STAG Industrial, Inc. (STAG) Q2 2020 Earnings Report, Transcript and Summary

Greetings and welcome to the STAG Industrial Second Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Matts Pinard, Senior Vice President of Investor Relations. Thank you, sir. You may begin.

Thank you. Welcome to STAG Industrial's conference call covering the second quarter 2020 results. In addition to the press release distributed yesterday, we posted an unaudited quarterly supplemental informational presentation on the Company's website at stagindustrial.com under the Investor Relations section. On today's call, the Company's prepared remarks and answers to your questions will contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements address matters that are subject to risks and uncertainties that may cause actual results to differ from those discussed today. Examples of forward-looking statements include statements relating to earnings trends, G&A amounts, acquisition and disposition volumes, retention rates, debt capacity, dividend rates, industry and economic trends and other matters. We encourage all of our listeners to review the more detailed discussion related to these forward-looking statements contained in the Company's filings with the SEC, and the definitions and reconciliations of non-GAAP measures contained in the supplemental informational package available on the Company's website. As a reminder, forward-looking statements represent managements estimates as of today. STAG Industrial assumes no obligation to update any forward-looking statements. On today's call, you will hear from Ben Butcher, our Chief Executive Officer; and Bill Crooker, our Chief Financial Officer. I will now turn the call over to Ben.

Thank you, Matts. Good morning, everybody, and welcome to the second quarter earnings call for STAG Industrial. We're pleased to have you join us and look forward to telling you about our second quarter results. Presenting today in addition to myself will be Bill Crooker, our Chief Financial Officer, who will discuss the bulk of the financial and operational data. On with me today are Steve Mackey, our Chief Operating Officer; and Dave King, our Director of Real Estate Operations. They will be available to answer questions specific to their areas of focus. As we enter the month of August, there continue to be more questions than concrete answers around important items that impact all of our daily lives. Will there be a second wave of COVID-19? If so, how will this impact reopening of our economy? Will students return to the classroom or be educated virtually? Will employees return to the office or continue to work-from-home? On top of these unanswered questions, we have the upcoming presidential election in November amid excessive levels of polarization. However, we do know the consumer behavior has been changed by necessity and the acceleration of already in place trends. Many of these changes are likely permanent as we settle into the post-COVID new normal. The issue of whether an e-commerce presence and associated supply chain are required is no longer a question for most businesses of size and e-commerce presence is required to compete effectively. Not surprisingly, in this environment, Amazon continues to be our largest tenant. This dominant e-commerce company now accounts for 2.5% of our annualized base revenue. This includes the recent leasing activity we have specifically discussed in conference calls and on conferences -- and at conferences. Across our platform, we continue to see the build out of e-commerce supply chain as a large and growing demand driver for industrial real estate. Let me now over the leasing status for the four buildings that have been highlighted in our recent communications. Our building in Hampstead, Maryland, a 1 million square foot building to be vacated by Solo Cup in July, has seen a healthy amount of leasing activity over the past two months. Our initial expectation was that it would take 12 to 18 months to accomplish the release of this building. Based on current information, we expect to outperform that estimate. Our value-add projects in Taunton, Massachusetts, a 350,000 square-foot building was acquired last year subject to a short-term lease to a known vacate tenant. The building received strongest units from a variety of tenants mostly for e-commerce use. We are happy to report that we have started 11 year lease to a dominant e-commerce tenant for the full building. In addition, we see a termination fee of over half a million dollars from the vacating tenant. The resulting zero downtime and the achieved rent significantly outperformed our budget and expectations for these metrics. Our speculative development in Burlington, New Jersey, a 250,000 square foot building that sits in one of the strongest strategic distribution markets on East Coast, access to say of the New Jersey Turnpike. We're happy to confirm that we've executed a full billion lease to a dominant e-commerce tenant, again, outperforming our expectations on both rent and lease uptime. Finally, we've determined the optimal path forward for other buildings in Burlington, New Jersey, the 1 million square foot building in the GSA will vacate in December. You may recall this asset also includes 40 acres of land adjacent to the building with development potential of over 500,000 square feet. After evaluating multiple potential paths, we'll be moving forward to release the existing building and to separately continue to pursue permanent of the development parcel. This decision was driven by the continued strong leasing velocity in the Exit 6A submarket. This strength has been evidenced by the multiple discussions we're having with potential full building users. We look forward to updating everybody with details on both components in the near future, in short, on these assets and across the portfolio, some very solid performance by our experienced and capable asset management team. With that, I'll turn it over to Bill, who will discuss our second quarter operational results and updates for 2020 guidance.

Thank you, Ben. Good morning everyone. Core FFO was $0.47 for the quarter, an increase of 4.4% compared to the second quarter of 2019. Leverage remains at the low end of our guidance at quarter end, and we expect leverage to normalize as we increase our acquisition activity moving into the second half of the year. Net debt to runway adjusted EBITDA is 4.3 times prior to factoring in the outside forward equity proceeds related to our January equity offering and 3.9 times when those proceeds are included. Acquisition volume for the second quarter totaled $11.9 million with stabilized cash in straight-line cap rates of 6.4% and 6.8%, respectively. Year-to-date, our acquisitions totaled $131.3 million. As stated in our guidance, we expect acquisition volume to increase in the second half of the year. With a quarter of 2.7 million square feet of operating leasing activity commenced with cash and straight-line reducing spreads of 1.6% and 9.6%, respectively. Note that the releasing spreads within our disclosure exclude the impact of short-term moves. Additionally, we released 482,000 square feet of value-add buildings during the quarter. Retention was 100% for the quarter and is 95% for the year. Same-store cash NOI grew by 2.1% for the quarter and 2.3% year-to-date, largely driven by retention rate of 95%. For the quarter, we collected 98% of our base rental billing, of the remaining 2% of uncollected rent 1.4%, has been deferred with repayment generally expected by year end. As of July 28, we have collected 90.9% of our July based rental billings, an additional 4.6% of July based rental billings yet to be received relates to investment grade tenants and tenants to pay in arrears. We expect these tenants remit payments within the next two weeks, bringing the total to 95.5%. The time is of these expected payments is consistent with past practices, 2.8% of the remaining 4.5% of our uncollected base rental billings has been deferred. The remaining uncollected based rent billings is associated with smaller tenants that have been impacted by the pandemic. To date, we have received rent relief requests totaling 5.3% of ABR for $21.1 million. Of the $21.1 million rent relief requested, we have granted rent relief of approximately $2.1 million, equal to 52 basis points ABR. The general framework includes a period of rent referral as opposed to abatement with the deferred rent amounts repaid within the next 12 months. As of today, we have six tenants on cash basis accounting, given their financial situation and our view of their ability to pay due to the economic climate. We incurred a total of $1.5 million of credit loss related to these six tenants. Approximately, $900,000 of that loss related to the write-off the straight line right, and approximately $600,000 of that loss related to cash credit loss. The cash credit loss equates to 20 basis points of our current same-store cash NOI credit loss guidance. These specific tenants account for approximately $4.2 million of ABR. Our credit loss guidance for 2020 includes the impacts related to these tenants. Moving to the capital market activity, on April 17, we refinanced term loans B and C, totaling $300 million, which was scheduled to mature this September and March of next year. STAG at its sole discretion has the option to execute two one-year expansion periods, which is both exercise would result in an outside maturity date in April of 2023. The term loan is fully swapped with an all-in fixed rate of 1.78% through April 2023. As a result of this transaction, we have no debt maturing until March of 2022 where we exercise our rights to extend. We've updated guidance based on our view of the remainder of 2020 continued uncertainty related to the health of the economy, and we'll continue to update the market as warranted. Components of our updated 2020 guidance are as follows. We maintain the expected acquisition volume of between $300 million and $600 million from 2014. We continue to expect all acquisitions to be stabilized assets with an expected cash cap rate range of 6.25% to 6.75%. Due to the expectation, we will hold and not sell the GSA building in Burlington, New Jersey. We've reduced our decision volume range to between $100 million and $150 million. We continue to expect retention to be within a range of 60% and 70%. The drivers for the lower than historical retention, includes the known non-retentions with Solo Cup and GSA. We expect that 2020 annual same-store pools cash NOI growth to be between 0 and 100 basis points for the year. This range includes a credit loss range of 100 to 150 basis points. We continue to expect G&A to be between $39 million and $41 million for the year. We expect to earn leverage between 4.5 times and 5.25 times for the year, with leverage increasing from the low end as we acquire more in the second half of the year. Capital expenditures per average square-foot is still expected to be between $0.27 and $0.31 per year and we continue to expect a range of core FFP per share between $1.80 and $1.88 for the year. I will now turn it back over to Ben.

Thank you, Bill. In closing, let me touch on two topics that have been at the forefront of national attention recently, the pandemic and persistent issues of inequality in our society. Our office has been open for almost two months on a voluntary basis. However, for the most part, our employees have continued to work-from-home and work collaboratively and effectively. We are confident the procedures we have in place will allow a safe return for all employees or office when conditions permit. We've always been proud to STAG as a place of opportunity, and that we are a company that always tries to err on the side of doing the right thing. We have backed causes we believe in with both direct financial support and with paid volunteer hours. However, recent events have caused us to reflect and made us realize that we could and should do more, more as a company and for many of us more as individuals. Some of the things we're doing as a company, we have significantly increased our annual budget for financial support and social causes. We're also expanding the opportunity for employees to engage in volunteer work and the community. We will be providing educational opportunities for our employees to further awareness and understandings on the subjects. Our hiring practices are being modified to ensure a broader and more diverse applicant pool for both full-time and in-turn, hiring. We realized that as one small company, there's only so much we can do. We hope that the steps outlined above and others we are taking lead to the progress of making both our community and society more equitable adjust. Thank you for your time this morning and I'll turn it back to the operator for questions.

Thank you. We will now be conducting a question-and-answer session. [Operator instructions] Thank you. Our first question comes from line of Manny Korchman with Citi. Please proceed with your question.

Good morning. This is Katie McConnell on for Manny. So, just based on the high level of retention achieved year-to-date date. Can you walk us through the downside scenario factored into your unchanged guidance range? And what degree of confidence you have in retention for 3Q?

So, the retention and retention numbers for the remainder of the year are down, in large part because to return the third or fourth quarter. The GSA building in Burlington, New Jersey, and the Solo Cup building in Hampstead, Maryland, we're very confident of our operations and execution in those buildings. But those are the three factors that will result in lower potential the remainder of the year.

And then can you discuss the percentage of leases that were signed on a short term basis this quarter and economic of those deals?

Obviously, in a downturn or recession, obviously more short term leases activity. I'll ask Dave to provide a little more detail.

Anecdotally, there are some tenants who were looking to move to other buildings, build-to-suits, et cetera that were delayed by COVID-related work stoppages. So, we've benefited from that in terms of short term rentals.

Our next question comes from line of Sheila McGrath with Evercore. Please proceed with your question.

The value add projects that you mentioned in Massachusetts and also the development project in New Jersey, the speculative one, appeared to have had good outcomes. Any insights on how the yield on cost on these projects will shake out? And how that compares to your typical acquisition yield?

The yield on cost is a little easier on a development project because it's just one product and it all goes in at one-time. So, the yield on top there was, I would say, dramatically higher than expectations near double digits, straight yield on cost. So, a very successful project, the yield on cost on the Taunton facility is a little harder to because you're buying the building and then applying additional cost to it. So it gets split out between the two, but certainly met our investment professionals by actually by quite a wide margin. Those are both elements that we expect to enjoy very solid cash flows from a long period of time.

And then, on our acquisition guidance that remains unchanged. Year-to-date, we're at about 131 million. That would imply a very active third and fourth quarter. Just wondering if the pipeline shaping up to with a lot more acquisitions, to occur pretty soon.

So, Sheila, as you probably recall, the third and fourth quarter, almost always our biggest quarters in normal time, so there's a little bit of that. But also, we're seen our pipeline reduced during the onset of the pandemic, but it's now sewing back up again, and we're very confident of it because 1 million is still made out of a lot of individual assets are and are. We're bidding on more assets. I think we're pretty proud of the ability to execute on -- Bill do you have something to add there?

Yes, in addition to that, our current pipeline sits on 1.8 billion and we expect that to increase with more assets coming to market in August and September. Sellers did pull some of their portfolios and larger assets during the onset and those are expected to come back to the market in the third quarter.

And do you think the forward is enough equity that to fund your current expectations or do you think it will require additional equity?

This year, it's not our expectation. We'll be back in the equity markets, given our current guidance, leverage that as the prepared remarks leveraged, sits at 3.9 times when including the flow of equity, so sufficient capital to acquire even the high end of our acquisition guidance and without hitting the equity markets.

Our next question comes from the line of James Feldman with Bank of America Merrill Lynch. Please proceed with your question.

Good morning, guys. This is Elvis on for Jamie. Just touching upon Sheila's question around funding and highlighting the potential you'll do somewhere equity in the future. Can you talk about how much of the acquisition pipeline you think you can do? Or can you end up at the higher end of that range at the end of this year or there's it just not enough product?

Simple math is, no, we're not limited by capital in our acquisition. So our simple math is, we can do about -- we can stay inside the new guidance, upper end of the new guidance is five quarter for this year. Longer term, our guidance is as high as 6 times or 5.25 times. But we can stay at that 5.25 and so acquired 600 million of assets over the remainder of the year. From where we are today that would be well above our total guidance for acquisitions for the year that would be closer to three quarters of a million for the year.

And is there is there anything that you're seeing, that gives you sort of more confidence and maybe you could do more than what you're saying. Obviously, your stock prices back up at a level that makes it sort of accretive to continue to do these deals. So, just trying to get an understanding of what can change here in the back half of the year given the strong industrials pipeline?

I think we can look at the world and at the little part of the world and say, there there's a lot of uncertainty. So, I think developing great degree of certainty, these are normal times. But as Bill has mentioned, we are expecting and have heard from numerous brokerage shop that the expectations are that assets that have been held in the market didn't come to market or for whatever reason are going to start coming back in August September. So, we expect the supply to be enhanced. The pipeline we have today, we'll certainly -- we believe strongly we'll get it into our guidance numbers. But as that supply of assets to -- for us to evaluate comes back to market, we believe that that'll allow us to move through the -- further into the range of our guidance.

Okay and just one more for me. So, I know, we've talked about this probably a little bit more offline than online, but just the benefits that you're starting to see in your portfolio or any early indication or signs of re-shoring and tenants starting to talk about using your assets or markets to, to bring some manufacturing back to the U.S.?

Yes, and I think it's still pretty early days on that. I think, the big question mark on re-shoring is at what cost. So I think there is, I don't think the U.S. consumers can agree to pay, 2x times or 3x times simply because it says it's made in the U.S. on it. So, I think the history has been re-shoring, something that happens, what happens gradually. And you can't, you can't throw a plan in a couple days. There's a lot of planning and obviously, development time is required to do that. So, the process by which re-shoring occurs is one of those ones with a pandemic, perhaps and the accelerated pandemic, almost certainly will be, but it still takes a fair amount of time. For instance, a lot of talk about bringing pharma back onshore. I've heard people talk about the lead times in development a manufacturing plant could be two to three years. So, it's not, not instantaneous things. Our assets are well positioned, they are around population centers, so they are well positioned to benefit from that happens, as well as being in traditional production areas like Wisconsin.

Our next question comes from Brendan Finn with Wells Fargo. Please proceed with your question.

I guess, Ben, in your opening remarks, you talked a lot about e-commerce. So, I guess, can you just comment maybe on the trajectory of demand from e-commerce tenants? It seemed like initially, we had a pretty big surge of demand, but has got this leasing velocity of demand for these types of tenants leveled off as we've gotten into later Q2 and early Q3?

I mean I think at very high level, there's an expectation that maybe it will slow down. There was such a mad rush as the pandemic came on. But I think we're still seeing a lot of people position themselves for the further increases in e-commerce activities that will ensue as we move, hopefully out of the pandemic era, but certainly as we continue through the pandemic here. Bill, do you have any other thoughts?

I would say, initially the e-commerce share was very high because most other participants have receded from the market. As they've come back, the share's gone down. We do see a broad-based demand and we'll say, pretty close to normal demand in our vacancies and near term rolls. And it's across a wide variety of industries.

And then, just on deferrals, it looks like the deferred rents picked up a little bit in July relative to average monthly deferral rate for Q2. So, I guess, is there any trend or can you talk about what types of tenants are now may be receiving deferred rents that were not in Q2?

Hey, Brian, it's Bill. The tenants that receive deferred rent Q2 in July. It's the same population of tenants. The increase in July is really driven by some of those tenants paying April and May rent and then agreeing to deferrals and later in the quarter.

I think those right we haven't had any new deferral requests for some time or very limited amount of deferral some time. The total number of tenants received deferrals Brendan is about eight tenants to date.

Your next question comes from line of Michael Carroll with RBC. Please proceed with your question.

Ben, can you provide some more color on some of those larger blocks of available space that you highlighted? I guess, specifically we could start with Solo Cup. I know a few months ago, it sounded like you had a lot of tenants that are looking at that space. I mean, how should we think about a lease being signed? Is that -- could that occur relatively soon and we can see that lease actually commence before year-end, I guess what's the timing expectations there?

So, without going too deeply into ongoing negotiations, and we're very, very confident that we will have a lease in place this year.

And then I guess similarly with the GSA property, I guess, can you talk a little bit about the -- it seems like you have a several full building users. I know usually it takes about 12 months so that you underwrite 12 months of downtime. But since you started earlier, can we assume that those leases could occur much sooner than that typical 12-month downtime?

Yes, I mean there's a lot of activity around that building, we're very confident we'll get something done in a shorter timeframe than that.

Great. And can you remind us where in place rents are relative to market on that, yes, to choose their property?

Yes. Obviously, with the variability about lease term and TI and other things, we're pretty close to market, maybe slightly, pretty, I say pretty close to market.

Okay, great. And then, the land parcel that's adjacent to that, what's your expectations there? I guess, I don't know if I missed this on your prepared remarks. Do you plan on building or developing an asset on that parcel? And if so, would you pursue that on a spec basis?

Well, our plan is to further the permitting to increase the value of the land parcel and then evaluate whether somebody else to build the dream or obviously had a very good experience, not very far away in terms of return on the development, we will continue to evaluate that opportunity. Important things, we move it forward, to getting a position where we or somebody else can build on it. So the market right now is reasonably full of activity and speculative basis. So we're pretty sure that someone's going to want to build on it, whether it's us or somebody else.

Okay. And then how long does it take for the entitlement process? I mean, are you able to start that right now? Or does the GSA lease kind of make it a little bit more difficult until that lease expires?

We are able to start process and indeed, has started the process of permitting it, the process is ongoing.

Okay. And then lastly for me is can you talk a little bit about the lease commencements at the Burlington site in the Massachusetts property? When does rent actually start hitting the P&L?

Those are heading into the P&L already, Mike, just because one has one month of free rent, but that's coming in through straight line. So, there's turning in the P&L, one of the tougher one was in Q2 and the Burlington one started in Q3.

Our next question comes from line of Dave Rogers with Baird. Please proceed with your question.

Good morning, wanted to follow up on something. I think Dave King had said earlier with respect to doing short term renewals for tenants that had planned to move out to build-to-suit. Is that in kind of the solo cut nature, are these additional move outs, we shouldn't be expecting six months down the road and in their tenant retention? Or is this an early 21 or let's see kind of a higher overall proportion of move out as you push these leases out a little bit? Anymore will be helpful?

So, that was just a reference to a couple of instances where we extend for a year because our projects were not ready and they're, they're small 250,000 for leases.

There is also activity generally, we haven't seen as much of an activity generally in light of the sort of the uncertainty with tenants doing shorter leases. We've actually one of the surprises, I think, to watch operationally has been, how much demand has been for longer term leases in a recession. And again, typical recession playbook is everybody has shorter leases. But we've seen a pretty strong demand for longer leases to solve our activity.

How would you I guess, maybe in that same vein, then how would you discuss the rent negotiations with tenants and whether, what happened, the market rates and spreads and concessions overall, just on the transactions that you've been negotiating or pre-COVID levels or, things taken a little bit of a pause in terms of growth? What have you seen in your markets?

I think that it was certainly a pause at the outset, but I don't think there's been any ingredient in this trend line a flattened a little bit I don't think it certainly didn't turn down.

And I think the tariffs are approaching this as a long-term, lease long term situation that might have short term disruption. So, I think pricing or rent levels haven't really moved much.

The national absorption and supply numbers mass demand numbers, both supply and demand are forecast to be down. We have not seen in the current leasing market, maybe they'll be voting at a lot of work doesn't really impact question.

Okay and then maybe just the last question for me with regard to acquisitions. Have you seen a change in pricing and it looks like your cap rate expectations largely similar to what they were before, but wondering if the product you're looking at today? That's coming to market is less risky, and that's keeping prices a little bit tighter. Have you seen any again diminish and frightening and in terms of the bid ask spread for what you're looking to acquire here in the second half of the year?

The spread is pretty narrow in industrial. We were able to -- two deals we closed in June, we're able to get some price deducts from pre-COVID pricing, one of them as much as 2.6%. But we're expecting very similar pricings with a slight maybe discount going forward, but nothing material.

I think your question as to risk. I think the assets that continue to travel along during the early part of the pandemic were probably the lower risk assets. So those things sort of sailed through and didn't have a whole lot of price adjustments. The assets we expect to come to market in August and September probably are a wider range or different risk profiles than perhaps you saw in April and March and May.

And your appetite, Ben, for those riskier assets at this point seems like that would be a good use of capital for you guys, what your thoughts?

Yes. I mean, not to beat the -- I mean, we're looking for overlays. We're looking to be paid -- overpaid for the risks that we take. So, we have guardrails in there. So we're not taking too much risk but we're certainly looking to be paid for risk -- I mean, we are happy to buy a 10-year Amazon lease in Ontario, California, but we'd want a six cap. Well, probably not six cap, but what we chose what we paid more than what the market is for an asset like that.

Our next question comes from line of Mike Muller with JP Morgan. Please proceed with your question.

Okay, just a quick one. Just wondering can you just little color on the negative leasing sprint from the new leases going forward?

Sure. I guess, overall, the thing is that we -- the new leases are about 11.5 years in term and the comparable prior leases for about 3.5 years. So in the trade opportunity term and rate, we've chosen the term and taking a bit of a hit on rate. And then in one instance, we got effectively an over market deal that benefited from a tax abatement that rolled off as anticipated and as we underwrote, and that accounts for about half of delta in the lower new rents.

Our next question comes from line of John Massocca with Ladenburg Thalmann. Please proceed with your question.

Just touching on acquisitions, and just given that you guys didn't close anything, subsequent quarter end as at this point. I mean, how should we kind of think about cadence over the remainder of the year? Should it be, I know, 4Q is always your most robust quarter in terms of acquisitions, but it should be almost all weighted towards 4Q or do you kind of expect the pipeline you've been able to put in place and things reopen and kind of come to fruition here in the next two months or so?

Yes, expect some acquisitions to close and at the end of Q3 and the bulk of the remaining acquisitions under either price agreement or contract, and we put those deals on hold for the middle of May, and then revisited those deals in the middle of May we're able to close those in June. So as more transactions start to come, come to market. In Mary we started on the right evaluate and takes at least 60 days to close those, so end of Q3 and into Q4.

Okay, understood. And then I'm sorry if I missed this in the prepared remarks, assuming there's no resumption of rent from the six leases that go into cash accounting, what kind of recovery are you expecting there?

That's all based into our credit loss guidance, our FFO guidance, and our same-store guidance for the year.

But in terms of just the recovery on cost, or new leases, I mean what kind of, right now --

It's close to zero for this year, John, it's just a matter of getting those tenants whether they vacate the space, and we can get those spaces back and release those, but for the remainder of the year, it's close to zero.

Your next question comes from Bill Crow with Raymond James. Please proceed

Ben, stepping outside STAG for a second, looking big picture, how vital is new absorption from Amazon? And how much attention you paid to the second derivative for their leasing activity annually?

Amazon obviously has been a huge, huge absorber of space this year and certainly at the end of last year. There is a chance -- I don't believe it can continue with the pace of the faster day. But I've heard a million and a half a week or maybe a million and a half a day, some very large number. So, that's the second row of Amazon's demand and certainly half of it, it definitely can't seem to absorb at that level forever. But they're not the only engine in town for ecommerce, they're the most aggressive. But we're seeing other tenants with ecommerce demand as part of the industry and some are big builders and some are smaller buildings. So, although that's certainly something to watch, and they're very important tenant it's not the only game we have.

[Operator instructions] Our next question comes from line of Chris Lucas with Capital One Securities. Please proceed with your question.

Bill, just couple of housekeeping questions for you. On the lease termination fee income what was that specifically for the for the quarter?

The cash or the gap side of it, the total the total termination income flow that was a 1 million dollars of which $740,000 was cash.

Okay. And you kind of lump a couple of topics together in the adjusted EBITDA page. The solar income is that a recurring stream or is that a one-off screen?

That's a recurring for gap purposes, it's amortized over the life of the contract and then for cash it's one-time. So, for CAD purposes is about $400,000 included in CAD this quarter related to solar income, and about $18,000 included in core FFO. So, you can see how long this lease is our advertising net income over.

We have no further questions at this time Mr. Butcher. I would now like to turn the floor back over to you for closing comments.

Thank you, operator. So, thank you all for joining us this morning. STAG is in a really good place where, as we talked about our balance sheet is in great position, our employees are engaged and they're looking at a lot of opportunity. Our asset managers are accomplishing great things on leasing front. Despite the fact we sit in pretty unsettled time, both on the pandemic and the political turmoil, the industrial sector is well positioned and STAG is extremely well positioned within the industrial sector. We're looking forward to a great second half of the year and to success beyond that. Thank you again.

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.