UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 


 

FORM 8-K/A

(Amendment No. 2)

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

 

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

 

STAG INDUSTRIAL, INC.

(Exact name of registrant specified in its charter)

 

Maryland

 

1-34907

 

27-3099608

(State or other jurisdiction

 

(Commission

 

(IRS Employer

of incorporation)

 

File Number)

 

Identification No.)

 

99 High Street, 28th Floor

Boston, Massachusetts 02110

(Address of principal executive offices, zip code)

 

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

 

Not applicable

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

 

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

 

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

 

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

 

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

 

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

 

 

 



 

Explanatory Note

 

This Current Report on Form 8-K/A amends and supplements the Current Report on Form 8-K filed by STAG Industrial, Inc. (the “Company”) with the Securities and Exchange Commission on October 11, 2012, as amended (the “Original Report”), reporting the Company’s acquisition of a portfolio of 33 industrial properties from the Company’s affiliate, STAG Investments Holdings II, LLC and its subsidiaries, to include the historical financial statements and unaudited pro forma financial information required by Item 9.01(a) and (b) of Form 8-K for 32 of the 33 industrial properties.  There remains one property included in the portfolio of industrial properties to be acquired from STAG Investments Holdings II, LLC for which the acquisition has not closed. Because the purchase and sale agreement for the property includes various contingencies, there can be no assurance that the property will be acquired or, if it is, what the timing of the purchase will be. This property is not reflected in the financial information required by Item 9.01(a) and (b) below.  This Current Report on Form 8-K/A should be read in conjunction with the Original Report.

 

ITEM 9.01.    FINANCIAL STATEMENTS AND EXHIBITS

 

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

 

Report of Independent Auditors

2

Combined Statements of Revenue and Certain Expenses for the nine months ended September 30, 2012 (unaudited) and the years ended December 31, 2011, 2010 and 2009

3

Notes to Combined Statements of Revenue and Certain Expenses

4

 

(b)           Unaudited Pro Forma Condensed Consolidated Financial Information

 

STAG Industrial, Inc. and Subsidiaries

 

Unaudited Pro Forma Condensed Consolidated Balance Sheet as of September 30, 2012

9

Unaudited Pro Forma Condensed Consolidated Statement of Operations for the nine months ended September 30, 2012

10

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

11

Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements

12

 

(d)          Exhibits

 

Exhibit No.

 

Description

 

 

 

23.1

 

Consent of PricewaterhouseCoopers LLP

 

1



 

Report of Independent Auditors

 

To STAG Industrial, Inc.:

 

We have audited the accompanying combined statements of revenue and certain expenses (the “Statements”) of the STAG Investments II Portfolio for the years ended December 31, 2011, 2010 and 2009. These Statements are the responsibility of the management of STAG Investments II, LLC. Our responsibility is to express an opinion on these Statements based on our audits.

 

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

 

The accompanying Statements were prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission (for inclusion in the Form 8-K/A of STAG Industrial, Inc.), as described in note 2 and are not intended to be a complete presentation of STAG Investments II Portfolio’s combined revenue and expenses.

 

In our opinion, the Statements referred to above present fairly, in all material respects, the combined revenue and certain expenses, as described in note 2, of the STAG Investments II Portfolio for the years ended December 31, 2011, 2010 and 2009 in conformity with accounting principles generally accepted in the United States of America.

 

/s/ PricewaterhouseCoopers LLP

 

Boston, Massachusetts

December 13, 2012

 

2



 

STAG Investments II Portfolio

 

Combined Statements of Revenue and Certain Expenses

 

(dollars in thousands)

 

 

 

Nine Months Ended
September 30,

 

Year Ended
December 31,

 

Year Ended
December 31,

 

Year Ended
December 31,

 

 

 

2012

 

2011

 

2010

 

2009

 

 

 

Unaudited

 

 

 

 

 

 

 

Revenue

 

 

 

 

 

 

 

 

 

Rental income

 

$

11,134

 

$

15,263

 

$

15,515

 

$

15,141

 

Tenant recoveries

 

$

1,393

 

$

1,415

 

$

1,234

 

$

1,467

 

 

 

 

 

 

 

 

 

 

 

Total revenue

 

$

12,527

 

$

16,678

 

$

16,749

 

$

16,608

 

 

 

 

 

 

 

 

 

 

 

Certain expenses

 

 

 

 

 

 

 

 

 

Cost of rental operations

 

$

939

 

$

1,654

 

$

1,433

 

$

1,581

 

Real estate taxes and insurance

 

$

1,542

 

$

1,503

 

$

1,635

 

$

1,671

 

 

 

 

 

 

 

 

 

 

 

Certain expenses

 

$

2,481

 

$

3,157

 

$

3,068

 

$

3,252

 

 

 

 

 

 

 

 

 

 

 

Revenue in excess of certain expenses

 

$

10,046

 

$

13,521

 

$

13,681

 

$

13,356

 

 

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

 

3



 

STAG Investments II Portfolio

 

Notes to Combined Statements of Revenue and Certain Expenses

 

(dollars in thousands)

 

1. Organization

 

On October 9, 2012, STAG Industrial Inc. (“STAG”) acquired 31 industrial properties from STAG Investments Holdings II, LLC, a wholly owned subsidiary of STAG Investments II, LLC (the “Fund”), which are related parties of STAG through common management. Subsequently, on October 31, 2012, STAG acquired one additional industrial property from the Fund.  STAG and its predecessor served as the asset manager of the Fund for all periods presented.

 

STAG Investments II Portfolio (the “Properties”), which is not a legal entity as presented in these combined statements of revenue and certain expenses (“Statements”), represents the combination of 32 industrial properties acquired by STAG which are located in 10 states throughout the United States. The accompanying Statements relate to the operations of the Properties.

 

The Properties were acquired by STAG Investments Holdings II, LLC prior to January 1, 2009.

 

2. Significant Accounting Policies

 

(a)                                 Basis of Presentation

 

The accompanying Statements relate to the Properties and have been prepared for the purpose of complying with Rule 3-14 of Regulation S-X promulgated under the Securities Act of 1933, as amended, and accordingly, are not representative of the actual results of operations of the Properties for the nine months ended September 30, 2012 and for the years ended December 31, 2011, 2010 and 2009, due to the exclusion of the following revenue and expenses which may not be comparable to the proposed future operations of the Properties:

 

·                  Depreciation and amortization

 

·                  Interest income and expense

 

·                  Amortization of above and below market leases

 

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

 

Because these Properties were acquired from a related party, these Statements have been prepared for the nine months ended September 30, 2012 and years ended December 31, 2011, 2010 and 2009 of ownership.  The Statements are presented on a combined basis as the Properties were under common management for all periods being presented.

 

(b)                                 Revenue Recognition

 

Rental revenue is recognized on a straight-line basis over the term of the related leases when collectability is reasonably assured. Differences between rental revenue earned and amounts due under the leases are charged or credited, as applicable, to accrued rental revenue. The impact of the straight-line rent adjustment increased revenue by approximately $117, $183, $698 and $121 for the nine months ended September 30, 2012 (unaudited) and for the years ended December 31, 2011, 2010 and 2009, respectively. Tenant recoveries represent additional rents from expense reimbursements for insurance, real estate taxes, and certain other expenses and are recognized in the period in which the related expenses are incurred.

 

4



 

STAG Investments II Portfolio

 

Notes to Combined Statements of Revenue and Certain Expenses

 

(dollars in thousands)

 

Certain tenants make payments for insurance, real estate taxes and certain other expenses and these costs, which have been assumed by the tenants under the terms of their respective leases, are not reflected in the Properties’ financial statements. Management estimates that real estate taxes, which are the responsibility of these certain tenants, were approximately $900, $1,600, $1,600, and $1,800 for the nine months ended September 30, 2012 (unaudited), the years ended December 31, 2011, 2010, and 2009, respectively.  In instances whereby the tenant has assumed the cost for insurance, real estate taxes, and certain other expenses, no recovery revenue has been reflected in the Statements.

 

Rental revenue from month-to-month leases or leases with no scheduled rent increases or other adjustments is recognized on a monthly basis when earned.

 

(c)                                  Use of Estimates

 

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

 

(d)           Unaudited Interim Statement

 

The statement of revenue and certain expenses for the nine months ended September 30, 2012 is unaudited. In the opinion of management, the Statement reflects all adjustments necessary for a fair presentation of the results of the interim period. All such adjustments are of a normal recurring nature.

 

3. Description of Leasing Arrangements

 

The Properties are leased to tenants primarily under non-cancelable operating leases which vary in length.

 

Future minimum base rentals on non-cancelable operating leases as of December 31, 2011, are as follows:

 

2012

 

$

13,295

 

2013

 

11,016

 

2014

 

7,234

 

2015

 

3,990

 

2016

 

2,954

 

 

The above future minimum lease payments exclude tenant reimbursements, amortization of accrued rental revenue and above/below-market lease intangibles. Some leases are subject to termination options. In general, these leases provide for termination payments should the termination options be exercised. The above table is prepared assuming such options are not exercised.

 

Certain leases provide for payments that represent reimbursements for related expenses incurred under existing ground leases.

 

4. Ground Lease Commitments

 

Two adjacent buildings are subject to one non-cancelable operating ground lease agreement which commenced on May 1, 1994 and has a forty year term expiring April 30, 2034. The ground lease provides for monthly minimum rent and future rent increases. For the nine months ended September 30, 2012 (unaudited) and for the years ended December 31, 2011, 2010 and 2009, the Properties expensed ground lease payments under these operating leases in the amount of $109, $146, $146, and $138, respectively. Rent adjustments are every five years on the basis of increases in the Consumer Price Index (CPI) or fair market value pursuant to certain clauses in the lease agreement.

 

5



 

STAG Investments II Portfolio

 

Notes to Combined Statements of Revenue and Certain Expenses

 

(dollars in thousands)

 

Future minimum ground lease commitments on non-cancelable operating ground leases as of December 31, 2011, are as follows:

 

2012

 

$

146

 

2013

 

146

 

2014

 

146

 

2015

 

146

 

2016

 

146

 

 

One building is subject to a non-cancelable operating ground lease agreement which commenced on October 28, 1996 and is set to expire on December 31, 2038.  The ground lease provides for monthly ground rent and future rent increases. Rent adjustments are every five years on the basis of increases in the Consumer Price Index (CPI) pursuant to certain clauses in the lease agreement.  The tenant in the building is obligated to pay directly to the land owner their obligations under their lease related to the ground lease payments assumed by the tenant.  These ground lease payments are not reflected in the Properties’ Statements of Revenue and Certain Expenses.  To the extent the tenant fails to make the ground lease payments, the Properties would recognize the expense for the obligation.  The Properties estimate that the ground lease payments, which are the responsibility of the tenant, were approximately $110, $142, $164, and $143 for the nine months ended September 30, 2012 (unaudited) and the years ended December 31, 2011, 2010, and 2009, respectively.

 

5. Commitments and Contingencies

 

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

 

6. Subsequent Events

 

Management has evaluated the events and transactions that have occurred through December 13, 2012, the date which the Statements were available to be issued, and noted no items requiring adjustment to the Statements or additional disclosure.

 

6



 

STAG Industrial, Inc. and Subsidiaries

 

Unaudited Pro Forma Condensed Consolidated Financial Statements

 

The unaudited pro forma condensed consolidated financial statements (including notes thereto) of STAG Industrial, Inc. (the “Company”) are qualified in their entirety and should be read in conjunction with the historical financial statements included elsewhere in this Current Report on Form 8-K, as well as the Company’s Annual Report on Form 10-K for the year ended December 31, 2011 filed with the Securities and Exchange Commission on March 9, 2012 and the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2012 filed with the Securities and Exchange Commission on November 8, 2012.

 

The unaudited pro forma condensed consolidated balance sheet as of September 30, 2012, reflects the financial position of the Company as if the acquisitions described in the notes to the unaudited pro forma condensed consolidated financial statements had been completed on September 30, 2012.  The unaudited pro forma condensed consolidated statements of operations for the year ended December 31, 2011 and the nine months ended September 30, 2012 are presented as if the acquisitions by the Company had occurred on January 1, 2011.

 

Such pro forma information is based upon the historical consolidated results of operations of the Company for the nine months ended September 30, 2012 and the year ended December 31, 2011, giving effect to the STAG Investment Holding II, LLC acquisitions for a total purchase price of $132.6 million, excluding closing costs:

 

Property Description

 

Market

 

# of
Buildings

 

Date Acquired

 

Square Footage

STAG Auburn Hills, LLC

 

Auburn Hills, MI

 

1

 

10/9/2012

 

87,932

STAG El Paso, LP

 

El Paso, TX

 

1

 

10/9/2012

 

269,245

STAG Gloversville 1, LLC

 

Gloversville, NY

 

1

 

10/9/2012

 

50,000

STAG Gloversville 2, LLC

 

Gloversville, NY

 

1

 

10/9/2012

 

101,589

STAG Gloversville 3, LLC

 

Gloversville, NY

 

1

 

10/9/2012

 

26,529

STAG Gloversville 4, LLC

 

Gloversville, NY

 

1

 

10/9/2012

 

59,965

STAG Greenwood 2, LLC

 

Greenwood, SC

 

1

 

10/9/2012

 

70,100

STAG Greenwood 1, LLC

 

Greenwood, SC

 

1

 

10/9/2012

 

104,955

STAG Holland 3, LLC

 

Holland, MI

 

1

 

10/9/2012

 

195,000

STAG Independence, LLC

 

Independence, VA

 

1

 

10/9/2012

 

120,000

STAG Jackson, LLC

 

Jackson, TN

 

1

 

10/9/2012

 

250,000

STAG Johnstown 1, LLC

 

Johnstown, NY

 

1

 

10/9/2012

 

52,500

STAG Johnstown 2, LLC

 

Johnstown, NY

 

1

 

10/9/2012

 

60,000

STAG Johnstown 3, LLC

 

Johnstown, NY

 

1

 

10/9/2012

 

42,325

STAG Johnstown 4, LLC

 

Johnstown, NY

 

1

 

10/9/2012

 

57,102

STAG Kansas City, LLC

 

Kansas City, KS

 

1

 

10/9/2012

 

56,580

STAG Layfayette 1, LLC

 

Lafayette, IN

 

1

 

10/9/2012

 

71,400

STAG Layfayette 2, LLC

 

Lafayette, IN

 

1

 

10/9/2012

 

120,000

STAG Layfayette 3, LLC

 

Lafayette, IN

 

1

 

10/9/2012

 

275,000

STAG Lansing 3, LLC

 

Lansing, MI

 

1

 

10/9/2012

 

250,100

STAG Marion, LLC

 

Marion, IN

 

1

 

10/9/2012

 

249,600

STAG Novi, LLC

 

Novi, MI

 

1

 

10/9/2012

 

120,800

STAG O’Hara, LLC

 

O’Hara Township, PA

 

1

 

10/9/2012

 

887,084

STAG Parsons, LLC

 

Parsons, KS

 

1

 

10/9/2012

 

120,000

STAG Phenix City, LLC

 

Phenix City, AL

 

1

 

10/9/2012

 

117,568

STAG Portage, LLC

 

Portage, IN

 

1

 

10/9/2012

 

212,000

STAG Ware Shoals, LLC

 

Ware Shoals, SC

 

1

 

10/9/2012

 

20,514

STAG Wichita 1, LLC

 

Wichita, KS

 

1

 

10/9/2012

 

80,850

STAG Wichita 2, LLC

 

Wichita, KS

 

1

 

10/9/2012

 

120,000

STAG Wichita 3, LLC

 

Wichita, KS

 

1

 

10/9/2012

 

44,760

STAG Wichita 4, LLC

 

Wichita, KS

 

1

 

10/9/2012

 

47,700

STAG Sterling Heights, LLC

 

Sterling Heights, MI

 

1

 

10/31/2012

 

108,000

 

 

 

 

32

 

 

 

4,449,198

 

7



 

In management’s opinion, all adjustments necessary to reflect the above transactions have been made.  The unaudited pro forma condensed consolidated statements of operations should be read in conjunction with the historical financial statements and notes thereto of the Company included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011 filed with the Securities and Exchange Commission on March 9, 2012 and the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2012 filed with the Securities and Exchange Commission on November 8, 2012.

 

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

 

The unaudited pro forma condensed consolidated financial statements as of September 30, 2012 and for the year ended December 31, 2011 and the nine months ended September 30, 2012 are not necessarily indicative of what the Company’s actual financial condition would have been at September 30, 2012 or what the Company’s actual results of operations would have been assuming the transactions had occurred as of January 1, 2011, nor do they purport to represent the Company’s financial condition or results of operations for future periods.

 

8



 

STAG Industrial, Inc. and Subsidiaries

 

Unaudited Pro Forma Condensed Consolidated Balance Sheet

 

September 30, 2012

 

(dollars in thousands)

 

 

 

STAG

 

 

 

 

 

 

 

Industrial

 

STAG Investments

 

Company

 

 

 

Inc.

 

II Portfolio

 

Pro Forma

 

 

 

(A)

 

(B)

 

 

 

Assets

 

 

 

 

 

 

 

Rental property

 

 

 

 

 

 

 

Land

 

$

90,337

 

$

8,508

 

$

98,845

 

Buildings

 

517,030

 

89,189

 

606,219

 

Tenant improvements

 

31,586

 

2,396

 

33,982

 

Building and land improvements

 

16,836

 

3,281

 

20,117

 

Less: accumulated depreciation

 

(41,881

)

 

(41,881

)

Total rental property, net

 

613,908

 

103,374

 

717,282

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

10,684

 

 

10,684

 

Restricted cash

 

5,768

 

 

5,768

 

Tenants accounts receivable, net

 

7,100

 

 

7,100

 

Prepaid expenses and other assets

 

5,706

 

 

5,706

 

Deferred financing fees, net

 

3,646

 

 

3,646

 

Leasing commissions, net

 

1,335

 

 

1,335

 

Goodwill

 

4,923

 

 

4,923

 

Due from related parties

 

375

 

 

375

 

Deferred leasing intangibles, net

 

150,466

 

30,349

 

180,815

 

Total assets

 

$

803,911

 

$

133,723

 

$

937,634

 

 

 

 

 

 

 

 

 

Liabilities and Equity

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

Mortgage notes payable

 

161,894

 

 

161,894

 

Unsecured credit facility

 

12,000

 

132,649

 

144,649

 

Unsecured term loan

 

100,000

 

 

100,000

 

Accounts payable, accrued expenses and other liabilities

 

8,179

 

 

8,179

 

Interest rate swaps

 

577

 

 

577

 

Tenant prepaid rent and security deposits

 

3,970

 

 

3,970

 

Dividends and distributions payable

 

12,772

 

 

12,772

 

Deferred leasing intangibles, net

 

5,513

 

1,074

 

6,587

 

Total liabilities

 

304,905

 

133,723

 

438,628

 

 

 

 

 

 

 

 

 

Equity:

 

 

 

 

 

 

 

Preferred stock

 

69,000

 

 

69,000

 

Common stock

 

349

 

 

349

 

Additional paid-in capital

 

408,834

 

 

408,834

 

Common stock dividends in excess of earnings

 

(47,916

)

 

(47,916

)

Accumulated other comprehensive loss

 

(427

)

 

(427

)

Total stockholders’ equity

 

429,840

 

 

429,840

 

Noncontrolling interest

 

69,166

 

 

69,166

 

Total equity

 

499,006

 

 

499,006

 

Total liabilities and equity

 

$

803,911

 

$

133,723

 

$

937,634

 

 

See accompanying notes to pro forma condensed consolidated financial statements.

 

9



 

STAG Industrial, Inc. and Subsidiaries

 

Unaudited Pro Forma Condensed Consolidated Statement of Operations

 

For the Nine Months Ended September 30, 2012

 

(dollars in thousands, except per share data)

 

 

 

STAG Industrial
Inc.

 

STAG Investments
II Portfolio

 

Pro Forma
Adjustments

 

Total Pro Forma
Adjustments

 

Company
Pro Forma

 

 

 

(AA)

 

(BB)

 

 

 

 

 

 

 

Revenue

 

 

 

 

 

 

 

 

 

 

 

Rental income

 

$

52,448

 

$

11,046

 

$

 

11,046

 

$

63,494

 

Tenant recoveries

 

6,283

 

1,393

 

 

1,393

 

7,676

 

Other income

 

982

 

 

(66

)(CC)

(66

)

916

 

Total revenue

 

59,713

 

12,439

 

(66

)

12,373

 

72,086

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

Property

 

9,255

 

2,481

 

 

2,481

 

11,736

 

General and administrative

 

9,962

 

 

 

 

9,962

 

Property acquisition costs

 

2,509

 

 

 

 

2,509

 

Depreciation and amortization

 

28,465

 

11,615

 

 

11,615

 

40,080

 

Loss on impairment

 

4,563

 

 

 

 

4,563

 

Other expenses

 

146

 

 

 

 

146

 

Total expenses

 

54,900

 

14,096

 

 

14,096

 

68,996

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense)

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

17

 

 

 

 

 

17

 

Interest expense

 

(11,888

)

(3,406

)

127

(DD)

(3,279

)

(15,167

)

Gain on interest rate swaps

 

215

 

 

 

 

215

 

Offering costs

 

(68

)

 

 

 

(68

)

Loss on extinguishment of debt

 

(929

)

 

 

 

(929

)

Total other income (expense)

 

(12,653

)

(3,406

)

127

 

(3,279

)

(15,932

)

Net loss from continuing operations

 

$

(7,840

)

$

(5,063

)

$

61

 

$

(5,002

)

$

(12,842

)

Income attributable to discontinued operations

 

35

 

 

 

 

35

 

Net loss

 

$

(7,805

)

$

(5,063

)

$

61

 

$

(5,002

)

$

(12,807

)

Less: loss attributable to noncontrolling interest

 

(3,244

)

 

(1,331

)(EE)

(1,331

)

(4,575

)

Net loss attributable to STAG Industrial, Inc.

 

$

(4,561

)

$

(5,063

)

$

1,392

 

$

(3,671

)

$

(8,232

)

Less: preferred stock dividends

 

4,659

 

 

 

 

4,659

 

Less: amount allocated to unvested restricted stock

 

81

 

 

 

 

81

 

Net Income (loss) loss attributable to the common stockholders

 

$

(9,301

)

$

(5,063

)

$

1,392

 

$

(3,671

)

$

(12,972

)

 

 

 

 

 

 

 

 

 

 

 

 

Loss per share - basic and diluted

 

 

 

 

 

 

 

 

 

 

 

Loss per share - basic and diluted

 

$

(0.43

)

 

 

 

 

 

(FF)

$

(0.60

)

Weighted average common shares outstanding - basic and diluted

 

21,716,590

 

 

 

 

 

 

 

21,716,590

 

 

See accompanying notes to pro forma condensed consolidated financial statements.

 

10



 

STAG Industrial, Inc. and Subsidiaries

 

Unaudited Pro Forma Condensed Consolidated Statement of Operations

 

For the Year Ended December 31, 2011

 

(dollars in thousands, except per share data)

 

 

 

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

 

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

 

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

 

 

 

 

 

STAG

 

 

 

 

 

 

 

 

 

 

 

STAG Industrial Inc.

 

Predecessor
Group

 

STAG Investments II
Portfolio

 

Pro Forma
Adjustments

 

Total Pro Forma
Adjustmens

 

Company
Pro Forma

 

 

 

(AA)

 

(GG)

 

(BB)

 

 

 

 

 

 

 

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental income

 

$

39,184

 

$

7,027

 

$

15,237

 

$

 

$

15,237

 

$

61,448

 

Tenant recoveries

 

4,747

 

1,218

 

1,415

 

 

1,415

 

$

7,380

 

Other income

 

940

 

 

 

(59

)(CC)

(59

)

$

881

 

Total revenue

 

44,871

 

8,245

 

16,652

 

(59

)

16,593

 

69,709

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

Property

 

7,943

 

2,075

 

3,157

 

 

3,157

 

13,175

 

General and administrative

 

8,365

 

322

 

 

 

 

8,687

 

Asset management fees

 

 

175

 

 

 

 

175

 

Property acquisition costs

 

1,088

 

 

 

 

 

1,088

 

Depreciation and amortization

 

22,733

 

2,437

 

15,487

 

 

15,487

 

40,657

 

Other expenses

 

294

 

 

 

 

 

294

 

Total expenses

 

40,423

 

5,009

 

18,644

 

 

18,644

 

64,076

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense)

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

28

 

1

 

 

 

 

29

 

Interest expense

 

(12,182

)

(4,053

)

(5,171

)

(16

)(DD)

(5,187

)

(21,422

)

Gain on interest rate swaps

 

2,179

 

762

 

 

 

 

2,941

 

Formation transaction costs

 

(3,674

)

 

 

 

 

(3,674

)

Offering costs

 

(78

)

 

 

 

 

(78

)

Total other income (expense)

 

(13,727

)

(3,290

)

(5,171

)

(16

)

(5,187

)

(22,204

)

Net loss from continuing operations

 

$

(9,279

)

$

(54

)

$

(7,163

)

$

(75

)

$

(7,238

)

$

(16,571

)

Income (loss) attributable to discontinued operations

 

52

 

(175

)

 

 

 

(123

)

Net Loss

 

$

(9,227

)

$

(229

)

$

(7,163

)

$

(75

)

$

(7,238

)

$

(16,694

)

Less: loss attributable to noncontrolling interest

 

(3,396

)

 

 

 

(2,434

)(EE)

(2,434

)

(5,830

)

Net loss attributable to STAG Industrial, Inc.

 

$

(5,831

)

 

 

$

(7,163

)

$

2,359

 

$

(4,804

)

$

(10,864

)

Less: preferred stock dividends

 

1,018

 

 

 

 

 

 

1,018

 

Net income (loss) attributable to the common stockholders

 

$

(6,849

)

 

 

$

(7,163

)

$

2,359

 

$

(4,804

)

$

(11,882

)

Loss per share - basic and diluted

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss per share - basic and diluted

 

$

(0.44

)

 

 

 

 

 

 

 

(FF)

$

(0.76

)

Weighted average common shares outstanding - basic and diluted

 

15,630,910

 

 

 

 

 

 

 

 

 

15,630,910

 

 

See accompanying notes to pro forma condensed consolidated financial statements.

 

11



 

STAG Industrial, Inc. and Subsidiaries

 

Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements

 

(dollars in thousands)

 

1. ADJUSTMENTS TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

 

The adjustments to the pro forma condensed consolidated balance sheet as of September 30, 2012 are as follows:

 

(A)          Represents the consolidated balance sheet of STAG Industrial, Inc. as of September 30, 2012.

 

(B)                               Reflects the acquisition of 32 industrial properties, in two separate transactions, from the Company’s affiliate, STAG Investments Holdings II, LLC that closed subsequent to September 30, 2012. On October 9, 2012, the Company acquired 31 industrial properties. Subsequently, on October 31, 2012 the Company acquired one additional industrial property.  For pro forma purposes, these acquisitions were funded using proceeds from the Company’s $200 million unsecured corporate revolving credit facility (“Unsecured Credit Facility”) of $132.6 million.  The following pro forma adjustments are necessary to reflect the initial allocation of the estimated purchase price of these acquisitions.  The allocation of purchase price shown in the table below is based on the Company’s best estimates and is subject to change based on the final determination of the fair value of assets and liabilities acquired.

 

Land

 

$

8,508

 

Building

 

89,189

 

Building and land improvements

 

3,281

 

Tenant improvements

 

2,396

 

Total rental property

 

103,374

 

Deferred leasing intangibles - assets

 

30,349

 

Assets acquired

 

133,723

 

 

 

 

 

Deferred leasing intangibles - liabilities

 

(1,074

)

Liabilities assumed

 

(1,074

)

Net acquisition price

 

$

132,649

 

 

12



 

STAG Industrial, Inc. and Subsidiaries

 

Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements

 

(dollars in thousands)

 

2. ADJUSTMENTS TO PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

 

The adjustments to the pro forma condensed consolidated statement of operations for the nine months ended September 30, 2012 and for the year ended December 31, 2011 are as follows:

 

(AA)                      Reflects the historical results of STAG Industrial, Inc. for the nine months ended September 30, 2012 (unaudited) and the period April 20, 2011 to December 31, 2011.

 

(BB)                      Reflects the results of operations for nine months ended September 30, 2012 and the year ended December 31, 2011, for the acquisitions of 32 industrial properties, in two separate closings, from the Company’s affiliate, STAG Investments Holdings II, LLC.  The table below illustrates the adjustments to revenue and expenses for these acquisitions. Adjustments to revenue represent the impact of the amortization of the net amount of above and below market rents and change in straight-line rent recognition as a result of purchase accounting adjustments. Adjustments to depreciation and amortization represent the additional depreciation expense and amortization of intangibles as a result of these purchase accounting adjustments. Depreciation and amortization amounts were determined in accordance with the Company’s policies and are based on management’s evaluation of the estimated useful lives of the properties and intangibles. The amounts allocated to buildings are depreciated over 40 years. The amounts allocated to lease intangibles are generally amortized over the remaining life of the related leases. Interest expense represents the interest expense of the debt from January 1, 2011 to September 10, 2012 at the secured credit facility negotiated rate and from September 11, 2012 to September 30, 2012 at the unsecured credit facility negotiated rate as if the debt was obtained on January 1, 2011. The negotiated rates changed on September 10, 2012 when the Company paid off the remaining balance under, and terminated, the credit facility and contemporaneously closed on the Unsecured Credit Facility.

 

STAG Investment Holdings II Portfolio

 

For the Nine Months Ended September 30, 2012

 

 

 

Certain
Revenue and
Expenses

 

 

 

 

 

 

 

STAG
Investments II
Portfolio

 

Adjustments

 

STAG
Investments II
Portfolio

 

Rental income

 

$

11,134

 

$

(88

)

$

11,046

 

Tenant recoveries

 

1,393

 

 

1,393

 

Total revenue

 

$

12,527

 

$

(88

)

$

12,439

 

Property

 

$

2,481

 

 

$

2,481

 

Depreciation and amortization

 

 

11,615

 

11,615

 

Interest expense

 

 

3,406

 

3,406

 

Total expense

 

$

2,481

 

$

15,021

 

$

17,502

 

 

13



 

STAG Industrial, Inc. and Subsidiaries

 

Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements

 

(dollars in thousands)

 

For the Year Ended December 31, 2011

 

 

 

Certain
Revenue and
Expenses

 

 

 

 

 

 

 

STAG
Investments II
Portfolio

 

Adjustments

 

STAG
Investments II
Portfolio

 

Rental income

 

$

15,263

 

$

(26

)

$

15,237

 

Tenant recoveries

 

1,415

 

 

1,415

 

Total revenue

 

$

16,678

 

$

(26

)

$

16,652

 

Property

 

$

3,157

 

 

$

3,157

 

Depreciation and amortization

 

 

15,487

 

15,487

 

Interest expense

 

 

5,171

 

5,171

 

Total expense

 

$

3,157

 

$

20,658

 

$

23,815

 

 

(CC)                      STAG Industrial Management, LLC (the “Manager”), a wholly owned subsidiary of STAG Industrial, Inc. is performing certain asset management services for STAG Investments II, LLC (“Fund II”), a related party. The Manager is paid annual asset management fee revenue based on the equity investment in the Fund II assets. Above reflects the reduction in asset management fee revenue due to the reduction of the Fund II assets by Fund II’s sale to the Company of 32 of its properties for the nine months ended September 30, 2012 and the year ended December 31, 2011.

 

(DD)                      Reflects the unused fee related to the secured and unsecured credit facility of the Company for the nine months ended September 30, 2012 and the year ended December 31, 2011.

 

(EE)                        Reflects the allocation of net income (loss) to the noncontrolling interest.

 

(FF)                          Pro forma loss per share—basic and diluted are calculated by dividing pro forma consolidated net loss allocable to the Company’s stockholders by the number of weighted average shares of common stock outstanding for the nine months ended September 30, 2012 and year ended December 31, 2011.

 

(GG)                      Reflects the historical combined statement of operations of STAG Predecessor Group for the period January 1, 2011 to April 19, 2011.

 

14



 

SIGNATURES

 

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

 

 

 

STAG INDUSTRIAL, INC.

 

 

 

By:

/s/ Gregory W. Sullivan

 

 

Gregory W. Sullivan

 

 

Chief Financial Officer, Executive Vice President and Treasurer

Dated: December 13, 2012

 

 

 

15



 

EXHIBIT INDEX

 

Exhibit No.

 

Description

 

 

 

23.1

 

Consent of PricewaterhouseCoopers LLP

 

16