ 21,487 , respectively 39,495 38,339 Building and land improvements, net of accumulated depreciation of $ 138,402 and $ 111,688 , respectively 243,807 232,456 Construction in progress 19,225 29,406 Deferred leasing intangibles, net of accumulated amortization of $ 264,262 and $ 241,304 , respectively 439,046 475,149 Total rental property, net $ 4,050,955 $ 3,998,507 Acquisitions The following table summarizes the acquisitions of the Company during the three and nine months ended September 30, 2020. Market (1) Date Acquired Square Feet Number of Buildings Purchase Price (in thousands) Detroit, MI January 10, 2020 491,049 1 $ 29,543 Rochester, NY January 10, 2020 124,850 1 8,565 Minneapolis/St Paul, MN February 6, 2020 139,875 1 10,460 Sacramento, CA February 6, 2020 160,534 1 18,468 Richmond, VA February 6, 2020 78,128 1 5,481 Milwaukee/Madison, WI February 7, 2020 81,230 1 7,219 Detroit, MI February 11, 2020 311,123 1 23,141 Philadelphia, PA March 9, 2020 78,000 1 6,571 Tulsa, OK March 9, 2020 134,600 1 9,895 Three months ended March 31, 2020 1,599,389 9 119,343 Sacramento, CA June 11, 2020 54,463 1 5,730 Chicago, IL June 29, 2020 67,817 1 6,184 Three months ended June 30, 2020 122,280 2 11,914 Philadelphia, PA August 31, 2020 112,294 1 8,427 Pittsburgh, PA September 3, 2020 125,000 1 15,580 Pittsburgh, PA September 24, 2020 66,387 1 6,685 Charlotte, NC September 28, 2020 50,000 1 5,729 Cleveland, OH September 29, 2020 276,000 1 28,261 Three months ended September 30, 2020 629,681 5 64,682 Nine months ended September 30, 2020 2,351,350 16 $ 195,939 (1) As defined by CoStar Realty Information Inc (“CoStar”). If the building is located outside of a CoStar defined market, the city and state is reflected. 10 Table of Contents The following table summarizes the allocation of the consideration paid at the date of acquisition during the nine months ended September 30, 2020 for the acquired assets and liabilities in connection with the acquisitions identified in the table above. Acquired Assets and Liabilities Purchase Price (in thousands) Weighted Average Amortization Period (years) of Intangibles at Acquisition Land $ 15,338 N/A Buildings 135,570 N/A Tenant improvements 2,096 N/A Building and land improvements 8,895 N/A Construction in progress 669 N/A Other assets 450 N/A Operating lease right-of-use assets 2,321 N/A Deferred leasing intangibles - In-place leases 21,496 8.0 Deferred leasing intangibles - Tenant relationships 10,150 11.1 Deferred leasing intangibles - Above market leases 3,962 12.6 Deferred leasing intangibles - Below market leases ( 2,687 ) 5.3 Operating lease liabilities ( 2,321 ) N/A Total purchase price $ 195,939 The following table summarizes the results of operations for the three and nine months ended September 30, 2020 for the buildings acquired during the nine months ended September 30, 2020 included in the Company’s Consolidated Statements of Operations from the date of acquisition. Results of Operations (in thousands) Three months ended September 30, 2020 Nine months ended September 30, 2020 Total revenue $ 3,298 $ 8,046 Net income $ 601 $ 1,462 Dispositions During the nine months ended September 30, 2020, the Company sold five buildings to third parties comprised of approximately 1.7 million rentable square feet with a net book value of approximately $ 64.4 million. These buildings contributed approximately $ 0.1 million, $ 0.8 million, $ 1.3 million and $ 4.5 million to revenue for the three and nine months ended September 30, 2020 and 2019, respectively. These buildings contributed approximately $( 0.3 ) million, $( 0.4 ) million, $( 0.2 ) million and $ 0.3 million to net income (loss) (exclusive of gain on the sales of rental property, net and loss on extinguishment of debt) for the three and nine months ended September 30, 2020 and 2019, respectively. Net proceeds from the sales of rental property were approximately $ 121.3 million and the Company recognized the full gain on the sales of rental property, net, of approximately $ 56.9 million for the nine months ended September 30, 2020. Loss on Impairments The following table summarizes the Company’s loss on impairments for assets held and used during the nine months ended September 30, 2020. Market (1) Number of Buildings Event or Change in Circumstance Leading to Impairment Evaluation (2) Valuation technique utilized to estimate fair value Fair Value (3) Loss on Impairments (in thousands) Williamsport, PA 1 Change in estimated hold period Discounted cash flows (4) Three months ended September 30, 2020 $ 5,019 $ 3,172 Nine months ended September 30, 2020 $ 5,019 $ 3,172 (1) As defined by CoStar. If the building is located outside of a CoStar defined market, the city and state is reflected. (2) The Company tested the asset group for impairment utilizing a recovery analysis, and it was determined that the carrying value of the property and intangibles were not recoverable from the estimated future undiscounted cash flows. (3) The estimated fair value of the property is based on Level 3 inputs and is a non-recurring fair value measurement. Level 3 is defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. (4) Level 3 inputs used to determine fair value for the property impaired for the three months ended September 30, 2020: discount rate of 10.5 % and exit capitalization rate of 10.0 %. During the three and nine months ended September 30, 2019, the Company recognized approximately $ 4.4 million and $ 9.8 million, respectively, of loss on impairments related to six buildings. 11 Table of Contents Gain on Involuntary Conversion During the three and nine months ended September 30, 2020, the Company recognized a gain on involuntary conversion of approximately $ 1.5 million and $ 2.2 million, respectively, related to an eminent domain taking of a portion of a parcel of land. During the three and nine months ended September 30, 2019, the Company did not recognize any gain on involuntary conversion. Deferred Leasing Intangibles The following table summarizes the deferred leasing intangibles on the accompanying Consolidated Balance Sheets as of September 30, 2020 and December 31, 2019. September 30, 2020 December 31, 2019 Deferred Leasing Intangibles (in thousands) Gross Accumulated Amortization Net Gross Accumulated Amortization Net Above market leases $ 93,002 $ ( 36,711 ) $ 56,291 $ 92,607 $ ( 32,115 ) $ 60,492 Other intangible lease assets 610,306 ( 227,551 ) 382,755 623,846 ( 209,189 ) 414,657 Total deferred leasing intangible assets $ 703,308 $ ( 264,262 ) $ 439,046 $ 716,453 $ ( 241,304 ) $ 475,149 Below market leases $ 39,167 $ ( 14,176 ) $ 24,991 $ 38,802 $ ( 12,064 ) $ 26,738 Total deferred leasing intangible liabilities $ 39,167 $ ( 14,176 ) $ 24,991 $ 38,802 $ ( 12,064 ) $ 26,738 The following table summarizes the amortization expense and the net decrease to rental income for the amortization of deferred leasing intangibles during the three and nine months ended September 30, 2020 and 2019. Three months ended September 30, Nine months ended September 30, Deferred Leasing Intangibles Amortization (in thousands) 2020 2019 2020 2019 Net decrease to rental income related to above and below market lease amortization $ 1,482 $ 1,248 $ 3,646 $ 3,361 Amortization expense related to other intangible lease assets $ 21,780 $ 18,472 $ 63,158 $ 53,185 The following table summarizes the amortization of deferred leasing intangibles over the next five calendar years beginning with 2020 as of September 30, 2020. Year Amortization Expense Related to Other Intangible Lease Assets (in thousands) Net Decrease to Rental Income Related to Above and Below Market Lease Amortization (in thousands) Remainder of 2020 $ 18,290 $ 859 2021 $ 65,614 $ 2,764 2022 $ 56,254 $ 2,298 2023 $ 47,759 $ 2,504 2024 $ 38,947 $ 2,812 4. Debt The following table summarizes the Company’s outstanding indebtedness, including borrowings under the Company’s unsecured credit facility, unsecured term loans, unsecured notes, and mortgage notes as of September 30, 2020 and December 31, 2019. 12 Table of Contents Loan Principal Outstanding as of September 30, 2020 (in thousands) Principal Outstanding as of December 31, 2019 (in thousands) Interest Rate (1)(2) Maturity Date Prepayment Terms (3) Unsecured credit facility: Unsecured Credit Facility (4) $ — $ 146,000 L + 0.90 % January 12, 2024 i Total unsecured credit facility — 146,000 Unsecured term loans: Unsecured Term Loan C (5) — 150,000 2.39 % September 29, 2020 i Unsecured Term Loan B (5) — 150,000 3.05 % March 21, 2021 i Unsecured Term Loan A 150,000 150,000 3.38 % March 31, 2022 i Unsecured Term Loan D 150,000 150,000 2.85 % January 4, 2023 i Unsecured Term Loan G (6) 300,000 — 2.77 % April 18, 2023 i Unsecured Term Loan E 175,000 175,000 3.92 % January 15, 2024 i Unsecured Term Loan F 200,000 100,000 3.11 % January 12, 2025 i Total unsecured term loans 975,000 875,000 Less: Total unamortized deferred financing fees and debt issuance costs ( 4,304 ) ( 3,625 ) Total carrying value unsecured term loans, net 970,696 871,375 Unsecured notes: Series F Unsecured Notes 100,000 100,000 3.98 % January 5, 2023 ii Series A Unsecured Notes 50,000 50,000 4.98 % October 1, 2024 ii Series D Unsecured Notes 100,000 100,000 4.32 % February 20, 2025 ii Series G Unsecured Notes 75,000 75,000 4.10 % June 13, 2025 ii Series B Unsecured Notes 50,000 50,000 4.98 % July 1, 2026 ii Series C Unsecured Notes 80,000 80,000 4.42 % December 30, 2026 ii Series E Unsecured Notes 20,000 20,000 4.42 % February 20, 2027 ii Series H Unsecured Notes 100,000 100,000 4.27 % June 13, 2028 ii Total unsecured notes 575,000 575,000 Less: Total unamortized deferred financing fees and debt issuance costs ( 1,819 ) ( 2,117 ) Total carrying value unsecured notes, net 573,181 572,883 Mortgage notes (secured debt): Wells Fargo Bank, National Association CMBS Loan 49,013 51,406 4.31 % December 1, 2022 iii Thrivent Financial for Lutherans 3,587 3,679 4.78 % December 15, 2023 iv Total mortgage notes 52,600 55,085 Add: Total unamortized fair market value premiums 31 39 Less: Total unamortized deferred financing fees and debt issuance costs ( 266 ) ( 369 ) Total carrying value mortgage notes, net 52,365 54,755 Total / weighted average interest rate (7) $ 1,596,242 $ 1,645,013 3.62 % (1) Interest rate as of September 30, 2020. At September 30, 2020, the one-month LIBOR (“L”) was 0.14825 %. The current interest rate is not adjusted to include the amortization of deferred financing fees or debt issuance costs incurred in obtaining debt or any unamortized fair market value premiums. The spread over the applicable rate for the Company’s unsecured credit facility and unsecured term loans is based on the Company’s debt rating, as defined in the respective loan agreements. (2) The unsecured term loans have a stated interest rate of one-month LIBOR plus a spread of 1.0 %, with the exception of the Unsecured Term Loan G which has a spread of 1.5 % and is subject to a minimum rate for LIBOR of 0.25 %. As of September 30, 2020, one-month LIBOR for the Unsecured Term Loans A, D, E, F, and G was swapped to a fixed rate of 2.38 %, 1.85 %, 2.92 %, 2.11 %, and 1.17 %, respectively. One-month LIBOR for the Unsecured Term Loan G will be swapped to a fixed rate of 0.28 % effective March 19, 2021. (3) Prepayment terms consist of (i) pre-payable with no penalty; (ii) pre-payable with penalty; (iii) pre-payable without penalty three months prior to the maturity date, however can be defeased; and (iv) pre-payable without penalty three months prior to the maturity date. (4) The capacity of the unsecured credit facility is $ 500.0 million. Deferred financing fees and debt issuance costs, net of accumulated amortization related to the unsecured credit facility of approximately $ 1.8 million and $ 2.4 million is included in prepaid expenses and other assets on the accompanying Consolidated Balance Sheets as of September 30, 2020 and December 31, 2019, respectively. The initial maturity date is January 15, 2023, which may be extended pursuant to two six -month extension options exercisable by the Company in its discretion upon advance written notice. Exercise of each six-month option is subject to the following conditions: (i) absence of a default immediately before the extension and immediately after giving effect to the extension, (ii) accuracy of representations and warranties as of the extension date (both immediately before and after the extension), as if made on the extension date, and (iii) payment of a fee. Neither extension option is subject to lender consent, assuming proper notice and satisfaction of the conditions. (5) The Unsecured Term Loan B and the Unsecured Term Loan C were paid in full on April 17, 2020 in connection with the execution of the Unsecured Term Loan G. 13 Table of Contents (6) The initial maturity date is April 16, 2021, which may be extended pursuant to two one-year extension options exercisable by the Company in its discretion upon advance written notice. Exercise of each one-year option is subject to the following conditions: (i) absence of a default immediately before the extension and immediately after giving effect to the extension, (ii) accuracy of representations and warranties as of the extension date (both immediately before and after the extension), as if made on the extension date, and (iii) payment of a fee. Neither extension option is subject to lender consent, assuming proper notice and satisfaction of the conditions. (7) The weighted average interest rate was calculated using the fixed interest rate swapped on the notional amount of $ 975.0 million of debt, and is not adjusted to include the amortization of deferred financing fees or debt issuance costs incurred in obtaining debt or any unamortized fair market value premiums. The aggregate undrawn nominal commitment on the unsecured credit facility as of September 30, 2020 was approximately $ 497.0 million, including issued letters of credit. The Company’s actual borrowing capacity at any given point in time may be less and is restricted to a maximum amount based on the Company’s debt covenant compliance. Total accrued interest for the Company’s indebtedness was approximately $ 7.8 million and $ 6.3 million as of September 30, 2020 and December 31, 2019, respectively, and is included in accounts payable, accrued expenses and other liabilities on the accompanying Consolidated Balance Sheets. The following table summarizes the costs included in interest expense related to the Company’s debt arrangements on the accompanying Consolidated Statement of Operations for the three and nine months ended September 30, 2020 and 2019. Three months ended September 30, Nine months ended September 30, Costs Included in Interest Expense (in thousands) 2020 2019 2020 2019 Amortization of deferred financing fees and debt issuance costs and fair market value premiums $ 750 $ 673 $ 2,172 $ 1,909 Facility, unused, and other fees $ 315 $ 348 $ 995 $ 1,118 On April 29, 2020, the mortgage note associated with the Wells Fargo, National Association CMBS Loan was partially defeased in the amount of approximately $ 1.0 million in connection with the sale of the Johnstown, NY property, which had served as partial collateral for the mortgage note. The associated defeasance fees and unamortized deferred financing fees and debt issuance costs of approximately $ 0.1 million were written off to loss on extinguishment of debt in the accompanying Consolidated Statement of Operations during the nine months ended September 30, 2020. On April 17, 2020, the Company entered into the $ 300.0 million Unsecured Term Loan G with Wells Fargo, National Association, as administrative agent on behalf of the various lenders under the agreement. In connection with the execution of the Unsecured Term Loan G, the Unsecured Term Loan B and Unsecured Term Loan C were paid in full. As of September 30, 2020, the Unsecured Term Loan G bore an interest rate of LIBOR plus a spread of 1.5% based on the Company’s debt rating, as defined in the loan agreement, and subject to a minimum rate for LIBOR of 0.25%. The Unsecured Term Loan G matures on April 16, 2021, subject to two one year extension options at the Company's discretion, and subject to certain conditions (other than lender discretion) such as the absence of default and the payment of an extension fee. The Company intends to exercise both extension options. To exercise the extension options the Company is required pay a fee equal to (i) 0.15 % of the outstanding amount on the effective day of the first extension period and (ii) 0.20 % of the outstanding amount on the effective day of the second extension period. In connection with the refinancing, the Company incurred approximately $ 2.1 million in deferred financing fees, including approximately $ 1.1 million of accrued extension fees, which are being amortized through the extended maturity date of April 18, 2023. In connection with the refinancing, the Company also recognized a loss on extinguishment of debt of approximately $ 0.7 million related to associated unamortized deferred financing fees and debt issuance costs related to the Unsecured Term Loan B and the Unsecured Term Loan C and other third-party costs. The Company is required to pay an annual fee of $ 35,000 . The Unsecured Term Loan G has an accordion feature that allows the Company to increase its borrowing capacity to $ 600.0 million, subject to the satisfaction of certain conditions and lender consents. The Company and certain wholly owned subsidiaries of the Operating Partnership are guarantors of the Unsecured Term Loan G. The agreement also contains financial and other covenants substantially similar to the covenants in the Company’s unsecured credit facility. On March 25, 2020, the Company drew the remaining $ 100.0 million of the $200.0 million Unsecured Term Loan F that was entered into on July 12, 2019. 14 Table of Contents Financial Covenant Considerations The Company was in compliance with all financial and other covenants as of September 30, 2020 and December 31, 2019 related to its unsecured credit facility, unsecured term loans, unsecured notes, and mortgage notes. The real estate net book value of the properties that are collateral for the Company’s debt arrangements was approximately $ 82.3 million and $ 85.5 million at September 30, 2020 and December 31, 2019, respectively, and is limited to senior, property-level secured debt financing arrangements. Fair Value of Debt The following table summarizes the aggregate principal outstanding under the Company’s debt arrangements and the corresponding estimate of fair value as of September 30, 2020 and December 31, 2019. September 30, 2020 December 31, 2019 Indebtedness (in thousands) Principal Outstanding Fair Value Principal Outstanding Fair Value Unsecured credit facility $ — $ — $ 146,000 $ 146,000 Unsecured term loans 975,000 965,296 875,000 875,000 Unsecured notes 575,000 628,955 575,000 614,493 Mortgage notes 52,600 55,009 55,085 56,021 Total principal amount 1,602,600 $ 1,649,260 1,651,085 $ 1,691,514 Add: Total unamortized fair market value premiums 31 39 Less: Total unamortized deferred financing fees and debt issuance costs ( 6,389 ) ( 6,111 ) Total carrying value $ 1,596,242 $ 1,645,013 The applicable fair value guidance establishes a three tier value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. The fair value of the Company’s debt is based on Level 3 inputs. 5. Derivative Financial Instruments Risk Management Objective of Using Derivatives The Company’s use of derivative instruments is limited to the utilization of interest rate swaps to manage interest rate risk exposure on existing and future liabilities and not for speculative purposes. The principal objective of such arrangements is to minimize the risks and related costs associated with the Company’s operating and financial structure. 15 Table of Contents The following table summarizes the Company’s outstanding interest rate swaps as of September 30, 2020. All of the Company’s interest rate swaps are designated as qualifying cash flow hedges. Interest Rate Derivative Counterparty Trade Date Effective Date Notional Amount (in thousands) Fair Value (in thousands) Pay Fixed Interest Rate Receive Variable Interest Rate Maturity Date Royal Bank of Canada Jan-08-2015 Mar-20-2015 $ 25,000 $ ( 182 ) 1.7090 % One-month L Mar-21-2021 The Toronto-Dominion Bank Jan-08-2015 Mar-20-2015 $ 25,000 $ ( 182 ) 1.7105 % One-month L Mar-21-2021 The Toronto-Dominion Bank Jan-08-2015 Sep-10-2017 $ 100,000 $ ( 970 ) 2.2255 % One-month L Mar-21-2021 Wells Fargo, N.A. Jan-08-2015 Mar-20-2015 $ 25,000 $ ( 639 ) 1.8280 % One-month L Mar-31-2022 The Toronto-Dominion Bank Jan-08-2015 Feb-14-2020 $ 25,000 $ ( 874 ) 2.4535 % One-month L Mar-31-2022 Regions Bank Jan-08-2015 Feb-14-2020 $ 50,000 $ ( 1,766 ) 2.4750 % One-month L Mar-31-2022 Capital One, N.A. Jan-08-2015 Feb-14-2020 $ 50,000 $ ( 1,808 ) 2.5300 % One-month L Mar-31-2022 The Toronto-Dominion Bank Jul-20-2017 Oct-30-2017 $ 25,000 $ ( 979 ) 1.8485 % One-month L Jan-04-2023 Royal Bank of Canada Jul-20-2017 Oct-30-2017 $ 25,000 $ ( 980 ) 1.8505 % One-month L Jan-04-2023 Wells Fargo, N.A. Jul-20-2017 Oct-30-2017 $ 25,000 $ ( 980 ) 1.8505 % One-month L Jan-04-2023 PNC Bank, N.A. Jul-20-2017 Oct-30-2017 $ 25,000 $ ( 978 ) 1.8485 % One-month L Jan-04-2023 PNC Bank, N.A. Jul-20-2017 Oct-30-2017 $ 50,000 $ ( 1,956 ) 1.8475 % One-month L Jan-04-2023 The Toronto-Dominion Bank Apr-20-2020 Sep-29-2020 $ 75,000 $ ( 272 ) 0.2750 % One-month L Apr-18-2023 Wells Fargo, N.A. Apr-20-2020 Sep-29-2020 $ 75,000 $ ( 279 ) 0.2790 % One-month L Apr-18-2023 The Toronto-Dominion Bank Apr-20-2020 Mar-19-2021 $ 75,000 $ ( 230 ) 0.2750 % One-month L Apr-18-2023 Wells Fargo, N.A. Apr-20-2020 Mar-19-2021 $ 75,000 $ ( 239 ) 0.2800 % One-month L Apr-18-2023 The Toronto-Dominion Bank Jul-24-2018 Jul-26-2019 $ 50,000 $ ( 4,568 ) 2.9180 % One-month L Jan-12-2024 PNC Bank, N.A. Jul-24-2018 Jul-26-2019 $ 50,000 $ ( 4,568 ) 2.9190 % One-month L Jan-12-2024 Bank of Montreal Jul-24-2018 Jul-26-2019 $ 50,000 $ ( 4,568 ) 2.9190 % One-month L Jan-12-2024 U.S. Bank, N.A. Jul-24-2018 Jul-26-2019 $ 25,000 $ ( 2,284 ) 2.9190 % One-month L Jan-12-2024 Wells Fargo, N.A. May-02-2019 Jul-15-2020 $ 50,000 $ ( 4,412 ) 2.2460 % One-month L Jan-15-2025 U.S. Bank, N.A. May-02-2019 Jul-15-2020 $ 50,000 $ ( 4,411 ) 2.2459 % One-month L Jan-15-2025 Regions Bank May-02-2019 Jul-15-2020 $ 50,000 $ ( 4,411 ) 2.2459 % One-month L Jan-15-2025 Bank of Montreal Jul-16-2019 Jul-15-2020 $ 50,000 $ ( 3,276 ) 1.7165 % One-month L Jan-15-2025 The following table summarizes the fair value of the interest rate swaps outstanding as of September 30, 2020 and December 31, 2019. Balance Sheet Line Item (in thousands) Notional Amount September 30, 2020 Fair Value September 30, 2020 Notional Amount December 31, 2019 Fair Value December 31, 2019 Interest rate swaps-Asset $ — $ — $ 250,000 $ 303 Interest rate swaps-Liability $ 1,125,000 $ ( 45,812 ) $ 850,000 $ ( 18,819 ) Cash Flow Hedges of Interest Rate Risk The Company’s objectives in using interest rate swaps are to add stability to interest expense and to manage its exposure to interest rate movements. For derivatives designated and that qualify as cash flow hedges of interest rate risk, the gain or loss on the derivative is recorded in accumulated other comprehensive income (loss) and subsequently reclassified into interest expense in the same periods during which the hedged transaction affects earnings. Amounts reported in accumulated other comprehensive income (loss) related to derivatives designated as qualifying cash flow hedges will be reclassified to interest expense as interest payments are made on the Company’s variable rate debt. The Company estimates that approximately $ 16.6 million will be reclassified from accumulated other comprehensive loss as an increase to interest expense over the next 12 months. 16 Table of Contents The following table summarizes the effect of cash flow hedge accounting and the location in the consolidated financial statements for the three and nine months ended September 30, 2020 and 2019. Three months ended September 30, Nine months ended September 30, Effect of Cash Flow Hedge Accounting (in thousands) 2020 2019 2020 2019 Income (loss) recognized in accumulated other comprehensive loss on interest rate swaps $ 169 $ ( 5,913 ) $ ( 36,167 ) $ ( 26,715 ) Income (loss) reclassified from accumulated other comprehensive loss into income as interest expense $ ( 4,758 ) $ 522 $ ( 8,894 ) $ 2,726 Total interest expense presented in the Consolidated Statements of Operations in which the effects of cash flow hedges are recorded $ 15,928 $ 14,053 $ 46,125 $ 39,080 Credit-risk-related Contingent Features The Company has agreements with each of its derivative counterparties that contain a provision where the Company could be declared in default on its derivative obligations if repayment of the underlying indebtedness is accelerated by the lender due to the Company’s default on the indebtedness. As of September 30, 2020, the Company had not breached the provisions of these agreements and had not posted any collateral related to these agreements. If the Company had breached any of these provisions at September 30, 2020, it could have been required to settle its obligations under the agreement of the interest rate swaps in a net liability position by counterparty plus accrued interest for approximately $ 46.9 million. Fair Value of Interest Rate Swaps The Company’s valuation of the interest rate swaps is determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs including interest rate curves. The Company incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Company has considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts, and guarantees. Although the Company has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by itself and its counterparties. However, as of September 30, 2020 and December 31, 2019, the Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation of its derivatives. As a result, the Company has determined that its derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy. The following table summarizes the Company’s financial instruments that are accounted for at fair value on a recurring basis as of September 30, 2020 and December 31, 2019. Fair Value Measurements as of September 30, 2020 Using Balance Sheet Line Item (in thousands) Fair Value September 30, 2020 Level 1 Level 2 Level 3 Interest rate swaps-Asset $ — $ — $ — $ — Interest rate swaps-Liability $ ( 45,812 ) $ — $ ( 45,812 ) $ — Fair Value Measurements as of December 31, 2019 Using Balance Sheet Line Item (in thousands) Fair Value December 31, 2019 Level 1 Level 2 Level 3 Interest rate swaps-Asset $ 303 $ — $ 303 $ — Interest rate swaps-Liability $ ( 18,819 ) $ — $ ( 18,819 ) $ — 17 Table of Contents 6. Equity Preferred Stock The following table summarizes the Company’s outstanding preferred stock issuances as of September 30, 2020. Preferred Stock Issuances Issuance Date Number of Shares Liquidation Value Per Share Interest Rate 6.875% Series C Cumulative Redeemable Preferred Stock ("Series C Preferred Stock") March 17, 2016 3,000,000 $ 25.00 6.875 % The following tables summarize the dividends attributable to the Company’s outstanding preferred stock issuances during the nine months ended September 30, 2020 and the year ended December 31, 2019. Quarter Ended 2020 Declaration Date Series C Preferred Stock Per Share Payment Date September 30 July 9, 2020 $ 0.4296875 September 30, 2020 June 30 April 9, 2020 0.4296875 June 30, 2020 March 31 January 8, 2020 0.4296875 March 31, 2020 Total $ 1.2890625 Quarter Ended 2019 Declaration Date Series C Preferred Stock Per Share Payment Date December 31 October 15, 2019 $ 0.4296875 December 31, 2019 September 30 July 15, 2019 0.4296875 September 30, 2019 June 30 April 9, 2019 0.4296875 July 1, 2019 March 31 January 10, 2019 0.4296875 April 1, 2019 Total $ 1.7187500 On October 9, 2020, the Company’s board of directors declared the Series C Preferred Stock dividends for the quarter ending December 31, 2020 at a quarterly rate of $ 0.4296875 per share. Common Stock The following table summarizes the terms of the Company’s at-the market (“ATM”) common stock offering program as of September 30, 2020. ATM Common Stock Offering Program Date Maximum Aggregate Offering Price (in thousands) Aggregate Common Stock Available as of September 30, 2020 (in thousands) 2019 $600 million ATM February 14, 2019 $ 600,000 $ 318,248 The table below summarizes the activity under the ATM common stock offering program during the year ended December 31, 2019 (in thousands, except share data). There was no activity under the ATM common stock offering program during the nine months ended September 30, 2020. Year ended December 31, 2019 ATM Common Stock Offering Program Shares Sold Weighted Average Price Per Share Net Proceeds 2019 $600 million ATM 9,711,706 $ 29.01 $ 279,156 Total/weighted average 9,711,706 $ 29.01 $ 279,156 On January 13, 2020, the Company completed an underwritten public offering of an aggregate 10,062,500 shares of common stock at a price to the underwriters of $ 30.9022 per share, consisting of (i) 5,600,000 shares offered directly by the Company and (ii) 4,462,500 shares offered by the forward dealer in connection with certain forward sale agreements (including 1,312,500 shares offered pursuant to the underwriters’ option to purchase additional shares, which option was exercised in full). The offering closed on January 16, 2020 and the Company received net proceeds from the sale of shares offered directly by the Company of approximately $ 173.1 million. Subject to the Company’s right to elect cash or net share settlement, the Company has the ability to settle the forward sales agreements at any time through scheduled maturity date of the forward sale agreements of January 13, 2021. 18 Table of Contents The following tables summarize the dividends attributable to the Company’s outstanding shares of common stock that were declared during the nine months ended September 30, 2020 and the year ended December 31, 2019. Month Ended 2020 Declaration Date Record Date Per Share Payment Date September 30 July 9, 2020 September 30, 2020 $ 0.12 October 15, 2020 August 31 July 9, 2020 August 31, 2020 0.12 September 15, 2020 July 31 July 9, 2020 July 31, 2020 0.12 August 17, 2020 June 30 April 9, 2020 June 30, 2020 0.12 July 15, 2020 May 31 April 9, 2020 May 29, 2020 0.12 June 15, 2020 April 30 April 9, 2020 April 30, 2020 0.12 May 15, 2020 March 31 January 8, 2020 March 31, 2020 0.12 April 15, 2020 February 29 January 8, 2020 February 28, 2020 0.12 March 16, 2020 January 31 January 8, 2020 January 31, 2020 0.12 February 18, 2020 Total $ 1.08 Month Ended 2019 Declaration Date Record Date Per Share Payment Date December 31 October 15, 2019 December 31, 2019 $ 0.119167 January 15, 2020 November 30 October 15, 2019 November 29, 2019 0.119167 December 16, 2019 October 31 October 15, 2019 October 31, 2019 0.119167 November 15, 2019 September 30 July 15, 2019 September 30, 2019 0.119167 October 15, 2019 August 31 July 15, 2019 August 30, 2019 0.119167 September 16, 2019 July 31 July 15, 2019 July 31, 2019 0.119167 August 15, 2019 June 30 April 9, 2019 June 28, 2019 0.119167 July 15, 2019 May 31 April 9, 2019 May 31, 2019 0.119167 June 17, 2019 April 30 April 9, 2019 April 30, 2019 0.119167 May 15, 2019 March 31 January 10, 2019 March 29, 2019 0.119167 April 15, 2019 February 28 January 10, 2019 February 28, 2019 0.119167 March 15, 2019 January 31 January 10, 2019 January 31, 2019 0.119167 February 15, 2019 Total $ 1.430004 On October 9, 2020, the Company’s board of directors declared the common stock dividends for the months ending October 31, 2020, November 30, 2020, and December 31, 2020 at a monthly rate of $ 0.12 per share of common stock. 19 Table of Contents Restricted Shares of Common Stock Restricted shares of common stock granted on February 13, 2020 and January 8, 2020 to certain employees of the Company, subject to the recipient’s continued employment, will vest over four years in equal installments on January 1 of each year beginning in 2021. Refer to Note 8 for a discussion of the restricted shares of common stock granted on January 8, 2020 pursuant to the January 6, 2017 performance units. The following table summarizes activity related to the Company’s unvested restricted shares of common stock for the nine months ended September 30, 2020 and the year ended December 31, 2019. Unvested Restricted Shares of Common Stock Shares Balance at December 31, 2018 190,462 Granted 110,830 (1) Vested ( 101,109 ) (2) Forfeited ( 7,138 ) Balance at December 31, 2019 193,045 Granted 75,419 (1) Vested ( 78,010 ) (2) Forfeited ( 1,376 ) Balance at September 30, 2020 189,078 (1) The fair value per share on the grant date of February 13, 2020, January 8, 2020, and January 7, 2019 was $ 32.64 , $ 31.49 , and $ 24.85 , respectively. (2) The Company repurchased and retired 33,119 and 28,504 restricted shares of common stock that vested during the nine months ended September 30, 2020 and the year ended December 31, 2019, respectively. The weighted average grant date fair value of unvested restricted shares of common stock was $ 24.38 per share at December 31, 2019, $ 31.60 per share granted during the nine months ended September 30, 2020, $ 23.11 per share vested during the nine months ended September 30, 2020, $ 26.15 per share forfeited during the nine months ended September 30, 2020, and $ 27.77 per share at September 30, 2020. The unrecognized compensation expense associated with the Company’s restricted shares of common stock at September 30, 2020 was approximately $ 3.7 million and is expected to be recognized over a weighted average period of approximately 2.5 years. The following table summarizes the fair value at vesting for the restricted shares of common stock that vested during the three and nine months ended September 30, 2020 and 2019. Three months ended September 30, Nine months ended September 30, Vested Restricted Shares of Common Stock 2020 2019 2020 2019 Vested restricted shares of common stock — — 78,010 78,431 Fair value of vested restricted shares of common stock (in thousands) $ — $ — $ 2,463 $ 1,951 7. Noncontrolling Interest The following table summarizes the activity for noncontrolling interest in the Company for the nine months ended September 30, 2020 and the year ended December 31, 2019. Noncontrolling Interest LTIP Units Other Common Units Total Noncontrolling Common Units Noncontrolling Interest Balance at December 31, 2018 1,616,200 2,453,234 4,069,434 3.5 % Granted/Issued 364,173 — 364,173 N/A Forfeited ( 16,618 ) — ( 16,618 ) N/A Conversions from LTIP units to Other Common Units ( 266,397 ) 266,397 — N/A Redemptions from Other Common Units to common stock — ( 680,137 ) ( 680,137 ) N/A Balance at December 31, 2019 1,697,358 2,039,494 3,736,852 2.5 % Granted/Issued 278,806 — 278,806 N/A Forfeited — — — N/A Conversions from LTIP units to Other Common Units ( 283,741 ) 283,741 — N/A Redemptions from Other Common Units to common stock — ( 730,104 ) ( 730,104 ) N/A Balance at September 30, 2020 1,692,423 1,593,131 3,285,554 2.2 % 20 Table of Contents The weighted average grant date fair value of outstanding LTIP units was $ 21.64 per unit at December 31, 2019, $ 29.47 per unit granted during the nine months ended September 30, 2020, $ 18.27 per unit converted during the nine months ended September 30, 2020, and $ 23.49 per unit at September 30, 2020. LTIP Units LTIP units granted on January 8, 2020 to non-employee, independent directors, subject to the recipient’s continued service, will vest over one year on January 1, 2021. LTIP units granted on January 8, 2020 to certain senior executive officers and senior employees, subject to the recipient’s continued employment, will vest quarterly over four years , with the first vesting date having been March 31, 2020. Refer to Note 8 for a discussion of the LTIP units granted on January 8, 2020 pursuant to the January 6, 2017 performance units. The fair value of the LTIP units at the date of grant was determined by a lattice-binomial option-pricing model based on a Monte Carlo simulation. The fair value of the LTIP units are based on Level 3 inputs and are non-recurring fair value measurements. The following table summarizes the assumptions used in valuing such LTIP units granted during the nine months ended September 30, 2020 (excluding those LTIP units granted pursuant to the January 6, 2017 performance units; refer to Note 8 for details). LTIP Units Assumptions Grant date January 8, 2020 Expected term (years) 10 Expected volatility 18.0 % Expected dividend yield 5.75 % Risk-free interest rate 1.61 % Fair value of LTIP units at issuance (in thousands) $ 4,030 LTIP units at issuance 136,741 Fair value unit price per LTIP unit at issuance $ 29.47 The following table summarizes activity related to the Company’s unvested LTIP units for the nine months ended September 30, 2020 and the year ended December 31, 2019. Unvested LTIP Units LTIP Units Balance at December 31, 2018 251,216 Granted 364,173 Vested ( 371,423 ) Forfeited ( 16,618 ) Balance at December 31, 2019 227,348 Granted 278,806 Vested ( 201,442 ) Forfeited — Balance at September 30, 2020 304,712 The weighted average grant date fair value of unvested LTIP units was $ 23.37 per unit at December 31, 2019, $ 29.47 per unit granted during the nine months ended September 30, 2020, $ 26.23 per unit vested during the nine months ended September 30, 2020, and $ 27.06 per unit at September 30, 2020. The unrecognized compensation expense associated with the Company’s LTIP units at September 30, 2020 was approximately $ 5.6 million and is expected to be recognized over a weighted average period of approximately 2.4 years. The following table summarizes the fair value at vesting for the LTIP units that vested during the three and nine months ended September 30, 2020 and 2019. Three months ended September 30, Nine months ended September 30, Vested LTIP units 2020 2019 2020 2019 Vested LTIP units 27,297 29,989 201,442 234,330 Fair value of vested LTIP units (in thousands) $ 832 $ 884 $ 5,906 $ 6,348 21 Table of Contents 8. Equity Incentive Plan On January 8, 2020, the Company granted performance units approved by the compensation committee of the board of directors under the 2011 Plan to certain key employees of the Company. The terms of the performance units granted on January 8, 2020 are substantially the same as the terms of the performance units granted on January 7, 2019, except that the measuring period commenced on January 1, 2020 and ends on December 31, 2022. The fair value of the performance units at the date of grant was determined by a lattice-binomial option-pricing model based on a Monte Carlo simulation. The fair value of the performance units are based on Level 3 inputs and are non-recurring fair value measurements. The performance unit equity compensation expense is recognized ratably from the grant date into earnings over the vesting period. The following table summarizes the assumptions used in valuing the performance units granted during the nine months ended September 30, 2020. Performance Units Assumptions Grant date January 8, 2020 Expected volatility 17.4 % Expected dividend yield 5.75 % Risk-free interest rate 1.59 % Fair value of performance units grant (in thousands) $ 5,389 On December 31, 2019, the measuring period pursuant to the January 6, 2017 performance units concluded and it was determined that the Company’s total stockholder return exceeded the threshold percentage and return hurdle. The compensation committee of the board of directors approved the issuance of 76,096 vested LTIP units and 46,376 vested shares of common stock to the participants (of which 18,241 shares of common stock were repurchased and retired), which were issued on January 8, 2020. The compensation committee of the board of directors also approved the issuance of 65,969 LTIP units and 3,398 restricted shares of common stock that will vest over one year on December 31, 2020, which were issued on January 8, 2020. The unrecognized compensation expense associated with the Company’s performance units at September 30, 2020 was approximately $ 7.3 million and is expected to be recognized over a weighted average period of approximately 1.8 years. Non-cash Compensation Expense The following table summarizes the amount recorded in general and administrative expenses in the accompanying Consolidated Statements of Operations for the amortization of restricted shares of common stock, LTIP units, performance units, and the Company’s director compensation for the three and nine months ended September 30, 2020 and 2019. Three months ended September 30, Nine months ended September 30, Non-Cash Compensation Expense (in thousands) 2020 2019 2020 2019 Restricted shares of common stock $ 487 $ 447 $ 1,435 $ 1,318 LTIP units 981 901 2,923 2,687 Performance units 1,356 1,107 4,004 3,062 Director compensation (1) 122 101 374 304 Total non-cash compensation expense $ 2,946 $ 2,556 $ 8,736 $ 7,371 (1) All of the Company’s independent directors elected to receive shares of common stock in lieu of cash for their service during the three and nine months ended September 30, 2020 and 2019. The number of shares of common stock granted is calculated based on the trailing ten days average common stock price ending on the third business day preceding the grant date. 9. Leases Lessor Leases The Company has operating leases in which it is the lessor for its rental property. Certain leases contain variable lease payments based upon changes in the Consumer Price Index (“CPI”). Certain leases contain options to renew or terminate the lease, and options for the lessee to purchase the rental property, all of which are predominately at the sole discretion of the lessee. 22 Table of Contents The following table summarizes the components of rental income recognized during the three and nine months ended September 30, 2020 and 2019 included in the accompanying Consolidated Statements of Operations. Three months ended September 30, Nine months ended September 30, Rental Income (in thousands) 2020 2019 2020 2019 Fixed lease payments $ 92,120 $ 80,262 $ 273,750 $ 227,337 Variable lease payments 23,757 20,189 74,351 61,628 Straight-line rental income 2,852 3,091 8,602 8,667 Net decrease to rental income related to above and below market lease amortization ( 1,482 ) ( 1,248 ) ( 3,646 ) ( 3,361 ) Total rental income $ 117,247 $ 102,294 $ 353,057 $ 294,271 During the nine months ended September 30, 2020 and 2019 the Company evaluated its operating leases and determined that the future collectability for 10 tenants under 11 leases was not reasonably assured. As a result the Company converted to the cash basis of accounting for these leases which resulted in a reduction of rental income of approximately $ 0.8 million, $ 1.7 million, $ 0 , and $ 0 for three and nine months ended September 30, 2020 and 2019, respectively, due to the reversal of accrued rent. Additionally, there was $ 0.9 million, $ 1.5 million, $ 0 , and $ 0 of contractual rental income that was not recognized for payments that were not received from these tenants for the three and nine months ended September 30, 2020 and 2019, respectively. As of September 30, 2020 and December 31, 2019, the Company had accrued rental income of approximately $ 54.6 million and $ 44.3 million, respectively, included in tenant accounts receivable on the accompanying Consolidated Balance Sheets. As of September 30, 2020 and December 31, 2019, the Company had approximately $ 28.4 million and $ 22.6 million, respectively, of total lease security deposits available in the form of existing letters of credit, which are not reflected on the accompanying Consolidated Balance Sheets. As of September 30, 2020 and December 31, 2019, the Company had approximately $ 0.7 million and $ 0.7 million, respectively, of lease security deposits available in cash, which are included in restricted cash on the accompanying Consolidated Balance Sheets. The Company’s remaining lease security deposits are commingled in cash and cash equivalents. These funds may be used to settle tenant accounts receivables in the event of a default under the related lease. As of September 30, 2020 and December 31, 2019, the Company’s total liability associated with these lease security deposits was approximately $ 10.1 million and $ 9.8 million, respectively, and is included in tenant prepaid rent and security deposits on the accompanying Consolidated Balance Sheets. The Company estimates that billings for real estate taxes, which are the responsibility of certain tenants under the terms of their leases and are not reflected on the Company’s consolidated financial statements, was approximately $ 5.0 million, $ 14.7 million, $ 5.1 million and $ 13.1 million for the three and nine months ended September 30, 2020 and 2019, respectively. These amounts would have been the maximum real estate tax expense of the Company, excluding any penalties or interest, had the tenants not met their contractual obligations for these periods. The following table summarizes the maturity of fixed lease payments under the Company’s leases as of September 30, 2020. Year Maturity of Fixed Lease Payments (in thousands) Remainder of 2020 $ 92,565 2021 $ 362,825 2022 $ 327,365 2023 $ 284,041 2024 $ 240,067 Thereafter $ 911,977 Lessee Leases The Company has operating leases in which it is the lessee for ground leases and its corporate office lease. These leases have remaining lease terms of approximately 5.8 years to 49.1 years. Certain ground leases contain options to extend the leases for ten years to 20 years, all of which are reasonably certain to be exercised, and are included in the computation of the Company’s right-of-use assets and operating lease liabilities. 23 Table of Contents The following table summarizes supplemental information related to operating lease right-of-use assets and operating lease liabilities recognized in the Company’s Consolidated Balance Sheets as of September 30, 2020 and December 31, 2019. Operating Lease Term and Discount Rate September 30, 2020 December 31, 2019 Weighted average remaining lease term (years) 28.9 36.0 Weighted average discount rate 6.8 % 7.1 % The following table summarizes the operating lease cost recognized during the three and nine months ended September 30, 2020 and 2019 included in the Company’s Consolidated Statements of Operations. Three months ended September 30, Nine months ended September 30, Operating Lease Cost (in thousands) 2020 2019 2020 2019 Operating lease cost included in property expense attributable to ground leases $ 345 $ 331 $ 1,007 $ 993 Operating lease cost included in general and administrative expense attributable to corporate office lease 424 266 1,165 799 Total operating lease cost $ 769 $ 597 $ 2,172 $ 1,792 The following table summarizes supplemental cash flow information related to operating leases recognized during the nine months ended September 30, 2020 and 2019 in the Company’s Consolidated Statements of Cash Flows. Nine months ended September 30, Operating Leases (in thousands) 2020 2019 Cash paid for amounts included in the measurement of lease liabilities (operating cash flows) $ 1,728 $ 1,711 Right-of-use assets obtained in exchange for new lease liabilities $ 7,718 $ — The following table summarizes the maturity of operating lease liabilities under the Company’s ground leases and corporate office lease as of September 30, 2020. Year Maturity of Operating Lease Liabilities (1) (in thousands) Remainder of 2020 $ 606 2021 2,222 2022 3,100 2023 3,153 2024 3,196 Thereafter 59,245 Total lease payments 71,522 Less: Imputed interest ( 45,108 ) Present value of operating lease liabilities $ 26,414 (1) Operating lease liabilities do not include estimates of CPI rent changes required by certain ground lease agreements. Therefore, actual payments may differ than those presented. 10. Earnings Per Share During the three and nine months ended September 30, 2020 and 2019, there were 189,202 , 186,956 , 220,284 and 218,231 , respectively, of unvested restricted shares of common stock on a weighted average basis that were considered participating securities. 24 Table of Contents The following table reconciles the numerators and denominators in the computation of basic and diluted earnings per common share for the three and nine months ended September 30, 2020 and 2019. Three months ended September 30, Nine months ended September 30, Earnings Per Share (in thousands, except per share data) 2020 2019 2020 2019 Numerator Net income attributable to common stockholders $ 22,386 $ 9,533 $ 102,021 $ 27,734 Denominator Weighted average common shares outstanding — basic 148,997 127,272 148,412 122,460 Effect of dilutive securities (1) Share-based compensation 675 178 375 254 Shares issuable under forward sales agreements 233 19 78 6 Weighted average common shares outstanding — diluted 149,905 127,469 148,865 122,720 Net income per share — basic and diluted Net income per share attributable to common stockholders — basic $ 0.15 $ 0.07 $ 0.69 $ 0.23 Net income per share attributable to common stockholders — diluted $ 0.15 $ 0.07 $ 0.69 $ 0.23 (1) During the three and nine months ended September 30, 2020 and 2019, there were 189 , 187 , 220 and 218 , unvested shares of restricted common stock, respectively, on a weighted average basis that were not included in the computation of diluted earnings per share because the allocation of income under the two-class method was more dilutive. 11. Commitments and Contingencies The Company is subject to various legal proceedings and claims that arise in the ordinary course of business. These matters are generally covered by insurance subject to deductible requirements. Management believes that the ultimate settlement of these actions will not have a material adverse effect on the Company’s financial position, results of operations, or cash flows. The Company has letters of credit of approximately $ 3.0 million as of September 30, 2020 related to construction projects and certain other agreements. 12. Subsequent Events The following non-recognized subsequent events were noted. Subsequent to September 30, 2020, the Company acquired nine buildings with approximately 3.7 million square feet for an aggregate contractual purchase price of approximately $ 256.5 million. The Company has not finalized the acquisition accounting, and therefore is not able to provide the disclosures otherwise required by GAAP, for these acquisitions. 25