What changed in this filing

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Item 2. Management’s Discussion and Analysis

2020-08-05 compared with 2020-05-06 · 275 added, 180 removed, 391 unchanged (54% of the section changed)

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Some of the risks and uncertainties that may cause our actual results, performance, or achievements to differ materially from those expressed or implied by forward-looking statements include, among others, the following:

• the factors included under the headings “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2019, which was filed with the Securities and Exchange Commission on February 6, 2020 and in our other public filings, which you should interpret as being heightened as a result of the numerous and ongoing adverse impacts of COVID-19;

• the factors included under the headings “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2019, which was filed with the Securities and Exchange Commission on February 6, 2020, in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, which was filed with the Securities and Exchange Commission on May 6, 2020, and in our other public filings, which you should interpret as being heightened as a result of the numerous and ongoing adverse impacts of COVID-19;

• our ability to identify and acquire industrial properties on terms favorable to us

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• risks relating to our real estate redevelopment, renovation and expansion strategies and activities;

• the impact of COVID-19 on the U.S., regional and global economies and the business, financial condition and results of operations of our Company and our tenants;

• the ongoing impact of COVID-19 on the U.S., regional and global economies and the business, financial condition and results of operations of our Company and our tenants;

• our failure to qualify or maintain our status as a real estate investment trust (“REIT”), and possible adverse changes to tax laws;

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Los Angeles, Northern New Jersey/New York City, San Francisco Bay Area, Seattle, Miami, and Washington, D.C.

We invest in several types of industrial real estate, including warehouse/distribution (approximately 82.7% of our total annualized base rent as of March 31, 2020), flex (including light industrial and research and development, or R&D) (approximately 5.1%), transshipment (approximately 5.3%) and improved land (approximately 6.9%).

We invest in several types of industrial real estate, including warehouse/distribution (approximately 81.9% of our annualized base rent as of June 30, 2020), flex buildings (including light industrial and research and development, or R&D, approximately 5.4%), transshipment (approximately 5.3%), and improved land parcels (approximately 7.4%).

We target functional buildings in infill locations that may be shared by multiple tenants and that cater to customer demand within the various submarkets in which we operate.

Infill locations are geographic locations surrounded by high concentrations of already developed land and existing buildings.

As of March 31, 2020, we owned a total of 219 buildings (including three buildings held for sale) aggregating approximately 13.4 million square feet, 21 improved land parcels consisting of approximately 82.2 acres and four properties under redevelopment expected to contain approximately 0.5 million square feet upon completion.

As of June 30, 2020, we owned a total of 218 buildings aggregating approximately 13.1 million square feet, 22 improved land parcels consisting of approximately 85.0 acres and two properties under redevelopment expected to contain approximately 0.5 million square feet upon completion.

The buildings and improved land parcels were approximately 96.0% and 98.5% leased, respectively, to 484 customers, the largest of which accounted for approximately 3.6% of our total annualized base rent.

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We are an internally managed Maryland corporation and elected to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended, or the Code, commencing with our taxable year ended December 31, 2010.

The following table summarizes by type our investments in real estate as of March 31, 2020:

The following table summarizes by type our investments in real estate as of June 30, 2020:

Type Number of Buildings or Improved Land Parcels Annualized Base Rent (000's) 1

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Transshipment 14 7,566 5.3 %

Improved Land Parcels 21 9,811 6.9 %

Improved land 22 10,562 7.4 %

Total/Weighted Average 240 $ 142,760 100.0 %

1 Annualized base rent is calculated as contractual monthly base rent per the leases, excluding any partial or full rent abatements, as of March 31, 2020, multiplied by 12.

The following table summarizes by market our investments in real estate as of March 31, 2020:

1 Annualized base rent is calculated as contractual monthly base rent per the leases, excluding any partial or full rent abatements, as of June 30, 2020, multiplied by 12.

The following table summarizes by market our investments in real estate as of June 30, 2020:

Los Angeles Northern New Jersey/New York City San Francisco Bay Area Seattle Miami Washington, D.C.

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% of Total 19.6 % 27.2 % 15.5 % 14.1 % 11.9 % 11.7 % 100.0 %

Occupancy % as of March 31, 2020 98.5 % 97.6 % 97.0 % 97.7 % 100.0 % 96.1 % 97.8 %

Occupancy % as of June 30, 2020 98.9 % 88.8 % 97.2 % 98.3 % 100.0 % 99.1 % 96.0 %

Annualized Base Rent

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% of Total 14.0 % 57.5 % 4.7 % 4.4 % 3.7 % 15.7 % 100.0 %

Occupancy % as of March 31, 2020 85.2 % 100.0 % 100.0 % — % 100.0 % 100.0 % 96.7 %

Occupancy % as of June 30, 2020 100.0 % 100.0 % 68.1 % 100.0 % 100.0 % 100.0 % 98.5 %

Annualized Base Rent

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% of Total 19.7 % 29.7 % 17.7 % 15.2 % 7.7 % 10.0 % 100.0 %

1 Annualized base rent is calculated as contractual monthly base rent per the leases, excluding any partial or full rent abatements, as of March 31, 2020, multiplied by 12.

2 Weighted average remaining lease term is calculated by summing the remaining lease term of each lease as of March 31, 2020, weighted by the respective square footage.

3 Includes four properties under redevelopment expected to contain approximately 0.5 million square feet upon completion, as discussed below.

As of March 31, 2020, we owned four properties under redevelopment expected to contain approximately 0.5 million square feet upon completion with a total expected investment of approximately $111.9 million, including redevelopment costs, capitalized interest, and other costs of approximately $102.5 million.

The following table summarizes our capital expenditures incurred during the three months ended March 31, 2020 and 2019 (in thousands):

For the Three Months Ended March 31,

1 Annualized base rent is calculated as contractual monthly base rent per the leases, excluding any partial or full rent abatements, as of June 30, 2020, multiplied by 12.

2 Weighted average remaining lease term is calculated by summing the remaining lease term of each lease as of June 30, 2020, weighted by the respective square footage.

3 Includes two properties under redevelopment expected to contain approximately 0.5 million square feet upon completion, as discussed below.

As of June 30, 2020, we owned two properties under redevelopment expected to contain approximately 0.5 million square feet upon completion with a total expected investment of approximately $97.0 million including redevelopment costs, capitalized interest and other costs of approximately $89.8 million.

The following table summarizes our capital expenditures incurred during the three and six months ended June 30, 2020 and 2019 (dollars in thousands):

For the Three Months Ended June 30, For the Six Months Ended June 30,

2020 2019 2020 2019

Building improvements $ 4,264 $ 4,395 $ 7,594 $ 9,442

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$ 8,874 $ 16,465 $ 16,625 $ 30,642

1 Includes approximately $4.4 million and $8.4 million for the three months ended March 31, 2020 and 2019, respectively, related to leasing acquired vacancy, redevelopment construction in progress and renovation and expansion projects (stabilization capital) at 10 and 13 properties for the three months ended March 31, 2020 and 2019, respectively.

1 Includes approximately $4.5 million and $13.8 million for the three months ended June 30, 2020 and 2019, respectively, and approximately $8.9 million and $22.2 million for the six months ended June 30, 2020 and 2019, respectively, related to leasing acquired vacancy, redevelopment construction in progress and renovation and expansion projects (stabilization capital) at 13 properties for both the three months ended June 30, 2020 and 2019, respectively, and at 13 and 14 properties for the six months ended June 30, 2020 and 2019, respectively.

Our industrial properties are typically subject to leases on a “triple net basis,” in which tenants pay their proportionate share of real estate taxes, insurance and operating costs, or are subject to leases on a “modified gross basis,” in which tenants pay expenses over certain threshold levels.

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As needed, we hold discussions with the tenant’s management about their business and we conduct site visits of the tenant’s operations.

Our top 20 customers based on annualized base rent as of March 31, 2020 are as follows:

Our top 20 customers based on annualized base rent as of June 30, 2020 are as follows:

Customer Leases Rentable

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Square Feet Annualized

1 Amazon.com 2

4 260,462 2.0 % $ 5,153 3.6 %

2 FedEx Corporation 3

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3 United States Government 8 300,732 2.3 % 3,748 2.6 %

3 Amazon.com 3 260,462 1.9 % 4,805 3.4 %

4 Danaher 3 171,707 1.3 % 3,732 2.6 %

5 District of Columbia 5 197,617 1.5 % 2,751 1.9 %

6 AmerisourceBergen 1 211,418 1.6 % 2,543 1.8 %

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1 147,898 1.1 % 1,651 1.2 %

9 District of Columbia 3 124,744 0.9 % 1,632 1.2 %

10 Topaz Lighting Corp.

1 190,000 1.4 % 1,463 1.0 %

11 Miami International Freight Systems 4

1 192,454 1.5 % 1,463 1.0 %

12 Port Kearny Security, Inc.

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17 Saia Motor Freight Line LLC 1 52,086 0.4 % 1,280 0.9 %

17 JAM'N Logistics 1 110,336 0.8 % 1,229 0.9 %

18 Space Systems/Loral LLC 2 107,060 0.8 % 1,246 0.9 %

19 JAM'N Logistics 1 110,336 0.8 % 1,229 0.9 %

20 Fredmore Inc.

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2 — — % 1,206 0.9 %

20 Northrop Grumman Systems 1 103,200 0.8 % 1,183 0.8 %

Total 48 3,262,988 24.9 % $ 43,120 30.2 %

1 Annualized base rent is calculated as contractual monthly base rent per the leases, excluding any partial or full rent abatements, as of March 31, 2020, multiplied by 12.

2 Includes two improved land parcels totaling 7.7 acres.

1 Annualized base rent is calculated as contractual monthly base rent per the leases, excluding any partial or full rent abatements, as of June 30, 2020, multiplied by 12.

2 Includes an improved land parcel consisting of 2.8 acres.

3 Includes an improved land parcel consisting of 7.7 acres.

4 Tenant occupied our 60th Property in Miami Lakes, FL that was sold on July 23, 2020.

5 Lease area consists of 16.9 acres of improved land.

6 Lease area consists of 10.6 acres of improved land.

The following table summarizes the anticipated lease expirations for leases in place as of March 31, 2020, without giving effect to the exercise of unexercised renewal options or termination rights, if any, at or prior to the scheduled expirations:

The following table summarizes the anticipated lease expirations for leases in place as of June 30, 2020, without giving effect to the exercise of unexercised renewal options or termination rights, if any, at or prior to the scheduled expirations:

Year Rentable Square Feet % of Total Rentable

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Total 12,558,690 96.0 % 158,197 100.0 %

1 Includes leases that expire on or after March 31, 2020 and month-to-month leases totaling approximately 63,998 square feet.

2 Annualized base rent is calculated as contractual monthly base rent per the leases at expiration, excluding any partial or full rent abatements, as of March 31, 2020, multiplied by 12.

1 Includes leases that expire on or after June 30, 2020 and month-to-month leases totaling approximately 61,156 square feet.

2 Annualized base rent is calculated as contractual monthly base rent per the leases at expiration, excluding any partial or full rent abatements, as of June 30, 2020, multiplied by 12.

3 Includes annualized base rent related to 22 improved land parcels totaling approximately 85.0 acres.

Our ability to re-lease or renew expiring space at rental rates equal to or in excess of current rental rates will impact our results of operations.

As of March 31, 2020, leases representing approximately 7.9% of the total annualized base rent of our portfolio are scheduled to expire through December 31, 2020.

We currently expect that, on average, the rental rates we are likely to achieve on new (re-leased) or renewed leases for our 2020 and 2021 expirations will be above the rates currently being paid for the same space.

Rent changes on new and renewed leases totaling approximately 0.6 million square feet commencing during the quarter ended March 31, 2020 were approximately 21.9%, with a tenant retention ratio of 85.7%.

The tenant at our Caribbean property will receive approximately $0.7 million in rent abatements during the second quarter of 2020 under the terms of a previously negotiated five-year lease extension.

Our past performance may not be indicative of future results, and we cannot assure you that leases will be renewed or that our properties will be re-leased at all or at rental rates equal to or above the current average rental rates, particularly given the uncertainty created by the COVID-19 pandemic.

As of June 30, 2020, leases representing approximately 6.0% of the total rentable square footage of our portfolio are scheduled to expire through December 31, 2020.

We currently expect that, on average, the rental rates we are likely to achieve on new (re-leased) or renewed leases for our 2020 expirations will be above the rates currently being paid for the same space.

Rent changes on new and renewed leases totaling approximately 0.5 million square feet commencing during the three months ended June 30, 2020 were approximately 38.2% higher as compared to the previous rental rates for that same space, and rent changes on new and renewed leases totaling approximately 1.1 million square feet commencing during the six months ended June 30, 2020 were approximately 28.9% higher as compared to the previous rental rates for that same space.

We had a tenant retention ratio of 18.4% and 52.3%, respectively, for the three and six months ended June 30, 2020.

Tenant retention decreased primarily due to 382,000 square foot expirations at our Interstate property, of which 190,000 was released to a new tenant as of June 30, 2020.

Further, re-leased/renewed rental rates in a particular market may not be consistent with rental rates across our portfolio as a whole and re-leased/renewed rental rates for particular properties within a market may not be consistent with rental rates across our portfolio within a particular market, in each case due to a number of factors, including local real estate conditions, local supply and demand for industrial space, the condition of the property, the impact of leasing incentives, including free rent and tenant improvements and whether the property, or space within the property, has been redeveloped.

Recent Developments

The COVID-19 pandemic, and mitigation measures put in place by governments to slow it, have caused widespread economic disruption.

We are headquartered in San Francisco and our employees have been working remotely in compliance with shelter-in-place orders mandated across the San Francisco Bay Area on March 16, 2020.

We utilize local, third-party property managers, and they are generally under similar shelter-in-place orders and are working remotely.

The COVID-19 pandemic, and mitigation measures put in place by governments to slow it, have caused significant economic disruption.

We are headquartered in San Francisco and our employees have been working remotely in compliance with stay-at-home orders mandated across the San Francisco Bay Area on March 16, 2020.

We utilize local, third-party property managers, and they are generally under similar stay-at-home orders and are working remotely.

We have business continuity and communication plans that we believe, although there can be no assurance, allow us to operate and manage our portfolio effectively during such disruptions.

We expect that even after shelter-in-place orders have been lifted, we will, for the intermediate term, employ lower density work arrangements consistent with social distancing and our business continuity plan.

While the impact of the COVID-19 pandemic on our business is not possible to predict accurately, we are working with our customers who have been forced to close, or otherwise limit operations or whose businesses have been adversely impacted during the pandemic to, on a case-by-case basis to provide rent deferments while those customers seek emergency funding from the U.S.

Small Business Administration and other federal, state and local funding programs.For vacant space and upcoming lease expirations, the current leasing environment has slowed due to shelter-in-place orders which will reduce our revenue from what it would be in a normal leasing environment.

In addition, due to the effects of COVID-19, the future contractual lease payments of certain of our tenants were not probable and as such, approximately $0.5 million in straight-line rent receivables was reversed during the three months ended March 31, 2020.

With regard to rent billed for April 2020, we received, as of May 1, 2020, approximately 84% of such rent in cash and 11% by applying security deposits.

As of May 1, 2020:

• 170 tenants, representing 34% of our 498 total tenants’ leases had requested rent deferral or abatement.

Such requests aggregated 6.5% of our annualized base rent as of April 1, 2020;

• Of the 170 requests, we granted rent deferrals to 49 tenants aggregating 2.0% of annualized base rent (29% of total requests by number and 31% by dollar amount).

Deferrals granted represent 76% of the total dollar requests from those 49 tenants.

We expect that even after certain mitigation measures, including stay-at-home

orders are relaxed or revoked, we will, for the intermediate term, employ lower density work arrangements consistent with social distancing and our business continuity plan.

While the impact of the COVID-19 pandemic on the Company's business is not possible to predict accurately, we continue to work with its customers who have been forced to close or otherwise limit operations or whose businesses have been adversely impacted during the pandemic to, on a case-by-case basis, provide rent deferments.

With regard to rent billed for July 2020, we received, as of August 4, 2020, approximately 95% of such rent in cash and an additional 1% by applying security deposits.

As of August 4, 2020:

• 174 tenants, representing approximately 36.0% of our total tenants had requested rent deferral or abatement.

Such requests aggregated 7.0% of our annualized base rent;

• Of the 174 requests, we granted rent deferrals to 61 tenants aggregating 2.7% of annualized base rent (35.1% of total requests by number and 38.7% by dollar amount) which represents 76.7% of the total dollar deferral requests (3.6% of annualized base rent) from those tenants.

We did not grant any rent abatement;

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59 tenants aggregating 1.6% of annualized base rent requesting rent deferral or abatement rescinded their requests (33.3% of requests by number and 22.5% by dollar amount);

• We are still in discussions with eight tenants who are requesting 0.2% of our annualized base rent in rent deferral or abatement (5% of requests by number and 3% by dollar amount);

• We reversed $0.4 million and $0.9 million for the three and six months ended June 30, 2020, respectively, in straight-line rent receivables for certain of our tenants where the future contractual lease payments were not probable;

• We are still in discussions with four tenants who are requesting 0.05% of our annualized base rent in rent deferral or abatement (2.3% of requests by number and 0.7% by dollar amount);

• We may in the future amend or enter into additional rent deferral agreements.

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Our acquisition volume will remain dependent on both the quality and pricing of the opportunity set and the price of our stock relative to net asset value per share.

We believe, although there can be no assurance, that our balance sheet is well positioned to make opportunistic acquisitions as we have no remaining debt maturities in 2020, an $11 million mortgage loan maturing in

April 2021, and no balance outstanding on our $250 million revolving credit facility.

In addition, we had a cash balance of approximately $69.7 million as of March 31, 2020.

In addition, we had a cash balance of approximate ly $148.3 million as of June 30, 2020 .

See “ Item 1A - Risk Factors ” in this Quarterly Report on Form 10-Q for additional discussion regarding the risks to which we are and may be subject as a result of the COVID-19 pandemic.

Acquisition Activity

During the three months ended March 31, 2020, we acquired two industrial properties consisting of one building containing approximately 66,000 square feet and one improved land parcel with 2.7 acres for a total purchase price of approximately $29.7 million.

The property and land parcel were both acquired from unrelated third parties using existing cash on hand, net proceeds from dispositions and net proceeds from the issuance of common stock under our ATM program.

The following table sets forth the industrial properties we acquired during the three months ended March 31, 2020:

During the three months ended June 30, 2020, we acquired one industrial building containing approximately 13,000 square feet and one improved land parcel containing approximately 2.8 acres for a total purchase price of approximately $10.1 million.

The properties were acquired from unrelated third parties using existing cash on hand, net proceeds from dispositions and net proceeds from the issuance of common stock.

The following table sets forth the industrial properties we acquired during the three months ended June 30, 2020:

Property Name Location Acquisition Date Number of

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(in thousands) 1

Old Bayshore 3

San Jose, CA March 12, 2020 — — $ 11,784 5.0 %

Gladwick Rancho Dominguez, CA March 12, 2020 1 65,699 17,950 3.6 %

Kent, WA April 17, 2020 — — $ 4,500 5.7 %

Hudson Seattle, WA May 13, 2020 1 13,000 5,611 4.0 %

Total/Weighted Average 1 13,000 $ 10,111 4.8 %

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We define cash basis net operating income for the property as net operating income excluding straight-line rents and amortization of lease intangibles.

These stabilized cap rates are subject to risks, uncertainties, and assumptions and are not guarantees of future performance, which may be affected by known and unknown risks, trends, uncertainties, and factors that are beyond our control, including risks related to our ability to meet our estimated forecasts related to stabilized cap rates and those risk factors contained in our Annual Report on Form 10-K for the year ended December 31, 2019, in this Quarterly Report on Form 10-Q and in our other public filings.

3 Includes an improved land parcel containing approximately 2.7 acres.

stabilized cap rates are subject to risks, uncertainties, and assumptions and are not guarantees of future performance, which may be affected by known and unknown risks, trends, uncertainties, and factors that are beyond our control, including risks related to our ability to meet our estimated forecasts related to stabilized cap rates and those risk factors contained in our Annual Report on Form 10-K for the year ended December 31, 2019, in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 and in out other public filings..

3 Represents an improved land parcel containing approximately 2.8 acres.

Redevelopment Activity

As of March 31, 2020, we had four properties under redevelopment expected to contain approximately 0.5 million square feet upon completion with a total expected investment of approximately $111.9 million, including redevelopment costs, capitalized interest and other costs of approximately $102.5 million as follows:

As of June 30, 2020, we have two properties under redevelopment expected to contain approximately 0.5 million square feet upon completion with a total expected investment of approximately $97.0 million, including redevelopment costs, capitalized interest and other costs of approximately $89.8 million as follows:

Property Name Total Expected

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Estimated Post-Development Square Feet Estimated

% Pre-leased March 31, 2020

Sodo Row - North and South 3

$ 61,652 $ 55,720 $ 5,932 4.5 % 234,308 Q3 2021 24.0 %

6th Avenue South 15,893 15,017 876 5.1 % 50,270 Q2 2020 — %

Quarter % Pre-leased June 30,2020

Sodo Row - North & South $ 62,271 $ 58,003 $ 4,268 4.5 % 234,308 Q3 2021 14.0 %

Kent 192 34,763 31,810 2,953 5.4 % 219,910 Q4 2020 — %

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We define cash basis net operating income for the property as net operating income excluding straight-line rents and amortization of lease intangibles.

stabilized cap rates and those risk factors contained in our Annual Report on Form 10-K for the year ended December 31, 2019, in this Quarterly Report on Form 10-Q and in our other public filings.

3 We expect to use Sodo Row - North as a parking amenity for tenants at Sodo Row - South and may seek to opportunistically lease-up or redevelop the space separately in the future.

4 Completion dates are estimates and are subject to the risks contained in our Annual Report on Form 10-K for the year ended December 31, 2019, in this Quarterly Report on Form 10-Q and our other public filings.

We have an at-the-market equity offering program (the “$300 Million ATM Program”) pursuant to which we may issue and sell shares of our common stock having an aggregate offering price of up to $300.0 million ($126.1 remaining as of March 31, 2020) in amounts and at times as we determine from time to time.

Prior to the implementation of the $300 Million ATM Program, we had a $250.0 million ATM program (the “$250 Million ATM Program”), which was substantially utilized as of May 31, 2019 and is no longer active.

These estimated stabilized cap rates are subject to risks, uncertainties, and assumptions and are not guarantees of future performance, which may be affected by known and unknown risks, trends, uncertainties, and factors that are beyond our control, including risks related to our ability to meet our estimated forecasts related to stabilized cap rates and those risk factors contained in our Annual Report on Form 10-K for the year ended December 31, 2020, in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 and in our other public filings.

Disposition Activity

During the six months ended June 30, 2020, we sold three properties located in the Washington D.C.

market for a sales price of approximately $51.3 million, resulting in a gain of approximately $17.8 million.

The following summarizes the condensed results of operations of the properties sold during the three and six months ended June 30, 2020 and 2019 (dollars in thousands):

For the Three Months Ended June 30, For the Six Months Ended June 30,

2020 2019 2020 2019

Rental revenues $ 590 $ 749 $ 1,339 $ 1,483

Tenant expense reimbursements 294 274 609 675

Property operating expenses (159) (267) (444) (663)

Depreciation and amortization — (315) (210) (632)

Income from operations $ 725 $ 441 $ 1,294 $ 863

We have an at-the-market equity offering program (the “$300 Million ATM Program”) pursuant to which we may issue and sell shares of our common stock having an aggregate offering price of up to $300.0 million ($93.3 million remaining as of June 30, 2020) in amounts and at times as we determine from time to time.

Prior to the implementation of the $300 Million ATM Program, we had a $250.0 Million ATM program (the “$250 Million ATM Program”), which was substantially utilized as of May 31, 2019 and which is no longer active.

We intend to use the net proceeds from the offering of the shares under the $300 Million ATM Program, if any, for general corporate purposes, which may include future acquisitions and repayment of indebtedness, including borrowings under our revolving credit facility.

During the three months ended March 31, 2020, we issued an aggregate of 427,027 shares of common stock at a weighted average offering price of $53.37 per share under the $300 Million ATM program resulting in net proceeds of approximately $22.5 million and paying total compensation to the applicable sales agents of approximately $0.3 million.

During the three and six months ended June 30, 2020, we issued an aggregate of 619,300 and 1,046,327 shares, respectively, of common stock at a weighted average offering price of $52.81 and $53.04 per share, respectively, under the $300 Million ATM Program, resulting in net proceeds of approximately $32.2 million and $54.7 million, respectively, and paying total compensation to the applicable sales agents of approximately $0.5 million and $0.8 million, respectively.

Long Term Incentive Plan

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The fair value of the performance share awards for the performance measurement period of January 1, 2020 to December 31, 2022 is $5.6 million, which will be recognized quarterly over a three-year period.

Stock-based compensation expense for the performance share awards for the performance measurement period of January 1, 2020 to December 31, 2022 was $0.5 million and $0, respectively, for the three months ended March 31, 2020 and 2019.

The fair value of the performance share awards for the performance measurement period of January 1, 2019 to December 31, 2021 is $4.8 million, which will be recognized quarterly over a three-year period.

Stock-based compensation expense for the performance share awards for the performance measurement period of January 1, 2019 to December 31, 2021 was $0.4 million for both the three months ended March 31, 2020 and 2019.

Stock-based compensation expense for the performance share awards was $1.0 million and $2.5 million for the three and six months ended June 30, 2020, respectively.

Equity Incentive Plan

On April 30, 2019, our stockholders approved the 2019 Equity Incentive Plan (the “2019 Plan”), which replaces the Amended and Restated 2010 Equity Incentive Plan (the “2010 Plan”).

The 2019 Plan permits the grant of restricted stock awards, performance share awards and unrestricted stock awards.

The maximum number of shares of our common stock that may be issued under the 2019 Plan is 1,898,961, which consists of (i) 1,510,079 shares initially reserved and available for issuance under the 2019 Plan and (ii) 388,882 shares underlying outstanding awards under the 2010 Plan, which if forfeited, canceled or otherwise terminated under the 2010 Plan shall be added to the shares available for issuance under the 2019 Plan.

No further awards will be made under the 2010 Plan.

As of June 30, 2020, there were 1,898,961 shares of common stock authorized for issuance as restricted stock grants, unrestricted stock awards or performance share awards under the 2019 Plan, of which 1,429,652 were remaining available for issuance.

Senior Secured Loan

As of March 31, 2020, we had a senior secured loan outstanding to a borrower that bears interest at a fixed annual interest rate of 8.0% and matures in May 2020 (the "Senior Secured Loan”).

The Senior Secured Loan is secured by a portfolio of six improved land parcels located primarily in Newark, New Jersey.

One of the properties securing the Senior Secured Loan may be put to us as partial repayment of the Senior Secured Loan at a previously agreed upon value.

This property may be called by us as partial repayment of the Senior Secured Loan at a previously agreed upon value.

In addition, per the terms of the Senior Secured Loan, the borrower may repay the loan at any time with either cash or deed in lieu, with the deed subject to our approval.

During the three months ended March 31, 2020, the borrower sold one of the improved land parcels that was securing the Senior Secured Loan and repaid a portion of the outstanding balance on the Senior Secured Loan.

As of March 31, 2020 and December 31, 2019, there was approximately $10.9 million and $15.9 million, respectively, net of deferred loan fees of approximately $0 and $0.1 million, respectively, outstanding on the Senior Secured Loan and approximately $0 and $0.3 million, respectively, of interest receivable outstanding on the Senior Secured Loan.

We had a senior secured loan (the “Senior Secured Loan”) outstanding to a borrower that bore interest at a fixed annual interest rate of 8.0% and was fully repaid during the three months ended June 30, 2020.

The Senior Secured Loan was secured by a portfolio of six improved land parcels located primarily in Newark, New Jersey.

As of June 30, 2020 and December 31, 2019, there was approximately $0 and $15.9 million, respectively, net of deferred loan fees of approximately $0 and $0.1 million, respectively, outstanding on the Senior Secured Loan and approximately $0 and $0.3 million, respectively, of interest receivable outstanding on the Senior Secured Loan.

Share Repurchase Program

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The program may be suspended or discontinued at any time.

As of March 31, 2020, we had not repurchased any shares of stock pursuant to our share repurchase program.

As of June 30, 2020, we had not repurchased any shares of stock pursuant to our share repurchase program.

Dividend and Distribution Activity

On May 5, 2020, our board of directors declared a cash dividend in the amount of $0.27 per share of our common stock payable on July 14, 2020 to the stockholders of record as of the close of business on June 30, 2020.

On August 4, 2020, our board of directors declared a cash dividend in the amount of $0.29 per share of our common stock payable on October 16, 2020 to the stockholders of record as of the close of business on October 2, 2020.

Contractual Commitments

As of May 5, 2020, we have one outstanding contract with a third-party seller to acquire one industrial property and one contract with a third-party buyer to sell three industrial properties as further described under the heading “Contractual Obligations” in this Quarterly Report on Form 10-Q.

There is no assurance that we will acquire or dispose of the properties under contract because the proposed acquisition and disposition are subject to the completion of satisfactory due diligence and various closing conditions.

As of August 4, 2020, we have one outstanding contract with a third-party seller to acquire one improved land parcel consisting of approximately 7.0 acres, as described under the heading “Contractual Obligations” in this Quarterly Report on Form 10-Q.

There is no assurance that we will acquire the property under contract because the proposed acquisition is subject to the completion of satisfactory due diligence and various closing conditions.

Financial Condition and Results of Operations

7 unchanged sentences

The results of operations of any acquired property are included in our financial statements as of the date of its acquisition.

The analysis of our results below for the three months ended March 31, 2020 and 2019 includes the changes attributable to same store properties.

The same store pool for the comparison of the three months ended March 31, 2020 and 2019 includes all properties that were owned and in operation as of March 31, 2020 and since January 1, 2019 and excludes properties that were either disposed of prior to, or in redevelopment as of March 31, 2020.

As of March 31, 2020, the same store pool consisted of 202 buildings aggregating approximately 12.5 million square feet representing approximately 94.0% of our total square feet owned and 14 improved land parcels consisting of 54.2 acres.

As of March 31, 2020, the non-same store properties, which we acquired, redeveloped, or sold during 2019 and 2020 or which were in redevelopment as of March 31, 2020, consisted of 17 buildings aggregating approximately 0.9 million square feet, seven improved land parcels containing approximately 28.0 acres and four properties under redevelopment expected to contain approximately 0.5 million square feet upon completion.

As of March 31, 2020 and 2019, our consolidated same store pool occupancy was approximately 98.1% and 98.2%, respectively.

The analysis of our results below for the three and six months ended June 30, 2020 and 2019 includes the changes attributable to same store properties.

The same store pool for the comparison of the three and six months ended June 30, 2020 and 2019 includes all properties that were owned and in operation as of June 30, 2020 and since January 1, 2019 and excludes properties that were either disposed of prior to, held for sale to a third party or in redevelopment as of June 30, 2020.

As of June 30, 2020, the same store pool consisted of 198 buildings aggregating approximately 12.0 million square feet representing approximately 91.8% of our total square feet owned and 14 improved land parcels consisting of 54.2 acres.

As of June 30, 2020, the non-same store properties, which we acquired, redeveloped, or sold during 2019 and 2020 or were held for sale (if any) or in redevelopment as of June 30, 2020, consisted of 20 buildings aggregating approximately 1.1 million square feet, eight improved land parcels containing approximately 30.8 acres and two properties under redevelopment expected to contain approximately 0.5 million square feet upon completion.

As of June 30, 2020 and 2019, our consolidated same store pool occupancy was approximately 96.5% and 97.7%, respectively.

Our future financial condition and results of operations, including rental revenues, straight-line rents and amortization of lease intangibles, may be impacted by the acquisitions of additional properties, and expenses may vary materially from historical results.

Comparison of the Three Months Ended March 31, 2020 to the Three Months Ended March 31, 2019:

For the Three Months Ended March 31,

Comparison of the Three Months Ended June 30, 2020 to the Three Months Ended June 30, 2019:

For the Three Months Ended June 30,

2020 2019 $ Change % Change

24 unchanged sentences

General and administrative 5,665 6,757 (1,092) (16.2) %

Acquisition costs 52 — 52 n/a

Acquisition costs 11 1 10 1000.0 %

Total other costs and expenses 17,135 17,406 (271) (1.6) %

2 unchanged sentences

Interest expense, including amortization (3,909) (4,053) 144 (3.6) %

Gain on sales of real estate investments — 4,465 (4,465) (100.0) %

Gain on sales of real estate investments 17,750 — 17,750 n/a

Total other income (expense) 14,031 (3,236) 17,267 n/a

3 unchanged sentences

All rental income earned pursuant to tenant leases is reflected as one line, “Rental revenues and tenant expense reimbursements” on our accompanying consolidated statements of operations.

We believe that the above presentation of rental revenues and tenant expense reimbursements is not, and is not intended to be, a presentation in accordance with GAAP, and a reconciliation to total revenues is provided above.

We believe that the above presentation of rental revenues and tenant expense reimbursements is not, and is not intended to be, a presentation in accordance with GAAP,and a reconciliation to total revenue is provided above.

We believe this information is frequently used by management, investors, and other interested parties to evaluate our performance.

See “Note 2 - Significant Accounting Policies” in our condensed notes to consolidated financial statements for more information regarding our adoption of this standard.

2 Includes 2020 and 2019 acquisitions and dispositions, seven improved land parcels and four properties under redevelopment as of March 31, 2020.

2 Includes 2020 and 2019 acquisitions and dispositions, eight improved land parcels and two properties under redevelopment as of June 30, 2020.

3 Includes straight-line rents and amortization of lease intangibles.

See “Non-GAAP Financial Measures” in this Quarterly Report on Form 10-Q for a definition and reconciliation of net operating income and same store net operating income from net income and a discussion of why we believe net operating income and same store net operating income are useful supplemental measures of our operating performance.

Total revenues increased approximately $4.2 million for the three months ended March 31, 2020 compared to the same period from the prior year due primarily to property acquisitions during 2019 and 2020 and increased revenue on new and renewed leases.

Cash rents on new and renewed leases totaling approximately 0.6 million square feet commencing during the three months ended March 31, 2020 increased approximately 21.9% compared to the same period from the prior year.

For both the three months ended March 31, 2020 and 2019, approximately $0.6 million was recorded in straight-line rental revenues related to contractual rent abatements given to certain tenants.

During the three months ended March 31, 2020, due to the effects of COVID-19, approximately $0.5 million in straight-line rent receivables was reversed.

Total revenues increased approximately $4.0 million for the three months ended June 30, 2020 compared to the same period from the prior year due primarily to property acquisitions during 2020 and 2019 and increased revenue on new and renewed leases, offset by a decline in occupancy rate.

Cash rents on new and renewed leases totaling approximately 0.5 million square feet commencing during the three months ended June 30, 2020 increased approximately 38.2% compared to the same period from the prior year.

For the three months ended June 30, 2020 and 2019, approximately $1.3 million and $0.7 million, respectively, was recorded in straight-line rental revenues related to contractual rent abatements given to certain tenants.

During the three months ended June 30, 2020, due to the effects of COVID-19, approximately $0.4 million in straight-line rent receivables was reversed.

For the three months ended June 30, 2020, approximately $0.7 million in rent abatement was provided to the tenant at our Caribbean property pursuant to a lease extension.

Property operating expenses.

Total property operating expenses increased approximately $1.2 million during the three months ended March 31, 2020 compared to the same period from the prior year.

Total property operating expenses increased approximately $1.2 million during the three months ended June 30, 2020 compared to the same period from the prior year.

The increase in total property operating expenses was primarily due to an increase of approximately $0.7 million attributable to property acquisitions during 2020 and 2019.

Depreciation and amortization.

Depreciation and amortization increased approximately $0.7 million during the three months ended March 31, 2020 compared to the same period from the prior year primarily due to property acquisitions during 2020 and 2019.

Depreciation and amortization increased approximately $0.8 million during the three months ended June 30, 2020 compared to the same period from the prior year primarily due to property acquisitions during 2020 and 2019.

General and administrative expenses.

General and administrative expenses decreased approximately $0.2 million for the three months ended March 31, 2020 compared to the same period from the prior year.

General and administrative expenses decreased approximately $1.1 million primarily due to lower performance share award expense of approximately $1.0 million, partially offset by increased compensation expenses for the three months ended June 30, 2020 compared to the same period from the prior year.

Interest and other income.

Interest and other income decreased approximately $1.0 million for the three months ended March 31, 2020 compared to the same period from the prior year primarily due to a decrease in the outstanding balance on our Senior Secured Loan and lower interest rates on our cash balances.

Interest and other income decreased approximately $0.6 million for the three months ended June 30, 2020 compared to the same period from the prior year primarily due to a decrease in our outstanding Senior Secured Loan balance.

Interest expense, including amortization.

Interest expense decreased approximately $0.3 million for the three months ended March 31, 2020 compared to the same period from the prior year primarily due to lower interest rates on our $100.0 million term loan, the payoff of a $50.0 million term loan in December 2019 and the payoff of one mortgage loan payable in January 2020 in the amount of $32.6 million.

Interest expense decreased approximately $0.1 million for the three months ended June 30, 2020 compared to the same period from the prior year primarily due to the repayment of a mortgage loan payable in the amount of approximately $32.7 million, offset by the issuance of approximately $100.0 million of senior unsecured debt in December 2019.

In addition, the interest rate on the variable rate term loan was lower during the three months ended June 30, 2020 compared to the same period from the prior year.

Gain on sales of real estate investments.

Gain on sales of real estate investments decreased approximately $4.5 million for the three months ended March 31, 2020 compared to the same period from the prior year.

During the three months ended March 31, 2019, we recognized a gain of approximately $4.5 million from the sale of one property.

We did not sell any properties in the same period from the current year.

Gain on sales of real estate investments increased approximately $17.8 million for the three months ended June 30, 2020 compared to the same period from the prior year.

We did not sell any properties in the same period from the prior year.

Comparison of the Six Months Ended June 30, 2020 to the Six Months Ended June 30, 2019:

For the Six Months Ended June 30,

2020 2019 $ Change % Change

(Dollars in thousands)

Rental revenues 1

Same store $ 61,035 $ 59,983 $ 1,052 1.8 %

Non-same store operating properties 2

10,706 4,596 6,110 132.9 %

Total rental revenues 71,741 64,579 7,162 11.1 %

Tenant expense reimbursements 1

Same store 17,445 16,838 607 3.6 %

Non-same store operating properties 2

1,672 1,193 479 40.1 %

Total tenant expense reimbursements 19,117 18,031 1,086 6.0 %

Total revenues 90,858 82,610 8,248 10.0 %

Property operating expenses

Same store 20,543 19,689 854 4.3 %

Non-same store operating properties 2

3,299 1,713 1,586 92.6 %

Total property operating expenses 23,842 21,402 2,440 11.4 %

Net operating income 3

Same store 57,937 57,132 805 1.4 %

Non-same store operating properties 2

9,079 4,076 5,003 122.7 %

Total net operating income $ 67,016 $ 61,208 $ 5,808 9.5 %

Other costs and expenses

Depreciation and amortization 22,559 21,063 1,496 7.1 %

General and administrative 11,423 12,720 (1,297) (10.2) %

Acquisition costs 63 1 62 6200.0 %

Total other costs and expenses 34,045 33,784 261 0.8 %

Other income (expense)

Interest and other income 754 2,339 (1,585) (67.8) %

Interest expense, including amortization (7,915) (8,317) 402 (4.8) %

Gain on sales of real estate investments 17,750 4,465 13,285 297.5 %

Total other income (expense) 10,589 (1,513) 12,102 n/a

Net income $ 43,560 $ 25,911 $ 17,649 68.1 %

2018-11, Leases (Topic 842), Targeted Improvements allows us to elect not to separate lease and non-lease rental income.

All rental income earned pursuant to tenant leases is reflected as one line, “Rental revenues and tenant expense reimbursements” on our accompanying consolidated statements of operations.

We believe that the above presentation of rental revenues and tenant expense reimbursements is not, and is not intended to be, a presentation in accordance with GAAP.

We believe this information is frequently used by management, investors, and other interested parties to evaluate our performance.

See “Note 2 - Significant Accounting Policies” in our condensed notes to consolidated financial statements for more information regarding our adoption of this standard.

2 Includes 2019 and 2020 acquisitions and dispositions, eight improved land parcels and two properties under redevelopment as of June 30, 2020.

3 Includes straight-line rents and amortization of lease intangibles.

Total revenues increased approximately $8.2 million for the six months ended June 30, 2020 compared to the same period from the prior year due primarily to property acquisitions during 2020 and 2019 and increased revenue on new and renewed leases, offset by a decline in occupancy rate.

Cash rents on new and renewed leases totaling approximately 1.1 million square feet commencing during the six months ended June 30, 2020 increased approximately 28.9% compared to the same period from the prior year.

For the six months ended June 30, 2020 and 2019, approximately $1.9 million and $1.3 million, respectively, was recorded in straight-line rental revenues related to contractual rent abatements given to certain tenants.

During the six months ended June 30, 2020, due to the effects of COVID-19, approximately $0.9 million in straight-line rent receivables was reversed.

For the six months ended June 30, 2020, approximately $0.7 million in rent abatements was provided to the tenant at our Caribbean property.

Property operating expenses.

Total property operating expenses increased approximately $2.4 million during the six months ended June 30, 2020 compared to the same period from the prior year.

The increase in total property operating expenses was primarily due to an increase of approximately $1.6 million attributable to property acquisitions during 2020 and 2019.

Depreciation and amortization.

Depreciation and amortization increased approximately $1.5 million during the six months ended June 30, 2020 compared to the same period from the prior year primarily due to property acquisitions during 2019 and 2020.

General and administrative expenses.

General and administrative expenses decreased approximately $1.3 million for the six months ended June 30, 2020 compared to the same period from the prior year due primarily to a decrease of approximately $1.6 million in stock based compensation expense including a decrease in performance share award expense of $2.3 million.

offset by an increase in compensation expenses.

The decrease in performance share award expense primarily related to the expense for performance share awards granted prior to January 1, 2019, which varies quarter to quarter based on our relative share price performance.

Interest and other income.

Interest and other income decreased approximately $1.6 million for the six months ended June 30, 2020 compared to the same period from the prior year primarily due to a decrease in our outstanding Senior Secured Loan balance.

Interest expense, including amortization.

Interest expense decreased approximately $0.4 million for the six months ended June 30, 2020 compared to the same period from the prior year.

This decrease is primarily due to a lower interest rate on the variable rate term loan, the repayment of a $32.7 million mortgage loan, and an increase in capitalized interest, offset by the issuance of a $100.0 million of senior unsecured debt in December 2019.

Gain on sales of real estate investments.

Gain on sales of real estate investments increased approximately $13.3 million for the six months ended June 30, 2020 compared to the same period from the prior year.

We recognized a gain of $17.8 million from the sale of three properties during the six months ended June 30, 2020, as compared to a recognized gain of approximately $4.5 million from the sale of one property in the same period from the prior year.

Liquidity and Capital Resources

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The success of our acquisition strategy may depend, in part, on our ability to obtain and borrow under our revolving credit facility and to access additional capital through issuances of equity and debt securities.

The following sets forth certain information regarding our current at-the-market common stock offering program as of March 31, 2020:

ATM Stock Offering Program Date Implemented Maximum Aggregate Offering Price (in thousands) Aggregate Common Stock Available as of March 31, 2020 (in thousands)

The following sets forth certain information regarding our current at-the-market common stock offering program as of June 30, 2020:

ATM Stock Offering Program Date Implemented Maximum Aggregate

Offering Price (in

thousands) Aggregate Common Stock Available as of three and six months ended (in thousands)

$300 Million ATM Program May 17, 2019 $ 300,000 $ 93,300

The table below sets forth the activity under our at-the-market common stock offering program during the three months ended March 31, 2020 and 2019, respectively (in thousands, except share and price per share data):

For the Three Months Ended Shares Sold Weighted Average

The table below sets forth the activity under our at-the-market common stock offering programs during the three and six months ended June 30, 2020 and 2019, respectively (in thousands, except share and price per share data):

For the Three Months Ended June 30,

Shares Sold Weighted Average

Price Per Share Net Proceeds (in

1 unchanged sentence

(in thousands)

March 31, 2020 427,027 $ 53.37 $ 22,458 $ 330

March 31, 2019 1,988,801 $ 41.39 $ 81,125 $ 1,194

As of March 31, 2020, we have a Senior Secured Loan outstanding to a borrower that bears interest at a fixed annual interest rate of 8.0% and matures in May 2020.

The Senior Secured Loan is secured by a portfolio of six improved land parcels located primarily in Newark, New Jersey.

One of the properties securing the Senior Secured Loan may be put to us as partial repayment of the Senior Secured Loan at a previously agreed upon value.

This property may be called by us as partial repayment of the Senior Secured Loan at a previously agreed upon value.

In addition, per the terms of the Senior Secured Loan, the borrower may repay the loan at any time with either cash or deed in lieu, with the deed subject to our approval.

As of March 31, 2020, we had $50.0 million of senior unsecured notes that mature in September 2022, $100.0 million of senior unsecured notes that mature in July 2024, $50.0 million of senior unsecured notes that mature in July 2026, $50.0 million of senior unsecured notes that mature in October 2027, $100.0 million of senior unsecured notes that mature in December 2029 (collectively, the “Senior Unsecured Notes”), and a credit facility (the “Facility”), which consists of a $250.0 million unsecured revolving credit facility that matures in October 2022, and a $100.0 million term loan that matures in January 2022.

As of both March 31, 2020 and December 31, 2019, there were no borrowings outstanding on our revolving credit facility and $100.0 million of borrowings outstanding on our term loan.

As of March 31, 2020, we had one interest rate cap to hedge the variable cash flows associated with $50.0 million of our existing $100.0 million variable-rate term loan.

As of December 31, 2019, we had two interest rate caps to hedge the variable cash flows associated with our existing $100.0 million

variable-rate term loan.

See “Note 9 - Derivative Financial Instruments” in our condensed notes to consolidated financial statements for more information regarding our interest rate caps.

June 30, 2020 619,300 $ 52.81 $ 32,230 $ 474

June 30, 2019 2,375,270 $ 45.76 $ 107,123 $ 1,576

For the Six Months Ended June 30,

Shares Sold Weighted Average

Price Per Share Net Proceeds (in

thousands) Sales Commissions

(in thousands)

June 30, 2020 1,046,327 $ 53.04 $ 54,688 $ 804

June 30, 2019 4,364,071 $ 43.77 $ 188,248 $ 2,770

We had a Senior Secured Loan outstanding to a borrower that bore interest at a fixed annual interest rate of 8.0% and matured and was paid off during the quarter ended June 30, 2020.

The Senior Secured Loan was secured by a portfolio of six improved land parcels located primarily in Newark, New Jersey.

As of June 30, 2020, we had $50.0 million of senior unsecured notes that mature in September 2022, $100.0 million of

senior unsecured notes that mature in July 2024, $50.0 million of senior unsecured notes that mature in July 2026, $50.0 million

of senior unsecured notes that mature in October 2027, $100.0 million of senior unsecured notes that mature in December 2029

(collectively, the “Senior Unsecured Notes”), and a credit facility (the “Facility”), which consists of a $250.0 million unsecured

revolving credit facility that matures in October 2022, a $100.0 million term loan that matures in January 2022.

June 30, 2020 and December 31, 2019, there were no borrowings outstanding on our revolving credit facility and $100.0 million of borrowings outstanding on our term loan.

As of June 30, 2020, we had one interest rate cap to hedge the variable cash flows associated with $50.0 million of its existing $100.0 million variable-rate term loan.

The cap has a notional value of $50.0 million and will effectively cap the annual interest rate payable at 4.0% plus 1.20% to 1.70%, depending on leverage, with respect to $50.0 million for the period from December 1, 2014 (effective date) to May 4, 2021.

As of December 31, 2019, we had an additional interest rate cap with a notional value of $50.0 million (which expired on February 3, 2020) to hedge the variable cash flows associated with $50.0 million of our existing $100.0 million variable-rate term loan.

We are required to make certain monthly variable rate payments on the term loan, while the applicable counterparty is obligated to make certain monthly floating rate payments based on LIBOR to us in the event LIBOR is greater than 4.0%, referencing the same notional amount.

The aggregate amount of the Facility may be increased to a total of up to $600.0 million, subject to the approval of the administrative agent and the identification of lenders willing to make available additional amounts.

Outstanding borrowings under the Facility are limited to the lesser of (i) the sum of the $100.0 million term loan and the $250.0 million revolving credit facility, or (ii) 60.0% of the value of the unencumbered properties.

Interest on the Facility, including the term loan, is generally to be paid based upon, at our option, either (i) LIBOR plus the applicable LIBOR margin or (ii) the applicable base rate, which is the greatest of the administrative agent’s prime rate, 0.50% above the federal funds effective rate, or thirty-day LIBOR plus the applicable LIBOR margin for LIBOR rate loans under the Facility plus 1.25%.

The applicable LIBOR margin will range from 1.05% to 1.50% (1.05% as of March 31, 2020) for the revolving credit facility and 1.20% to 1.70% (1.20% as of March 31, 2020) for the $100.0 million term loan that matures in January 2022, depending on the ratio of our outstanding consolidated indebtedness to the value of our consolidated gross asset value.

Interest on the Facility, including the term loans, is generally to be paid based upon, at our option, either (i) LIBOR plus the applicable LIBOR margin or (ii) the applicable base rate which is the greatest of the administrative agent’s prime rate, 0.50% above the federal funds effective rate, or thirty-day LIBOR plus the applicable LIBOR margin for LIBOR rate loans under the Facility plus 1.25%.

The applicable LIBOR margin will range from 1.05% to 1.50% (1.05% as of June 30, 2020) for the revolving credit facility and 1.20% to 1.70% (1.20% as of June 30, 2020) and the $100.0 million term loan that matures in January 2022, depending on the ratio of our outstanding consolidated indebtedness to the value of our consolidated gross asset value.

The Facility requires quarterly payments of an annual facility fee in an amount ranging from 0.15% to 0.30%, depending on the ratio of our outstanding consolidated indebtedness to the value of our consolidated gross asset value.

2 unchanged sentences

The Facility and the Senior Unsecured Notes include a series of financial and other covenants with which we must comply.

We were in compliance with the covenants under the Facility and the Senior Unsecured Notes as of March 31, 2020 and December 31, 2019.

As of March 31, 2020 and December 31, 2019, we had outstanding mortgage loans payable, net of deferred financing costs, of approximately $11.6 million and $44.3 million, respectively, and held cash and cash equivalents totaling approximately $69.7 million and $110.1 million, respectively.

The following tables summarize our debt maturities and principal payments and market capitalization, capitalization ratios, Adjusted EBITDA, interest coverage, fixed charge coverage and debt ratios as of and for the three months ended March 31, 2020 and 2019 (dollars in thousands, except share data):

We were in compliance with the covenants under the Facility and the Senior Unsecured Notes as of June 30, 2020 and December 31, 2019.

As of June 30, 2020 and December 31, 2019, we had outstanding mortgage loans payable, net of deferred financing costs, of approximately $11.5 million and $44.3 million, respectively, and held cash and cash equivalents totaling approximately $148.3 million and $110.1 million, respectively.

The following tables summarize our debt maturities and principal payments and market capitalization, capitalization ratios, Adjusted EBITDA, interest coverage, fixed charge coverage and debt ratios as of and for the six months ended June 30, 2020 and 2019 (dollars in thousands, except per share data):

Facility Term Loan Senior

11 unchanged sentences

Weighted average interest rate n/a 1.7 % 3.8 % 5.5 % 3.4 %

As of March 31, 2020 As of March 31, 2019

As of June 30, 2020 As of June 30, 2019

Total Debt, net $ 459,044 $ 442,694

14 unchanged sentences

Unhedged Floating Rate Debt as a % of Total Debt 7

10.9 % 11.3 %

Mortgage Loans Payable as a % of Total Debt 8

6 unchanged sentences

Weighted Average Maturity of Total Debt (years) 5.0 4.1

1 Includes 438,835 and 389,852 shares of unvested restricted stock outstanding as of March 31, 2020 and 2019, respectively.

2 Closing price of our shares of common stock on the New York Stock Exchange on March 31, 2020 and March 29, 2019, respectively, in dollars per share.

3 Total debt-to-total investments in properties is calculated as total debt, including premiums and net of deferred financing costs, divided by total investments in properties, including three properties held for sale with a gross book value of approximately $39.1 million and accumulated depreciation and amortization of $7.2 million.

4 Total debt-to-total investments in properties and Senior Secured Loan is calculated as total debt, including premiums and net of deferred financing costs, divided by total investments in properties, including three properties held for sale with a gross book value of approximately $39.1 million and accumulated depreciation and amortization of $7.2 million, and total Senior Secured Loan, net of deferred loan fees of approximately $0 and $0.1 million, as of March 31, 2020 and 2019, respectively.

5 Total debt-to-total market capitalization is calculated as total debt, including premiums and net of deferred financing costs, divided by total market capitalization as of March 31, 2020 and 2019, respectively.

1 Includes 438,483 and 370,201 shares of unvested restricted stock outstanding as of June 30, 2020 and 2019, respectively.

2 Closing price of our shares of common stock on the New York Stock Exchange on June 30, 2020 and June 28, 2019, respectively, in dollars per share.

3 Total debt-to-total investments in properties is calculated as total debt, including premiums and net of deferred financing costs, divided by total investments in properties, including one property held for sale with a gross book value of approximately $15.1 million and accumulated depreciation and amortization of $3.3 million.

4 Total debt-to-total investments in properties and Senior Secured Loan is calculated as total debt, including premiums and net of deferred financing costs, divided by total investments in properties, including one property held for sale with a gross book value of approximately $15.1 million and accumulated depreciation and amortization of $3.3 million, and total Senior Secured Loan, net of deferred loan fees of approximately $0 and $0.1 million, as of June 30, 2020 and 2019, respectively.

5 Total debt-to-total market capitalization is calculated as total debt, including premiums and net of deferred financing costs, divided by total market capitalization as of June 30, 2020 and 2019, respectively.

6 Floating rate debt as a percentage of total debt is calculated as floating rate debt, including premiums and net of deferred financing costs, divided by total debt, including premiums and net of deferred financing costs.

Floating rate debt includes $100.0 million variable-rate term loan borrowings, of which $50.0 million is subject to interest rate caps of 4.0% plus 1.20% to 1.70%, depending on leverage as of March 31, 2020, and $150.0 million variable-rate term loan borrowings subject to interest rate caps of 4.0% plus 1.20% to 1.70% as of March 31, 2019.

Floating rate debt includes $100.0 million variable-rate term loan borrowings, of which $50.0 million is subject to an interest rate cap of 4.0% plus 1.20% to 1.70%, depending on leverage as of June 30, 2020, and $150.0 million variable-rate term loan borrowings, of which $100.0 million is subject to interest rate caps of 4.0% plus 1.20% to 1.70% as of June 30, 2019.

See “Note 9 - Derivative Financial Instruments” in our condensed notes to consolidated financial statements for more information regarding our interest rate caps.

7 Unhedged floating rate debt as a percentage of total debt is calculated as unhedged floating rate debt, including premiums and net of deferred financing costs, divided by total debt, including premiums and net of deferred financing costs.

Hedged debt includes $50.0 million of our variable-rate term loan borrowings subject to interest rate caps of 4.0% plus 1.20% to 1.70%, depending on leverage as of March 31, 2020 and $150.0 million variable rate term loan borrowings subject to interest rate caps of 4.0% plus 1.20% to 1.70% as of March 31, 2019.

Hedged debt includes our $100.0 million variable-rate term loan borrowings, of which $50.0 million is subject to an interest rate cap of 4.0% plus 1.20% to 1.70%, depending on leverage as of June 30, 2020 and $150.0 million variable rate term loan borrowings subject to interest rate caps of 4.0% plus 1.20% to 1.70% as of June 30, 2019.

See “Note 9 - Derivative Financial Instruments” in our condensed notes to consolidated financial statements for more information regarding our interest rate caps.

8 Mortgage loans payable as a percentage of total debt is calculated as mortgage loans payable, including premiums and net of deferred financing costs, divided by total debt, including premiums and net of deferred financing costs.

properties held for sale with a gross book value of approximately $39.1 million and accumulated depreciation and amortization of $7.2 million.

10 Earnings before interest, taxes, gains (losses) from sales of property, depreciation and amortization, acquisition costs and stock-based compensation (“Adjusted EBITDA”) for the three months ended March 31, 2020 and 2019, respectively.

9 Mortgage loans payable as a percentage of total investments in properties is calculated as mortgage loans payable, including premiums and net of deferred financing costs, divided by total investments in properties, including one property held for sale with a gross book value of approximately $15.1 million and accumulated depreciation and amortization of $3.3 million.

10 Earnings before interest, taxes, gains (losses) from sales of property, depreciation and amortization, acquisition costs and stock-based compensation (“Adjusted EBITDA”) for the six months ended June 30, 2020 and 2019, respectively.

See “Non-GAAP Financial Measures” in this Quarterly Report on Form 10-Q for a definition and reconciliation of Adjusted EBITDA from net income and a discussion of why we believe Adjusted EBITDA is a useful supplemental measure of our operating performance.

5 unchanged sentences

The following table sets forth the cash dividends paid or payable per share during the three months ended March 31, 2020:

The following table sets forth the cash dividends paid or payable per share during the six months ended June 30, 2020:

For the Three Months Ended Security Dividend per

1 unchanged sentence

March 31, 2020 Common stock $ 0.27 February 5, 2020 March 27, 2020 April 10, 2020

June 30, 2020 Common stock $ 0.27 May 5, 2020 June 30, 2020 July 14, 2020

Sources and Uses of Cash

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Cash From Operating Activities.

Net cash provided by operating activities totaled approximately $22.2 million for the three months ended March 31, 2020 compared to approximately $19.8 million for the three months ended March 31, 2019.

Net cash provided by operating activities totaled approximately $45.4 million for the six months ended June 30, 2020 compared to approximately $43.9 million for the six months ended June 30, 2019.

This increase in cash provided by operating activities is primarily attributable to additional cash flows generated from the properties acquired during 2019 and 2020 and same store properties.

Cash From Investing Activities.

Net cash used in investing activities was approximately $36.2 million and $27.7 million, respectively, for the three months ended March 31, 2020 and 2019, which consisted primarily of cash paid for property acquisitions of approximately $30.1 million and $25.8 million, respectively, additions to capital improvements of approximately $11.1 million and $13.9 million, respectively and partially offset by net proceeds from sales of real estate investments of approximately $0 and $12.0 million, respectively, and partial repayment of our Senior Secured Loan of approximately $5.0 million and $0, respectively.

Net cash provided by investing activities was approximately $5.5 million and net cash used in investing activities was $93.1 million, respectively, for the six months ended June 30, 2020 and 2019, which consisted primarily of cash paid for property acquisitions of approximately $40.4 million and $73.2 million, respectively, additions to capital improvements of approximately $19.7 million and $31.8 million, respectively, offset by net cash received for the Senior Secured Loan of $15.9 million and $0, respectively, and net proceeds from sales of real estate investments of approximately $49.7 million and $12.0 million, respectively.

Cash From Financing Activities.

Net cash used in financing activities was approximately $28.7 million for the three months ended March 31, 2020, which consisted primarily of approximately $22.5 million in net common stock issuance proceeds, offset by approximately $18.2 million in equity dividend payments and $32.7 million in payments on mortgage loan payable.

Net cash provided by financing activities was approximately $35.8 million for the three months ended March 31, 2019, which consisted primarily of approximately $73.8 million in net common stock issuance proceeds, partially offset by $19.0 million in net borrowing repayments on our Facility and approximately $14.6 million in equity dividend payments.

Net cash used in financing activities was approximately $14.9 million for the six months ended June 30, 2020, which consisted primarily of approximately $54.7 million in net common stock issuance proceeds offset by approximately $36.5 million in equity dividend payments and approximately $32.8 million in mortgage loan payments.

Net cash provided by financing activities was approximately $134.8 million for the six months ended June 30, 2019, which consisted primarily of approximately $188.3 million in net common stock issuance proceeds and $21.9 million in net borrowings on our Facility offset by approximately $29.8 million in equity dividend payments.

Critical Accounting Policies

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Contractual Obligations

As of May 5, 2020, we have one outstanding contract with a third-party seller to acquire one industrial property.

As of August 4, 2020, we have one outstanding contract with a third-party seller to acquire one industrial property.

There is no assurance that we will acquire the property under contract because the proposed acquisition is subject to the completion of satisfactory due diligence and various closing conditions.

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San Francisco Bay Area — — — —

Seattle 1 13,000 5,700 —

Miami — — — —

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Total — — $ 7,275 $ —

The following table summarizes our contractual obligations due by period as of March 31, 2020 (dollars in thousands):

1 Includes one improved land parcel containing approximately 7.0 acres.

As of August 4, 2020, we executed two non-binding letters of intent with third-party sellers to acquire one industrial building consisting of approximately 13,000 square feet and one improved land parcel consisting of approximately 4.7 acres for a total anticipated purchase price of approximately $22.7 million.

In the normal course of its business, we enter into non-binding letters of intent to purchase properties from third parties that may obligate us to make payments or perform other obligations upon the occurrence of certain events, including the execution of a purchase and sale agreement and satisfactory completion of various due diligence matters.

There can be no assurance that we will enter into purchase and sale agreements with respect to these properties or otherwise complete any such prospective purchases on the terms described or at all.

The following table summarizes our contractual obligations due by period as of June 30, 2020 (dollars in thousands):

Contractual Obligations Less than 1

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Operating lease commitments 273 280 — — 553

Redevelopment obligations 289 — — — 289

Purchase obligations 7,275 — — — 7,275

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As a result, we believe that the use of FFO, together with the required GAAP presentations, provide a more complete understanding of our operating performance.

The following table reflects the calculation of FFO reconciled from net income for the three months ended March 31, 2020 and 2019 (dollars in thousands except per share data):

For the Three Months Ended March 31,

2020 2019 $ Change % Change

The following table reflects the calculation of FFO reconciled from net income for the three and six months ended June 30, 2020 and 2019 (dollars in thousands except per share data):

For the Three Months Ended June 30, For the Six Months Ended June 30,

2020 2019 $ Change % Change 2020 2019 $ Change % Change

$ 30,704 $ 10,379 $ 20,325 195.8 % $ 43,560 $ 25,911 $ 17,649 68.1 %

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To be consistent with our policies of determining whether instruments granted in share-based payment transactions are participating securities and accounting for earnings per share, the FFO per common share is adjusted for FFO distributed through declared dividends (if any) and allocated to all participating securities (weighted average common shares outstanding and unvested restricted shares outstanding) under the two-class method.

Under this method, allocations were made to 434,538 and 389,518 of weighted average unvested restricted shares outstanding for the three months ended March 31, 2020 and 2019, respectively.

2 Includes performance share award expense of approximately $1.5 million and $2.0 million for the three months ended March 31, 2020 and 2019, respectively.

See “Note 11 – Stockholders’ Equity” in our condensed notes to consolidated financial statements for more information regarding our performance share awards.

FFO increased by approximately $2.5 million for the three months ended March 31, 2020 as compared to the same period from the prior year due primarily to property acquisitions during 2019 and 2020, a decrease of share award expense and same store NOI growth of approximately $0.4 million for the three months ended March 31, 2020, compared to the same period from the prior year.

The FFO increase was partially offset by increased weighted average common shares outstanding for the three months ended March 31, 2020 compared to the same period from the prior year.

Under this method, allocations were made to 438,595 and 385,587 of weighted average unvested restricted shares outstanding for the three months ended June 30, 2020 and 2019, respectively, and 436,567 and 387,542 of weighted average unvested restricted shares outstanding for the six months ended June 30, 2020 and 2019, respectively.

Includes performance share award expense of approximately $1.0 million and $2.8 million for the three months ended June 30, 2020 and 2019, respectively, and approximately $2.5 million and $4.8 million for the six months ended June 30, 2020 and 2019, respectively.

See “Note 11 – Stockholders’ Equity” in the condensed notes to consolidated financial statements for more information regarding our performance share awards.

FFO increased by approximately $3.4 million and $5.8 million for the three and six months ended June 30, 2020, respectively, compared to the same periods from the prior year due primarily to property acquisitions during 2019 and 2020 and same store NOI growth of approximately $0.5 million and $0.8 million for the three and six months ended June 30, 2020, respectively, compared to the same periods from the prior year.

In addition, the FFO increased due to a decrease in performance share award expense of approximately $1.8 million and $2.1 million for the three and six months ended June 30, 2020, respectively, partially offset by a decline of approximately $0.2 million and $0.1 million related to the disposition of properties for the three and six months ended June 30, 2020, respectively.

We compute Adjusted EBITDA as earnings before interest, taxes, depreciation and amortization, gain on sales of real estate investments, acquisition costs and stock-based compensation.

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As we are currently in a growth phase, acquisition costs are excluded from Adjusted EBITDA to allow for the comparison of our operating performance to that of stabilized companies.

The following table reflects the calculation of Adjusted EBITDA reconciled from net income for the three months ended March 31, 2020 and 2019 (dollars in thousands):

For the Three Months Ended March 31,

2020 2019 $ Change % Change

The following table reflects the calculation of Adjusted EBITDA reconciled from net income for the three and six months ended June 30, 2020 and 2019 (dollars in thousands):

For the Three Months Ended June 30, For the Six Months Ended June 30,

2020 2019 $ Change % Change 2020 2019 $ Change % Change

Net income $ 30,704 $ 10,379 $ 20,325 195.8 % $ 43,560 $ 25,911 $ 17,649 68.1 %

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Stock-based compensation 2,316 3,660 (1,344) (36.7) % 4,495 6,160 (1,665) (27.0) %

Acquisition costs 52 — 52 n/a

Acquisition costs 11 1 10 1000.0 % 63 1 62 6200.0 %

Adjusted EBITDA $ 30,649 $ 28,741 $ 1,908 6.6 % $ 60,842 $ 56,987 $ 3,855 6.8 %

The analysis of our results below for the three months ended March 31, 2020 and 2019 includes the changes attributable to same store properties.

As of March 31, 2020, the same store pool consisted of 202 buildings (including three properties held for sale) aggregating approximately 12.5 million square feet representing approximately 94.0% of our total square feet owned and 14 improved land parcels consisting of 54.2 acres.

As of March 31, 2020 and 2019, our consolidated same store pool occupancy was approximately 98.1% and 98.2%, respectively.

The following table reflects the calculation of NOI, same store NOI and cash-basis same store NOI reconciled from net income for the three months ended March 31, 2020 and 2019 (dollars in thousands):

For the Three Months Ended March 31,

2020 2019 $ Change % Change

We compute NOI as rental revenues, including tenant expense reimbursements, less property operating expenses.

We compute same store NOI as rental revenues, including tenant expense reimbursements, less property operating expenses on a same store basis.

NOI excludes depreciation, amortization, general and administrative expenses, acquisition costs and interest expense, including amortization.

We compute cash-basis same store NOI as same store NOI excluding straight-line rents and amortization of lease intangibles.

The same store pool includes all properties that were owned and in operation as of June 30, 2020 and since January 1, 2019 and excludes properties that were either disposed of prior to, held for sale to a third party or in redevelopment as of June 30, 2020.

We believe that presenting NOI, same store NOI and cash-basis same store NOI provides useful information to investors regarding the operating performance of our properties because NOI excludes certain items that are not considered to be controllable in connection with the management of the properties, such as depreciation, amortization, general and administrative expenses, acquisition costs and interest expense.

By presenting same store NOI and cash-basis same store NOI, the operating results on a same store basis are directly comparable from period to period.

The following table reflects the calculation of NOI, same store NOI and cash-basis same store NOI reconciled from net income for the three and six months ended June 30, 2020 and 2019 (dollars in thousands):

For the Three Months Ended June 30, For the Six Months Ended June 30,

2020 2019 $ Change % Change 2020 2019 $ Change % Change

$ 30,704 $ 10,379 $ 20,325 195.8 % $ 43,560 $ 25,911 $ 17,649 68.1 %

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General and administrative 5,665 6,757 (1,092) (16.2) % 11,423 12,720 (1,297) (10.2) %

Acquisition costs 52 — 52 n/a

Total other income and expenses 3,442 (1,723) 5,165 n/a

Acquisition costs 11 1 10 1000.0 % 63 1 62 6200.0 %

Total other income and expenses (14,031) 3,236 (17,267) n/a (10,589) 1,513 (12,102) n/a

Net operating income 33,808 31,021 2,787 9.0 % 67,016 61,208 5,808 9.5 %

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$ 28,107 $ 26,977 $ 1,130 4.2 % $ 56,239 $ 53,706 $ 2,533 4.7 %

1 Includes approximately $0 of lease termination income for both the three months ended March 31, 2020 and 2019.

2 Includes 2019 and 2020 acquisitions and dispositions, seven improved land parcels and four properties under redevelopment.

3 Includes approximately $0 of lease termination income for both the three months ended March 31, 2020 and 2019.

1 Includes approximately $0.2 million of lease termination income for both the three months ended June 30, 2020 and 2019, and approximately $0.2 million of lease termination income for both the six months ended June 30, 2020 and 2019.

2 Includes 2019 and 2020 acquisitions and dispositions, eight improved land parcels and two properties under redevelopment.

3 Includes approximately $0.1 million and $0.2 million of lease termination income for the three months ended June 30, 2020 and 2019, respectively, and approximately $0.1 million and $0.2 million of lease termination income for the six months ended June 30, 2020 and 2019, respectively.

4 Includes straight-line rents and amortization of lease intangibles for the same store pool only.

Also includes approximately $0.5 million in straight-line rent receivable reversal due to the effects of COVID-19 during the three months ended March 31, 2020.

Cash-basis same store NOI increased by approximately $1.2 million for the three months ended March 31, 2020 compared to the same period from the prior year primarily due to increased rental revenue on new and renewed leases.

For both the three months ended March 31, 2020 and 2019, total contractual rent abatements of approximately $0.6 million were given to certain tenants in the same-store pool and approximately $0 in lease termination income was received from certain tenants in the same store pool.

In addition, approximately $0.1 million of the increase in cash-basis same store NOI for the three months ended March 31, 2020 related to properties that were acquired vacant or with near term expirations in 2018.

Cash-basis same store NOI increased by approximately $1.1 million for the three months ended June 30, 2020 compared to the same period from the prior year primarily due to increased rental revenue on new and renewed leases, offset by a decrease in occupancy rate.

The decline in occupancy as compared to the prior quarter was driven primarily by a 192,000 square foot lease expiration at our 130 Interstate property and a 50,000 square foot lease expiration at our Whelan property which was acquired in the fourth quarter of 2019 with a short-term lease.

For the three months ended June 30, 2020 and 2019, respectively, total contractual rent abatements of approximately $0.8 million and $0.7 million were given to certain tenants in the same-store pool and approximately $0.1 million and $0.2 million in lease termination income was received from certain tenants in the same store pool.

In addition, approximately $0.3 million of the increase in cash-basis same store NOI for the three months ended June 30, 2020 related to properties that were acquired vacant or with near term expirations in 2018.

Cash-basis same store NOI increased by approximately $2.5 million for the six months ended June 30, 2020 compared to the same period from the prior year primarily due to increased rental revenue on new and renewed leases, offset by a decrease in occupancy rate.

For both the six months ended June 30, 2020 and 2019, total contractual rent abatements of approximately $1.2 million were given to certain tenants in the same-store pool and approximately $0.1 million and $0.2 million, respectively, in lease termination income was received from certain tenants in the same store pool.

In addition, approximately $0.4 million of the increase in cash-basis same store NOI for the six months ended June 30, 2020 related to properties that were acquired vacant or with near term expirations in 2018.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis