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BOSTON, Feb. 15, 2023 /PRNewswire/ -- STAG Industrial, Inc. (the "Company") (STAG" href="/company/STAG" onmouseover="handlePagePreview('company','STAG')" style="color:#4007a2 !important; text-decoration:underline !important; font-weight:bold;">NYSE:STAGSTAG-pp">), today announced its financial and operating results for the fourth quarter and full year ended December 31, 2022.
"Our strong fourth quarter results conclude a year that featured many successes, including a record level of same store growth, opportunistic investments in a volatile transaction market, and operational efficiencies that resulted in impressive cash flow growth," said Bill Crooker, President and Chief Executive Officer of the Company. "Secular tailwinds in the industrial space coupled with our attractive portfolio positioning will continue to drive meaningful internal growth, and our defensive balance sheet should allow us to capitalize on opportunities throughout 2023."
Fourth Quarter and Full Year 2022 Highlights
Please refer to the Non-GAAP Financial Measures and Other Definitions section at the end of this release for definitions of capitalized terms used in this release.
The Company will host a conference call tomorrow, Thursday, February 16, 2023 at 10:00 a.m. (Eastern Time), to discuss the quarter's results and provide information about acquisitions, operations, capital markets and corporate activities. Details of the call can be found at the end of this release.
Key Financial Measures
FOURTH QUARTER AND FULL YEAR 2022 KEY FINANCIAL MEASURES | |||||||||||||
Three months ended December 31, | Year ended December 31, | ||||||||||||
Metrics | 2022 | 2021 | % Change | 2022 | 2021 | % Change | |||||||
(in $000s, except per share data) | |||||||||||||
Net income attributable to common stockholders | $29,737 | $86,198 | (65.5) % | $178,089 | $188,175 | (5.4) % | |||||||
Net income per common share — basic | $0.17 | $0.50 | (66.0) % | $1.00 | $1.15 | (13.0) % | |||||||
Net income per common share — diluted | $0.17 | $0.50 | (66.0) % | $1.00 | $1.15 | (13.0) % | |||||||
Cash NOI | $130,109 | $114,456 | 13.7 % | $513,891 | $438,036 | 17.3 % | |||||||
Same Store Cash NOI (1) | $104,703 | $100,170 | 4.5 % | $415,535 | $395,924 | 5.0 % | |||||||
Adjusted EBITDAre | $120,272 | $105,457 | 14.0 % | $475,688 | $399,404 | 19.1 % | |||||||
Core FFO | $101,148 | $89,995 | 12.4 % | $403,354 | $344,257 | 17.2 % | |||||||
Core FFO per share / unit — basic | $0.55 | $0.51 | 7.8 % | $2.21 | $2.07 | 6.8 % | |||||||
Core FFO per share / unit — diluted | $0.55 | $0.51 | 7.8 % | $2.21 | $2.06 | 7.3 % | |||||||
Cash Available for Distribution | $86,082 | $74,132 | 16.1 % | $342,705 | $293,769 | 16.7 % |
(1) The Same Store pool accounted for 82.2% of the total portfolio square footage as of December 31, 2022. |
Definitions of the above-mentioned non-GAAP financial measures, together with reconciliations to net income (loss) in accordance with GAAP, appear at the end of this release. Please also see the Company's supplemental information package for additional disclosure.
Acquisition and Disposition Activity
For the three months ended December 31, 2022, the Company acquired one building for $8.1 million with an Occupancy Rate of 100.0% upon acquisition. The chart below details the acquisition activity for the quarter:
FOURTH QUARTER 2022 ACQUISITION ACTIVITY | |||||||
Market | Date | Square Feet | Buildings | Purchase | W.A. Lease | Cash | Straight-Line |
Chicago, IL | 12/28/2022 | 115,491 | 1 | $8,055 | 5.0 | ||
Total / weighted average | 115,491 | 1 | $8,055 | 5.0 | 7.8 % | 8.1 % |
The chart below details the 2022 acquisition activity and Pipeline through February 14, 2023:
2022 ACQUISITION ACTIVITY AND PIPELINE DETAIL | ||||||
Square Feet | Buildings | Purchase Price | W.A. Lease | Cash | Straight-Line | |
Q1 | 1,799,761 | 8 | $166,351 | 5.3 | 5.0 % | 5.2 % |
Q2 | 1,467,543 | 9 | 165,362 | 9.1 | 5.2 % | 5.7 % |
Q3 | 1,358,318 | 8 | 127,320 | 5.0 | 5.4 % | 5.8 % |
Q4 | 115,491 | 1 | 8,055 | 5.0 | 7.8 % | 8.1 % |
Total / weighted average | 4,741,113 | 26 | $467,088 | 6.6 | 5.2 % | 5.6 % |
As of February 14, 2023 | ||||||
Subsequent to quarter-end acquisitions | 0.0 million | 0 | $0.0 million | |||
Pipeline | 20.4 million | 131 | $2.4 billion |
The chart below details the disposition activity for the year ended December 31, 2022:
2022 DISPOSITION ACTIVITY | |||
Square Feet | Buildings | Sale Price ($000s) | |
Q1 | 237,500 | 1 | $36,115 |
Q2 | 90,000 | 1 | 3,150 |
Q3 | 1,286,980 | 4 | 93,696 |
Q4 | 140,141 | 2 | 4,635 |
Total | 1,754,621 | 8 | $137,596 |
Subsequent to quarter end, the Company sold one building, consisting of 185,000 square feet, for gross proceeds of approximately $14.8 million.
Leasing Activity
The chart below details the leasing activity for leases commenced during the three months ended December 31, 2022:
FOURTH QUARTER 2022 OPERATING PORTFOLIO LEASING ACTIVITY | |||||||||||
Lease Type | Square | Lease | W.A. | Cash Base $/SF | SL Base $/SF | Lease Commissions $/SF | Tenant | Cash Rent | SL Rent | Retention | |
New Leases | 749,819 | 9 | 8.4 | $5.63 | $6.18 | $3.03 | $0.34 | 12.6 % | 38.7 % | ||
Renewal Leases | 2,234,006 | 18 | 3.8 | $4.86 | $5.06 | $0.76 | $0.21 | 14.8 % | 20.8 % | 79.5 % | |
Total / weighted average | 2,983,825 | 27 | 5.0 | $5.06 | $5.34 | $1.33 | $0.24 | 14.2 % | 25.4 % |
The chart below details the leasing activity for leases commenced during the year ended December 31, 2022:
2022 YEAR TO DATE OPERATING PORTFOLIO LEASING ACTIVITY | |||||||||||
Lease Type | Square | Lease | W.A. | Cash Base $/SF | SL Base $/SF | Lease Commissions $/SF | Tenant | Cash Rent | SL Rent | Retention | |
New Leases | 4,376,929 | 35 | 5.9 | $5.34 | $5.67 | $2.06 | $0.67 | 18.6 % | 31.2 % | ||
Renewal Leases | 7,795,545 | 66 | 4.7 | $4.84 | $5.10 | $0.68 | $0.41 | 11.8 % | 20.5 % | 71.0 % | |
Total / weighted average | 12,172,474 | 101 | 5.1 | $5.02 | $5.30 | $1.18 | $0.51 | 14.3 % | 24.3 % |
Additionally, for the three months and year ended December 31, 2022, leases commenced totaling 260,416 and 1.1 million square feet, respectively, related to Value Add assets and first generation leasing. These are excluded from the Operating Portfolio statistics above.
As of February 13, 2023, 61.5% of expected 2023 new and renewal leasing has been addressed, consisting of 8.4 million square feet, achieving cash rent change of 31.6%.
Capital Markets Activity
As of December 31, 2022, net debt to Annualized Run Rate Adjusted EBITDAre was 5.2x and Liquidity was $847.3 million.
Subsequent to quarter end, on January 5, 2023, the Company paid off a $100 million fixed rate senior unsecured note.
Conference Call
The Company will host a conference call tomorrow, Thursday, February 16, 2023, at 10:00 a.m. (Eastern Time) to discuss the quarter's results. The call can be accessed live over the phone toll-free by dialing (877) 407-4018, or for international callers, (201) 689-8471. A replay will be available shortly after the call and can be accessed by dialing (844) 512-2921, or for international callers, (412) 317-6671. The passcode for the replay is 13735172.
Interested parties may also listen to a simultaneous webcast of the conference call by visiting the Investor Relations section of the Company's website at www.stagindustrial.com, or by clicking on the following link:
http://ir.stagindustrial.com/QuarterlyResults
Supplemental Schedule
The Company has provided a supplemental information package with additional disclosure and financial information on its website ( www.stagindustrial.com ) under the "Quarterly Results" tab in the Investor Relations section.
CONSOLIDATED BALANCE SHEETS | |||
STAG Industrial, Inc. | |||
(unaudited, in thousands, except share data) | |||
December 31, 2022 | December 31, 2021 | ||
Assets | |||
Rental Property: | |||
Land | $ 647,098 | $ 617,297 | |
Buildings and improvements, net of accumulated depreciation of $763,128 and $611,867, respectively | 4,706,745 | 4,435,743 | |
Deferred leasing intangibles, net of accumulated amortization of $328,848 and $282,038, respectively | 508,935 | 567,658 | |
Total rental property, net | 5,862,778 | 5,620,698 | |
Cash and cash equivalents | 25,884 | 18,981 | |
Restricted cash | 905 | 4,215 | |
Tenant accounts receivable | 115,509 | 93,600 | |
Prepaid expenses and other assets | 71,733 | 60,953 | |
Interest rate swaps | 72,223 | 5,220 | |
Operating lease right-of-use assets | 31,313 | 29,582 | |
Assets held for sale, net | 4,643 | — | |
Total assets | $ 6,184,988 | $ 5,833,249 | |
Liabilities and Equity | |||
Liabilities: | |||
Unsecured credit facility | $ 175,000 | $ 296,000 | |
Unsecured term loans, net | 1,020,440 | 970,577 | |
Unsecured notes, net | 1,295,442 | 896,941 | |
Mortgage notes, net | 7,898 | 54,744 | |
Accounts payable, accrued expenses and other liabilities | 97,371 | 76,475 | |
Interest rate swaps | — | 17,052 | |
Tenant prepaid rent and security deposits | 40,847 | 37,138 | |
Dividends and distributions payable | 22,282 | 21,906 | |
Deferred leasing intangibles, net of accumulated amortization of $24,593 and $21,136, respectively | 32,427 | 35,721 | |
Operating lease liabilities | 35,100 | 33,108 | |
Total liabilities | 2,726,807 | 2,439,662 | |
Equity: | |||
Preferred stock, par value $0.01 per share, 20,000,000 shares authorized at December 31, 2022 and December 31, 2021; none issued or outstanding | — | — | |
Common stock, par value $0.01 per share, 300,000,000 shares authorized at December 31, 2022 and December 31, 2021, 179,248,980 and 177,769,342 shares issued and outstanding at December 31, 2022 and December 31, 2021, respectively | 1,792 | 1,777 | |
Additional paid-in capital | 4,188,677 | 4,130,038 | |
Cumulative dividends in excess of earnings | (876,145) | (792,332) | |
Accumulated other comprehensive income (loss) | 70,500 | (11,783) | |
Total stockholders' equity | 3,384,824 | 3,327,700 | |
Noncontrolling interest | 73,357 | 65,887 | |
Total equity | 3,458,181 | 3,393,587 | |
Total liabilities and equity | $ 6,184,988 | $ 5,833,249 | |
CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||
STAG Industrial, Inc. | |||||||
(unaudited, in thousands, except per share data) | |||||||
Three months ended December 31, | Year ended December 31, | ||||||
2022 | 2021 | 2022 | 2021 | ||||
Revenue | |||||||
Rental income | $ 170,036 | $ 147,525 | $ 654,377 | $ 559,432 | |||
Other income | 295 | 98 | 2,968 | 2,727 | |||
Total revenue | 170,331 | 147,623 | 657,345 | 562,159 | |||
Expenses | |||||||
Property | 34,965 | 28,886 | 125,701 | 107,986 | |||
General and administrative | 11,527 | 10,593 | 46,958 | 48,629 | |||
Depreciation and amortization | 68,939 | 63,714 | 275,040 | 238,699 | |||
Loss on impairments | — | — | 1,783 | — | |||
Other expenses | 2,756 | 694 | 4,363 | 2,878 | |||
Total expenses | 118,187 | 103,887 | 453,845 | 398,192 | |||
Other income (expense) | |||||||
Interest and other income | 20 | 29 | 103 | 121 | |||
Interest expense | (21,708) | (17,107) | (78,018) | (63,484) | |||
Debt extinguishment and modification expenses | — | (1,473) | (838) | (2,152) | |||
Gain (loss) on the sales of rental property, net | (12) | 62,933 | 57,487 | 97,980 | |||
Total other income (expense) | (21,700) | 44,382 | (21,266) | 32,465 | |||
Net income | $ 30,444 | $ 88,118 | $ 182,234 | $ 196,432 | |||
Less: income attributable to noncontrolling interest after preferred stock dividends | 650 | 1,825 | 3,908 | 4,098 | |||
Net income attributable to STAG Industrial, Inc. | $ 29,794 | $ 86,293 | $ 178,326 | $ 192,334 | |||
Less: preferred stock dividends | — | — | — | 1,289 | |||
Less: redemption of preferred stock | — | — | — | 2,582 | |||
Less: amount allocated to participating securities | 57 | 95 | 237 | 288 | |||
Net income attributable to common stockholders | $ 29,737 | $ 86,198 | $ 178,089 | $ 188,175 | |||
Weighted average common shares outstanding — basic | 179,064 | 172,801 | 178,753 | 163,442 | |||
Weighted average common shares outstanding — diluted | 179,371 | 173,650 | 178,940 | 164,090 | |||
Net income per share — basic and diluted | |||||||
Net income per share attributable to common stockholders — basic | $ 0.17 | $ 0.50 | $ 1.00 | $ 1.15 | |||
Net income per share attributable to common stockholders — diluted | $ 0.17 | $ 0.50 | $ 1.00 | $ 1.15 | |||
RECONCILIATIONS OF GAAP TO NON-GAAP MEASURES | |||||||
STAG Industrial, Inc. | |||||||
(unaudited, in thousands) | |||||||
Three months ended December 31, | Year ended December 31, | ||||||
2022 | 2021 | 2022 | 2021 | ||||
NET OPERATING INCOME RECONCILIATION | |||||||
Net income | $ 30,444 | $ 88,118 | $ 182,234 | $ 196,432 | |||
General and administrative | 11,527 | 10,593 | 46,958 | 48,629 | |||
Depreciation and amortization | 68,939 | 63,714 | 275,040 | 238,699 | |||
Interest and other income | (20) | (29) | (103) | (121) | |||
Interest expense | 21,708 | 17,107 | 78,018 | 63,484 | |||
Loss on impairments | — | — | 1,783 | — | |||
Debt extinguishment and modification expenses | — | 1,473 | 838 | 2,152 | |||
Other expenses | 2,756 | 694 | 4,363 | 2,878 | |||
Gain (loss) on the sales of rental property, net | 12 | (62,933) | (57,487) | (97,980) | |||
Net operating income | $ 135,366 | $ 118,737 | $ 531,644 | $ 454,173 | |||
Net operating income | $ 135,366 | $ 118,737 | $ 531,644 | $ 454,173 | |||
Rental property straight-line rent adjustments, net | (5,113) | (4,310) | (17,401) | (18,188) | |||
Amortization of above and below market leases, net | (144) | 29 | (352) | 2,051 | |||
Cash net operating income | $ 130,109 | $ 114,456 | $ 513,891 | $ 438,036 | |||
Cash net operating income | $ 130,109 | ||||||
Cash NOI from acquisitions' and dispositions' timing | 191 | ||||||
Cash termination, solar and other income | (845) | ||||||
Run Rate Cash NOI | $ 129,455 | ||||||
Same Store Portfolio NOI | |||||||
Total NOI | $ 135,366 | $ 118,737 | $ 531,644 | $ 454,173 | |||
Less: NOI non-same-store properties | (26,766) | (15,245) | (99,421) | (38,914) | |||
Termination, solar and other adjustments, net | (1,156) | (405) | (5,708) | (3,433) | |||
Same Store NOI | $ 107,444 | $ 103,087 | $ 426,515 | $ 411,826 | |||
Less: straight-line rent adjustments, net | (2,972) | (3,070) | (11,678) | (16,980) | |||
Plus: amortization of above and below market leases, net | 231 | 153 | 698 | 1,078 | |||
Same Store Cash NOI | $ 104,703 | $ 100,170 | $ 415,535 | $ 395,924 | |||
EBITDA FOR REAL ESTATE (EBITDAre) RECONCILIATION | |||||||
Net income | $ 30,444 | $ 88,118 | $ 182,234 | $ 196,432 | |||
Depreciation and amortization | 68,939 | 63,714 | 275,040 | 238,699 | |||
Interest and other income | (20) | (29) | (103) | (121) | |||
Interest expense | 21,708 | 17,107 | 78,018 | 63,484 | |||
Loss on impairments | — | — | 1,783 | — | |||
Gain (loss) on the sales of rental property, net | 12 | (62,933) | (57,487) | (97,980) | |||
EBITDAre | $ 121,083 | $ 105,977 | $ 479,485 | $ 400,514 | |||
ADJUSTED EBITDAre RECONCILIATION | |||||||
EBITDAre | $ 121,083 | $ 105,977 | $ 479,485 | $ 400,514 | |||
Straight-line rent adjustments, net | (5,170) | (4,304) | (17,610) | (18,947) | |||
Amortization of above and below market leases, net | (144) | 29 | (352) | 2,051 | |||
Non-cash compensation expense | 2,618 | 2,579 | 12,026 | 14,414 | |||
Severance costs | — | — | — | 2,148 | |||
Non-recurring other items | 1,885 | (297) | 1,301 | (2,928) | |||
Debt extinguishment and modification expenses | — | 1,473 | 838 | 2,152 | |||
Adjusted EBITDAre | $ 120,272 | $ 105,457 | $ 475,688 | $ 399,404 | |||
RECONCILIATIONS OF GAAP TO NON-GAAP MEASURES | |||||||
STAG Industrial, Inc. | |||||||
(unaudited, in thousands, except per share data) | |||||||
Three months ended December 31, | Year ended December 31, | ||||||
2022 | 2021 | 2022 | 2021 | ||||
CORE FUNDS FROM OPERATIONS RECONCILIATION | |||||||
Net income | $ 30,444 | $ 88,118 | $ 182,234 | $ 196,432 | |||
Rental property depreciation and amortization | 68,885 | 63,662 | 274,823 | 238,487 | |||
Loss on impairments | — | — | 1,783 | — | |||
Gain (loss) on the sales of rental property, net | 12 | (62,933) | (57,487) | (97,980) | |||
Funds from operations | $ 99,341 | $ 88,847 | $ 401,353 | $ 336,939 | |||
Preferred stock dividends | — | — | — | (1,289) | |||
Redemption of preferred stock | — | — | — | (2,582) | |||
Amount allocated to restricted shares of common stock and unvested units | (122) | (197) | (558) | (838) | |||
Funds from operations attributable to common stockholders and unit holders | $ 99,219 | $ 88,650 | $ 400,795 | $ 332,230 | |||
Funds from operations attributable to common stockholders and unit holders | $ 99,219 | $ 88,650 | $ 400,795 | $ 332,230 | |||
Amortization of above and below market leases, net | (144) | 29 | (352) | 2,051 | |||
Non-recurring dead deal costs and other | 2,073 | 158 | 2,073 | 759 | |||
Debt extinguishment and modification expenses | — | 1,473 | 838 | 2,152 | |||
Redemption of preferred stock | — | — | — | 2,582 | |||
Retirement plan adoption | — | (315) | — | 2,335 | |||
Severance costs | — | — | — | 2,148 | |||
Core funds from operations | $ 101,148 | $ 89,995 | $ 403,354 | $ 344,257 | |||
Weighted average common shares and units | |||||||
Weighted average common shares outstanding | 179,064 | 172,801 | 178,753 | 163,442 | |||
Weighted average units outstanding | 3,729 | 3,192 | 3,695 | 3,164 | |||
Weighted average common shares and units - basic | 182,793 | 175,993 | 182,448 | 166,606 | |||
Dilutive shares | 307 | 849 | 187 | 648 | |||
Weighted average common shares, units, and other dilutive shares - diluted | 183,100 | 176,842 | 182,635 | 167,254 | |||
Core funds from operations per share / unit - basic | $ 0.55 | $ 0.51 | $ 2.21 | $ 2.07 | |||
Core funds from operations per share / unit - diluted | $ 0.55 | $ 0.51 | $ 2.21 | $ 2.06 | |||
CASH AVAILABLE FOR DISTRIBUTION RECONCILIATION | |||||||
Core funds from operations | $ 101,148 | $ 89,995 | $ 403,354 | $ 344,257 | |||
Non-rental property depreciation and amortization | 54 | 52 | 217 | 212 | |||
Straight-line rent adjustments, net | (5,170) | (4,357) | (17,610) | (17,516) | |||
Capital expenditures | (8,984) | (8,511) | (31,363) | (24,437) | |||
Capital expenditures reimbursed by tenants | (172) | (1,373) | (976) | (3,768) | |||
Lease commissions and tenant improvements | (4,404) | (5,420) | (26,690) | (18,370) | |||
Non-cash portion of interest expense | 992 | 852 | 3,747 | 2,931 | |||
Non-cash compensation expense | 2,618 | 2,894 | 12,026 | 12,079 | |||
Severance costs | — | — | — | (1,619) | |||
Cash available for distribution | $ 86,082 | $ 74,132 | $ 342,705 | $ 293,769 | |||
Non-GAAP Financial Measures and Other Definitions
Acquisition Capital Expenditures: We define Acquisition Capital Expenditures as capital expenditures identified at the time of acquisition. Acquisition Capital Expenditures also include new lease commissions and tenant improvements for space that was not occupied under the Company's ownership.
Cash Available for Distribution: Cash Available for Distribution represents Core FFO, excluding non-rental property depreciation and amortization, straight-line rent adjustments, non-cash portion of interest expense, non-cash compensation expense, and deducts capital expenditures reimbursed by tenants, capital expenditures, leasing commissions and tenant improvements, and severance costs.
Cash Available for Distribution should not be considered as an alternative to net income (determined in accordance with GAAP) as an indication of our performance, and we believe that to understand our performance further, these measurements should be compared with our reported net income or net loss in accordance with GAAP, as presented in our consolidated financial statements.
Cash Available for Distribution excludes, among other items, depreciation and amortization and capture neither the changes in the value of our buildings that result from use or market conditions of our buildings, all of which have real economic effects and could materially impact our results from operations, the utility of these measures as measures of our performance is limited. In addition, our calculation of Cash Available for Distribution may not be comparable to similarly titled measures disclosed by other REITs.
Cash Capitalization Rate: We define Cash Capitalization Rate as calculated by dividing (i) the Company's estimate of year one cash net operating income from the applicable property's operations stabilized for occupancy (post-lease-up for vacant properties), which does not include termination income, solar income, miscellaneous other income, capital expenditures, general and administrative costs, reserves, tenant improvements and leasing commissions, credit loss, or vacancy loss, by (ii) the GAAP purchase price plus estimated Acquisition Capital Expenditures. These Capitalization Rate estimates 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 those risk factors contained in our Annual Report on Form 10-K for the year ended December 31, 2022.
Cash Rent Change: We define Cash Rent Change as the percentage change in the base rent of the lease commenced during the period compared to the base rent of the Comparable Lease for assets included in the Operating Portfolio. The calculation compares the first base rent payment due after the lease commencement date compared to the base rent of the last monthly payment due prior to the termination of the lease, excluding holdover rent. Rent under gross or similar type leases are converted to a net rent based on an estimate of the applicable recoverable expenses.
Comparable Lease: We define a Comparable Lease as a lease in the same space with a similar lease structure as compared to the previous in-place lease, excluding new leases for space that was not occupied under our ownership.
Earnings before Interest, Taxes, Depreciation, and Amortization for Real Estate (EBITDAre), Adjusted EBITDAre, Annualized Adjusted EBITDAre, Run Rate Adjusted EBITDAre, and Annualized Run Rate Adjusted EBITDAre: We define EBITDAre in accordance with the standards established by the National Association of Real Estate Investment Trusts ("NAREIT"). EBITDAre represents net income (loss) (computed in accordance with GAAP) before interest expense, interest and other income, tax, depreciation and amortization, gains or losses on the sale of rental property, and loss on impairments. Adjusted EBITDAre further excludes straight-line rent adjustments, non-cash compensation expense, amortization of above and below market leases, net, gain (loss) on involuntary conversion, debt extinguishment and modification expenses, and other non-recurring items.
We define Annualized Adjusted EBITDAre as Adjusted EBITDAre multiplied by four.
We define Run Rate Adjusted EBITDAre as Adjusted EBITDAre plus incremental Adjusted EBITDAre adjusted for a full period of acquisitions and dispositions. Run Rate Adjusted EBITDAre does not reflect the Company's historical results and does not predict future results, which may be substantially different.
We define Annualized Run Rate Adjusted EBITDAre as Run Rate Adjusted EBITDAre excluding allowable one-time items multiplied by four plus allowable one-time items.
EBITDAre, Adjusted EBITDAre, and Run Rate Adjusted EBITDAre should not be considered as an alternative to net income (determined in accordance with GAAP) as an indication of our performance, and we believe that to understand our performance further, EBITDAre, Adjusted EBITDAre, and Run Rate Adjusted EBITDAre should be compared with our reported net income or net loss in accordance with GAAP, as presented in our consolidated financial statements. We believe that EBITDAre, Adjusted EBITDAre, and Run Rate Adjusted EBITDAre are helpful to investors as supplemental measures of the operating performance of a real estate company because they are direct measures of the actual operating results of our properties. We also use these measures in ratios to compare our performance to that of our industry peers.
Funds from Operations (FFO) and Core FFO: We define FFO in accordance with the standards established by the National Association of Real Estate Investment Trusts ("NAREIT"). FFO represents net income (loss) (computed in accordance with GAAP), excluding gains (or losses) from sales of depreciable operating property, gains (losses) from sales of land, impairment write-downs of depreciable real estate, rental property depreciation and amortization (excluding amortization of deferred financing costs and fair market value of debt adjustment) and after adjustments for unconsolidated partnerships and joint ventures. Core FFO excludes amortization of above and below market leases, net, debt extinguishment and modification expenses, gain (loss) on involuntary conversion, gain (loss) on swap ineffectiveness, and non-recurring other expenses.
None of FFO or Core FFO should be considered as an alternative to net income (determined in accordance with GAAP) as an indication of our performance, and we believe that to understand our performance further, these measurements should be compared with our reported net income or net loss in accordance with GAAP, as presented in our consolidated financial statements. We use FFO as a supplemental performance measure because it is a widely recognized measure of the performance of REITs. FFO may be used by investors as a basis to compare our operating performance with that of other REITs. We and investors may use Core FFO similarly as FFO.
However, because FFO and Core FFO exclude, among other items, depreciation and amortization and capture neither the changes in the value of our buildings that result from use or market conditions of our buildings, all of which have real economic effects and could materially impact our results from operations, the utility of these measures as measures of our performance is limited. In addition, other REITs may not calculate FFO in accordance with the NAREIT definition as we do, and, accordingly, our FFO may not be comparable to such other REITs' FFO. Similarly, our calculation of Core FFO may not be comparable to similarly titled measures disclosed by other REITs.
GAAP: We define GAAP as generally accepted accounting principles in the United States.
Liquidity: We define Liquidity as the amount of aggregate undrawn nominal commitments the Company could immediately borrow under the Company's unsecured debt instruments, consistent with the financial covenants, plus unrestricted cash balances.
Market: We define Market as the market defined by CoStar based on the building address. If the building is located outside of a CoStar defined market, the city and state is reflected.
Net operating income (NOI), Cash NOI, and Run Rate Cash NOI: We define NOI as rental income, including reimbursements, less property expenses, which excludes depreciation, amortization, loss on impairments, general and administrative expenses, interest expense, interest income, gain (loss) on involuntary conversion, debt extinguishment and modification expenses, gain on sales of rental property, and other expenses.
We define Cash NOI as NOI less rental property straight-line rent adjustments and less amortization of above and below market leases, net.
We define Run Rate Cash NOI as Cash NOI plus Cash NOI adjusted for a full period of acquisitions and dispositions, less cash termination income, solar income and revenue associated with one-time tenant reimbursements of capital expenditures. Run Rate Cash NOI does not reflect the Company's historical results and does not predict future results, which may be substantially different.
We consider NOI, Cash NOI and Run Rate Cash NOI to be appropriate supplemental performance measures to net income because we believe they help us, and investors understand the core operations of our buildings. None of these measures should be considered as an alternative to net income (determined in accordance with GAAP) as an indication of our performance, and we believe that to understand our performance further, these measurements should be compared with our reported net income or net loss in accordance with GAAP, as presented in our consolidated financial statements. Further, our calculations of NOI, Cash NOI and Run Rate NOI may not be comparable to similarly titled measures disclosed by other REITs.
Occupancy Rate: We define Occupancy Rate as the percentage of total leasable square footage for which either revenue recognition has commenced in accordance with GAAP or the lease term has commenced as of the close of the reporting period, whichever occurs earlier.
Operating Portfolio: We define the Operating Portfolio as all warehouse and light manufacturing assets that were acquired stabilized or have achieved Stabilization. The Operating Portfolio excludes non-core flex/office assets, assets contained in the Value Add Portfolio, and assets classified as held for sale.
Pipeline: We define Pipeline as a point in time measure that includes all of the transactions under consideration by the Company's acquisitions group that have passed the initial screening process. The pipeline also includes transactions under contract and transactions with non-binding LOIs.
Renewal Lease: We define a Renewal Lease as a lease signed by an existing tenant to extend the term for 12 months or more, including (i) a renewal of the same space as the current lease at lease expiration, (ii) a renewal of only a portion of the current space at lease expiration, or (iii) an early renewal or workout, which ultimately does extend the original term for 12 months or more.
Retention: We define Retention as the percentage determined by taking Renewal Lease square footage commencing in the period divided by square footage of leases expiring in the period for assets included in the Operating Portfolio.
Same Store: We define Same Store properties as properties that were in the Operating Portfolio for the entirety of the comparative periods presented. The results for Same Store properties exclude termination fees, solar income, and revenue associated with one-time tenant reimbursements of capital expenditures. Same Store properties exclude Operating Portfolio properties with expansions placed into service or transferred from the Value Add Portfolio to the Operating Portfolio after December 31, 2020.
Stabilization: We define Stabilization for assets under development or redevelopment to occur as the earlier of achieving 90% occupancy or 12 months after completion. Stabilization for assets that were acquired and immediately added to the Value Add Portfolio occurs under the following:
Straight-Line Capitalization Rate: We define Straight-Line Capitalization Rate as calculated by dividing (i) the Company's estimate of average annual net operating income from the applicable property's operations stabilized for occupancy (post-lease-up for vacant properties), which does not include termination income, solar income, miscellaneous other income, capital expenditures, general and administrative costs, reserves, tenant improvements and leasing commissions, credit loss, or vacancy loss, by (ii) the GAAP purchase price plus estimated Acquisition Capital Expenditures. These Capitalization Rate estimates 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 those risk factors contained in our Annual Report on Form 10-K for the year ended December 31, 2022.
Straight-Line Rent Change (SL Rent Change): We define SL Rent Change as the percentage change in the average monthly base rent over the term of the lease that commenced during the period compared to the Comparable Lease for assets included in the Operating Portfolio. Rent under gross or similar type leases are converted to a net rent based on an estimate of the applicable recoverable expenses, and this calculation excludes the impact of any holdover rent.
Value Add Portfolio: We define the Value Add Portfolio as properties that meet any of the following criteria:
Weighted Average Lease Term: We define Weighted Average Lease Term as the contractual lease term in years as of the lease start date weighted by square footage. Weighted Average Lease Term related to acquired assets reflects the remaining lease term in years as of the acquisition date weighted by square footage.
Forward-Looking Statements
This earnings release contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. STAG Industrial, Inc. (STAG) intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and includes this statement for purposes of complying with these safe harbor provisions. Forward-looking statements, which are based on certain assumptions and describe STAG's future plans, strategies and expectations, are generally identifiable by use of the words "believe," "will," "expect," "intend," "anticipate," "estimate," "should", "project" or similar expressions. You should not rely on forward-looking statements since they involve known and unknown risks, uncertainties and other factors that are, in some cases, beyond STAG's control and which could materially affect actual results, performances or achievements. Factors that may cause actual results to differ materially from current expectations include, but are not limited to, the risk factors discussed in STAG's most recent Annual Report on Form 10-K for the year ended December 31, 2022, as updated by the Company's subsequent reports filed with the Securities and Exchange Commission. Accordingly, there is no assurance that STAG's expectations will be realized. Except as otherwise required by the federal securities laws, STAG disclaims any obligation or undertaking to publicly release any updates or revisions to any forward-looking statement contained herein (or elsewhere) to reflect any change in STAG's expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.
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SOURCE STAG Industrial, Inc.