STAG Industrial, Inc. 10-Q

Item 1. Financial Statements STAG Industrial, Inc. Consolidated Balance Sheets (unaudited, in thousands, except share data) March 31, 2021 December 31, 2020 Assets Rental Property: Land $ 500,947 $ 492,783 Buildings and improvements, net of accumulated depreciation of $ 524,965 and $ 495,348 , respectively 3,565,366 3,532,608 Deferred leasing intangibles, net of accumulated amortization of $ 264,103 and $ 258,005 , respectively 490,532 499,802 Total rental property, net 4,556,845 4,525,193 Cash and cash equivalents 18,579 15,666 Restricted cash 3,738 4,673 Tenant accounts receivable 79,956 77,796 Prepaid expenses and other assets 44,841 43,471 Interest rate swaps 3,592 — Operating lease right-of-use assets 25,016 25,403 Assets held for sale, net — 444 Total assets $ 4,732,567 $ 4,692,646 Liabilities and Equity Liabilities: Unsecured credit facility $ 233,000 $ 107,000 Unsecured term loans, net 970,572 971,111 Unsecured notes, net 573,377 573,281 Mortgage notes, net 56,341 51,898 Accounts payable, accrued expenses and other liabilities 60,600 69,765 Interest rate swaps 32,106 40,656 Tenant prepaid rent and security deposits 27,522 27,844 Dividends and distributions payable 19,657 19,379 Deferred leasing intangibles, net of accumulated amortization of $ 16,105 and $ 15,759 , respectively 33,559 32,762 Operating lease liabilities 27,717 27,898 Total liabilities 2,034,451 1,921,594 Commitments and contingencies (Note 11) Equity: Preferred stock, par value $ 0.01 per share, 20,000,000 shares authorized at March 31, 2021 and December 31, 2020, Series C, - 0 - and 3,000,000 shares (liquidation preference of $ 25.00 per share) issued and outstanding at March 31, 2021 and December 31, 2020, respectively — 75,000 Common stock, par value $ 0.01 per share, 300,000,000 shares authorized at March 31, 2021 and December 31, 2020, respectively, 159,082,448 and 158,209,823 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively 1,591 1,582 Additional paid-in capital 3,443,787 3,421,721 Cumulative dividends in excess of earnings ( 778,727 ) ( 742,071 ) Accumulated other comprehensive loss ( 28,143 ) ( 40,025 ) Total stockholders’ equity 2,638,508 2,716,207 Noncontrolling interest 59,608 54,845 Total equity 2,698,116 2,771,052 Total liabilities and equity $ 4,732,567 $ 4,692,646 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 March 31, 2021 2020 Revenue Rental income $ 133,825 $ 118,339 Other income 170 209 Total revenue 133,995 118,548 Expenses Property 27,002 21,947 General and administrative 12,790 10,373 Depreciation and amortization 58,407 52,688 Other expenses 852 476 Total expenses 99,051 85,484 Other income (expense) Interest and other income 32 79 Interest expense ( 15,358 ) ( 14,864 ) Debt extinguishment and modification expenses ( 679 ) — Gain on the sales of rental property, net 6,409 46,759 Total other income (expense) ( 9,596 ) 31,974 Net income $ 25,348 $ 65,038 Less: income attributable to noncontrolling interest after preferred stock dividends 473 1,598 Net income attributable to STAG Industrial, Inc. $ 24,875 $ 63,440 Less: preferred stock dividends 1,289 1,289 Less: redemption of preferred stock 2,582 — Less: amount allocated to participating securities 73 79 Net income attributable to common stockholders $ 20,931 $ 62,072 Weighted average common shares outstanding — basic 158,430 147,570 Weighted average common shares outstanding — diluted 159,126 147,656 Net income per share — basic and diluted Net income per share attributable to common stockholders — basic $ 0.13 $ 0.42 Net income per share attributable to common stockholders — diluted $ 0.13 $ 0.42 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 March 31, 2021 2020 Net income $ 25,348 $ 65,038 Other comprehensive income (loss): Income (loss) on interest rate swaps 12,150 ( 30,191 ) Other comprehensive income (loss) 12,150 ( 30,191 ) Comprehensive income 37,498 34,847 Income attributable to noncontrolling interest after preferred stock dividends ( 473 ) ( 1,598 ) Other comprehensive (income) loss attributable to noncontrolling interest ( 268 ) 757 Comprehensive income attributable to STAG Industrial, Inc. $ 36,757 $ 34,006 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 March 31, 2021 Balance, December 31, 2020 $ 75,000 158,209,823 $ 1,582 $ 3,421,721 $ ( 742,071 ) $ ( 40,025 ) $ 2,716,207 $ 54,845 $ 2,771,052 Proceeds from sales of common stock, net — 680,276 7 21,559 — — 21,566 — 21,566 Redemption of preferred stock ( 75,000 ) — — 2,573 ( 2,582 ) — ( 75,009 ) — ( 75,009 ) Dividends and distributions, net — — — — ( 58,828 ) — ( 58,828 ) ( 1,436 ) ( 60,264 ) Non-cash compensation activity, net — 95,190 1 ( 3,214 ) ( 121 ) — ( 3,334 ) 6,607 3,273 Redemption of common units to common stock — 97,159 1 1,622 — — 1,623 ( 1,623 ) — Rebalancing of noncontrolling interest — — — ( 474 ) — — ( 474 ) 474 — Other comprehensive income — — — — — 11,882 11,882 268 12,150 Net income — — — — 24,875 — 24,875 473 25,348 Balance, March 31, 2021 $ — 159,082,448 $ 1,591 $ 3,443,787 $ ( 778,727 ) $ ( 28,143 ) $ 2,638,508 $ 59,608 $ 2,698,116 Three months ended March 31, 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 56 172,667 — — 172,723 — 172,723 Dividends and distributions, net — — — — ( 54,822 ) — ( 54,822 ) ( 896 ) ( 55,718 ) Non-cash compensation activity, net — 73,048 1 ( 858 ) ( 390 ) — ( 1,247 ) 2,618 1,371 Redemption of common units to common stock — 219,390 2 3,426 — — 3,428 ( 3,428 ) — Rebalancing of noncontrolling interest — — — ( 3,293 ) — — ( 3,293 ) 3,293 — Other comprehensive loss — — — — — ( 29,434 ) ( 29,434 ) ( 757 ) ( 30,191 ) Net income — — — — 63,440 — 63,440 1,598 65,038 Balance, March 31, 2020 $ 75,000 148,708,031 $ 1,487 $ 3,142,495 $ ( 714,799 ) $ ( 47,860 ) $ 2,456,323 $ 60,791 $ 2,517,114 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) Three months ended March 31, 2021 2020 Cash flows from operating activities: Net income $ 25,348 $ 65,038 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 58,407 52,688 Non-cash portion of interest expense 487 676 Amortization of above and below market leases, net 1,474 984 Straight-line rent adjustments, net ( 4,676 ) ( 3,849 ) Gain on the sales of rental property, net ( 6,409 ) ( 46,759 ) Non-cash compensation expense 4,615 2,852 Change in assets and liabilities: Tenant accounts receivable 3,281 ( 509 ) Prepaid expenses and other assets ( 4,132 ) ( 490 ) Accounts payable, accrued expenses and other liabilities ( 4,613 ) 390 Tenant prepaid rent and security deposits ( 322 ) ( 441 ) Total adjustments 48,112 5,542 Net cash provided by operating activities 73,460 70,580 Cash flows from investing activities: Acquisitions of land and buildings and improvements ( 81,969 ) ( 100,187 ) Additions of land and building and improvements ( 10,269 ) ( 16,815 ) Acquisitions of other assets — ( 450 ) Proceeds from sales of rental property, net 23,884 99,678 Acquisition deposits, net 2,008 500 Acquisitions of deferred leasing intangibles ( 13,156 ) ( 18,706 ) Net cash used in investing activities ( 79,502 ) ( 35,980 ) Cash flows from financing activities: Proceeds from unsecured credit facility 393,000 387,000 Repayment of unsecured credit facility ( 267,000 ) ( 308,000 ) Proceeds from unsecured term loans 300,000 100,000 Repayment of unsecured term loans ( 300,000 ) — Repayment of mortgage notes ( 531 ) ( 497 ) Payment of loan fees and costs ( 2,750 ) — Proceeds from sales of common stock, net 21,639 172,771 Redemption of preferred stock ( 75,000 ) — Dividends and distributions ( 59,996 ) ( 54,883 ) Repurchase and retirement of share-based compensation ( 1,342 ) ( 1,472 ) Net cash provided by financing activities 8,020 294,919 Increase in cash and cash equivalents and restricted cash 1,978 329,519 Cash and cash equivalents and restricted cash—beginning of period 20,339 11,864 Cash and cash equivalents and restricted cash—end of period $ 22,317 $ 341,383 Supplemental disclosure: Cash paid for interest, net of capitalized interest $ 13,471 $ 12,544 Supplemental schedule of non-cash investing and financing activities Acquisitions of land and buildings and improvements $ ( 4,239 ) $ — Acquisitions of deferred leasing intangibles $ ( 703 ) $ — Change in additions of land, building, and improvements included in accounts payable, accrued expenses, and other liabilities $ 4,281 $ ( 1,080 ) Additions to building and other capital improvements from non-cash compensation $ — $ ( 8 ) Assumption of mortgage notes $ 5,103 $ — Fair market value adjustment to mortgage notes acquired $ ( 161 ) $ — Change in loan fees, costs, and offering costs included in accounts payable, accrued expenses, and other liabilities $ 879 $ ( 62 ) Dividends and distributions accrued $ 19,657 $ 18,301 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 March 31, 2021 and December 31, 2020, the Company owned a 97.8 % and 98.0 %, 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 March 31, 2021, the Company owned 494 buildings in 39 states with approximately 99.1 million rentable square feet, consisting of 414 warehouse/distribution buildings, 72 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. The Company did not incur significant disruptions from the COVID-19 pandemic during the three months ended March 31, 2021. In addition, the Company did no t enter into any rent deferral agreements during the three months ended March 31, 2021. The Company will continue to evaluate 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, 2020. 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. 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) March 31, 2021 December 31, 2020 Cash and cash equivalents $ 18,579 $ 15,666 Restricted cash 3,738 4,673 Total cash and cash equivalents and restricted cash $ 22,317 $ 20,339 Incentive and Equity-Based Employee Compensation Plans On January 7, 2021, the Company adopted the STAG Industrial, Inc. Employee Retirement Vesting Program (the “Vesting Program”) to provide supplemental retirement benefits for eligible employees. For those employees who are retirement eligible or will become retirement eligible during the applicable vesting period under the terms of the Vesting Program, the Company accelerates equity-based compensation through the employee’s six -month retirement notification period or retirement eligibility date, respectively. The adoption of the Vesting Program resulted in an increase to general and administrative expenses of approximately $ 1.5 million for the three months ended March 31, 2021 due to the acceleration of equity-based compensation expense for certain eligible employees. The Company estimates that the adoption of the Vesting Program will result in an increase in general and administrative expenses of approximately $ 2.4 million for the year ending December 31, 2021. Taxes Federal Income Taxes The Company’s taxable REIT subsidiary did no t have any activity during the three months ended March 31, 2021 and 2020. State and Local Income, Excise, and Franchise Tax State and local income, excise, and franchise taxes in the amount of $ 0.4 million and $ 0.4 million have been recorded in other expenses on the accompanying Consolidated Statements of Operations for the three months ended March 31, 2021 and 2020, respectively. Uncertain Tax Positions As of March 31, 2021 and December 31, 2020, 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 March 31, 2021 and December 31, 2020. Rental Property (in thousands) March 31, 2021 December 31, 2020 Land $ 500,947 $ 492,783 Buildings, net of accumulated depreciation of $ 347,390 and $ 327,043 , respectively 3,242,182 3,195,439 Tenant improvements, net of accumulated depreciation of $ 25,333 and $ 24,891 , respectively 42,290 43,684 Building and land improvements, net of accumulated depreciation of $ 152,242 and $ 143,414 , respectively 274,135 275,433 Construction in progress 6,759 18,052 Deferred leasing intangibles, net of accumulated amortization of $ 264,103 and $ 258,005 , respectively 490,532 499,802 Total rental property, net $ 4,556,845 $ 4,525,193 Acquisitions The following table summarizes the acquisitions of the Company during the three months ended March 31, 2021. The Company accounted for all of its acquisitions as asset acquisitions. Market (1) Date Acquired Square Feet Number of Buildings Purchase Price (in thousands) Omaha/Council Bluffs, NE-IA January 21, 2021 370,000 1 $ 24,922 Minneapolis/St Paul, MN February 24, 2021 80,655 1 10,174 Long Island, NY February 25, 2021 64,224 1 8,516 Sacramento, CA February 25, 2021 267,284 1 25,917 Little Rock/N Little Rock March 1, 2021 300,160 1 24,317 Cleveland, OH March 18, 2021 170,000 1 6,382 Three months ended March 31, 2021 1,252,323 6 $ 100,228 (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. The following table summarizes the allocation of the consideration paid at the date of acquisition during the three months ended March 31, 2021 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 $ 9,766 N/A Buildings 71,738 N/A Tenant improvements 757 N/A Building and land improvements 3,947 N/A Deferred leasing intangibles - In-place leases 9,813 8.7 Deferred leasing intangibles - Tenant relationships 4,704 11.5 Deferred leasing intangibles - Above market leases 1,975 15.0 Deferred leasing intangibles - Below market leases ( 2,633 ) 5.9 Below market assumed debt adjustment 161 18.8 Total purchase price $ 100,228 Less: Mortgage notes assumed ( 5,103 ) Net assets acquired $ 95,125 On February 25, 2021, the Company assumed a mortgage note of approximately $ 5.1 million in connection with the acquisition of the property located in Long Island, NY. For a discussion of the method used to determine the fair value of the mortgage note, see Note 4. The following table summarizes the results of operations for the three months ended March 31, 2021 for the buildings acquired during the three months ended March 31, 2021 included in the Company’s Consolidated Statements of Operations from the date of acquisition. Results of Operations (in thousands) Three months ended March 31, 2021 Total revenue $ 1,287 Net income $ 23 10 Table of Contents Dispositions During the three months ended March 31, 2021, the Company sold four buildings to third parties comprised of approximately 0.5 million rentable square feet with a net book value of approximately $ 17.5 million. These buildings contributed approximately $ 10,000 and $ 0.4 million to revenue for the three months ended March 31, 2021 and 2020, respectively. These buildings contributed approximately $ 0.1 million and $ 0.1 million to net loss (exclusive of gain on the sales of rental property, net) for the three months ended March 31, 2021 and 2020, respectively. Net proceeds from the sales of rental property were approximately $ 23.9 million and the Company recognized the full gain on the sales of rental property, net, of approximately $ 6.4 million for the three months ended March 31, 2021. Deferred Leasing Intangibles The following table summarizes the deferred leasing intangibles on the accompanying Consolidated Balance Sheets as of March 31, 2021 and December 31, 2020. March 31, 2021 December 31, 2020 Deferred Leasing Intangibles (in thousands) Gross Accumulated Amortization Net Gross Accumulated Amortization Net Above market leases $ 92,406 $ ( 35,251 ) $ 57,155 $ 92,125 $ ( 33,629 ) $ 58,496 Other intangible lease assets 662,229 ( 228,852 ) 433,377 665,682 ( 224,376 ) 441,306 Total deferred leasing intangible assets $ 754,635 $ ( 264,103 ) $ 490,532 $ 757,807 $ ( 258,005 ) $ 499,802 Below market leases $ 49,664 $ ( 16,105 ) $ 33,559 $ 48,521 $ ( 15,759 ) $ 32,762 Total deferred leasing intangible liabilities $ 49,664 $ ( 16,105 ) $ 33,559 $ 48,521 $ ( 15,759 ) $ 32,762 The following table summarizes the amortization expense and the net decrease to rental income for the amortization of deferred leasing intangibles during the three months ended March 31, 2021 and 2020. Three months ended March 31, Deferred Leasing Intangibles Amortization (in thousands) 2021 2020 Net decrease to rental income related to above and below market lease amortization $ 1,480 $ 990 Amortization expense related to other intangible lease assets $ 22,447 $ 20,302 The following table summarizes the amortization of deferred leasing intangibles over the next five calendar years beginning with 2021 as of March 31, 2021. 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 2021 $ 56,927 $ 517 2022 $ 67,300 $ 483 2023 $ 58,725 $ 983 2024 $ 49,665 $ 1,452 2025 $ 42,085 $ 1,283 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 March 31, 2021 and December 31, 2020. 11 Table of Contents Loan Principal Outstanding as of March 31, 2021 (in thousands) Principal Outstanding as of December 31, 2020 (in thousands) Interest Rate (1)(2) Maturity Date Prepayment Terms (3) Unsecured credit facility: Unsecured Credit Facility (4) $ 233,000 $ 107,000 L + 0.90 % January 12, 2024 i Total unsecured credit facility 233,000 107,000 Unsecured term loans: 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 E 175,000 175,000 3.92 % January 15, 2024 i Unsecured Term Loan F 200,000 200,000 3.11 % January 12, 2025 i Unsecured Term Loan G 300,000 300,000 1.28 % February 5, 2026 i Total unsecured term loans 975,000 975,000 Total unamortized deferred financing fees and debt issuance costs ( 4,428 ) ( 3,889 ) Total carrying value unsecured term loans, net 970,572 971,111 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 Total unamortized deferred financing fees and debt issuance costs ( 1,623 ) ( 1,719 ) Total carrying value unsecured notes, net 573,377 573,281 Mortgage notes (secured debt): Wells Fargo Bank, National Association CMBS Loan 48,063 48,546 4.31 % December 1, 2022 iii Thrivent Financial for Lutherans 3,527 3,556 4.78 % December 15, 2023 iv United of Omaha Life Insurance Company 5,087 — 3.71 % October 1, 2039 ii Total mortgage notes 56,677 52,102 Net unamortized fair market value premium (discount) ( 134 ) 29 Total unamortized deferred financing fees and debt issuance costs ( 202 ) ( 233 ) Total carrying value mortgage notes, net 56,341 51,898 Total / weighted average interest rate (5) $ 1,833,290 $ 1,703,290 3.05 % (1) Interest rate as of March 31, 2021. At March 31, 2021, the one-month LIBOR (“L”) was 0.11113 %. 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 %. As of March 31, 2021, 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 0.28 %, respectively. One-month LIBOR for the Unsecured Term Loan G will be swapped to a fixed rate of 0.94 % effective April 18, 2023. (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 $ 750.0 million. Deferred financing fees and debt issuance costs, net of accumulated amortization related to the unsecured credit facility of approximately $ 2.5 million and $ 1.6 million is included in prepaid expenses and other assets on the accompanying Consolidated Balance Sheets as of March 31, 2021 and December 31, 2020, 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 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 or discounts. The aggregate undrawn nominal commitment on the unsecured credit facility as of March 31, 2021 was approximately $ 514.4 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 12 Table of Contents Company’s indebtedness was approximately $ 7.9 million and $ 6.3 million as of March 31, 2021 and December 31, 2020, 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 months ended March 31, 2021 and 2020. Three months ended March 31, Costs Included in Interest Expense (in thousands) 2021 2020 Amortization of deferred financing fees and debt issuance costs and fair market value premiums/discounts $ 487 $ 676 Facility, unused, and other fees $ 386 $ 364 On February 25 2021, the Company assumed a mortgage note with United of Omaha Life Insurance Company of approximately $ 5.1 million in connection with the acquisition of the property located in Long Island, NY, which serves as collateral for the debt. The debt matures on October 1, 2039 and bears interest at 3.71% per annum. The assumed debt was recorded at fair value and a fair value discount of approximately $ 0.2 million was recorded during three months ended March 31, 2021. The fair value of debt was determined by discounting the future cash flows using the current rate of approximately 4.10 % at which loans would be made to borrowers with similar credit ratings for loans with similar maturities, terms, and loan-to-value ratios. The fair value of the debt is based on Level 3 inputs and is a nonrecurring fair value measurement. On February 5, 2021, the Company entered into an amendment to the unsecured credit facility (the “Credit Facility Amendment”). The Credit Facility Amendment provides for an increase in the aggregate commitments available for borrowing under the unsecured credit facility from $500 million to up to $750 million. As of March 31, 2021, the unsecured credit facility bore an interest rate of LIBOR plus a spread of 0.90% based on the Company’s debt rating, as defined in the loan agreement. In connection with the Credit Facility Amendment, the Company incurred approximately $ 1.2 million in costs which are being deferred and amortized through the maturity date of the unsecured credit facility. Other than the increase in the borrowing commitments, the material terms of the unsecured credit facility remain unchanged. On February 5, 2021, the Company entered into an amendment to the Unsecured Term Loan G (the “Amendment to Unsecured Term Loan G”). The Amendment to Unsecured Term Loan G provides for an extension of the maturity date to February 5, 2026 and a reduced stated interest rate of one-month LIBOR plus a spread that ranges from 0.85 % to 1.65 % for LIBOR borrowings based on the Company’s debt ratings. The Amendment to Unsecured Term Loan G also amended the provision for a minimum interest rate, or floor, for LIBOR borrowings to 0.00 % and for Base Rate borrowings to 1.00 %. As of March 31, 2021 , borrowings under the Unsecured Term Loan G bore interest at LIBOR plus 1.00 %. In connection with the Amendment to Unsecured Term Loan G, the Company incurred approximately $ 1.6 million in costs which are being deferred and amortized through the new maturity date of February 5, 2026. The Company also incurred approximately $ 0.7 million of modification expenses which were recognized in debt extinguishment and modification expenses in the accompanying Consolidated Statements of Operations. Additionally, the Company reversed the previously accrued extension fees of approximately $ 1.1 million from the amendment to the Unsecured Term Loan G that was entered into on April 17, 2020, which resulted in a decrease to interest expense of approximately $ 0.3 million. Other than the maturity and interest rate provisions described above, the material terms of the Unsecured Term Loan G remain unchanged. Financial Covenant Considerations The Company was in compliance with all financial and other covenants as of March 31, 2021 and December 31, 2020 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 $ 89.0 million and $ 81.4 million at March 31, 2021 and December 31, 2020, respectively, and is limited to senior, property-level secured debt financing arrangements. 13 Table of Contents 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 March 31, 2021 and December 31, 2020. March 31, 2021 December 31, 2020 Indebtedness (in thousands) Principal Outstanding Fair Value Principal Outstanding Fair Value Unsecured credit facility $ 233,000 $ 233,000 $ 107,000 $ 107,000 Unsecured term loans 975,000 975,000 975,000 978,448 Unsecured notes 575,000 628,674 575,000 628,575 Mortgage notes 56,677 58,841 52,102 54,485 Total principal amount 1,839,677 $ 1,895,515 1,709,102 $ 1,768,508 Net unamortized fair market value premium (discount) ( 134 ) 29 Total unamortized deferred financing fees and debt issuance costs ( 6,253 ) ( 5,841 ) Total carrying value $ 1,833,290 $ 1,703,290 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. 14 Table of Contents The following table summarizes the Company’s outstanding interest rate swaps as of March 31, 2021. 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 Wells Fargo Bank, N.A. Jan-08-2015 Mar-20-2015 $ 25,000 $ ( 426 ) 1.8280 % One-month L Mar-31-2022 The Toronto-Dominion Bank Jan-08-2015 Feb-14-2020 $ 25,000 $ ( 584 ) 2.4535 % One-month L Mar-31-2022 Regions Bank Jan-08-2015 Feb-14-2020 $ 50,000 $ ( 1,178 ) 2.4750 % One-month L Mar-31-2022 Capital One, N.A. Jan-08-2015 Feb-14-2020 $ 50,000 $ ( 1,206 ) 2.5300 % One-month L Mar-31-2022 The Toronto-Dominion Bank Jul-20-2017 Oct-30-2017 $ 25,000 $ ( 739 ) 1.8485 % One-month L Jan-04-2023 Royal Bank of Canada Jul-20-2017 Oct-30-2017 $ 25,000 $ ( 740 ) 1.8505 % One-month L Jan-04-2023 Wells Fargo Bank, N.A. Jul-20-2017 Oct-30-2017 $ 25,000 $ ( 740 ) 1.8505 % One-month L Jan-04-2023 PNC Bank, N.A. Jul-20-2017 Oct-30-2017 $ 25,000 $ ( 739 ) 1.8485 % One-month L Jan-04-2023 PNC Bank, N.A. Jul-20-2017 Oct-30-2017 $ 50,000 $ ( 1,477 ) 1.8475 % One-month L Jan-04-2023 The Toronto-Dominion Bank Apr-20-2020 Sep-29-2020 $ 75,000 $ ( 83 ) 0.2750 % One-month L Apr-18-2023 Wells Fargo Bank, N.A. Apr-20-2020 Sep-29-2020 $ 75,000 $ ( 90 ) 0.2790 % One-month L Apr-18-2023 The Toronto-Dominion Bank Apr-20-2020 Mar-19-2021 $ 75,000 $ ( 83 ) 0.2750 % One-month L Apr-18-2023 Wells Fargo Bank, N.A. Apr-20-2020 Mar-19-2021 $ 75,000 $ ( 91 ) 0.2800 % One-month L Apr-18-2023 The Toronto-Dominion Bank Jul-24-2018 Jul-26-2019 $ 50,000 $ ( 3,585 ) 2.9180 % One-month L Jan-12-2024 PNC Bank, N.A. Jul-24-2018 Jul-26-2019 $ 50,000 $ ( 3,582 ) 2.9190 % One-month L Jan-12-2024 Bank of Montreal Jul-24-2018 Jul-26-2019 $ 50,000 $ ( 3,582 ) 2.9190 % One-month L Jan-12-2024 U.S. Bank, N.A. Jul-24-2018 Jul-26-2019 $ 25,000 $ ( 1,793 ) 2.9190 % One-month L Jan-12-2024 Wells Fargo Bank, N.A. May-02-2019 Jul-15-2020 $ 50,000 $ ( 3,100 ) 2.2460 % One-month L Jan-15-2025 U.S. Bank, N.A. May-02-2019 Jul-15-2020 $ 50,000 $ ( 3,100 ) 2.2459 % One-month L Jan-15-2025 Regions Bank May-02-2019 Jul-15-2020 $ 50,000 $ ( 3,096 ) 2.2459 % One-month L Jan-15-2025 Bank of Montreal Jul-16-2019 Jul-15-2020 $ 50,000 $ ( 2,092 ) 1.7165 % One-month L Jan-15-2025 U.S. Bank, N.A. Feb-17-2021 Apr-18-2023 $ 150,000 $ 1,794 0.9385 % One-month L Feb-5-2026 Wells Fargo Bank, N.A. Feb-17-2021 Apr-18-2023 $ 75,000 $ 896 0.9365 % One-month L Feb-5-2026 The Toronto-Dominion Bank Feb-17-2021 Apr-18-2023 $ 75,000 $ 902 0.9360 % One-month L Feb-5-2026 The following table summarizes the fair value of the interest rate swaps outstanding as of March 31, 2021 and December 31, 2020. Balance Sheet Line Item (in thousands) Notional Amount March 31, 2021 Fair Value March 31, 2021 Notional Amount December 31, 2020 Fair Value December 31, 2020 Interest rate swaps-Asset $ 300,000 $ 3,592 $ — $ — Interest rate swaps-Liability $ 975,000 $ ( 32,106 ) $ 1,125,000 $ ( 40,656 ) 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 $ 15.4 million will be reclassified from accumulated other comprehensive loss as an increase to interest expense over the next 12 months. 15 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 months ended March 31, 2021 and 2020. Three months ended March 31, Effect of Cash Flow Hedge Accounting (in thousands) 2021 2020 Income (loss) recognized in accumulated other comprehensive loss on interest rate swaps $ 7,750 $ ( 31,087 ) Loss reclassified from accumulated other comprehensive loss into income as interest expense $ 4,400 $ 896 Total interest expense presented in the Consolidated Statements of Operations in which the effects of cash flow hedges are recorded $ 15,358 $ 14,864 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 March 31, 2021, 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 March 31, 2021, 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 $ 29.2 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 March 31, 2021 and December 31, 2020, 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 March 31, 2021 and December 31, 2020. Fair Value Measurements as of March 31, 2021 Using Balance Sheet Line Item (in thousands) Fair Value March 31, 2021 Level 1 Level 2 Level 3 Interest rate swaps-Asset $ 3,592 $ — $ 3,592 $ — Interest rate swaps-Liability $ ( 32,106 ) $ — $ ( 32,106 ) $ — Fair Value Measurements as of December 31, 2020 Using Balance Sheet Line Item (in thousands) Fair Value December 31, 2020 Level 1 Level 2 Level 3 Interest rate swaps-Asset $ — $ — $ — $ — Interest rate swaps-Liability $ ( 40,656 ) $ — $ ( 40,656 ) $ — 16 Table of Contents 6. Equity Preferred Stock On March 1, 2021, the Company gave notice to redeem all 3,000,000 issued and outstanding shares of the 6.875 % Series C Cumulative Redeemable Preferred Stock ("Series C Preferred Stock") on March 31, 2021. The Company redeemed the Series C Preferred Stock on March 31, 2021 at a cash redemption price of $ 25.00 per share, plus accrued and unpaid dividends to but excluding, the redemption date. The Company recognized a deemed dividend to the holders of the Series C Preferred Stock of approximately $ 2.6 million on the accompanying Consolidated Statements of Operations for the three months ended March 31, 2021 related to redemption costs and the original issuance costs of the Series C Preferred Stock. The Company has no outstanding preferred stock issuances as of March 31, 2021. The following tables summarize the dividends attributable to the Company’s outstanding preferred stock issuances during the three months ended March 31, 2021 and the year ended December 31, 2020. Quarter Ended 2021 Declaration Date Series C Preferred Stock Per Share Payment Date March 31 January 11, 2021 $ 0.4296875 March 31, 2021 Total $ 0.4296875 Quarter Ended 2020 Declaration Date Series C Preferred Stock Per Share Payment Date December 31 October 9, 2020 $ 0.4296875 December 31, 2020 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 $ 1.7187500 Common Stock The following table summarizes the terms of the Company’s at-the market (“ATM”) common stock offering program as of March 31, 2021. ATM Common Stock Offering Program Date Maximum Aggregate Offering Price (in thousands) Aggregate Common Stock Available as of March 31, 2021 (in thousands) 2019 $600 million ATM February 14, 2019 $ 600,000 $ 296,244 The table below summarizes the activity under the ATM common stock offering program during the three months ended March 31, 2021 (in thousands, except share data). There was no activity under the ATM common stock offering program during the year ended December 31, 2020. Three months ended March 31, 2021 ATM Common Stock Offering Program Shares Sold Weighted Average Price Per Share Net Proceeds 2019 $600 million ATM 680,276 $ 32.35 $ 21,785 Total/weighted average 680,276 $ 32.35 $ 21,785 Subsequent to March 31, 2021, the Company sold 602,316 shares under the ATM common stock offering program at a price of $ 34.24 per share, or $ 20.6 million, and $ 33.90 per share net of sales agent fees. In addition, on April 5, 2021, the Company sold 1,446,760 shares on a forward basis under the ATM common stock offering program at a price of $ 34.56 per share, or $ 50.0 million, and $ 34.2144 per share net of sales agent fees. The Company does not initially receive any proceeds from the sale of shares on a forward basis. The Company may elect to cash settle or net share settle the forward sale agreement at any time through the scheduled maturity date of April 5, 2022. 17 Table of Contents The following tables summarize the dividends attributable to the Company’s outstanding shares of common stock that were declared during the three months ended March 31, 2021 and the year ended December 31, 2020. Month Ended 2021 Declaration Date Record Date Per Share Payment Date March 31 January 11, 2021 March 31, 2021 $ 0.120833 April 15, 2021 February 28 January 11, 2021 February 26, 2021 0.120833 March 15, 2021 January 31 January 11, 2021 January 29, 2021 0.120833 February 16, 2021 Total $ 0.362499 Month Ended 2020 Declaration Date Record Date Per Share Payment Date December 31 October 9, 2020 December 31, 2020 $ 0.12 January 15, 2021 November 30 October 9, 2020 November 30, 2020 0.12 December 15, 2020 October 31 October 9, 2020 October 30, 2020 0.12 November 16, 2020 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 $ 1.44 On April 12, 2021, the Company’s board of directors declared the common stock dividends for the months ending April 30, 2021, May 31, 2021, and June 30, 2021 at a monthly rate of $ 0.120833 per share of common stock. Restricted Shares of Common Stock Restricted shares of common stock granted on January 7, 2021 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 2022. Refer to Note 8 for a discussion of the restricted shares of common stock granted on January 7, 2021 pursuant to the 2018 performance units. The following table summarizes activity related to the Company’s unvested restricted shares of common stock for the three months ended March 31, 2021 and the year ended December 31, 2020. Unvested Restricted Shares of Common Stock Shares Balance at December 31, 2019 193,045 Granted 75,419 (1) Vested ( 81,408 ) (2) Forfeited ( 2,166 ) Balance at December 31, 2020 184,890 Granted 90,304 (1) Vested ( 72,788 ) (2) Forfeited — Balance at March 31, 2021 202,406 (1) The fair value per share on the grant date of January 7, 2021, February 13, 2020, January 8, 2020, was $ 29.77 , $ 32.64 , and $ 31.49 , respectively. (2) The Company repurchased and retired 25,840 and 34,117 restricted shares of common stock that vested during the three months ended March 31, 2021 and the year ended December 31, 2020, respectively. The weighted average grant date fair value of unvested restricted shares of common stock was $ 27.70 per share at December 31, 2020, $ 29.77 per share granted during the three months ended March 31, 2021, $ 26.76 per share vested during the three months ended March 31, 2021, and $ 28.96 per share at March 31, 2021. The unrecognized compensation expense associated with the Company’s restricted shares of common stock at March 31, 2021 was approximately $ 5.0 million and is expected to be recognized over a weighted average period of approximately 2.8 years. 18 Table of Contents The following table summarizes the fair value at vesting for the restricted shares of common stock that vested during the three months ended March 31, 2021 and 2020. Three months ended March 31, Vested Restricted Shares of Common Stock 2021 2020 Vested restricted shares of common stock 72,788 78,010 Fair value of vested restricted shares of common stock (in thousands) $ 2,280 $ 2,463 7. Noncontrolling Interest The following table summarizes the activity for noncontrolling interest in the Company for the three months ended March 31, 2021 and the year ended December 31, 2020. Noncontrolling Interest LTIP Units Other Common Units Total Noncontrolling Common Units Noncontrolling Interest 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 — ( 730,420 ) ( 730,420 ) N/A Balance at December 31, 2020 1,692,423 1,592,815 3,285,238 2.0 % Granted/Issued 405,844 — 405,844 N/A Forfeited — — — N/A Conversions from LTIP units to Other Common Units ( 97,159 ) 97,159 — N/A Redemptions from Other Common Units to common stock — ( 97,159 ) ( 97,159 ) N/A Balance at March 31, 2021 2,001,108 1,592,815 3,593,923 2.2 % The weighted average grant date fair value of outstanding LTIP units was $ 23.49 per unit at December 31, 2020, $ 28.13 per unit granted during the three months ended March 31, 2021, $ 21.47 per unit converted during the three months ended March 31, 2021, and $ 24.53 per unit at March 31, 2021. LTIP Units LTIP units granted on January 7, 2021 to non-employee, independent directors, subject to the recipient’s continued service, will vest on January 1, 2022. LTIP units granted on January 7, 2021 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, 2021. Refer to Note 8 for a discussion of the LTIP units granted on January 7, 2021 pursuant to the 2018 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 three months ended March 31, 2021 (excluding those LTIP units granted pursuant to the 2018 performance units; refer to Note 8 for details). LTIP Units Assumptions Grant date January 7, 2021 Expected term (years) 10 Expected volatility 34.0 % Expected dividend yield 5.0 % Risk-free interest rate 0.229 % Fair value of LTIP units at issuance (in thousands) $ 4,316 LTIP units at issuance 153,430 Fair value unit price per LTIP unit at issuance $ 28.13 19 Table of Contents The following table summarizes activity related to the Company’s unvested LTIP units for the three months ended March 31, 2021 and the year ended December 31, 2020. Unvested LTIP Units LTIP Units Balance at December 31, 2019 227,348 Granted 278,806 Vested ( 294,706 ) Forfeited — Balance at December 31, 2020 211,448 Granted 405,844 Vested ( 183,486 ) Forfeited — Balance at March 31, 2021 433,806 The weighted average grant date fair value of unvested LTIP units was $ 26.54 per unit at December 31, 2020, $ 28.13 per unit granted during the three months ended March 31, 2021, $ 28.08 per unit vested during the three months ended March 31, 2021, and $ 27.38 per unit at March 31, 2021. The unrecognized compensation expense associated with the Company’s LTIP units at March 31, 2021 was approximately $ 6.5 million and is expected to be recognized over a weighted average period of approximately 2.0 years. The following table summarizes the fair value at vesting for the LTIP units that vested during the three months ended March 31, 2021 and 2020. Three months ended March 31, Vested LTIP units 2021 2020 Vested LTIP units 183,486 130,187 Fair value of vested LTIP units (in thousands) $ 5,683 $ 3,861 8. Equity Incentive Plan On January 7, 2021, 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 7, 2021 are substantially the same as the terms of the performance units granted on January 8, 2020, except that the measuring period commenced on January 1, 2021 and ends on December 31, 2023. 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 is 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 three months ended March 31, 2021. Performance Units Assumptions Grant date January 7, 2021 Expected volatility 34.4 % Expected dividend yield 5.0 % Risk-free interest rate 0.2271 % Fair value of performance units grant (in thousands) $ 5,522 On December 31, 2020, the measuring period pursuant to the 2018 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 127,671 vested LTIP units and 44,591 vested shares of common stock to the participants (of which 17,731 shares of common stock were repurchased and retired), which were issued on January 7, 2021. The compensation committee of the board of directors also approved the issuance of 124,743 LTIP units and 6,352 restricted shares of common stock that will vest in one year on December 31, 2021, which were issued on January 7, 2021. The unrecognized compensation expense associated with the Company’s performance units at March 31, 2021 was approximately $ 10.0 million and is expected to be recognized over a weighted average period of approximately 2.1 years. 20 Table of Contents 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 months ended March 31, 2021 and 2020. Three months ended March 31, Non-Cash Compensation Expense (in thousands) 2021 2020 Restricted shares of common stock $ 651 $ 467 LTIP units 2,408 964 Performance units 1,438 1,307 Director compensation (1) 118 114 Total non-cash compensation expense $ 4,615 $ 2,852 (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 months ended March 31, 2021 and 2020. 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. The following table summarizes the components of rental income recognized during the three months ended March 31, 2021 and 2020 included in the accompanying Consolidated Statements of Operations. Three months ended March 31, Rental Income (in thousands) 2021 2020 Fixed lease payments $ 101,179 $ 90,396 Variable lease payments 29,244 25,006 Straight-line rental income 4,882 3,927 Net decrease to rental income related to above and below market lease amortization ( 1,480 ) ( 990 ) Total rental income $ 133,825 $ 118,339 The Company evaluates its operating leases to determine if it is probable it will collect substantially all of the lessee's remaining lease payments under the lease term. For those that are not probable of collection, the Company converts to the cash basis of accounting. If the Company subsequently determines that it is probable it will collect substantially all of the lessee's remaining lease payments under the lease term, the Company will reinstate the accrued rent balance adjusting for the amount related to the period when the lease was accounted for on a cash basis. During the three months ended March 31, 2021, this resulted in a net increase of rental income of approximately $ 0.1 million for the three months ended March 31, 2021 due to the reversal of a net accrued rent liability and tenants converting from cash basis accounting to accrual basis accounting. Additionally, there was $ 1.4 million of contractual rental income not received from cash basis tenants partially offset by $ 1.2 million of previously unrecognized rental income payments received from tenants under the cash basis of accounting during the three months ended March 31, 2021. During the three months ended March 31, 2020, the Company did not have any tenants under the cash basis of accounting. As of March 31, 2021 and December 31, 2020, the Company had accrued rental income of approximately $ 65.4 million and $ 60.0 million, respectively, included in tenant accounts receivable on the accompanying Consolidated Balance Sheets. As of March 31, 2021 and December 31, 2020, the Company had approximately $ 29.9 million and $ 30.1 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 March 31, 2021 and December 31, 2020, 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 March 31, 2021 and December 31, 2020, the Company’s total liability associated with these lease security deposits was 21 Table of Contents approximately $ 11.4 million and $ 11.0 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 $ 5.1 million and $ 4.8 million for the three months ended March 31, 2021 and 2020, 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 March 31, 2021. Year Maturity of Fixed Lease Payments (in thousands) Remainder of 2021 $ 306,057 2022 $ 382,216 2023 $ 339,261 2024 $ 289,904 2025 $ 240,509 Thereafter $ 906,866 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 5.3 years to 48.6 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. 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 March 31, 2021 and December 31, 2020. Operating Lease Term and Discount Rate March 31, 2021 December 31, 2020 Weighted average remaining lease term (years) 29.9 29.9 Weighted average discount rate 6.8 % 6.8 % The following table summarizes the operating lease cost recognized during the three months ended March 31, 2021 and 2020 included in the Company’s Consolidated Statements of Operations. Three months ended March 31, Operating Lease Cost (in thousands) 2021 2020 Operating lease cost included in property expense attributable to ground leases $ 417 $ 331 Operating lease cost included in general and administrative expense attributable to corporate office lease 429 318 Total operating lease cost $ 846 $ 649 The following table summarizes supplemental cash flow information related to operating leases recognized during the three months ended March 31, 2021 and 2020 in the Company’s Consolidated Statements of Cash Flows. Three months ended March 31, Operating Leases (in thousands) 2021 2020 Cash paid for amounts included in the measurement of lease liabilities (operating cash flows) $ 627 $ 571 Right-of-use assets obtained in exchange for new lease liabilities $ — $ 7,718 22 Table of Contents The following table summarizes the maturity of operating lease liabilities under the Company’s ground leases and corporate office lease as of March 31, 2021. Year Maturity of Operating Lease Liabilities (1) (in thousands) Remainder of 2021 $ 1,681 2022 3,188 2023 3,248 2024 3,291 2025 3,336 Thereafter 62,365 Total lease payments 77,109 Less: Imputed interest ( 49,392 ) Present value of operating lease liabilities $ 27,717 (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 months ended March 31, 2021 and 2020, there were 198,812 and 181,747 , respectively, of unvested restricted shares of common stock on a weighted average basis that were considered participating securities. The following table reconciles the numerators and denominators in the computation of basic and diluted earnings per common share for the three months ended March 31, 2021 and 2020. Three months ended March 31, Earnings Per Share (in thousands, except per share data) 2021 2020 Numerator Net income attributable to common stockholders $ 20,931 $ 62,072 Denominator Weighted average common shares outstanding — basic 158,430 147,570 Effect of dilutive securities (1) Share-based compensation 350 86 Shares issuable under forward sales agreements 346 — Weighted average common shares outstanding — diluted 159,126 147,656 Net income per share — basic and diluted Net income per share attributable to common stockholders — basic $ 0.13 $ 0.42 Net income per share attributable to common stockholders — diluted $ 0.13 $ 0.42 (1) During the three months ended March 31, 2021 and 2020, there were approximately 199 and 182 , 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 $ 2.6 million as of March 31, 2021 related to construction projects and certain other agreements. 12. Subsequent Events The following non-recognized subsequent events were noted. Subsequent to March 31, 2021, the Company sold 602,316 shares under the ATM common stock offering program at a price of $ 34.24 per share, or $ 20.6 million, and $ 33.90 per share net of sales agent fees. In addition, on April 5, 2021, the Company sold 1,446,760 shares on a forward basis under the ATM common stock offering program at a price of $ 34.56 per share, or $ 50.0 million, and $ 34.2144 per share net of sales agent fees. The Company does not initially receive any proceeds from the sale of 23 Table of Contents shares on a forward basis. The Company may elect to cash settle or net share settle the forward sale agreement at any time through the scheduled maturity date of April 5, 2022. 24