STAG Industrial, Inc. 10-Q

Item 1. Financial Statements STAG Industrial, Inc. Consolidated Balance Sheets (unaudited, in thousands, except share data) September 30, 2024 December 31, 2023 Assets Rental Property: Land $ 739,975 $ 698,633 Buildings and improvements, net of accumulated depreciation of $ 1,042,046 and $ 921,846 , respectively 5,054,195 4,838,522 Deferred leasing intangibles, net of accumulated amortization of $ 369,301 and $ 360,094 , respectively 413,509 435,722 Total rental property, net 6,207,679 5,972,877 Cash and cash equivalents 70,036 20,741 Restricted cash 1,108 1,127 Tenant accounts receivable 128,366 128,274 Prepaid expenses and other assets 101,922 80,455 Interest rate swaps 29,016 50,418 Operating lease right-of-use assets 28,105 29,566 Total assets $ 6,566,232 $ 6,283,458 Liabilities and Equity Liabilities: Unsecured credit facility $ 256,000 $ 402,000 Unsecured term loans, net 1,021,513 1,021,773 Unsecured notes, net 1,643,821 1,195,872 Mortgage notes, net 4,247 4,401 Accounts payable, accrued expenses and other liabilities 139,879 83,152 Interest rate swaps 3,027 — Tenant prepaid rent and security deposits 47,056 44,238 Dividends and distributions payable 22,937 22,726 Deferred leasing intangibles, net of accumulated amortization of $ 29,055 and $ 26,613 , respectively 31,195 29,908 Operating lease liabilities 32,217 33,577 Total liabilities 3,201,892 2,837,647 Commitments and contingencies (Note 11) Equity: Preferred stock, par value $ 0.01 per share, 20,000,000 shares authorized at September 30, 2024 and December 31, 2023; none issued or outstanding — — Common stock, par value $ 0.01 per share, 300,000,000 shares authorized at September 30, 2024 and December 31, 2023, 182,205,640 and 181,690,867 shares issued and outstanding at September 30, 2024 and December 31, 2023, respectively 1,822 1,817 Additional paid-in capital 4,281,290 4,272,376 Cumulative dividends in excess of earnings ( 1,012,760 ) ( 948,720 ) Accumulated other comprehensive income 25,320 49,207 Total stockholders’ equity 3,295,672 3,374,680 Noncontrolling interest 68,233 71,131 Noncontrolling interest in joint venture 435 — Total equity 3,364,340 3,445,811 Total liabilities and equity $ 6,566,232 $ 6,283,458 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, 2024 2023 2024 2023 Revenue Rental income $ 190,286 $ 177,858 $ 564,155 $ 522,565 Other income 453 1,423 3,904 1,963 Total revenue 190,739 179,281 568,059 524,528 Expenses Property 38,015 34,429 114,564 102,985 General and administrative 11,978 11,097 36,758 35,833 Depreciation and amortization 72,506 69,761 219,213 207,199 Loss on impairment — — 4,967 — Other expenses 545 773 1,703 4,109 Total expenses 123,044 116,060 377,205 350,126 Other income (expense) Interest and other income 14 17 39 53 Interest expense ( 28,705 ) ( 23,753 ) ( 81,498 ) ( 69,225 ) Debt extinguishment and modification expenses ( 36 ) — ( 703 ) — Gain on involuntary conversion 3,568 — 9,285 — Gain on the sales of rental property, net 195 11,683 23,281 49,343 Total other income (expense) ( 24,964 ) ( 12,053 ) ( 49,596 ) ( 19,829 ) Net income 42,731 51,168 141,258 154,573 Less: income attributable to noncontrolling interest 875 1,128 2,992 3,461 Net income attributable to STAG Industrial, Inc. 41,856 50,040 138,266 151,112 Less: amount allocated to participating securities 45 53 138 159 Net income attributable to common stockholders $ 41,811 $ 49,987 $ 138,128 $ 150,953 Weighted average common shares outstanding — basic 182,027 180,803 181,899 179,810 Weighted average common shares outstanding — diluted 182,297 181,163 182,173 180,070 Net income per share — basic and diluted Net income per share attributable to common stockholders — basic $ 0.23 $ 0.28 $ 0.76 $ 0.84 Net income per share attributable to common stockholders — diluted $ 0.23 $ 0.28 $ 0.76 $ 0.84 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, 2024 2023 2024 2023 Net income $ 42,731 $ 51,168 $ 141,258 $ 154,573 Other comprehensive income (loss): Income (loss) on interest rate swaps ( 28,513 ) 4,882 ( 24,404 ) 4,691 Other comprehensive income (loss) ( 28,513 ) 4,882 ( 24,404 ) 4,691 Comprehensive income 14,218 56,050 116,854 159,264 Income attributable to noncontrolling interest ( 875 ) ( 1,128 ) ( 2,992 ) ( 3,461 ) Other comprehensive (income) loss attributable to noncontrolling interest 605 ( 109 ) 517 ( 105 ) Comprehensive income attributable to STAG Industrial, Inc. $ 13,948 $ 54,813 $ 114,379 $ 155,698 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 Income Total Stockholders’ Equity Noncontrolling Interest - Unit Holders in Operating Partnership Noncontrolling Interest in Joint Venture Total Equity Shares Amount Three months ended September 30, 2024 Balance, June 30, 2024 $ — 182,105,303 $ 1,821 $ 4,276,498 $ ( 987,218 ) $ 53,228 $ 3,344,329 $ 71,001 $ — $ 3,415,330 Proceeds from sales of common stock, net — — — ( 103 ) — — ( 103 ) — — ( 103 ) Dividends and distributions, net ($ 0.37 per share/unit) — — — — ( 67,398 ) — ( 67,398 ) ( 1,135 ) — ( 68,533 ) Non-cash compensation activity, net — 4,769 — 2,084 — — 2,084 909 — 2,993 Redemption of common units to common stock — 95,568 1 1,755 — — 1,756 ( 1,756 ) — — Rebalancing of noncontrolling interest — — — 1,056 — — 1,056 ( 1,056 ) — — Contributions from noncontrolling interest in joint venture — — — — — — — — 435 435 Other comprehensive loss — — — — — ( 27,908 ) ( 27,908 ) ( 605 ) — ( 28,513 ) Net income — — — — 41,856 — 41,856 875 — 42,731 Balance, September 30, 2024 $ — 182,205,640 $ 1,822 $ 4,281,290 $ ( 1,012,760 ) $ 25,320 $ 3,295,672 $ 68,233 $ 435 $ 3,364,340 Three months ended September 30, 2023 Balance, June 30, 2023 $ — 179,660,771 $ 1,797 $ 4,201,551 $ ( 907,061 ) $ 70,313 $ 3,366,600 $ 77,259 $ — $ 3,443,859 Proceeds from sales of common stock, net — 1,717,993 17 61,015 — — 61,032 — — 61,032 Dividends and distributions, net ($ 0.37 per share/unit) — — — — ( 66,685 ) — ( 66,685 ) ( 1,492 ) — ( 68,177 ) Non-cash compensation activity, net — 14,253 — 1,835 — — 1,835 764 — 2,599 Redemption of common units to common stock — 120,597 1 2,260 — — 2,261 ( 2,261 ) — — Rebalancing of noncontrolling interest — — — 97 — — 97 ( 97 ) — — Other comprehensive income — — — — — 4,773 4,773 109 — 4,882 Net income — — — — 50,040 — 50,040 1,128 — 51,168 Balance, September 30, 2023 $ — 181,513,614 $ 1,815 $ 4,266,758 $ ( 923,706 ) $ 75,086 $ 3,419,953 $ 75,410 $ — $ 3,495,363 Nine months ended September 30, 2024 Balance, December 31, 2023 $ — $ 181,690,867 $ 1,817 $ 4,272,376 $ ( 948,720 ) $ 49,207 $ 3,374,680 $ 71,131 $ — $ 3,445,811 Proceeds from sales of common stock, net — — — ( 362 ) — — ( 362 ) — — ( 362 ) Dividends and distributions, net ($ 1.11 per share/unit) — — — — ( 202,072 ) — ( 202,072 ) ( 4,248 ) — ( 206,320 ) Non-cash compensation activity, net — 74,223 1 1,677 ( 234 ) — 1,444 6,478 — 7,922 Redemption of common units to common stock — 440,550 4 8,157 — — 8,161 ( 8,161 ) — — Rebalancing of noncontrolling interest — — — ( 558 ) — — ( 558 ) 558 — — Contributions from noncontrolling interest in joint venture — — — — — — — — 435 435 Other comprehensive loss — — — — — ( 23,887 ) ( 23,887 ) ( 517 ) — ( 24,404 ) Net income — — — — 138,266 — 138,266 2,992 — 141,258 Balance, September 30, 2024 $ — 182,205,640 $ 1,822 $ 4,281,290 $ ( 1,012,760 ) $ 25,320 $ 3,295,672 $ 68,233 $ 435 $ 3,364,340 Nine months ended September 30, 2023 Balance, December 31, 2022 $ — 179,248,980 $ 1,792 $ 4,188,677 $ ( 876,145 ) $ 70,500 $ 3,384,824 $ 73,357 $ — $ 3,458,181 Proceeds from sales of common stock, net — 1,967,009 20 69,507 — — 69,527 — — 69,527 Dividends and distributions, net ($ 1.10 per share/unit) — — — — ( 198,590 ) — ( 198,590 ) ( 1,240 ) — ( 199,830 ) Non-cash compensation activity, net — 98,194 1 ( 100 ) ( 83 ) — ( 182 ) 8,403 — 8,221 Redemption of common units to common stock — 199,431 2 3,742 — — 3,744 ( 3,744 ) — — Rebalancing of noncontrolling interest — — — 4,932 — — 4,932 ( 4,932 ) — — Other comprehensive income — — — — — 4,586 4,586 105 — 4,691 Net income — — — — 151,112 — 151,112 3,461 — 154,573 Balance, September 30, 2023 $ — 181,513,614 $ 1,815 $ 4,266,758 $ ( 923,706 ) $ 75,086 $ 3,419,953 $ 75,410 $ — $ 3,495,363 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, 2024 2023 Cash flows from operating activities: Net income $ 141,258 $ 154,573 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 219,213 207,199 Loss on impairment 4,967 — Gain on involuntary conversion ( 9,285 ) — Non-cash portion of interest expense 3,201 2,924 Amortization of above and below market leases, net 2 ( 490 ) Straight-line rent adjustments, net ( 11,384 ) ( 13,414 ) Debt extinguishment and modification expenses 36 — Gain on the sales of rental property, net ( 23,281 ) ( 49,343 ) Non-cash compensation expense 8,824 9,006 Change in assets and liabilities: Tenant accounts receivable 9,273 6,212 Prepaid expenses and other assets ( 28,596 ) ( 24,298 ) Accounts payable, accrued expenses and other liabilities 38,317 6,324 Tenant prepaid rent and security deposits 2,818 813 Total adjustments 214,105 144,933 Net cash provided by operating activities 355,363 299,506 Cash flows from investing activities: Additions of land and buildings and improvements ( 83,082 ) ( 77,886 ) Acquisitions of land and buildings and improvements ( 358,146 ) ( 238,226 ) Acquisitions of other assets ( 196 ) — Acquisitions of tenant prepaid rent — 511 Proceeds from sales of rental property, net 97,718 97,234 Acquisition deposits, net ( 245 ) 2,000 Acquisitions of deferred leasing intangibles ( 46,570 ) ( 16,786 ) Net cash used in investing activities ( 390,521 ) ( 233,153 ) Cash flows from financing activities: Proceeds from unsecured credit facility 1,043,000 965,000 Repayment of unsecured credit facility ( 1,189,000 ) ( 815,000 ) Proceeds from unsecured notes 450,000 — Repayment of unsecured notes — ( 100,000 ) Repayment of mortgage notes ( 161 ) ( 259 ) Payment of loan fees and costs ( 12,379 ) ( 270 ) Proceeds from sales of common stock, net ( 342 ) 69,616 Dividends and distributions ( 206,105 ) ( 199,387 ) Repurchase and retirement of share-based compensation ( 1,014 ) ( 812 ) Contributions from noncontrolling interest in joint venture 435 — Net cash provided by (used in) financing activities 84,434 ( 81,112 ) Increase (decrease) in cash and cash equivalents and restricted cash 49,276 ( 14,759 ) Cash and cash equivalents and restricted cash—beginning of period 21,868 26,789 Cash and cash equivalents and restricted cash—end of period $ 71,144 $ 12,030 Supplemental disclosure: Cash paid for interest, net of amounts capitalized of $ 1,770 and $ 1,686 for 2024 and 2023, respectively $ 66,339 $ 62,896 Supplemental schedule of non-cash investing and financing activities Acquisitions of land and buildings and improvements $ ( 2,456 ) $ ( 66 ) Acquisitions of deferred leasing intangibles $ ( 357 ) $ ( 6 ) Additions to building and other capital improvements from involuntary conversion $ ( 12,253 ) $ — Investing other receivables due to involuntary conversion of building $ 2,968 $ — Change in additions of land, building, and improvements included in accounts payable, accrued expenses and other liabilities $ ( 17,110 ) $ 1,089 Additions to building and other capital improvements from non-cash compensation $ ( 137 ) $ ( 42 ) Change in loan fees, costs, and offering costs included in accounts payable, accrued expenses and other liabilities $ ( 559 ) $ ( 89 ) Dividends and distributions accrued $ 22,937 $ 22,726 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 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 all of its properties 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, 2024 and December 31, 2023, the Company owned 98.0 % and 97.9 %, respectively, of the common units of the limited partnership interests 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, including the Operating Partnership, except where context otherwise requires. As of September 30, 2024, the Company owned 578 industrial buildings in 40 states with approximately 114.5 million rentable square feet. 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, 2023. Basis of Presentation The Company’s consolidated financial statements include the accounts of the Company, the Operating Partnership, and their consolidated 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 majority-owned subsidiaries and joint ventures over which the Company has a controlling financial interest are included in the consolidated financial statements. 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. Joint Venture The Company has an equity interest in a consolidated joint venture that is primarily engaged in the development and operation of an industrial real estate property. The Company evaluated the joint venture under the variable interest entity (“VIE”) model of consolidation and determined that the joint venture is not a VIE. Accordingly, the Company has determined to account for its investment in the joint venture under the voting interest model of consolidation, as the Company has a majority voting interest, operational control, or financial control. Control is determined using accounting standards related to the consolidation of joint ventures and VIE’s. The evaluation of control includes a review of the entity’s governing documents and the Company’s rights and obligations. In determining whether the Company has a controlling financial interest in a joint venture, the Company considers various factors, including the percentage of voting interests owned, the ability to direct the activities that most significantly impact the entity’s economic performance, and the extent of the Company’s exposure to the entity’s returns. The Company also considers whether other parties hold substantive participating rights or protective rights that would preclude consolidation. The Company reevaluates its determination of whether an entity is a VIE upon the occurrence of certain significant events under the accounting standards consolidation guidance. 8 Table of Contents The assets and liabilities of the consolidated joint venture are included in the accompanying Consolidated Balance Sheets, and the joint venture’s results of operations are included in the accompanying Consolidated Statements of Operations. The joint venture partner’s share of the joint venture is reflected as noncontrolling interest in the accompanying consolidated financial statements. See Note 7 for further discussion of the noncontrolling interest in joint venture. The Company’s interest in the joint venture uses the hypothetical liquidation at book value model. Under this model, the Company’s earnings from and equity interest in the joint venture is recorded based on its proportionate share of the joint venture based on its ownership interest, after giving effect to incentive fees earned by the joint venture partner. 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, 2024 December 31, 2023 Cash and cash equivalents $ 70,036 $ 20,741 Restricted cash 1,108 1,127 Total cash and cash equivalents and restricted cash $ 71,144 $ 21,868 Uncertain Tax Positions As of September 30, 2024 and December 31, 2023, 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. 3. Rental Property The following table summarizes the components of rental property, net as of September 30, 2024 and December 31, 2023. Rental Property (in thousands) September 30, 2024 December 31, 2023 Land $ 739,975 $ 698,633 Buildings, net of accumulated depreciation of $ 708,083 and $ 622,941 , respectively 4,463,520 4,330,799 Tenant improvements, net of accumulated depreciation of $ 39,851 and $ 36,920 , respectively 41,709 39,145 Building and land improvements, net of accumulated depreciation of $ 294,112 and $ 261,985 , respectively 375,368 369,724 Construction in progress 173,598 98,854 Deferred leasing intangibles, net of accumulated amortization of $ 369,301 and $ 360,094 , respectively 413,509 435,722 Total rental property, net $ 6,207,679 $ 5,972,877 9 Table of Contents Acquisitions The following table summarizes the Company’s acquisitions during the three and nine months ended September 30, 2024. The Company accounted for all of its acquisitions as asset acquisitions. Market (1) Date Acquired Square Feet Number of Buildings Purchase Price (in thousands) Cincinnati, OH March 18, 2024 697,500 1 $ 50,073 Three months ended March 31, 2024 697,500 1 50,073 Milwaukee, WI April 8, 2024 150,002 1 16,062 Portland, OR April 15, 2024 99,136 1 17,058 Louisville, IN April 16, 2024 592,800 1 52,352 Portland, OR (2) June 6, 2024 — — 8,178 El Paso, TX June 10, 2024 254,103 1 32,182 Chicago, IL June 24, 2024 947,436 5 87,560 Columbus, OH June 26, 2024 150,207 1 20,408 Three months ended June 30, 2024 2,193,684 10 233,800 Reno, NV (2) July 25, 2024 — — 1,896 Reno, NV (3) August 8, 2024 — — 8,959 LaGrange, GA September 9, 2024 323,368 1 34,870 Boston, MA September 12, 2024 290,471 5 78,127 Three months ended September 30, 2024 613,839 6 123,852 Nine months ended September 30, 2024 3,505,023 17 $ 407,725 (1) As defined by CBRE-EA industrial market geographies. If the building is located outside of a CBRE-EA defined market, the city and state is reflected. (2) The Company acquired a vacant land parcel. (3) The Company acquired a vacant land parcel through a consolidated joint venture. On August 8, 2024, the Company formed a joint venture with a third party that is primarily engaged in the development and operation of an industrial real estate property located in Reno, Nevada. The Company determined to account for its investment in the joint venture under the voting interest model of consolidation. See Note 2 for further discussion of this determination. See Note 7 for further discussion of the third party’s noncontrolling interest in the joint venture. The following table summarizes the allocation of the consideration paid at the date of acquisition during the nine months ended September 30, 2024 for the acquired assets and liabilities in connection with the acquisitions identified in the table above. Nine Months Ended September 30, 2024 Acquired Assets and Liabilities Purchase Price (in thousands) Weighted Average Amortization Period (years) of Intangibles at Acquisition Land $ 50,575 N/A Buildings 288,653 N/A Tenant improvements 4,104 N/A Building and land improvements 15,487 N/A Construction in progress 1,783 N/A Other assets 196 N/A Deferred leasing intangibles - In-place leases 33,762 5.6 Deferred leasing intangibles - Tenant relationships 20,116 9.3 Deferred leasing intangibles - Above market leases 934 6.0 Deferred leasing intangibles - Below market leases ( 7,885 ) 6.1 Total purchase price $ 407,725 10 Table of Contents Dispositions The following table summarizes the Company’s dispositions during the nine months ended September 30, 2024. All of the dispositions were sold to third parties and were accounted for under the full accrual method. Sales of rental property, net (dollars in thousands) Nine months ended September 30, 2024 Number of buildings 8 Building square feet (in millions) 1.3 Proceeds from sales of rental property, net $ 97,718 Net book value $ 74,437 Gain on the sales of rental property, net (1) $ 23,281 (1) Inclusive of a loss on the sale of rental property, net, of approximately $ 2.0 million. The following table summarizes the results of operations for the three and nine months ended September 30, 2024 and 2023 for the buildings sold during the nine months ended September 30, 2024, which are included in the Company’s Consolidated Statements of Operations prior to the date of sale. Three months ended September 30, Nine months ended September 30, Sales of rental property, net (dollars in thousands) 2024 2023 2024 2023 Sold buildings contribution to net income (loss) (1) $ ( 237 ) $ 602 $ ( 6,081 ) $ 2,866 (1) Exclusive of gain on the sales of rental property, net and loss on impairment. Loss on Impairment The following table summarizes the Company’s loss on impairment for assets held and used during the nine months ended September 30, 2024. The Company did no t recognize a loss on impairment during the three months ended September 30, 2024 and the three and nine months ended September 30, 2023. Market (1) Buildings Event or Change in Circumstance Leading to Impairment Evaluation (2) Valuation Technique Utilized to Estimate Fair Value Fair Value (3) Loss on Impairment (in thousands) Salt Lake City, UT 1 Change in estimated hold period (4) Discounted cash flows (5) $ 21,827 $ 4,967 Nine months ended September 30, 2024 $ 4,967 (1) As defined by CBRE-EA industrial market geographies. If the building is located outside of a CBRE-EA defined market, the city and state is reflected. (2) The Company tested the asset group for impairment utilizing a probability weighted recovery analysis of certain scenarios, 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) This building was sold during the three months ended September 30, 2024. (5) Level 3 inputs used to determine fair value for the property impaired: discount rate of 9.3 % and exit capitalization rate of 6.3 %. Involuntary Conversion During the nine months ended September 30, 2024, the approximately $ 3.0 million receivable at December 31, 2023 from the insurance coverage related to the involuntary conversion event that occurred in December 2023 was relieved and exchanged for improvements made to the building and included as non-cash investing activity on the accompanying Consolidated Statements of Cash Flows. During the three and nine months ended September 30, 2024, the Company recognized a gain on involuntary conversion of approximately $ 3.6 million and $ 9.3 million, respectively. 11 Table of Contents Deferred Leasing Intangibles The following table summarizes the deferred leasing intangibles, net on the accompanying Consolidated Balance Sheets as of September 30, 2024 and December 31, 2023. September 30, 2024 December 31, 2023 Deferred Leasing Intangibles (in thousands) Gross Accumulated Amortization Net Gross Accumulated Amortization Net Above market leases $ 76,517 $ ( 37,900 ) $ 38,617 $ 79,946 $ ( 35,698 ) $ 44,248 Other intangible lease assets 706,293 ( 331,401 ) 374,892 715,870 ( 324,396 ) 391,474 Total deferred leasing intangible assets $ 782,810 $ ( 369,301 ) $ 413,509 $ 795,816 $ ( 360,094 ) $ 435,722 Below market leases $ 60,250 $ ( 29,055 ) $ 31,195 $ 56,521 $ ( 26,613 ) $ 29,908 Total deferred leasing intangible liabilities $ 60,250 $ ( 29,055 ) $ 31,195 $ 56,521 $ ( 26,613 ) $ 29,908 The following table summarizes the net increase to rental income and amortization expense for the amortization of deferred leasing intangibles during the three and nine months ended September 30, 2024 and 2023. Three months ended September 30, Nine months ended September 30, Deferred Leasing Intangibles Amortization (in thousands) 2024 2023 2024 2023 Net increase (decrease) to rental income related to above and below market lease amortization $ 524 $ 292 $ ( 19 ) $ 473 Amortization expense related to other intangible lease assets $ 22,225 $ 22,095 $ 69,441 $ 66,398 12 Table of Contents 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, 2024 and December 31, 2023. Indebtedness (dollars in thousands) September 30, 2024 December 31, 2023 Interest Rate (1)(2) Maturity Date Prepayment Terms (3) Unsecured credit facility: Unsecured Credit Facility (4) $ 256,000 $ 402,000 Term SOFR + 0.875 % September 7, 2029 i Total unsecured credit facility 256,000 402,000 Unsecured term loans: Unsecured Term Loan G 300,000 300,000 1.80 % February 5, 2026 i Unsecured Term Loan A 150,000 150,000 2.16 % March 15, 2027 i Unsecured Term Loan H 187,500 187,500 3.35 % January 25, 2028 i Unsecured Term Loan I 187,500 187,500 3.51 % January 25, 2028 i Unsecured Term Loan F (5) 200,000 200,000 2.96 % March 23, 2029 i Total unsecured term loans 1,025,000 1,025,000 Total unamortized deferred financing fees and debt issuance costs ( 3,487 ) ( 3,227 ) Total carrying value unsecured term loans, net 1,021,513 1,021,773 Unsecured notes: Series A Unsecured Notes (6) 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 Series L Unsecured Notes 175,000 — 6.05 % May 28, 2029 ii Series M Unsecured Notes 125,000 — 6.17 % May 28, 2031 ii Series I Unsecured Notes 275,000 275,000 2.80 % September 29, 2031 ii Series K Unsecured Notes 400,000 400,000 4.12 % June 28, 2032 ii Series J Unsecured Notes 50,000 50,000 2.95 % September 28, 2033 ii Series N Unsecured Notes 150,000 — 6.30 % May 28, 2034 ii Total unsecured notes 1,650,000 1,200,000 Total unamortized deferred financing fees and debt issuance costs ( 6,179 ) ( 4,128 ) Total carrying value unsecured notes, net 1,643,821 1,195,872 Mortgage notes (secured debt): United of Omaha Life Insurance Company 4,376 4,537 3.71 % October 1, 2039 ii Total mortgage notes 4,376 4,537 Net unamortized fair market value discount ( 129 ) ( 136 ) Total carrying value mortgage notes, net 4,247 4,401 Total / weighted average interest rate (7) $ 2,925,581 $ 2,624,046 3.97 % (1) Interest rate as of September 30, 2024. At September 30, 2024, the one-month Term Secured Overnight Financing Rate (“Term SOFR”) was 4.8457 %. 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 or discounts. 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 and leverage ratio, as defined in the respective loan agreements. (2) The unsecured credit facility has a stated interest rate of one-month Term SOFR plus a 0.10 % adjustment and a spread of 0.775 %. The unsecured term loans have a stated interest rate of one-month Term SOFR plus a 0.10 % adjustment and a spread of 0.85 %. As of September 30, 2024, one-month Term SOFR for the Unsecured Term Loans A, F, G, H, and I was swapped to a fixed rate of 1.31 %, 2.11 %, 0.95 %, 2.50 %, and 2.66 %, respectively (which includes the 0.10% adjustment). The Unsecured Term Loan F provides for the election of Daily Simple Secured Overnight Financing Rate (“Daily SOFR”), and effective January 15, 2025, Daily SOFR will be swapped to a fixed rate of 3.98 %. (3) Prepayment terms consist of (i) pre-payable with no penalty; and (ii) pre-payable with penalty. (4) The capacity of the unsecured credit facility is $ 1.0 billion. Deferred financing fees and debt issuance costs, net of accumulated amortization related to the unsecured credit facility of approximately $ 10.7 million and $ 3.3 million are included in prepaid expenses and other assets on the accompanying Consolidated Balance Sheets as of September 30, 2024 and December 31, 2023, respectively. The initial maturity date is September 8, 2028, or such later date 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 13 Table of Contents 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. The Company is required to pay a facility fee on the aggregate commitment amount (currently $1.0 billion) at a rate per annum of 0.1 % to 0.3 %, depending on the Company’s debt rating, as defined in the 2024 Credit Agreement (as defined below). The facility fee is due and payable quarterly. (5) The initial maturity date is March 25, 2027, or such later date 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. (6) Subsequent to September 30, 2024, on October 1, 2024, the Company redeemed in full at maturity the $ 50.0 million in aggregate principal amount of the Series A Unsecured Notes. (7) The weighted average interest rate was calculated using the fixed interest rate swapped on the notional amount of $ 1,025.0 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 September 30, 2024 was approximately $ 740.0 million, including issued letters of credit. The Company’s actual borrowing capacity at any given point in time may be restricted to a maximum amount based on the Company’s debt covenant compliance. Total accrued interest for the Company’s indebtedness was approximately $ 26.2 million and $ 14.6 million as of September 30, 2024 and December 31, 2023, 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, 2024 and 2023. Three months ended September 30, Nine months ended September 30, Costs Included in Interest Expense (in thousands) 2024 2023 2024 2023 Amortization of deferred financing fees and debt issuance costs and fair market value discount $ 1,165 $ 976 $ 3,201 $ 2,924 Facility, unused, and other fees $ 444 $ 444 $ 1,322 $ 1,316 Debt Activity On September 10, 2024, the Company entered into the second amended and restated credit agreement for the unsecured credit facility (the “2024 Credit Agreement”) to (i) extend the maturity date to September 8, 2028, or such later date which may be extended pursuant to two six-month extension options exercisable by the Company in its discretion, subject to certain conditions, including the payment of a fee, and (ii) provide that borrowings under the unsecured credit facility will, at the Company’s election, bear interest based on a Base Rate, Adjusted Term SOFR or Adjusted Daily Simple SOFR (each as defined in the 2024 Credit Agreement), which interest rate will be increased by 0.10 % for any SOFR Loan (as defined in the 2024 Credit Agreement), plus an applicable spread based on the Company’s debt rating and leverage ratio (each as defined in the 2024 Credit Agreement). Other than the increase in the borrowing commitments and the interest rate provisions described above, the material terms of the unsecured credit facility remain unchanged. In connection with the 2024 Credit Agreement, the Company incurred approximately $ 8.9 million in costs, which have been deferred and will amortize through the maturity date of September 8, 2028. The previous unamortized fees related to the unsecured credit facility have been extended to amortize through the new maturity date of September 8, 2028. Additionally, the Company incurred approximately $ 36 thousand of modification expenses, which were recognized in debt extinguishment and modification expenses in the accompanying Consolidated Statements of Operations. On June 29, 2024, the sustainability-related interest rate reduction of 0.02 % on the Company’s unsecured credit facility and each of the unsecured term loans ended in accordance with the respective loan agreements. On March 25, 2024, the Company entered into a second amended and restated term loan agreement for the Unsecured Term Loan F to (i) extend the maturity date to March 25, 2027, with two one-year extension options, subject to certain conditions (discussed below), that would extend the maturity date to March 23, 2029 if both exercised, and (ii) provide that borrowings under the Unsecured Term Loan F will, at the Company’s election, bear interest based on a Base Rate, Adjusted Term SOFR, or Adjusted Daily Simple SOFR (each as defined in the loan agreement), which interest rate will be increased by 0.10 % for any SOFR Loan (as defined in the loan agreement), plus an applicable spread based on the Company’s debt rating and leverage ratio (each as defined in the loan agreement), less a sustainability-related adjustment. Other than the maturity and interest rate provisions described above, the material terms remain unchanged. 14 Table of Contents The Unsecured Term Loan F’s initial maturity date is March 25, 2027, or such later date 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 equal to 0.125 % of the outstanding amount on the effective day of each extension period. Neither extension option is subject to lender consent, assuming proper notice and satisfaction of the conditions. Upon execution of the amended loan agreement for the Unsecured Term Loan F, the Company intended to exercise both extension options. In connection with the amended loan agreement, the Company incurred approximately $ 1.2 million in costs, which have been deferred, including approximately $ 0.5 million of accrued extension fees, and will amortize through the extended maturity date of March 23, 2029. 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. On March 13, 2024, the Company entered into a note purchase agreement (the “March 2024 NPA”) for the private placement by the Operating Partnership of $ 175.0 million senior unsecured notes maturing May 28, 2029, with a fixed annual interest rate of 6.05 %, $ 125.0 million senior unsecured notes maturing May 28, 2031, with a fixed annual interest rate of 6.17 %, and $ 150.0 million senior unsecured notes maturing May 28, 2034, with a fixed annual interest rate of 6.30 %. The March 2024 NPA contains a number of financial covenants substantially similar to the financial covenants contained in the Company’s unsecured credit facility and other unsecured notes, plus a financial covenant that requires the Company to maintain a minimum interest coverage ratio of not less than 1.50 :1.00. The Company and certain wholly owned subsidiaries of the Operating Partnership are guarantors of the unsecured notes. On May 28, 2024, the Operating Partnership issued all of the notes under the March 2024 NPA. Financial Covenant Considerations The Company was in compliance with all such applicable restrictions and financial and other covenants as of September 30, 2024 and December 31, 2023 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 $ 7.3 million and $ 7.5 million at September 30, 2024 and December 31, 2023, respectively, and is limited to senior, property-level secured debt financing arrangements. Fair Value of Debt The following table summarizes the aggregate principal amount outstanding under the Company’s debt arrangements and the corresponding estimate of fair value as of September 30, 2024 and December 31, 2023. September 30, 2024 December 31, 2023 Indebtedness (in thousands) Principal Outstanding Fair Value Principal Outstanding Fair Value Unsecured credit facility $ 256,000 $ 256,000 $ 402,000 $ 402,000 Unsecured term loans 1,025,000 1,025,000 1,025,000 1,025,000 Unsecured notes 1,650,000 1,582,546 1,200,000 1,074,003 Mortgage notes 4,376 3,601 4,537 3,535 Total principal amount 2,935,376 $ 2,867,147 2,631,537 $ 2,504,538 Net unamortized fair market value discount ( 129 ) ( 136 ) Total unamortized deferred financing fees and debt issuance costs ( 9,666 ) ( 7,355 ) Total carrying value $ 2,925,581 $ 2,624,046 The applicable fair value guidance establishes a three tier fair 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. 15 Table of Contents 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. During the nine months ended September 30, 2024, the Company entered into four interest rate swaps with an aggregate notional value of $ 200.0 million which fix Daily SOFR at 3.98 %, effective January 15, 2025 and mature on March 25, 2027 and were designated as cash flow hedges. As of September 30, 2024, the Company had 21 interest rate swaps, all of which are used to hedge the variable cash flows associated with unsecured loans. All of the Company’s interest rate swaps convert the related loans’ Term SOFR or Daily SOFR components, as applicable, to effectively fixed interest rates, and the Company has concluded that each of the hedging relationships are highly effective. The following table summarizes the fair value of the interest rate swaps as of September 30, 2024 and December 31, 2023. Balance Sheet Line Item (in thousands) Effective Notional Amount September 30, 2024 Fair Value September 30, 2024 Effective Notional Amount December 31, 2023 Fair Value December 31, 2023 Interest rate swaps-gross asset $ 1,025,000 $ 29,016 $ 1,025,000 $ 50,418 Interest rate swaps-gross liability (1) $ — $ ( 3,027 ) $ — $ — (1) The notional amount for these interest rate swaps are effective January 15, 2025. 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 to interest expense in the same periods during which the hedged transaction affects earnings. Amounts reported in accumulated other comprehensive income 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 $ 18.3 million will be reclassified from accumulated other comprehensive income as a decrease to interest expense over the next 12 months. The following table summarizes the effect of cash flow hedge accounting and the location of amounts related to Company’s derivatives in the consolidated financial statements for the three and nine months ended September 30, 2024 and 2023. Three months ended September 30, Nine months ended September 30, Effect of Cash Flow Hedge Accounting (in thousands) 2024 2023 2024 2023 Income (loss) recognized in accumulated other comprehensive income on interest rate swaps $ ( 19,153 ) $ 13,933 $ 3,603 $ 29,559 Income reclassified from accumulated other comprehensive income into income as interest expense $ 9,360 $ 9,051 $ 28,007 $ 24,868 Total interest expense presented in the Consolidated Statements of Operations in which the effects of cash flow hedges are recorded $ 28,705 $ 23,753 $ 81,498 $ 69,225 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. 16 Table of Contents As of September 30, 2024, 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, it would be required to settle its obligations under the agreements at their termination value. 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 the Company or its counterparties. However, as of September 30, 2024 and December 31, 2023, 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 were recorded at fair value on a recurring basis as of September 30, 2024 and December 31, 2023. Fair Value Measurements as of September 30, 2024 Using Balance Sheet Line Item (in thousands) Fair Value September 30, 2024 Level 1 Level 2 Level 3 Interest rate swaps-gross asset $ 29,016 $ — $ 29,016 $ — Interest rate swaps-gross liability $ ( 3,027 ) $ — $ ( 3,027 ) $ — Fair Value Measurements as of December 31, 2023 Using Balance Sheet Line Item (in thousands) Fair Value December 31, 2023 Level 1 Level 2 Level 3 Interest rate swaps-gross asset $ 50,418 $ — $ 50,418 $ — 6. Equity Preferred Stock The Company is authorized to issue up to 20,000,000 shares of preferred stock, par value $ 0.01 per share. As of September 30, 2024 and December 31, 2023, there were no shares of preferred stock issued or outstanding. Common Stock The Company is authorized to issue up to 300,000,000 shares of common stock, par value $ 0.01 per share. The following table summarizes the terms of the Company’s at-the-market (“ATM”) common stock offering program as of September 30, 2024. ATM Common Stock Offering Program Date Maximum Aggregate Offering Price (in thousands) Aggregate Available as of September 30, 2024 (in thousands) 2022 $750 million ATM February 17, 2022 $ 750,000 $ 513,722 17 Table of Contents The following table summarizes the activity for shares sold on a forward basis under the ATM common stock offering program during the nine months ended September 30, 2024. The Company did not receive any proceeds from the sales of such shares on a forward basis. Forward Sale Agreements Trade date September 16, 2024 September 5, 2024 August 16, 2024 April 1, 2024 January 9, 2024 Shares sold 492,000 1,000,203 842,047 227,146 567,112 Gross sale price per share $ 39.9592 $ 39.9792 $ 39.7381 $ 39.1020 $ 38.8818 Gross sale price (in thousands) $ 19,660 $ 39,987 $ 33,461 $ 8,882 $ 22,050 Net sale price per share $ 39.5888 $ 39.5514 $ 39.3407 $ 38.6621 $ 38.5058 Maturity date September 22, 2025 September 5, 2025 September 30, 2025 March 31, 2025 January 9, 2025 The Company expects to fully physically settle the applicable forward sale agreements on one or more dates prior to the respective scheduled maturity dates, at which point the Company would receive the proceeds net of certain costs; provided, however, the Company may elect to cash settle or net share settle such forward sale agreements at any time through the respective scheduled maturity dates. In addition to the forward sale agreements discussed above, at September 30, 2024, there was an additional outstanding forward sale agreement that the Company entered into during the year ended December 31, 2023 for 1,100,000 shares sold on a forward basis under the ATM common stock offering program. The Company expects to fully physically settle such forward sale agreement on one or more dates prior to the scheduled maturity date of December 14, 2024, at which point the Company would receive the proceeds net of certain costs; provided, however, the Company may elect to cash settle or net share settle such forward sale agreement. Restricted Stock-Based Compensation The Company granted restricted shares of common stock under the 2011 Plan on January 8, 2024 to certain employees of the Company, which will vest over four years in equal installments on January 1 of each year beginning on January 1, 2025, subject to the recipient’s continued employment. The following table summarizes activity related to the Company’s unvested restricted shares of common stock during the nine months ended September 30, 2024. Unvested Restricted Shares of Common Stock Shares Weighted Average Grant Date Fair Value per Share Balance at December 31, 2023 144,032 $ 35.73 Granted 41,911 $ 38.92 Vested (1) ( 59,232 ) $ 34.51 Forfeited ( 4,727 ) $ 38.60 Balance at September 30, 2024 121,984 $ 37.30 (1) The Company repurchased and retired 21,151 restricted shares of common stock that vested during the nine months ended September 30, 2024. The unrecognized compensation expense associated with the Company’s restricted shares of common stock at September 30, 2024 was approximately $ 2.9 million and is expected to be recognized over a weighted average period of approximately 2.3 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, 2024 and 2023. Three months ended September 30, Nine months ended September 30, Vested Restricted Shares of Common Stock 2024 2023 2024 2023 Vested restricted shares of common stock — — 59,232 68,625 Fair value of vested restricted shares of common stock (in thousands) $ — $ — $ 2,325 $ 2,217 18 Table of Contents 7. Noncontrolling Interest Noncontrolling Interest - LTIP Units and Other Common Units The following table summarizes the activity for noncontrolling interest in the Company during the nine months ended September 30, 2024. Noncontrolling Interest LTIP Units Other Common Units Total Noncontrolling Common Units Noncontrolling Interest Balance at December 31, 2023 2,361,920 1,467,718 3,829,638 2.1 % Granted/Issued 383,292 — 383,292 N/A Forfeited — — — N/A Conversions from LTIP units to Other Common Units ( 437,550 ) 437,550 — N/A Redemptions from Other Common Units to common stock — ( 440,550 ) ( 440,550 ) N/A Balance at September 30, 2024 2,307,662 1,464,718 3,772,380 2.0 % LTIP Units On July 1, 2024, the Company’s board of directors appointed Vicki Lundy Wilbon to serve as director of the Company. The Company granted LTIP units under the 2011 Plan to Ms. Wilbon on July 1, 2024, which, subject to Ms. Wilbon’s continued service, will vest on January 1, 2025. The Company granted LTIP units under the 2011 Plan on January 8, 2024 to non-employee, independent directors, which will vest on January 1, 2025, subject to the recipient’s continued service. The Company granted LTIP units under the 2011 Plan on January 8, 2024 to certain executive officers and senior employees of the Company, which will vest in equal installments on a quarterly basis over four years , with the first vesting date having been March 31, 2024, subject to the recipient’s continued employment. Refer to Note 8 for a discussion of the LTIP units granted on January 8, 2024 pursuant to the 2021 performance units. The fair value of the LTIP units as of the grant date 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 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, 2024 (excluding the LTIP units granted pursuant to the 2021 performance units discussed in Note 8). LTIP Units Grant date July 1, 2024 January 8, 2024 Expected term (years) 10 10 Expected stock price volatility 25.0 % 25.0 % Expected dividend yield 4.0 % 4.0 % Risk-free interest rate 4.58 % 4.11 % Fair value of LTIP units at issuance (in thousands) $ 60 $ 4,597 LTIP units at issuance 1,775 124,235 Fair value unit price per LTIP unit at issuance $ 33.80 $ 37.00 The expected stock price volatility is based on a mix of the historical and implied volatilities of the Company and certain peer group companies. The expected dividend yield is based on the Company’s average historical dividend yield and the dividend yield as of the valuation date for each award. The risk-free interest rate is based on U.S. Treasury note yields matching a three-year time period. 19 Table of Contents The following table summarizes activity related to the Company’s unvested LTIP units during the nine months ended September 30, 2024. Unvested LTIP Units LTIP Units Weighted Average Grant Date Fair Value per Unit Balance at December 31, 2023 176,926 $ 34.25 Granted 383,292 $ 36.99 Vested ( 354,294 ) $ 36.23 Forfeited — $ — Balance at September 30, 2024 205,924 $ 35.92 The unrecognized compensation expense associated with the Company’s LTIP units at September 30, 2024 was approximately $ 5.3 million and is expected to be recognized over a weighted average period of approximately 2.5 years. Noncontrolling Interest in Joint Venture On August 8, 2024, the Company formed a joint venture with a third party that is primarily engaged in the development and eventual operation of an industrial real estate property located in Reno, Nevada. At September 30, 2024, the Company held a 95 % interest and the third party held the remaining 5 % interest in the joint venture. The third party equity interest in the joint venture, totaling approximately $ 0.4 million at September 30, 2024, is included in noncontrolling interest in joint venture on the accompanying Consolidated Balance Sheets. 8. Equity Incentive Plan On January 8, 2024, the compensation committee of the board of directors approved and the Company granted performance units under the 2011 Plan to the executive officers and certain key employees of the Company. The terms of the performance units granted on January 8, 2024 are substantially the same as the terms of the performance units granted in January 2023, except that the measuring period commenced on January 1, 2024 and ends on December 31, 2026. The fair value of the performance units as of the grant date 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 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, 2024. Performance Units Grant date January 8, 2024 Expected stock price volatility 24.5 % Expected dividend yield 4.0 % Risk-free interest rate 4.113 % Fair value of performance units grant (in thousands) $ 6,502 The expected stock price volatility is based on a mix of the historical and implied volatilities of the Company and certain peer group companies. The expected dividend yield is based on the Company’s average historical dividend yield and the dividend yield as of the valuation date for each award. The risk-free interest rate is based on U.S. Treasury note yields matching the three-year performance period. 20 Table of Contents On December 31, 2023, the measuring period for the 2021 performance units concluded, and it was determined that the Company’s TSR exceeded the threshold percentage and return hurdle. The following table summarizes the issuances of LTIP units and shares of common stock approved by the compensation committee of the board of directors and issued upon the settlement of the 2021 performance units at the conclusion of the applicable measuring period during the nine months ended September 30, 2024. Settlement of Performance Units in LTIP Units or Shares of Common Stock 2021 Performance Units Measuring period conclusion date December 31, 2023 Issuance date January 8, 2024 Vested LTIP units 257,282 Vested shares of common stock 49,106 Shares of common stock repurchased and retired 4,716 The unrecognized compensation expense associated with the Company’s performance units at September 30, 2024 was approximately $ 7.5 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, 2024 and 2023. Three months ended September 30, Nine months ended September 30, Non-Cash Compensation Expense (in thousands) 2024 2023 2024 2023 Restricted shares of common stock $ 420 $ 474 $ 1,352 $ 1,499 LTIP units 908 765 2,730 3,507 Performance units 1,415 1,202 4,171 3,556 Director compensation (1) 209 161 560 425 Total non-cash compensation expense $ 2,952 $ 2,602 $ 8,813 $ 8,987 (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, 2024 and 2023. The number of shares of common stock granted was calculated based on the trailing 10 day average common stock price 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”). Billings for real estate taxes and other expenses are also considered to be variable lease payments. 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 included in the accompanying Consolidated Statements of Operations for the three and nine months ended September 30, 2024 and 2023. Three months ended September 30, Nine months ended September 30, Rental Income (in thousands) 2024 2023 2024 2023 Fixed lease payments $ 147,075 $ 136,207 $ 433,464 $ 400,457 Variable lease payments 38,800 37,348 119,207 108,017 Straight-line rental income 3,887 4,011 11,503 13,618 Net increase (decrease) to rental income related to above and below market lease amortization 524 292 ( 19 ) 473 Total rental income $ 190,286 $ 177,858 $ 564,155 $ 522,565 As of September 30, 2024 and December 31, 2023, the Company had accrued rental income of approximately $ 115.3 million and $ 105.9 million, respectively, included in tenant accounts receivable on the accompanying Consolidated Balance Sheets. 21 Table of Contents As of September 30, 2024 and December 31, 2023, the Company’s total liability associated with lease security deposits was approximately $ 22.6 million and $ 21.8 million, respectively, which is included in tenant prepaid rent and security deposits on the accompanying Consolidated Balance Sheets. The following table summarizes the maturity of fixed lease payments under the Company’s leases as of September 30, 2024. Year Maturity of Fixed Lease Payments (in thousands) Remainder of 2024 $ 149,503 2025 $ 586,024 2026 $ 515,025 2027 $ 429,245 2028 $ 353,859 Thereafter $ 879,335 Lessee Leases The Company has operating leases in which it is the lessee for its ground leases and corporate office leases. These leases have remaining lease terms of approximately 1.6 years to 46.0 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 September 30, 2024 and December 31, 2023. Operating Lease Term and Discount Rate September 30, 2024 December 31, 2023 Weighted average remaining lease term (years) 32.1 31.6 Weighted average discount rate 6.8 % 6.8 % The following table summarizes the operating lease cost included in the Company’s Consolidated Statements of Operations for the three and nine months ended September 30, 2024 and 2023. Three months ended September 30, Nine months ended September 30, Operating Lease Cost (in thousands) 2024 2023 2024 2023 Operating lease cost included in property expense attributable to ground leases $ 619 $ 614 $ 1,851 $ 1,850 Operating lease cost included in general and administrative expense attributable to corporate office leases 430 431 1,291 1,302 Total operating lease cost $ 1,049 $ 1,045 $ 3,142 $ 3,152 The following table summarizes supplemental cash flow information related to operating leases in the Company’s Consolidated Statements of Cash Flows for the nine months ended September 30, 2024 and 2023. Nine months ended September 30, Operating Leases (in thousands) 2024 2023 Cash paid for amounts included in the measurement of lease liabilities (operating cash flows) $ 2,976 $ 2,901 Right-of-use assets obtained in exchange for new lease liabilities $ — $ 141 22 Table of Contents The following table summarizes the maturity of operating lease liabilities under the Company’s ground leases and corporate office leases as of September 30, 2024. Year Maturity of Operating Lease Liabilities (1) (in thousands) Remainder of 2024 $ 999 2025 4,022 2026 3,014 2027 2,023 2028 2,064 Thereafter 79,898 Total lease payments 92,020 Less: Imputed interest ( 59,803 ) Present value of operating lease liabilities $ 32,217 (1) Operating lease liabilities do not include estimates of CPI rent changes required by certain ground lease agreements. Therefore, actual payments may differ from those presented. 10. Earnings Per Share During the three and nine months ended September 30, 2024 and 2023, there were 122,137 , 144,032 , 123,701 and 142,485 of unvested restricted shares of common stock (on a weighted average basis), respectively, that were considered participating securities for the purposes of computing earnings per share. The following table reconciles the numerators and denominators in the computation of basic and diluted earnings per share of common stock for the three and nine months ended September 30, 2024 and 2023. Three months ended September 30, Nine months ended September 30, Earnings Per Share (in thousands, except per share data) 2024 2023 2024 2023 Numerator Net income attributable to common stockholders $ 41,811 $ 49,987 $ 138,128 $ 150,953 Denominator Weighted average common shares outstanding — basic 182,027 180,803 181,899 179,810 Effect of dilutive securities (1) Share-based compensation 207 360 253 260 Shares issuable under forward sale agreements 63 — 21 — Weighted average common shares outstanding — diluted 182,297 181,163 182,173 180,070 Net income per share — basic and diluted Net income per share attributable to common stockholders — basic $ 0.23 $ 0.28 $ 0.76 $ 0.84 Net income per share attributable to common stockholders — diluted $ 0.23 $ 0.28 $ 0.76 $ 0.84 (1) During the three and nine months ended September 30, 2024 and 2023, there were approximately 122 , 144 , 124 and 142 unvested restricted shares of common stock (on a weighted average basis), respectively, 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 $ 4.0 million as of September 30, 2024 related to construction projects and certain other agreements. 12. Subsequent Events There were no recognized or non-recognized subsequent events. 23