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TABLE OF CONTENTS
INDEX TO FINANCIAL STATEMENTS

Table of Contents

As filed with the Securities and Exchange Commission on July 29, 2010

Registration Statement No. 333-            

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549



FORM S-11
FOR REGISTRATION
UNDER
THE SECURITIES ACT OF 1933
OF SECURITIES OF CERTAIN REAL ESTATE COMPANIES



STAG Industrial, Inc.
(Exact name of registrant as specified in its governing instruments)



99 Chauncy Street, 10th Floor
Boston, Massachusetts 02111
(617) 574-4777
(Address, including Zip Code, and Telephone Number, including
Area Code, of Registrant's Principal Executive Offices)



Benjamin S. Butcher
Chairman, Chief Executive Officer and President
STAG Industrial, Inc.
99 Chauncy Street, 10th Floor
Boston, Massachusetts 02111
(617) 574-4777
(Name, Address, including Zip Code, and Telephone Number, including Area Code, of Agent for Service)



Copies to:

Jeffrey M. Sullivan, Esq.
DLA Piper LLP (US)
4141 Parklake Avenue, Suite 300
Raleigh, North Carolina 27612
Tel: (919) 786-2000
Fax: (919) 786-2200

 

Gilbert G. Menna, Esq.
Daniel P. Adams, Esq.
Goodwin Procter LLP
Exchange Place
Boston, Massachusetts 02109
Tel: (617) 570-1000
Fax: (617) 523-1231



          Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this registration statement.

          If any of the Securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act, check the following box:    o

          If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

          If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

          If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

          If delivery of the prospectus is expected to be made pursuant to Rule 434, check the following box.    o

          Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check One):

Large accelerated filer o   Accelerated filer o   Non-accelerated filer ý
(Do not check if a
smaller reporting company)
  Smaller reporting company o



CALCULATION OF REGISTRATION FEE

       
 
Title of
Securities to be Registered

  Proposed Maximum
Aggregate
Offering Price(1)

  Amount of
Registration Fee(2)

 

Common Stock, par value $0.01 per share

  $300,000,000   $21,390

 

(1)
Estimated solely for the purpose of determining the registration fee in accordance with Rule 457(o) of the Securities Act of 1933, as amended. Includes additional shares of common stock that the underwriters have the option to purchase. See "Underwriting."

(2)
Calculated in accordance with Rule 457(o) under the Securities Act of 1933, as amended.



          The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.


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The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities, and is not soliciting an offer to buy these securities, in any state where the offer or sale is not permitted.

Subject to completion
Preliminary Prospectus dated July 29, 2010

PROSPECTUS

                  Shares

LOGO

Common stock



        STAG Industrial, Inc. is a newly formed, self-administered and self-managed full-service real estate company focused on the acquisition, ownership and management of single-tenant industrial properties throughout the United States. Upon completion of our formation transactions and this offering, our portfolio will consist of 101 properties in 24 states with approximately 13.4 million rentable square feet.

        This is our initial public offering. We are selling                        shares of our common stock.

        We expect the public offering price to be between $            and $            per share. Currently, no public market exists for the shares. After pricing of the offering, we expect that the shares will trade under the symbol "STIR" on the New York Stock Exchange.

        We intend to elect and qualify to be taxed as a real estate investment trust for U.S. federal income tax purposes ("REIT") commencing with our taxable year ending December 31, 2010. To assist us in qualifying as a REIT, shareholders are generally restricted from owning more than 9.8% in value or in number of shares, whichever is more restrictive, of our outstanding shares of common stock or of our outstanding shares of capital stock. Our charter contains additional restrictions on the ownership and transfer of shares of our common stock. See "Description of Stock—Restrictions on Ownership and Transfer of Stock."

        Investing in our common stock involves risks that are described in the "Risk Factors" section beginning on page 25 of this prospectus.



 
  Per share   Total  

Public offering price

  $     $    

Underwriting discount

  $     $    

Proceeds, before expenses, to us

  $     $    

        The underwriters also may purchase up to an additional            shares from us, at the public offering price, less the underwriting discount, within 30 days from the date of this prospectus to cover overallotments, if any.

        Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

        The shares will be ready for delivery on or about                        , 2010.



BofA Merrill Lynch   J.P. Morgan



The date of this prospectus is                        , 2010.


Table of Contents


TABLE OF CONTENTS

 
  Page

PROSPECTUS SUMMARY

  1

RISK FACTORS

  25

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

  52

USE OF PROCEEDS

  54

DISTRIBUTION POLICY

  55

CAPITALIZATION

  58

DILUTION

  59

SELECTED FINANCIAL INFORMATION

  60

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

  64

MARKET OVERVIEW

  86

BUSINESS

  97

MANAGEMENT

  116

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

  127

STRUCTURE AND FORMATION OF OUR COMPANY

  131

POLICIES WITH RESPECT TO CERTAIN ACTIVITIES

  141

PRINCIPAL SHAREHOLDERS

  145

DESCRIPTION OF STOCK

  147

CERTAIN PROVISIONS OF MARYLAND LAW AND OF OUR CHARTER AND BYLAWS

  152

SHARES ELIGIBLE FOR FUTURE SALE

  159

OUR OPERATING PARTNERSHIP AND THE PARTNERSHIP AGREEMENT

  161

U.S. FEDERAL INCOME TAX CONSIDERATIONS

  165

ERISA CONSIDERATIONS

  190

UNDERWRITING

  194

LEGAL MATTERS

  200

EXPERTS

  200

WHERE YOU CAN FIND MORE INFORMATION

  200

INDEX TO FINANCIAL STATEMENTS

  F-1



        You should rely only on the information contained in this prospectus, any free writing prospectus prepared by us or information to which we have referred you. We have not, and the underwriters have not, authorized any other person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. We are not, and the underwriters are not, making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. You should assume that the information appearing in this prospectus and any free writing prospectus prepared by us is accurate only as of their respective dates or on the date or dates which are specified in those documents. Our business, financial condition, results of operations and prospects may have changed since those dates.



        We use market data and industry forecasts and projections in this prospectus. We have obtained substantially all of the information under "Prospectus Summary—Market Overview" and under "Market Overview" from market research prepared or obtained by CB Richard Ellis—Econometric

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Advisors ("CBRE-EA") in connection with this offering. Such information is included herein in reliance on CBRE-EA's authority as an expert on such matters. See "Experts." In addition, CBRE-EA in some cases has obtained market data and industry forecasts and projections from publicly available information and industry publications. These sources generally state that the information they provide has been obtained from sources believed to be reliable, but that the accuracy and completeness of the information are not guaranteed. The forecasts and projections are based on industry surveys and the preparers' experience in the industry, and there is no assurance that any of the projections or forecasts will be achieved. We believe that the surveys and market research others have performed are reliable, but we have not independently verified this information.



        In this prospectus:

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        See "Management's Discussion and Analysis of Financial Condition and Results of Operations" for more detailed explanations of NOI, EBITDA, FFO and AFFO, and reconciliations of NOI, EBITDA, FFO and AFFO to net income computed in accordance with U.S. generally accepted accounting principles ("GAAP").

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PROSPECTUS SUMMARY

        The following summary highlights information contained elsewhere in this prospectus. You should read carefully the entire prospectus, including "Risk Factors," our financial statements, pro forma financial information, and related notes appearing elsewhere in this prospectus, before making a decision to invest in our common stock.

        Unless indicated otherwise, the information included in this prospectus assumes (i) no exercise of the underwriters' option to purchase up to             additional shares of our common stock to cover over-allotments, if any, and (ii) the shares of common stock to be sold in this offering are sold at $             per share, which is the midpoint of the range set forth on the front cover of this prospectus.

        The historical operations described in this prospectus refer to the historical operations of STAG Industrial, Inc. and our predecessor business. We have generally described the business operations in this prospectus as if the historical operations of our predecessor business were conducted by us.

        On May 14, 2010, we acquired a 187,200 square foot manufacturing property located in Newton, NC, which is 100% occupied by a single tenant. Unless otherwise stated, the number of our properties and the total annualized rent, occupancy and other information regarding our properties and our formation transactions in this prospectus are given as of March 31, 2010. Accordingly, such information excludes this one property acquired after March 31, 2010. We have included the statements of revenue and certain expenses and related notes for such property elsewhere in this prospectus.

Overview

        STAG Industrial, Inc. is a newly formed, self-administered and self-managed full-service real estate company focused on the acquisition, ownership and management of single-tenant industrial properties throughout the United States. We will continue and grow the single-tenant industrial business conducted by our predecessor business. Benjamin S. Butcher, the Chairman of our board of directors and our Chief Executive Officer and President, together with an affiliate of New England Development, LLC ("NED"), a real estate development and management company, formed our predecessor business in 2003. Since inception, our predecessor business has deployed more than $1.2 billion of capital, representing the acquisition of more than 200 properties totaling approximately 31.3 million rentable square feet in 130 individual transactions.

        Upon completion of our formation transactions and this offering, our portfolio will consist of 101 industrial properties in 24 states with approximately 13.4 million rentable square feet. Our 101 properties are 45 warehouse/distribution properties, 29 manufacturing properties and 27 flex/office properties. As of March 31, 2010, our properties were 93.7% leased to 84 tenants, with no single tenant accounting for more than 4.3% of our total annualized rent and no single industry accounting for more than 12.1% of our total annualized rent.

        We intend to continue to target the acquisition of individual Class B, single-tenant industrial properties predominantly in secondary markets throughout the United States with purchase prices ranging from $5 million to $20 million. We believe that, due to observed market inefficiencies, our focus on owning and expanding a portfolio of such individual properties will generate higher risk-adjusted returns for our shareholders, when compared to other real estate portfolios, because:

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        Reflecting the market inefficiencies we have observed, our target properties are generally leased to:

        We believe that the market inefficiently prices such properties and that our relationships with a national network of commercial real estate brokers and experience in the sourcing, underwriting, acquisition, financing and management of single-tenant industrial properties allow us to acquire properties at a discount to their intrinsic values, where intrinsic values are determined by the properties' future cash flows. Through the evaluation of more than 3,600 qualified transactions (that is, transactions that pass our initial screening) since 2003, we believe we have developed a unique approach to melding real estate and tenant-credit underwriting analyses, which allows us to identify assets that we believe are undervalued by the market. The significant volume of acquisition opportunities presented to us each year provides us with market intelligence that further supports our underwriting and due diligence processes.

        Our affiliate, STAG GI, LLC entered into a joint venture agreement with STAG GI Investco, LLC ("GI Partners") to form STAG GI Investments, LLC ("STAG GI"). STAG GI intends to assemble a portfolio of single-tenant industrial properties that will be contributed to our operating partnership in exchange for common units as part of our formation transactions. STAG GI has not yet acquired any properties. Upon contribution of its properties to our operating partnership, STAG GI will not pursue further acquisitions.

        We intend to elect and qualify to be taxed as a REIT under the Internal Revenue Code of 1986, as amended (the "Code"), for the year ending December 31, 2010, and generally will not be subject to U.S. federal taxes on our income to the extent we currently distribute our income to our shareholders and maintain our qualification as a REIT. We are structured as an umbrella partnership REIT ("UPREIT") and will own substantially all of our assets and conduct substantially all of our business through our operating partnership. Our principal executive offices are located at 99 Chauncy Street, 10th Floor, Boston, Massachusetts 02111. Our telephone number is (617) 574-4777. Our website is www.stagreit.com. The information found on, or otherwise accessible through, our website is not

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incorporated into, and does not form a part of, this prospectus or any other report or document we file with or furnish to the SEC.

Competitive Strengths

        We believe that our investment strategy and operating model distinguish us from other owners, operators and acquirers of industrial real estate in a number of ways, including:

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Our Strategies

        Our primary business objectives are to own and operate a balanced and diversified portfolio of single-tenant industrial properties that maximizes cash flows available for distribution to our shareholders, and to enhance shareholder value over time by achieving sustainable long-term growth in FFO per share through the following strategies.

        Our primary investment strategy is to acquire individual Class B, single-tenant industrial properties predominantly in secondary markets throughout the United States through third-party purchases and structured sale-leasebacks featuring high initial yields and strong ongoing cash-on-cash returns.

        We believe secondary markets tend to have less occupancy and rental rate volatility and less buyer competition compared with primary markets. As of March 31, 2010, our 101 properties had an average annualized rent of $3.83 per rentable square foot. Our low average rent baseline reduces the potential

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for substantial rent or value declines, and, from a tenant's perspective, the costs of relocating may seem expensive compared to continued payment of our prevailing rent.

        The performance of single-tenant properties tends to be binary in nature: (i) a tenant is paying rent, or (ii) the owner is paying the entire carrying costs of the property. We believe that this binary nature frequently causes the market to inefficiently price our target assets due to the rigid application of decision rules by others and their resulting misperceptions of risk on an individual property basis. Some frequently observed decision rules applied by buyers of single-tenant properties include avoidance of investments where the tenant does not have an investment grade rating or where the remaining primary lease term is less than an arbitrary number such as 12 years.

        We further believe that the way in which we use and apply the results of our due diligence and our ability to understand and underwrite risk allows us to exploit this market inefficiency. Lastly, we believe that the systematic aggregation of individual properties will result in a diversified portfolio that mitigates the risk of any single property and will produce sustainable, attractive risk-adjusted returns. A diversified portfolio with low correlated risk—essentially a "virtual industrial park"—facilitates debt financing and mitigates individual property ownership risk.

        External Growth through Acquisitions:    We will target acquisitions, predominantly in secondary markets across the United States, in the $5 million to $20 million range. Where appropriate risk adjusted returns present themselves, we also may acquire assets in both primary and tertiary markets. Other institutional industrial real estate buyers tend to concentrate their efforts on larger deal sizes in select primary markets. Therefore, the competition for our target assets is primarily local investors who are not likely to have ready access to debt or equity capital. In addition, our UPREIT structure may enable us to acquire industrial properties on a non-cash basis in a tax efficient manner. We will also continue to develop our large existing network of relationships with real estate and financial intermediaries. These individuals and companies give us access to significant deal flow—both those broadly marketed and those exposed through only limited marketing. From time to time, if an attractive opportunity presents itself, we may consider portfolio acquisitions. As of July 22, 2010, we were evaluating approximately $450.0 million of specific potential acquisitions (by value, 74% warehouse/distribution properties, 17% manufacturing properties and 9% flex/office properties) that we have identified as warranting further investment consideration after an initial review. We believe that a significant portion of the 14 billion square feet of industrial space in the United States falls within our target investment criteria and that there will be ample supply of suitable acquisition opportunities.

        Consistent with our growth strategy, STAG GI, LLC and GI Partners formed STAG GI to assemble a portfolio of single-tenant industrial properties that will be contributed to our operating partnership upon completion of our formation transactions and this offering. STAG GI has not yet acquired any properties. Upon completion of our formation transactions and this offering, STAG GI will not pursue further acquisitions.

        As part of our formation transactions, we will receive the right to acquire, in our discretion, three properties that are currently largely vacant (the "Option Properties"). See "—Our Formation Transactions and Structure—Option Properties and Other Excluded Properties" below.

        Internal Growth through Asset Management:    Our asset management team is integral to both the ongoing management of our portfolio and to the acquisition process. Our management team will seek to maximize cash flows by driving occupancy through maintaining high retention rates and leasing vacant space, managing operating expenses and maintaining our properties. Our asset management team independently reviews the real estate inputs used in the acquisition process and works with our internal credit function to actively monitor the credit profile of each of our tenants on an ongoing basis. Additionally, we work with national and local brokerage companies to market and lease available

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properties on advantageous terms. During the period from May 18, 2006 (the date of acquisition of our first property) to March 31, 2010, the lease renewal rate for our properties was 90.0% based on square footage. As of March 31, 2010, our portfolio had approximately 844,716 square feet, or 6.3% of our total rentable square feet, available for lease.

        We believe that our market knowledge and systems and processes allow us to analyze efficiently the risks in an asset's ability to produce cash flow going forward. We blend fundamental real estate analysis with corporate credit analysis in our proprietary model to make a probabilistic assessment of cash flows that will be realized in future periods. For each asset, our analysis focuses on:

        We intend to preserve a flexible capital structure and to utilize primarily non-recourse debt secured by pools of properties. Although we are not required to maintain any particular leverage ratio under our charter or bylaws, we intend to target a long-term, stabilized debt-to-EBITDA ratio of between      and      , although we may exceed these levels from time to time as we complete acquisitions.

        We expect to fund property acquisitions initially through a combination of borrowings under our anticipated secured corporate credit facility and traditional mortgage financing. We are currently negotiating with a number of financial institutions regarding the establishment of a corporate credit facility, prior to or contemporaneously with the closing of this offering. In addition, we are currently negotiating the refinancing of our debt due in 2012. No assurances can be given that we will obtain any credit facility or refinancing or if we do what the terms will be. Where possible, we also anticipate using common units issued by our operating partnership to acquire properties from existing owners seeking a tax-deferred transaction. We intend to meet our long-term liquidity needs through cash provided by operations and use of other financing methods as available from time to time including,

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but not limited to, secured and unsecured debt, perpetual and non-perpetual preferred stock, additional common equity issuances, letters of credit and other arrangements. In addition, we may invest in properties subject to existing mortgages or similar liens.

Our Properties

        Our portfolio has a stable and diversified tenant base. As of March 31, 2010, our properties were in 24 states and were 93.7% leased to 84 tenants, with no single tenant accounting for more than 4.3% and no single industry accounting for more than 12.1% of our total annualized rent. Our 10 largest tenants account for 27.9% of our total annualized rent. We intend to continue to maintain a diversified mix of tenants to limit our exposure to any single tenant or industry.

        The following tables portray the property type, geographic, and industry diversity of our properties and tenants, respectively, as of March 31, 2010:

Property Type
  Total Number
of Properties
  Occupancy(1)   Total Rentable
Square Feet
  Percentage of
Total Rentable
Square Feet
  Total
Annualized
Rent
  Percentage of
Total
Annualized
Rent
 

Warehouse/Distribution

    45     94.2 %   8,665,634     64.6 % $ 25,014,818     48.6 %

Flex/Office

    27     96.3 %   1,542,728     11.5 %   15,440,635     30.0 %

Manufacturing

    29     91.2 %   3,211,309     23.9 %   11,007,154     21.4 %
                           

Total/Weighted Average

    101     93.7 %   13,419,671     100.0 % $ 51,462,607     100.0 %
                           

 

State
  Total Number
of Properties
  Occupancy(1)   Total Rentable
Square Feet
  Percentage of
Total Rentable
Square Feet
  Total
Annualized
Rent
  Percentage of
Total
Annualized
Rent
 

Ohio

    11     90.1 %   2,169,635     16.2 % $ 6,248,013     12.1 %

Michigan

    13     95.6 %   1,673,915     12.5 %   6,035,685     11.7 %

Wisconsin

    7     97.1 %   1,506,623     11.2 %   4,279,297     8.3 %

Indiana

    14     89.7 %   1,166,628     8.7 %   4,094,709     8.0 %

Massachusetts

    4     100.0 %   347,983     2.6 %   3,652,544     7.1 %

Pennsylvania

    3     86.4 %   1,088,267     8.1 %   3,160,347     6.1 %

Kentucky

    3     97.6 %   949,449     7.1 %   2,857,441     5.6 %

Maine

    6     100.0 %   378,979     2.8 %   2,802,853     5.4 %

North Carolina

    5     100.0 %   798,425     5.9 %   2,712,360     5.3 %

Kansas

    7     100.0 %   908,370     6.8 %   2,559,214     5.0 %

Florida

    4     56.6 %   329,184     2.5 %   1,819,114     3.5 %

Iowa

    1     100.0 %   148,131     1.1 %   1,666,474     3.2 %

South Dakota

    1     100.0 %   137,001     1.0 %   1,576,269     3.1 %

All Others

    22     95.7 %   1,817,081     13.5 %   7,998,287     15.6 %
                           

Total/Weighted Average

    101     93.7 %   13,419,671     100.0 % $ 51,462,607     100.0 %
                           

(1)
Calculated as the average occupancy weighted by each property's rentable square footage. A few properties have more than one tenant.

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Industry
  Total Number
of Leases(1)
  Total Leased
Square Feet
  Percentage of
Total Leased
Square Feet
  Total
Annualized
Rent
  Percentage of
Total
Annualized
Rent
 

Technology

    10     948,431     7.5 % $ 6,208,926     12.1 %

Industrial Equipment & Components

    10     1,201,287     9.6 %   5,046,506     9.8 %

Business Services

    8     713,973     5.7 %   4,980,366     9.7 %

Automotive

    9     1,056,164     8.4 %   4,538,655     8.8 %

Personal Products

    5     1,316,083     10.5 %   3,573,185     7.0 %

Air Freight & Logistics

    8     894,599     7.1 %   3,567,827     6.9 %

Aerospace & Defense

    6     658,527     5.2 %   3,139,272     6.1 %

Finance

    2     387,227     3.1 %   3,093,290     6.0 %

Containers & Packaging

    4     1,087,068     8.6 %   2,893,428     5.6 %

Food & Beverages

    2     896,200     7.1 %   2,610,960     5.1 %

Office Supplies

    6     1,198,756     9.5 %   2,535,866     4.9 %

Retail

    4     994,421     7.9 %   2,529,120     4.9 %

Healthcare

    4     245,413     2.0 %   1,897,236     3.7 %

Non-Profit/Government

    5     124,202     1.0 %   1,714,946     3.3 %

Other

    8     852,604     6.8 %   3,133,024     6.1 %
                       

Total/Weighted Average

    91     12,574,955     100.0 % $ 51,462,607     100.0 %
                       

(1)
A single lease may cover space in more than one building.

        The following table sets forth information about the 10 largest tenants in our portfolio based on total annualized rent as of March 31, 2010.

Tenant
  Number of
Properties
  Total Leased
Square Feet
  Percentage of
Total Leased
Square Feet
  Total
Annualized
Rent
  Percentage of
Total
Annualized
Rent
 

Bank of America

    5     318,979     2.5 % $ 2,232,853     4.3 %

Verizon New England

    1     160,000     1.3 %   1,920,000     3.7 %

American Beverage

    1     613,200     4.9 %   1,772,148     3.5 %

Stream International

    1     148,131     1.2 %   1,666,474     3.2 %

Woodbridge Ventures

    1     250,100     2.0 %   1,288,015     2.5 %

Ohio Wholesale

    2     345,000     2.8 %   1,133,544     2.2 %

Brown Group

    1     427,000     3.4 %   1,131,550     2.2 %

Busche Enterprise

    8     319,513     2.5 %   1,110,099     2.2 %

Thyssen Krupp

    4     293,310     2.3 %   1,055,916     2.1 %

Wausau Paper

    1     594,000     4.7 %   1,049,340     2.0 %
                       

Total

    25     3,469,233     27.6 % $ 14,359,939     27.9 %
                       

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        As of March 31, 2010, our weighted average in-place remaining lease term was 5.0 years. In addition, during the period from May 18, 2006 (the date of acquisition of our first property) to March 31, 2010, our tenant retention rate was 90.0% based on square footage. The following table sets forth a summary schedule of lease expirations for leases in place as of March 31, 2010, plus available space, for each of the five full and partial calendar years beginning March 31, 2010 and thereafter in our portfolio. The information set forth in the table assumes that tenants exercise no renewal options and no early termination rights.

Year of
Lease
Expiration
  Number of
Leases
Expiring
  Total
Rentable
Square
Feet
  Percentage of
Total Expiring
Square Feet
  Total
Annualized
Rent
  Percentage
of Total
Annualized
Rent
 

Available

          844,716     6.3 %            

2010

    7     789,240     5.9 %   3,293,274     6.4 %

2011

    19     1,608,819     12.0 %   7,573,199     14.7 %

2012

    22     2,392,382     17.8 %   10,765,485     20.9 %

2013

    12     2,361,394     17.6 %   9,037,719     17.6 %

2014

    5     1,074,953     8.0 %   4,382,867     8.5 %

Thereafter

    26     4,348,167     32.4 %   16,410,063     31.9 %
                       

    91     13,419,671     100.0 %   51,462,607     100.0 %
                       

Market Overview

        Unless otherwise indicated, all information contained in this Market Overview section is derived from market materials prepared by CBRE-EA as of July 26, 2010, and the projections and beliefs of CBRE-EA stated herein are as of that date.

        As of March 31, 2010, the overall U.S. industrial market consisted of approximately 265,000 buildings with more than 14 billion square feet of space. In terms of net rentable area ("NRA"), warehouse/distribution facilities constitute the majority (59.2%) of this space followed by manufacturing (25.0%) and flex/office (which includes research and development) (11.8%). Unclassified buildings (industrial facilities such as sewage treatment centers and airport hangars that are not amenable to private real estate investment) represent the remaining 4.0%.

 
  NRA
(square feet in millions)
  Number of Properties  

Warehouse/Distribution

    8,483     152,526  

Manufacturing

    3,582     59,232  

Flex/Office

    1,683     41,413  

Other

    573     12,344  
           

All Industrial

    14,321     265,515  
           


Source: CBRE-EA Industrial Peer Select, Summer 2010.

        The single-tenant industrial sector offers investors the opportunity to receive stable income from leases to a variety of firms across the spectrum of industrial sub-property types, and single-tenant industrial buildings are more likely to provide their owners with a high degree of cash flow efficiency, as they generally do not require the same degree of tenant and capital improvement expenditures that are required on an ongoing basis to lease multi-tenanted space or other classes of commercial property.

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        Within the context of the broader real estate market, industrial property, including our targeted asset class, has exhibited a number of favorable investment characteristics:

Summary Risk Factors

        An investment in our common stock involves material risks. You should consider carefully the risks described below and under "Risk Factors" before purchasing shares of our common stock in this offering:

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Debt Financing and Liquidity

        As of March 31, 2010, on a pro forma basis for debt paydowns at the closing of this offering, we expect to have mortgage debt outstanding with an estimated aggregate balance of approximately $230.7 million secured by the majority of the contributed properties at a weighted average interest rate of 4.8%. Almost all of this debt will bear interest at a fixed rate through its initial term as a result of interest rate swaps. Following completion of this offering, we will have approximately $77.4 million and $153.3 million of debt maturing in 2011 and 2012, respectively, based on outstanding debt balances as of March 31, 2010 on a pro forma basis. These debt instruments have debt yields of     % and    %, respectively. For our debt maturing in 2011, subject to the satisfaction of certain conditions, we have two one-year extension options to extend the maturity date to July 25, 2013. Immediately following the completion of our formation transactions and this offering, our portfolio-wide debt-to-EBIDTA ratio will be approximately            based on our pro forma EBITDA for the 12 months ended March 31, 2010, which we expect will facilitate our refinancing capabilities. See "Business—Description of Certain Debt" for more information about such debt.

        We are currently negotiating with a number of financial institutions regarding the establishment of a secured corporate credit facility, prior to or contemporaneously with the closing of this offering. This facility will be used for property acquisitions, working capital requirements and other general corporate purposes. We anticipate that the proposed credit facility will contain customary terms, covenants and other conditions for credit facilities of this type. In addition, we are currently negotiating the refinancing of our debt due in 2012. No assurances can be given that we will obtain any credit facility or refinancing or if we do what the terms will be.

        Upon completion of this offering and after the debt paydowns discussed under "Use of Proceeds," we expect to have approximately $             million in cash and credit facility capacity available to us to fund working capital and property acquisitions and to execute our business strategy.

Our Formation Transactions and Structure

        Our predecessor business has deployed over $1.2 billion of capital representing the acquisition of over 200 properties since 2003. These investments were made through four private equity real estate funds, SCP Green, LLC ("Fund I"), Fund II, Fund III and Fund IV. We were formed to acquire the assets and operations of our predecessor business.

        All of the 24 properties owned by Fund I were sold in 2006. In 2007, 16 properties owned by Fund II were sold. Of the 91 properties currently owned by Fund II, 26 properties will be sold to us in our formation transactions. The other properties owned by Fund II will not be sold or contributed to us and Fund II will continue to operate as a private, fully-invested fund but will not make any further property acquisitions. Fund III and Fund IV will contribute 75 properties to us in our formation transactions in exchange for common units. Fund III will retain ownership of the Option Properties. See "—Option Properties and Other Excluded Properties." In addition to the properties being sold or contributed by Fund II, Fund III and Fund IV, upon completion of our formation transactions and this

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offering, STAG GI will contribute its properties to our operating partnership in exchange for common units.

        Our senior management team consists of Mr. Butcher, the Chairman of our board of directors and our Chief Executive Officer and President, Gregory W. Sullivan, our Chief Financial Officer, Executive Vice President and Treasurer, Stephen C. Mecke, our Chief Operating Officer and Executive Vice President, Kathryn Arnone, our Executive Vice President, General Counsel and Secretary, and David G. King, our Executive Vice President and Director of Real Estate Operations. They have each led or helped manage private and public real estate companies and funds, including STAG, AMB Property Corp., Trizec Hahn Corporation, Meditrust Corporation and LaQuinta Corporation.

        Prior to or concurrent with the completion of this offering, we will engage in formation transactions that are designed to: (i) consolidate the ownership of our property portfolio under our operating partnership and its subsidiaries; (ii) consolidate our acquisition and asset management businesses into a subsidiary of our operating partnership; (iii) enable us to qualify as a REIT for U.S. federal income tax purposes commencing with the taxable year ending December 31, 2010; (iv) defer the recognition of taxable gain by certain continuing investors; and (v) enable certain prior investors to obtain liquidity (common units) for their investments.

        Pursuant to our formation transactions, the following have occurred or will occur on or prior to the completion of this offering:

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        We will not enter into any tax protection agreements in connection with our formation transactions. In addition, in connection with our formation transactions, we have not obtained any independent appraisals for the properties we will acquire in our formation transactions for purposes of determining how much we should pay, and the consideration for them in our formation transactions may exceed their aggregate fair market value. In addition, the purchase and sale agreement we entered into with Fund II and the contribution agreements we entered into with Fund III, Fund IV, STAG GI and the owners of the management company were not negotiated at arm's length, and the terms of those agreements may be more favorable to Fund II, Fund III, Fund IV, STAG GI and the owners of the management company than they would have been had they been negotiated by third parties.

        Fund III will retain ownership of the Option Properties, which consist of three properties with approximately 890,891 rentable square feet that are vacant and that are acquisition opportunities for us. Upon approval of a majority of our independent directors, we will have the right to acquire any of the Option Properties individually for a period of up to three months after notification that the property has stabilized, defined as 85% or greater occupancy pursuant to leases with at least two years in remaining duration. The sale price of each property will be based on the fair market value of the property as determined by a third-party appraisal. Upon completion of our formation transactions and this offering, our subsidiary will enter into a services agreement with Fund III to manage the Option Properties for an annual fee of $30,000 per property. We have the right to purchase the Option Properties for a period of five years from the date of the closing of this offering.

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        Upon completion of our formation transactions and this offering, Fund II will continue to operate as a private, fully invested fund and will retain ownership of 65 properties, with approximately 9.4 million rentable square feet (the "Excluded Properties"). Pursuant to our formation transactions, Fund II will sell its direct or indirect interests in its other 26 properties to our operating partnership in exchange for approximately $165.0 million in cash. Fund II will use the proceeds from the sale of such properties to pay down debt. In deciding which properties to sell to us in our formation transactions, Fund II selected properties that (i) are all under one particular lender's debt facility, (ii) have sufficient value to retire the entire debt encumbering these properties, (iii) are fully occupied, or for the properties with more than one tenant, have a low vacancy rate, (iv) are independent properties that were not initially purchased by Fund II in a sub-portfolio, which allows Fund II to avoid dividing leases, and (v) have variable lease terms, with an emphasis on no near-term rollover. Following completion of our formation transactions, we will enter into a services agreement with Fund II on terms we believe to be customary, pursuant to which we will manage the Excluded Properties in return for an annual asset management fee of 1.25% of the equity investment in such assets.

        Following completion of our formation transactions, Fund II, Fund III, Fund IV and STAG GI will make no additional investment property acquisitions.

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        The chart below reflects our organization immediately following completion of our formation transactions and this offering.

CHART


(1)
Includes            restricted shares of common stock that will be issued upon closing of this offering to our executive officers and independent directors pursuant to our 2010 Equity Incentive Plan.

(2)
Includes ownership through Fund III, Fund IV and STAG GI and residual interests in Fund III, Fund IV and STAG GI. Solely for purposes of this chart, we calculated our executive officers' residual interests assuming Fund III, Fund IV and STAG GI are liquidated upon the closing of this offering at $            , the midpoint of the range set forth on the front cover of this prospectus and made certain other assumptions. See "Certain Relationships and Related Transactions—Formation Transactions" for a description of the residual interests that our executive officers have in Fund III, Fund IV and STAG GI. Through the operation of the residual interests, the ownership percentage of our executive officers in Fund III, Fund IV and STAG GI and, therefore, in our operating partnership, may be greater or less than indicated. We cannot predict how much of Fund III, Fund IV and STAG GI, or the consideration we pay Fund III, Fund IV and STAG GI for our properties, will ultimately be owned by our directors and executive officers.

(3)
Excludes common units in which a director or executive officer has no pecuniary interest but that are owned by entities that a director or executive officer may directly or indirectly control. Includes LTIP units, as if LTIP units were common units that will be issued upon closing of this offering to our executive officers pursuant to our 2010 Equity Incentive Plan.

(4)
Ownership is through Fund III, Fund IV and STAG GI.

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Benefits to Related Parties

        Upon completion of our formation transactions and this offering, our directors and executive officers and their affiliates will receive material financial and other benefits, as shown below. For a more detailed discussion of these benefits see "Management" and "Certain Relationships and Related Transactions."

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        Pursuant to the contributions and sales of our properties and the management company, Messrs. Butcher, Sullivan, Mecke and King and Ms. Arnone will receive consideration in the following amounts:

 
   
  Common Units  
Name(1)(2)
  Transactions   Number   Value(3)  

Benjamin S. Butcher

  Fund III properties              

  Fund IV properties              

  STAG GI properties              

  Management company              
               

  Total:              

Gregory W. Sullivan

 

Fund III properties

             

  Fund IV properties              

  STAG GI properties              

  Management company              
               

  Total:              

Stephen C. Mecke

 

Fund III properties

             

  Fund IV properties              

  STAG GI properties              

  Management company              
               

  Total:              

Kathryn Arnone

 

Fund III properties

             

  Fund IV properties              

  STAG GI properties              

  Management company              
               

  Total:              

David G. King

 

Fund III properties

             

  Fund IV properties              

  STAG GI properties              

  Management company              
               

  Total:              

(1)
The amounts shown in the table above reflect common units received by the individual directly or received by any entity, but if by an entity only to the extent of the individual's interest in the assets of the entity. Accordingly, the amounts shown in the table above do not reflect common units received by entities that may be controlled by the individual (except to the extent of the individual's interest in the assets of the entity).

(2)
Includes ownership through Fund III, Fund IV and STAG GI and residual interests in Fund III, Fund IV and STAG GI. Solely for purposes of this table, we calculated our executive officers' residual interests assuming Fund III, Fund IV and STAG GI are liquidated upon the closing of this offering at $            per share, which is the midpoint of the price range set forth on the front cover of this prospectus and made certain other assumptions. See "Certain Relationships and Related Transactions—Formation Transactions" for a description of the residual interests that our executive officers have in Fund III, Fund IV and STAG GI. Through the operation of the residual interests, the ownership percentage of our executive officers in Fund III, Fund IV and STAG GI and, therefore, in our operating partnership, may be greater or less than indicated. We cannot predict how much of Fund III, Fund IV and STAG GI, or the consideration we pay Fund III, Fund IV and STAG GI for our properties, will ultimately be owned by our directors and executive officers.

(3)
Based upon an assumed initial public offering price of $            per share, which is the midpoint of the price range set forth on the front cover of this prospectus.

        In addition, Messrs. Butcher, Sullivan, Mecke and King have equity interests in Fund II and/or residual interests in Fund II. While we do not expect any of them to receive directly any of the $165.0 million in cash we will pay Fund II for the properties, any value they may eventually realize on their equity and residual interests will be affected by the sale of the Fund II properties to us for cash.

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The value of such interests also will depend on the subsequent sale of the properties remaining in Fund II, and as a result we cannot predict how much of the consideration we pay Fund II for our properties will ultimately be received by them.

        Each of Fund II, Fund III, Fund IV and STAG GI has a manager responsible for the management of the fund's operations who are paid certain fees. Because the managers have no employees, they have executed services agreements with the management company to provide the services necessary to operate the respective funds in exchange for payment of acquisition, asset management and/or disposition fees payable to the particular manager under the respective fund's operating agreements. Upon completion of our formation transactions and this offering, the managers for Fund II, Fund III, Fund IV and STAG GI will terminate these services agreements. The manager of Fund II will enter into a similar services agreement with our subsidiary to manage Fund II's operations. Following completion of our formation transactions, Fund II will continue to own the Excluded Properties, will operate as a private, fully-invested fund and, pursuant to the services agreement, our subsidiary will manage the Excluded Properties in return for an annual asset management fee of 1.25% of the equity investment in such assets. The managers of Fund III and Fund IV will enter into a similar services agreement with our subsidiary to provide the administrative services they will require until their liquidation. In addition, our subsidiary will manage the Option Properties for Fund III for an annual fee of $30,000 per property. If it contributes its properties to our operating partnership, STAG GI will not require further ministerial services, so it will not enter into a new services agreement. Following completion of our formation transactions, Fund II, Fund III, Fund IV and STAG GI will make no additional property acquisitions and our company will serve as the exclusive vehicle through which our senior management team will acquire additional properties.

Conflicts of Interest

        Following completion of our formation transactions and this offering, conflicts of interest may exist between our directors and officers and our company as described below.

        Each of Fund III, Fund IV and STAG GI will be subject to a    -month lock-up period on their common units. Thereafter, Fund III, Fund IV and STAG GI will have the discretion to determine whether they wish to redeem any or all of their common units for cash equal to the then-current market value of shares of our common stock, or, at our election, for shares of our common stock, in each case on a one-for-one basis. The managers of each of Fund II, Fund III, Fund IV and STAG GI are controlled by Mr. Butcher, affiliates and principals of NED and Roseview Capital Partners, LLC ("Roseview"). In addition, the executive officers for each of the managers of Fund II, Fund III, Fund IV and STAG GI consist of a number of persons who serve as executive officers in similar positions in our company, specifically: Messrs. Butcher, Sullivan, Mecke and King and Ms. Arnone. Also, Mr. Butcher, who is a member of our board of directors, also serves on the board of managers and/or management committees of the managers of Fund II, Fund III and Fund IV, and is a member of the board of directors of STAG GI. Our executive officers and certain of our directors may have conflicting duties because they have a duty to both us and to Fund II (which will retain ownership of certain properties and continue as a private, fully-invested fund until liquidated), Fund III (which will retain ownership of the Option Properties), Fund IV and STAG GI. Upon completion of our formation transactions, all of these entities will be fully invested and, as a result, will not be making any additional investments in income properties. It is possible that the executive officers' and board members' fiduciary duty to Fund II, Fund III, Fund IV and STAG GI, including, without limitation, their interests in Fund II and the Option Properties, will conflict with what will be in the best interests of our company.

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        We did not conduct arm's-length negotiations with respect to the terms and structuring of our formation transactions, resulting in the principals of the management company having the ability to influence the type and level of benefits that they and our other affiliates will receive. In connection with this offering, we have not obtained any third-party appraisals of the properties and other assets to be acquired by us in our formation transactions, and the fair market value of the consideration to be paid by us to the prior investors, including certain of our executive officers, for the acquisition of the assets in our formation transactions may exceed the fair market value of those assets.

        Additional conflicts of interest could arise in the future as a result of the relationships between us and our affiliates, on the one hand, and our operating partnership or any partner thereof on the other. Our directors and officers have duties to our company under applicable Maryland law in connection with their management of our company. At the same time, we, as the indirect general partner of our operating partnership, have duties to our operating partnership and to its limited partners in connection with the management of our operating partnership under Delaware law as modified by our operating partnership agreement. Our duties, as the indirect general partner of our operating partnership, may come into conflict with the duties of our directors and officers to our company.

        We plan to adopt policies to reduce potential conflicts of interest. Generally, our policies will provide that any transaction involving us in which any of our directors, officers or employees has an interest must be approved by a vote of a majority of our disinterested directors. However, we cannot assure you that these policies will be successful in eliminating the influence of these conflicts. See "Policies with Respect to Certain Activities—Conflicts of Interest Policies."

Tax Status

        We will elect to be taxed as a REIT under the Code commencing with our taxable year ending December 31, 2010. As a REIT, we generally will not be subject to U.S. federal income tax on income that we distribute currently to our shareholders. Under the Code, REITs are subject to numerous organizational and operational requirements, including the distribution requirement described below. If we fail to qualify for taxation as a REIT in any year, our income will be taxed at regular corporate rates, we will not be allowed a deduction for dividends to our shareholders in computing our taxable income and we may be precluded from qualifying for treatment as a REIT for the four-year period following the year of our failure to qualify. Even if we qualify as a REIT for U.S. federal income tax purposes, we may still be subject to state and local taxes on our income and property and to U.S. federal income and excise taxes on our undistributed income.

Distribution Policy

        U.S. federal income tax law generally requires that a REIT distribute annually at least 90% of its REIT taxable income, determined without regard to the deduction for dividends paid and excluding any net capital gains. We will not be required to make distributions with respect to income derived from the activities conducted through our TRS that is not distributed to us. Our TRS is the entity through which we will provide any third-party management and advisory services, potentially including management services provided to Fund II, Fund III and Fund IV, unless such services can be provided without jeopardizing our REIT status. To the extent our TRS's income is not distributed and is instead reinvested with the operations of our TRS, the value of our equity interest in our TRS will increase. The aggregate value of the securities that we hold in our TRS may not exceed 25% of the total value of our gross assets. In part because of restrictions applicable to us as a REIT, distributions from our TRS to us will not exceed 25% of our gross income with respect to any given taxable year.

        To satisfy the requirements to qualify as a REIT and generally not be subject to U.S. federal income tax, we intend to make quarterly distributions of all or substantially all of our net income to holders of our common shares out of assets legally available therefor. We intend to pay a pro rata

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initial distribution with respect to the period commencing on the completion of this offering and ending at the last day of the then-current fiscal quarter, based on a distribution of $          per share for a full quarter. On an annualized basis, this would be $          per share, or an annual distribution rate of approximately        %, based on the midpoint of the range set forth on the cover page of this prospectus. We intend to maintain our initial distribution rate for the 12-month period following completion of this offering unless our actual results of operations, economic conditions or other factors differ materially from the assumption used is our estimate. Any future distributions we make will be at the discretion of our board of directors and will depend upon our earnings and financial condition, maintenance of REIT qualification, the applicable provisions of the Maryland General Corporation Law ("MGCL") and such other factors as our board may determine in its sole discretion.

Restrictions on Ownership and Transfer of Stock

        Due to limitations on the concentration of ownership of a REIT imposed by the Code, not more than 50% of the value of the outstanding shares of beneficial ownership of a REIT may be owned, directly or indirectly, by five or fewer individuals (as defined by the Code to include certain entities) during the last half of a taxable year (other than the first year for which an election to be a REIT has been made). As a result, our charter provides that, subject to certain exceptions, no person may beneficially own, or be deemed to own by virtue of the attribution provisions of the Code, either (1) more than 9.8% in value or in number of shares, whichever is more restrictive, of our outstanding shares of capital stock, or (2) more than 9.8% in value or in number of shares, whichever is more restrictive, of our outstanding common stock. Our board of directors may, in its discretion, exempt a person from the 9.8% ownership limits under certain circumstances. In connection with our formation transactions, our board of directors has granted a waiver to STAG GI to own up to        % of our outstanding common stock on a fully diluted basis. Our charter also prohibits any person from, among other matters, (1) beneficially or constructively owning or transferring shares of our capital stock if such ownership or transfer would result in our being "closely held" within the meaning of Section 856(h) of the Code; (2) owning or transferring our capital stock if such ownership or transfer would result in us becoming a "pension-held REIT" under Section 856(h)(3)(D) of the Code; (3) transferring shares of our capital stock if such transfer would result in our capital stock being owned by fewer than 100 persons; or (4) beneficially or constructively owning or transferring shares of our capital stock if such ownership or transfer would cause us to own, directly or indirectly, 10% or more of the ownership interests in a tenant of our company (or a tenant of any entity owned or controlled by us) or would cause any independent contractor to not be treated as such under Section 856(d)(3) of the Code, or otherwise causing us to fail to qualify as a REIT. See "Description of Stock—Restrictions on Ownership and Transfer of Stock."

Lock-Up Arrangements

        We and our executive officers and directors and the owners of the management company, Fund III, Fund IV and STAG GI have agreed not to sell or transfer any common units or shares of common stock, as applicable, for     months after the date of this prospectus. Specifically, all of these parties have agreed, subject to exceptions, not to directly or indirectly offer, pledge, sell or contract to sell any common units or shares of common stock, sell any option or contract to purchase any common units or shares of common stock, purchase any option or contract to sell any common units or shares of common stock, grant any option, right or warrant for the sale of any common units or shares of common stock, lend or otherwise dispose of or transfer any common units or shares of common stock, request or demand that we file a registration statement related to the common units or shares of common stock, or enter into any swap or other agreement that transfers, in whole or in part, the economic consequence of ownership of any common units or shares of common stock whether any such swap or transaction is to be settled by delivery of shares or other securities, in cash or otherwise.

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The Offering

Common stock offered by us                           shares of common stock (plus up to an additional                        shares of common stock that we may issue and sell upon the exercise of the underwriters' overallotment option)
Common stock and common units to be outstanding after completion of our formation transactions and this offering                           shares/units(1)(2)(3)
Use of proceeds   We estimate that the net proceeds we will receive from the sale of shares of our common stock in this offering will be approximately $         million (or approximately $         million if the underwriters exercise their overallotment option in full), in each case assuming a public offering price of $        per share, which is the mid-point of the range set forth on the cover of this prospectus, and after deducting underwriting discounts and commissions of approximately $         million (or approximately $         million if the underwriters exercise their overallotment option in full) and estimated offering expenses of approximately $         million payable by us. We will contribute the net proceeds we receive from this offering to our operating partnership in exchange for common units in our operating partnership.
    We expect our operating partnership will use the net proceeds as follows:
   

•       approximately $165.0 million to acquire direct or indirect interests in 26 properties from Fund II;

   

•       approximately $58.3 million to repay mortgage debt secured by certain of the properties we will acquire in our formation transactions;

   

•       approximately $5.5 million to repay subordinate mortgage debt secured by the Option Properties (the common units to be issued to Fund III in our formation transactions will be reduced accordingly);

   

•       approximately $4.4 million to repay the loan dated January 31, 2009 from an affiliate of NED to the Fund III subsidiaries that will be contributed to us in our formation transactions;

   

•       approximately $2.4 million to repay the loan originally drawn on May 15, 2007 from Fund III to the management company;

   

•       approximately $1.0 million to repay the line of credit dated May 15, 2007 from an affiliate of NED to the management company; and

   

•       approximately $        to pay transfer taxes associated with the contribution and sale of our properties to us.

    If the underwriters exercise their overallotment option in full, we expect to use the additional $         million of net proceeds for general corporate purposes. See "Use of Proceeds."
Proposed New York Stock Exchange symbol   "STIR"

(1)
Assumes the underwriters' overallotment option to purchase up to an additional                shares of common stock is not exercised.

(2)
Does not include                shares of our common stock reserved for issuance under our 2010 Equity Incentive Plan. Includes                shares of our restricted common stock to be issued under our 2010 Equity Incentive Plan to our directors, executive officers and non-executive employees upon consummation of this offering. See "Management—Equity Incentive Plan" for additional information.

(3)
Includes                common units held by limited partners (other than STAG Industrial, Inc.) expected to be outstanding following consummation of our formation transactions and                LTIP units to be granted to our executive officers under our 2010 Equity Incentive Plan upon consummation of this offering.

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Summary Financial Information

        The following table sets forth summary financial and operating data on (i) a pro forma basis for our company and (ii) an historical basis for STAG Predecessor Group. On a pro forma basis, we will own 101 industrial properties, consisting of 57 properties owned by STAG Predecessor Group and 44 properties that collectively constitute STAG Acquisition Group and STAG Contribution Group. STAG Predecessor Group is part of our predecessor business and consists of the subsidiaries of Fund III that will be contributed to us by Fund III in our formation transactions. STAG Acquisition Group consists of the properties owned by Fund II that will be sold to us in our formation transactions. STAG Contribution Group consists of the properties owned by Fund IV and STAG GI that will be contributed to us in the formation transactions.

        In the summary financial and operating data, we have not presented historical information for STAG Industrial, Inc. because we have not had any corporate activity since our formation other than the issuance of shares of common stock in connection with the initial capitalization of our company and activity in connection with our formation transactions and this offering, and because we believe that a discussion of the results of STAG Industrial, Inc. would not be meaningful.

        We have not presented historical financial information for the management company as its results are not considered significant, and because we believe that a discussion of these results (which primarily consist of acquisition and asset management fees from Fund II, Fund III and Fund IV and general and administrative costs), would not be meaningful.

        You should read the following summary financial and operating data in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operation," our unaudited pro forma consolidated financial statements and related notes, the historical combined financial statements and related notes of STAG Predecessor Group, and the historical combined statements of revenue and certain expenses and related notes of STAG Acquisition Group and STAG Contribution Group.

        The unaudited pro forma condensed consolidated balance sheet data is presented as if this offering and our formation transactions had occurred on March 31, 2010, and the unaudited pro forma statements of operations and other data for the three months ended March 31, 2010 and the year ended December 31, 2009, is presented as if this offering and our formation transactions had occurred on January 1, 2009. The pro forma financial information is not necessarily indicative of what our actual financial condition would have been as of March 31, 2010 or what our actual results of operations would have been assuming this offering and our formation transactions had been completed as of January 1, 2009, nor does it purport to represent our future financial position or results of operations.

        The unaudited summary historical combined balance sheet information as of March 31, 2010 and statement of operations data for the three months ended March 31, 2010 and 2009 have been derived from the unaudited combined financial statements of the STAG Predecessor Group included elsewhere in this prospectus. The summary historical combined balance sheet information as of December 31, 2009 and 2008, and the historical combined statement of operations data for the years ended December 31, 2009, 2008, and 2007, have been derived from the combined financial statements of the STAG Predecessor Group audited by PricewaterhouseCoopers LLP, independent registered public accountants, whose report thereon is included elsewhere in this prospectus. The summary historical combined balance sheet information as of December 31, 2007 and 2006 and the historical combined statement of operations for the period ended December 31, 2006 have been derived from the unaudited combined financial statements of the STAG Predecessor Group, which are not included in this prospectus. Both of the two components were audited.

        The audited historical financial statements of STAG Predecessor Group in this prospectus, and therefore the historical financial and operating data in the table below, exclude the operating results and financial condition of (i) the Option Properties, (ii) the entities that own the Option Properties and (iii) the management company.

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  Company
Pro Forma
  STAG Predecessor Group
Historical
 
 
  Three Months
Ended
March 31,
  Year Ended
December 31,
  Three Months Ended
March 31,
  Year Ended December 31,   Period
Ended
December 31,
 
 
  2010   2009   2010   2009   2009   2008   2007(1)   2006  
 
  (unaudited)
  (unaudited)
  (unaudited)
  (unaudited)
   
   
  (unaudited)
  (unaudited)
 
 
  (dollars in thousands)
 

Statement of Operations Data:

                                                 

Revenue

                                                 

Rental income

              $ 6,323   $ 6,524   $ 25,658   $ 27,319   $ 11,162   $ 941  

Tenant recoveries

                1,360     1,156     4,508     3,951     1,326      

Other

                                     
                                   

Total revenue

                7,683     7,680     30,166     31,270     12,488     941  
                                   

Expenses

                                                 

Property

                2,098     2,344     9,009     6,423     1,681     11  

General and administrative

                189     76     478     502     404     29  

Depreciation and amortization

                2,383     3,216     10,257     12,108     4,687     336  

Loss on impairment of assets

                              3,728          
                                   

Total expenses

                4,670     5,636     19,744     22,761     6,772     376  
                                   

Other income (expense)

                                                 

Interest income

                1     1     66     140     163     4  

Interest expense

                (3,531 )   (3,346 )   (14,328 )   (15,058 )   (7,861 )   (616 )

Gain (loss) on interest rate swaps

                (589 )   493     (1,720 )   (1,275 )        
                                   

Total other income (expense)

                (4,119 )   (2,852 )   (15,982 )   (16,193 )   (7,698 )   (612 )
                                   

Net income (loss)

                (1,106 )   (808 )   (5,560 )   (7,684 )   (1,982 )   (47 )
                                   

Balance Sheet Data (End of Period):

                                                 

Rental property, before accumulated depreciation

                210,067     209,383     210,009     208,948     212,688     31,998  

Rental property, after accumulated depreciation

                194,269     199,213     195,383     200,268     210,294     31,808  

Total assets

                217,572     225,648     220,116     229,731     242,134     35,976  

Notes payable

                211,002     215,460     212,132     216,178     217,360     31,877  

Total liabilities

                220,797     217,961     221,637     223,171     220,548     32,305  

Owners'/shareholders' equity (deficit)

                (3,225 )   7,687     (1,521 )   6,560     21,586     3,671  

Other Data:

                                                 

NOI(2)

                                                 

EBITDA(2)

                                                 

FFO(2)

                                                 

AFFO(2)

                                                 

(1)
We have prepared the results of operations for the year ended December 31, 2007 by combining amounts for 2007 obtained by adding the audited operating results of the Antecedent for the period of January 1, 2007 to May 31, 2007 and STAG Predecessor Group for the period of June 1, 2007 to December 31, 2007 (since the difference in basis between Antecedent and STAG Predecessor Group were not materially different and under common management). Although this combined presentation does not comply with GAAP, we believe that it provides a meaningful method of comparison. In addition, each of its two components was audited.

(2)
See "Management's Discussion and Analysis of Financial Condition and Results of Operations" for more detailed explanations of NOI, EBITDA, FFO and AFFO, and reconciliations of NOI, EBITDA, FFO and AFFO to net income computed in accordance with GAAP.

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RISK FACTORS

        An investment in our common stock involves risks. In addition to other information in this prospectus, you should carefully consider the following risks before investing in our common stock offered by this prospectus. The occurrence of any of the following risks could materially and adversely affect our business, prospects, financial condition, results of operations and our ability to make cash distributions to our shareholders, which could cause you to lose all or a significant portion of your investment in our common stock. Some statements in this prospectus, including statements in the following risk factors, constitute forward-looking statements. See "Cautionary Note Regarding Forward-Looking Statements."

Risks Related to Our Business and Operations

        Our investments in real estate assets are concentrated in the industrial real estate sector. This concentration may expose us to the risk of economic downturns in this sector to a greater extent than if our business activities included a more significant portion of other sectors of the real estate industry.

        Our operating results may be affected by market and economic challenges, including the current global economic credit environment, which may result from a continued or exacerbated general economic slow down experienced by the nation as a whole or by the local economies where our properties may be located, or by the real estate industry, including the following:

        Also, to the extent we purchase real estate in an unstable market, we are subject to the risk that if the real estate market ceases to attract the same level of capital investment in the future that it attracts at the time of our purchases, or the number of companies seeking to acquire properties decreases, the value of our investments may not appreciate or may decrease significantly below the amount we pay for these investments. The length and severity of any economic slow down or downturn cannot be predicted. Our operations could be negatively affected to the extent that an economic slow down or downturn is prolonged or becomes more severe.

        Domestic and international financial markets recently experienced significant dislocations brought about in large part by failures in the U.S. banking system. These dislocations have impacted the availability of credit and have contributed to rising costs associated with obtaining credit. If debt financing is not available on terms and conditions we find acceptable, we may not be able to obtain financing for investments. If this dislocation in the credit markets persists, our ability to borrow monies to finance the purchase of, or other activities related to, real estate assets will be negatively impacted. If we are unable to borrow monies on terms and conditions that we find acceptable, we likely will have to reduce the number of properties we can purchase, and the return on the properties we do purchase

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may be lower. Also, if the values of our properties decline we may we may be unable to refinance all of our debt as it matures. All of these events would have a material adverse effect on our results of operations, financial condition and ability to pay distributions.

        In addition to general, regional, national and international economic conditions, our operating performance is impacted by the economic conditions of the specific markets in which we have concentrations of properties. We have significant holdings in the following states (which, as of March 31, 2010, accounted for the percentage of our total annualized rent indicated): Ohio (12.1%); Michigan (11.7%); Wisconsin (8.3%); Indiana (8.0%); Massachusetts (7.1%) and Pennsylvania (6.1%). Our operating performance could be adversely affected if conditions become less favorable in any of the states or regions in which we have a concentration of properties.

        We are subject to certain industry concentrations with respect to our properties, which, as of March 31, 2010, included the following (which, as of March 31, 2010, accounted for the percentage of our total annualized rent indicated): technology (12.1%); industrial equipments and components (9.8%); business services (9.7%); automotive (8.8%); personal products (7.0%); and air freight and logistics (6.9%). Any downturn in one or more of these industries, or in any other industry in which we may have a significant concentration now or in the future, could adversely affect our tenants who are involved in such industries. If any of these tenants is unable to withstand such downturn or is otherwise unable to compete effectively in its business, it may be forced to declare bankruptcy, fail to meet its rental obligations, seek rental concessions or be unable to enter into new leases, which could materially and adversely affect us.

        Our current strategy focuses primarily on the acquisition, ownership and management of single-tenant industrial properties throughout the United States. Consequently, the success of each of our investments materially depends on the financial stability of the single tenant leasing the applicable property. Any of our tenants may experience a downturn in its business at any time that may significantly weaken its financial condition or cause its failure. As a result, such tenant may delay lease commencement, decline to extend or renew its lease upon expiration, fail to make rental payments when due or declare bankruptcy. The default, financial distress or bankruptcy of a single tenant could cause interruptions in the receipt of rental revenue and/or result in a vacancy, which is likely to result in the complete reduction in the operating cash flows generated by the property leased to that tenant and may decrease the value of that property. In addition, a majority of our leases generally require the tenant to pay all or substantially all of the operating expenses normally associated with the ownership of the property, such as utilities, real estate taxes, insurance and routine maintenance. Following a vacancy at a single-tenant property, we will be responsible for all of the operating costs at such property until it can be re-let, if at all.

        Moreover, we derive a significant percentage of our rental revenue from our major tenants. As of March 31, 2010, our 10 largest tenants accounted for approximately 27.9% of our total annualized rent. Consequently, the occurrence of any of the foregoing events with respect to one or more of our major

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tenants could result in a significant reduction in our rental revenue, which would materially and adversely affect us.

        Many of our tenants rely on external sources of financing to operate their businesses. The U.S. financial and credit markets continue to experience significant liquidity disruptions, resulting in the unavailability of financing for many businesses. If our tenants are unable to obtain financing necessary to continue to operate their businesses, they may be unable to meet their rent obligations to us or enter into new leases with us or be forced to declare bankruptcy and reject our leases, which could materially and adversely affect us.

        We were organized in July 2010 and will commence operations upon completion of our formation transactions and this offering. We are subject to all the risks and uncertainties associated with any new business, including the risk that we will not achieve our investment objectives and that the value of your investment could decline substantially.

        We have no experience operating as a publicly traded REIT. We cannot assure you that our past experience will be sufficient to successfully operate our company as a REIT or a publicly traded company, including the requirements to timely meet disclosure requirements and comply with the Sarbanes-Oxley Act of 2002. Failure to maintain REIT status would have an adverse effect on our financial condition, results of operations, cash flow, per share trading price of our common stock and ability to satisfy our debt service obligations and to pay dividends to you.

        Our success depends to a significant degree upon the continued contributions of certain key personnel including, but not limited to, Messrs. Butcher, Sullivan, Mecke and King and Ms. Arnone, whose continued service is not guaranteed, and each of whom would be difficult to replace. While we have entered into employment contracts with Messrs. Butcher, Sullivan, Mecke and King and Ms. Arnone, they may nevertheless cease to provide services to us at any time. If any of our key personnel were to cease employment with us, our operating results could suffer. Our ability to retain our management group or to attract suitable replacements should any members of the management group leave is dependent on the competitive nature of the employment market. The loss of services from key members of the management group or a limitation in their availability could adversely impact our financial condition and cash flows. Further, such a loss could be negatively perceived in the capital markets. We have not obtained and do not expect to obtain key man life insurance on any of our key personnel except for Mr. Butcher, the founder of STAG. The policy has limits in the amount of $5.0 million and covers us in the event of Mr. Butcher's death.

        We also believe that, as we expand, our future success depends, in large part, upon our ability to hire and retain highly skilled managerial, investment, financing, operational and marketing personnel. Competition for such personnel is intense, and we cannot assure you that we will be successful in attracting and retaining such skilled personnel.

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        We acquire and intend to continue to acquire primarily generic distribution warehouses, manufacturing properties and flex/office facilities. The acquisition of properties entails various risks, including the risks that our investments may not perform as we expect. Further, we face competition for attractive investment opportunities from other well-capitalized real estate investors, including both publicly-traded REITs and private institutional investment funds, and these competitors may have greater financial resources than us and a greater ability to borrow funds to acquire properties. This competition will increase as investments in real estate become increasingly attractive relative to other forms of investment. As a result of competition, we may be unable to acquire additional properties as we desire or the purchase price may be significantly elevated. In addition, we expect to finance future acquisitions through a combination of secured and unsecured borrowings, proceeds from equity or debt offerings by us or our operating partnership or its subsidiaries and proceeds from property contributions and divestitures which may not be available and which could adversely affect our cash flows. Any of the above risks could adversely affect our financial condition, results of operations, cash flows and ability to pay distributions on, and the market price of, our common stock.

        A key component of our growth strategy is to continue to acquire additional industrial real estate assets. To date, more than 42.8% of our acquisitions, based on total purchase price, were acquired before they were widely marketed by real estate brokers, or "limited marketing" transactions. Properties that are acquired by "limited marketing" transactions are typically more attractive to us as a purchaser because of the absence of a formal sales process, which could lead to higher prices. If we cannot obtain "limited marketing" deal flow in the future, our ability to locate and acquire additional properties at attractive prices could be somewhat adversely affected.

        We have not obtained as part of our formation transactions any updated third-party appraisals of the properties and other assets to be acquired by us in connection with this offering or our formation transactions. The initial public offering price of our common stock was determined in consultation with the underwriters based on the history and prospects for the industry in which we compete, our financial information, the ability of our management and our business potential and earning prospects, the prevailing securities markets at the time of this offering, and the recent market prices of, and the demand for, publicly traded shares of generally comparable companies. The initial public offering price does not necessarily bear any relationship to the book value or the fair market value of such assets. As a result, the fair market value of the consideration to be paid by us to these affiliates for the acquisition of the assets in our formation transactions may exceed the fair market value of those assets. The aggregate pro forma net tangible book value of the assets to be acquired by us in our formation transactions was approximately $             million as of March 31, 2010.

        As part of our formation transactions, we will assume existing liabilities of contributed operating companies and liabilities in connection with contributed properties, some of which may be unknown or unquantifiable at the time this offering is consummated. Unknown liabilities might include liabilities for cleanup or remediation of undisclosed environmental conditions, claims of tenants, vendors or other

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persons dealing with the entities prior to this offering, tax liabilities, and accrued but unpaid liabilities whether incurred in the ordinary course of business or otherwise. As part of our formation transactions, the owners of our predecessor business have only made limited representations and warranties to us regarding the entities, properties and assets that we will own following our formation transactions that survive for a period of one year and agreed to indemnify us and our operating partnership for breaches of such representations subject to specified deductibles and caps, as applicable. Because many liabilities, including tax liabilities, may not be identified within such period, we may have no recourse against any of the owners of our predecessor business for these liabilities.

        All distributions will be made at the discretion of our board of directors and will depend on our earnings, our financial condition, maintenance of our REIT qualification and other factors as our board of directors may deem relevant from time to time. We may not be able to make distributions in the future. In addition, some of our distributions may include a return of capital. To the extent that we make distributions in excess of our current and accumulated earnings and profits, such distributions would generally be considered a return of capital for U.S. federal income tax purposes to the extent of the holder's adjusted tax basis in its shares. A return of capital is not taxable, but it has the effect of reducing the holder's adjusted tax basis in its investment. To the extent that distributions exceed the adjusted tax basis of a holder's shares, they will be treated as gain from the sale or exchange of such stock. See "U.S. Federal Income Tax Considerations—Taxation of shareholders." If we borrow to fund distributions, our future interest costs would increase, thereby reducing our earnings and cash available for distribution from what they otherwise would have been.

        Prior to our formation transactions and this offering, Fund II, Fund III and Fund IV owned or controlled 101 of our initial properties comprising an aggregate 13.4 million rentable square feet. All of these properties have been under management for less than four years. In addition, upon completion of our formation transactions and this offering, we will acquire interests in the properties acquired by STAG GI. The properties may have characteristics or deficiencies unknown to us that could affect their valuation or revenue potential. We cannot assure you that the operating performance of the properties will not decline under our management.

        The design and effectiveness of our disclosure controls and procedures and internal control over financial reporting may not prevent all errors, misstatements or misrepresentations. While management will continue to review the effectiveness of our disclosure controls and procedures and internal control over financial reporting, there can be no guarantee that our internal control over financial reporting will be effective in accomplishing all control objectives all of the time. Deficiencies, including any material weakness, in our internal control over financial reporting which may occur in the future could result in misstatements of our results of operations, restatements of our financial statements, a decline in our stock price, or otherwise materially adversely affect our business, reputation, results of operations, financial condition or liquidity.

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Risks Related to Our Organization and Structure

        Certain of our directors and executive officers have ownership interests in the other entities or properties to be acquired in our formation transactions, including Fund II, Fund III, Fund IV, STAG GI and the management company. Following the completion of our formation transactions and this offering, under the contribution agreements with certain of our directors and executive officers and their affiliates, we will be entitled to indemnification in the event of breaches of the representations and warranties made by them with respect to the entities and properties to be acquired by us. Such indemnification is limited and we are not entitled to any other indemnification in connection with our formation transactions. See "—We are assuming liabilities in connection with our formation transactions, including unknown liabilities" above. In addition, we expect that our executive officers will enter into employment agreements with us pursuant to which they will agree, among other things, not to engage in certain business activities in competition with us and pursuant to which they will devote substantially full-time attention to our affairs. See "Management—Employment Agreements." We may choose not to enforce, or to enforce less vigorously, our rights under these agreements due to our ongoing relationship with our directors and executive officers.

        We did not conduct arm's-length negotiations with respect to all of the terms of our formation transactions. In the course of structuring our formation transactions, our directors and executive officers had the ability to influence the type and level of benefits that they and our other officers will receive from us. In addition, certain of our directors and executive officers had substantial pre-existing ownership interests in Fund II, Fund III, Fund IV, STAG GI and the management company, and will receive substantial economic benefits as a result of our formation transactions. The formation transaction documents provide that the individual allocations of the total formation transaction value to each prior investor are determined by the provisions of the applicable partnership agreement or organizational document of the relevant fund relating to distributions of distributable net proceeds from sales of properties. Also, our directors and executive officers have assumed management and/or director positions with us, for which they will obtain certain other benefits such as employment agreements, restricted stock or LTIP unit grants and other compensation.

        Certain of our executive officers and directors also serve on the board of managers and/or management committees of the managers of Fund II, Fund III and Fund IV, and are members of the board of directors of STAG GI. Our officers and directors may have conflicting duties because they have a duty to both us and to Fund II (which will retain ownership of certain properties and continue as a private, fully-invested fund until liquidated), Fund III (which will retain ownership of the Option Properties), Fund IV and STAG GI. Upon completion of our formation transactions, all of these entities will be fully invested and, as a result, will not be making any additional investments in income properties. It is possible that the executive officers' and board members' fiduciary duty to Fund II, Fund III, Fund IV and STAG GI, including, without limitation, their interests in Fund II and the Option Properties, will conflict with what will be in the best interests of our company.

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        After the consummation of this offering, we, as the sole member of the general partner of our operating partnership, will have fiduciary duties to the other limited partners in the operating partnership, the discharge of which may conflict with the interests of our shareholders. The limited partners of our operating partnership have agreed that, in the event of a conflict in the fiduciary duties owed by us to our shareholders and, in our capacity as indirect general partner of our operating partnership, to such limited partners, we are under no obligation to give priority to the interests of such limited partners. In addition, those persons holding common units will have the right to vote on certain amendments to the operating partnership agreement (which require approval by a majority in interest of the limited partners, including us) and individually to approve certain amendments that would adversely affect their rights. These voting rights may be exercised in a manner that conflicts with the interests of our shareholders. For example, we are unable to modify the rights of limited partners to receive distributions as set forth in the operating partnership agreement in a manner that adversely affects their rights without their consent, even though such modification might be in the best interest of our shareholders.

        In addition, conflicts may arise when the interests of our shareholders and the limited partners of the operating partnership diverge, particularly in circumstances in which there may be an adverse tax consequence to the limited partners. Tax consequences to holders of common units upon a sale or refinancing of our properties may cause the interests of our senior management to differ from your own. As a result of unrealized built-in gain attributable to contributed property at the time of contribution, some holders of common units, including our principals, may suffer different and more adverse tax consequences than holders of our common stock upon the sale or refinancing of the properties owned by our operating partnership, including disproportionately greater allocations of items of taxable income and gain upon a realization event. As those holders will not receive a correspondingly greater distribution of cash proceeds, they may have different objectives regarding the appropriate pricing, timing and other material terms of any sale or refinancing of certain properties, or whether to sell or refinance such properties at all.

        We may experience conflicts of interest with several members of our senior management team who have or may become limited partners in our operating partnership through the receipt of LTIP units granted under our 2010 Equity Incentive Plan. See "Management—Equity Incentive Plan."

        In order to maintain our qualification as a REIT, we are generally required under the Code to distribute annually at least 90% of our net taxable income, determined without regard to the dividends paid deduction and excluding any net capital gain. In addition, we will be subject to income tax at regular corporate rates to the extent that we distribute less than 100% of our net taxable income, including any net capital gains. Because of these distribution requirements, we may not be able to fund future capital needs, including any necessary acquisition financing, from operating cash flow. Consequently, we may rely on third-party sources to fund our capital needs. We may not be able to obtain financing on favorable terms or at all. Any additional debt we incur will increase our leverage. Our access to third-party sources of capital depends, in part, on:

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        If we cannot obtain capital from third-party sources, we may not be able to acquire or develop properties when strategic opportunities exist, meet the capital and operating needs of our existing properties or satisfy our debt service obligations. Further, in order to meet the REIT distribution requirements and maintain our REIT status and to avoid the payment of income and excise taxes, we may need to borrow funds on a short-term basis even if the then-prevailing market conditions are not favorable for these borrowings. These short-term borrowing needs could result from differences in timing between the actual receipt of cash and inclusion of income for U.S. federal income tax purposes or the effect of non-deductible capital expenditures, the creation of reserves, certain restrictions on distributions under loan documents or required debt or amortization payments.

        To the extent that capital is not available to acquire or develop properties, profits may not be realized or their realization may be delayed, which could result in an earnings stream that is less predictable than some of our competitors and result in us not meeting our projected earnings and distributable cash flow levels in a particular reporting period. Failure to meet our projected earnings and distributable cash flow levels in a particular reporting period could have an adverse effect on our financial condition and on the market price of our common stock.

        Our charter contains 9.8% ownership limits.    Our charter, subject to certain exceptions, authorizes our directors to take such actions as are necessary and desirable to limit any person to actual or constructive ownership of no more than 9.8% in value or in number of shares, whichever is more restrictive, of the outstanding shares of our capital stock and no more than 9.8% in value or in number of shares, whichever is more restrictive, of the outstanding shares of our common stock. Our board of directors, in its sole discretion, may exempt a proposed transferee from the ownership limits. However, our board of directors may not grant an exemption from the ownership limits to any proposed transferee whose ownership, direct or indirect, of more than 9.8% of the value or number of our outstanding shares of our common stock could jeopardize our status as a REIT. The ownership limits contained in our charter and the restrictions on ownership of our common stock may delay or prevent a transaction or a change of control that might involve a premium price for our common stock or otherwise be in the best interest of our shareholders. See "Description of Stock—Restrictions on Ownership and Transfer of Stock."

        Our board of directors may create and issue a class or series of preferred stock without shareholder approval.    Our board of directors is empowered under our charter to amend our charter to increase or decrease the aggregate number of shares of our common stock or the number of shares of stock of any class or series that we have authority to issue, to designate and issue from time to time one or more classes or series of preferred stock and to classify or reclassify any unissued shares of our common stock or preferred stock without shareholder approval. Our board of directors may determine the relative rights, preferences and privileges of any class or series of preferred stock issued. As a result, we may issue series or classes of preferred stock with preferences, dividends, powers and rights, voting or otherwise, senior to the rights of holders of our common stock. The issuance of preferred stock could also have the effect of delaying or preventing a change of control transaction that might otherwise be in the best interests of our shareholders.

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        Certain provisions in the partnership agreement for our operating partnership may delay or prevent unsolicited acquisitions of us.    Provisions in the partnership agreement for our operating partnership may delay or make more difficult unsolicited acquisitions of us or changes in our control. These provisions could discourage third parties from making proposals involving an unsolicited acquisition of us or change of our control, although some shareholders might consider such proposals, if made, desirable. These provisions include, among others:

        Any potential change of control transaction may be further limited as a result of provisions of the partnership unit designation for the LTIP units, which require us to preserve the rights of LTIP unit holders and may restrict us from amending the partnership agreement for our operating partnership in a manner that would have an adverse effect on the rights of LTIP unit holders.

        Certain provisions of Maryland law could inhibit changes in control.    Certain provisions of the MGCL may have the effect of inhibiting a third party from making a proposal to acquire us or impeding a change of control under circumstances that otherwise could provide our shareholders with the opportunity to realize a premium over the then-prevailing market price of our common stock, including:

        We have elected to opt out of these provisions of the MGCL, in the case of the business combination provisions of the MGCL, by resolution of our board of directors, and in the case of the control share provisions of the MGCL, pursuant to a provision in our bylaws. However, our board of directors may by resolution elect to repeal the foregoing opt-outs from the business combination provisions of the MGCL and we may, by amendment to our bylaws, opt in to the control share provisions of the MGCL in the future.

        Additionally, Title 8, Subtitle 3 of the MGCL, permits our board of directors, without shareholder approval and regardless of what is currently provided in our charter or our bylaws, to implement takeover defenses, some of which (for example, a classified board) we do not currently have. These

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provisions may have the effect of inhibiting a third party from making an acquisition proposal for our company or of delaying, deferring or preventing a change in control of our company under circumstances that otherwise could provide the holders of our common stock with the opportunity to realize a premium over the then-current market price.

        Our charter, bylaws, the partnership agreement for our operating partnership and Maryland law also contain other provisions that may delay, defer or prevent a transaction or a change of control that might involve a premium price for our common stock or otherwise be in the best interest of our shareholders. See "Certain Provisions of Maryland Law and of Our Charter and Bylaws—Our Board of Directors," "—Business Combinations," "—Control Share Acquisitions," "—Maryland Unsolicited Takeovers Act," "—Advance Notice of Director Nominations and New Business" and "Our Operating Partnership and the Partnership Agreement."

        In connection with this offering, we are entering into employment agreements with Messrs. Butcher, Sullivan, Mecke and King and Ms. Arnone. These employment agreements provide that each executive may terminate his employment under certain conditions, including after a change of control, and receive severance based on             or            times (depending on the officer) the annual total of salary, bonus and incentive compensation such as LTIP units or restricted shares of common stock grants. In addition, Messrs. Sullivan, Mecke and King and Ms. Arnone would not be restricted from competing with us after their departure. See "Management—Employment Agreements" for further details about the terms of these employment agreements.

        The compensation committee of our board of directors is responsible for overseeing our compensation and employee benefit plans and practices, including our executive compensation plans and our incentive compensation and equity-based compensation plans. Our compensation committee has significant discretion in structuring compensation packages and may make compensation decisions based on any number of factors. As a result, compensation awards may not be tied to or correspond with improved financial results at our company or the share price of our common stock.

        In the past, we have reported our results to the investors in our predecessor business on a fund-by-fund basis. We have generally maintained separate systems and procedures for each fund, which makes it more difficult for us to evaluate and integrate their systems and procedures on a reliable company-wide basis. In addition, for certain funds we were not required to report our results on a GAAP basis. In connection with our operation as a public company, we will be required to report our operations on a consolidated basis under GAAP and, in some cases, on a property by property basis. We are in the process of implementing an internal audit function and modifying our company-wide systems and procedures in a number of areas to enable us to enhance our reporting on a consolidated basis under GAAP as we continue the process of integrating the financial reporting of our predecessor. If we fail to implement proper overall business controls, including as required to integrate our predecessor entities and support our growth, our results of operations could be harmed or we could fail to meet our reporting obligations.

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        Our board of directors has overall authority to oversee our operations and determine our major corporate policies. This authority includes significant flexibility. For example, our board of directors can do the following:

        Any of these actions could increase our operating expenses, impact our ability to make distributions or reduce the value of our assets without giving you, as a shareholder, the right to vote.

        Maryland law provides that a director or officer has no liability in that capacity if he or she performs his or her duties in good faith, in a manner he or she reasonably believes to be in our best interests and with the care that an ordinarily prudent person in a like position would use under similar circumstances. In addition, our charter eliminates our directors' and officers' liability to us and our shareholders for money damages except for liability resulting from actual receipt of an improper benefit or profit in money, property or services or active and deliberate dishonesty established by a final judgment and which is material to the cause of action. Our bylaws require us to indemnify our directors and officers to the maximum extent permitted by Maryland law for liability actually incurred in connection with any proceeding to which they may be made, or threatened to be made, a party, except to the extent that the act or omission of the director or officer was material to the matter giving rise to the proceeding and was either committed in bad faith or was the result of active and deliberate dishonesty, the director or officer actually received an improper personal benefit in money, property or services, or, in the case of any criminal proceeding, the director or officer had reasonable cause to believe that the act or omission was unlawful. As a result, we and our shareholders may have more

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limited rights against our directors and officers than might otherwise exist under common law. In addition, we may be obligated to fund the defense costs incurred by our directors and officers.

General Real Estate Risks

        The investment returns available from equity investments in real estate depend on the amount of income earned and capital appreciation generated by the properties, as well as the expenses incurred in connection with the properties. If our properties do not generate income sufficient to meet operating expenses, including debt service and capital expenditures, then our ability to pay distributions to our shareholders could be adversely affected. In addition, there are significant expenditures associated with an investment in real estate (such as mortgage payments, real estate taxes and maintenance costs) that generally do not decline when circumstances reduce the income from the property. Income from and the value of our properties may be adversely affected by:

        In addition, periods of economic slowdown or recession, rising interest rates or declining demand for real estate, or public perception that any of these events may occur, would result in a general decrease in rents or an increased occurrence of defaults under existing leases, which would adversely affect our financial condition and results of operations. Future terrorist attacks may result in declining economic activity, which could reduce the demand for, and the value of, our properties. To the extent that future attacks impact our tenants, their businesses similarly could be adversely affected, including their ability to continue to honor their existing leases.

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        For these and other reasons, we cannot assure you that we will be profitable or that we will realize growth in the value of our real estate properties.

        We compete with other owners, operators and developers of real estate, some of which own properties similar to ours in the same markets and submarkets in which our properties are located. If our competitors offer space at rental rates below current market rates or below the rental rates we currently charge our tenants, we may lose potential tenants, and we may be pressured to reduce our rental rates below those we currently charge in order to retain tenants when our tenants' leases expire. As a result, our financial condition, cash flows, cash available for distribution, trading price of our common stock and ability to satisfy our debt service obligations could be materially adversely affected.

        Our results of operations, distributable cash flows and the value of our common stock would be adversely affected if we are unable to lease, on economically favorable terms, a significant amount of space in our operating properties. We have approximately 8.2 million rentable square feet (out of a total of 12.6 million leased rentable square feet) with leases that expire in the next five years. The number of vacant or partially vacant industrial properties in a market or submarket could adversely affect our ability to re-lease the space at attractive rental rates.

        A property may incur a vacancy either by the continued default of a tenant under its lease or the expiration of one of our leases. In addition, certain of the properties we acquire may have some level of vacancy at the time of closing. Certain of our properties may be specifically suited to the particular needs of a tenant. We may have difficulty obtaining a new tenant for any vacant space we have in our properties. If the vacancy continues for a long period of time, we may suffer reduced revenue resulting in less cash available to be distributed to shareholders. In addition, the resale value of a property could be diminished because the market value of a particular property will depend principally upon the value of the leases of such property.

        When a tenant at one of our properties does not renew its lease or otherwise vacates its space in one of our buildings, it is likely that, in order to attract one or more new tenants, we will be required to expend funds to construct new tenant improvements in the vacated space. Although we intend to manage our cash position or financing availability to pay for any improvements required for re-leasing, we cannot assure you that we will have adequate sources of funding available to us for such purposes in the future.

        If a tenant becomes bankrupt or insolvent, that could diminish the income we receive from that tenant's leases. Our tenants may experience downturns in their operating results due to adverse changes to their business or economic conditions, and those tenants that are highly leveraged may have a higher possibility of filing for bankruptcy or insolvency. We may not be able to evict a tenant solely because of its bankruptcy. On the other hand, a bankruptcy court might authorize the tenant to terminate its

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leases with us. If that happens, our claim against the bankrupt tenant for unpaid future rent would be an unsecured prepetition claim subject to statutory limitations, and therefore such amounts received in bankruptcy are likely to be substantially less than the remaining rent we otherwise were owed under the leases. In addition, any claim we have for unpaid past rent could be substantially less than the amount owed. If the lease for such a property is rejected in bankruptcy, our revenue would be reduced and could cause us to reduce distributions to shareholders.

        Real estate investments are not as liquid as other types of investments, and this lack of liquidity may limit our ability to react promptly to changes in economic or other conditions. In addition, significant expenditures associated with real estate investments, such as mortgage payments, real estate taxes and maintenance costs, are generally not reduced when circumstances cause a reduction in income from the investments. In addition, we intend to comply with the safe harbor rules relating to the number of properties that can be disposed of in a year, the tax bases and the costs of improvements made to these properties, and other items that enable a REIT to avoid punitive taxation on the sale of assets. Thus, our ability at any time to sell assets or contribute assets to property funds or other entities in which we have an ownership interest may be restricted. This lack of liquidity may limit our ability to vary our portfolio promptly in response to changes in economic or other conditions and, as a result, could adversely affect our financial condition, results of operations, cash flows and our ability to pay distributions on, and the market price of, our common stock.

        We have acquired, and may continue to acquire, properties in markets that are new to us. When we acquire properties located in these markets, we may face risks associated with a lack of market knowledge or understanding of the local economy, forging new business relationships in the area and unfamiliarity with local government and permitting procedures. We work to mitigate such risks through extensive diligence and research and associations with experienced service providers; however, there can be no guarantee that all such risks will be eliminated.

        We attempt to ensure that all of our properties are adequately insured to cover casualty losses. However, there are certain losses, including losses from floods, earthquakes, acts of war, acts of terrorism or riots, that are not generally insured against or that are not generally fully insured against because it is not deemed economically feasible or prudent to do so. In addition, changes in the cost or availability of insurance could expose us to uninsured casualty losses. In the event that any of our properties incurs a casualty loss that is not fully covered by insurance, the value of our assets will be reduced by the amount of any such uninsured loss, and we could experience a significant loss of capital invested and potential revenue in these properties and could potentially remain obligated under any recourse debt associated with the property. Moreover, we, as the indirect general partner of our operating partnership, generally will be liable for all of our operating partnership's unsatisfied recourse obligations, including any obligations incurred by our operating partnership as the general partner of joint ventures. Any such losses could adversely affect our financial condition, results of operations, cash flows and ability to pay distributions on, and the market price of, our common stock. In addition, we may have no source of funding to repair or reconstruct the damaged property, and we cannot assure you that any such sources of funding will be available to us for such purposes in the future. We

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evaluate our insurance coverage annually in light of current industry practice through an analysis prepared by outside consultants.

        We have acquired, and may in the future acquire, properties, or may have previously owned properties, subject to liabilities and without any recourse, or with only limited recourse, with respect to unknown liabilities. As a result, if a liability were asserted against us based upon ownership of any of these entities or properties, then we might have to pay substantial sums to settle it, which could adversely affect our cash flows. Unknown liabilities with respect to entities or properties acquired might include:

        Under various federal, state and local environmental laws, a current or previous owner or operator of real property may be liable for the cost of removing or remediating hazardous or toxic substances on such property. Such laws often impose liability whether or not the owner or operator knew of, or was responsible for, the presence of such hazardous or toxic substances. Even if more than one person may have been responsible for the contamination, each person covered by the environmental laws may be held responsible for all of the clean-up costs incurred. In addition, third parties may sue the owner or operator of a site for damages based on personal injury, natural resources or property damage or other costs, including investigation and clean-up costs, resulting from the environmental contamination. The presence of hazardous or toxic substances on one of our properties, or the failure to properly remediate a contaminated property, could give rise to a lien in favor of the government for costs it may incur to address the contamination, or otherwise adversely affect our ability to sell or lease the property or borrow using the property as collateral. Environmental laws also may impose restrictions on the manner in which property may be used or businesses may be operated. A property owner who violates environmental laws may be subject to sanctions which may be enforced by governmental agencies or, in certain circumstances, private parties. In connection with the acquisition and ownership of our properties, we may be exposed to such costs. The cost of defending against environmental claims, of compliance with environmental regulatory requirements or of remediating any contaminated property could materially adversely affect our business, assets or results of operations and, consequently, amounts available for distribution to our shareholders.

        Environmental laws in the United States also require that owners or operators of buildings containing asbestos properly manage and maintain the asbestos, adequately inform or train those who may come into contact with asbestos and undertake special precautions, including removal or other abatement, in the event that asbestos is disturbed during building renovation or demolition. These laws may impose fines and penalties on building owners or operators who fail to comply with these requirements and may allow third parties to seek recovery from owners or operators for personal injury associated with exposure to asbestos. Some of our properties may contain asbestos-containing building materials.

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        We invest in properties historically used for industrial, manufacturing and commercial purposes. Some of these properties contain, or may have contained, underground storage tanks for the storage of petroleum products and other hazardous or toxic substances. All of these operations create a potential for the release of petroleum products or other hazardous or toxic substances. Some of our properties are adjacent to or near other properties that have contained or currently contain underground storage tanks used to store petroleum products or other hazardous or toxic substances. In addition, certain of our properties are on or are adjacent to or near other properties upon which others, including former owners or tenants of our properties, have engaged, or may in the future engage, in activities that may release petroleum products or other hazardous or toxic substances.

        We maintain a portfolio environmental insurance policy that provides coverage for potential environmental liabilities, subject to the policy's coverage conditions and limitations, for all of our properties as of March 31, 2010. From time to time, we may acquire properties, or interests in properties, with known adverse environmental conditions where we believe that the environmental liabilities associated with these conditions are quantifiable and that the acquisition will yield a superior risk-adjusted return. In such an instance, we underwrite the costs of environmental investigation, clean-up and monitoring into the cost. Further, in connection with property dispositions, we may agree to remain responsible for, and to bear the cost of, remediating or monitoring certain environmental conditions on the properties. We may not always maintain environmental insurance on all of our properties.

        All of our properties were subject to a Phase I or similar environmental assessment by independent environmental consultants at the time of acquisition. Phase I assessments are intended to discover and evaluate information regarding the environmental condition of the surveyed property and surrounding properties. Phase I assessments generally include an historical review, a public records review, an investigation of the surveyed site and surrounding properties, and preparation and issuance of a written report, but do not include soil sampling or subsurface investigations and typically do not include an asbestos survey. While some of these assessments have led to further investigation and sampling, none of our environmental assessments of our properties has revealed an environmental liability that we believe would have a material adverse effect on our business, financial condition or results of operations taken as a whole. However, we cannot give any assurance that such conditions do not exist or may not arise in the future. In addition, no such assessments have been updated for purposes of this offering, and, as of March 31, 2010, approximately 38.0% of our properties have environmental assessments which are more than three years old. Material environmental conditions, liabilities or compliance concerns may arise after the environmental assessment has been completed. Moreover, there can be no assurance that (i) future laws, ordinances or regulations will not impose any material environmental liability or (ii) the current environmental condition of our properties will not be affected by tenants, by the condition of land or operations in the vicinity of our properties (such as releases from underground storage tanks), or by third parties unrelated to us.

        All real property and the operations conducted on real property are subject to federal, state and local laws and regulations relating to environmental protection and human health and safety. Tenants' ability to operate and to generate income to pay their lease obligations may be affected by permitting and compliance obligations arising under such laws and regulations. Some of these laws and regulations may impose joint and several liability on tenants, owners or operators for the costs to investigate or remediate contaminated properties, regardless of fault or whether the acts causing the contamination were legal. Leasing properties to tenants that engage in industrial, manufacturing, and commercial

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activities will cause us to be subject to the risk of liabilities under environmental laws and regulations. In addition, the presence of hazardous or toxic substances, or the failure to properly remediate these substances, may adversely affect our ability to sell, rent or pledge such property as collateral for future borrowings.

        Some of these laws and regulations have been amended so as to require compliance with new or more stringent standards as of future dates. Compliance with new or more stringent laws or regulations or stricter interpretation of existing laws may require us to incur material expenditures. Future laws, ordinances or regulations may impose material environmental liability. Additionally, our tenants' operations, the existing condition of land when we buy it, operations in the vicinity of our properties, such as the presence of underground storage tanks, or activities of unrelated third parties may affect our properties. In addition, there are various local, state and federal fire, health, life-safety and similar regulations with which we may be required to comply and which may subject us to liability in the form of fines or damages for noncompliance. Any material expenditures, fines or damages we must pay will reduce our ability to make distributions and may reduce the value of your investment.

        In addition, changes in these laws and governmental regulations, or their interpretation by agencies or the courts, could occur.

        Under the Americans with Disabilities Act of 1990, as amended (the "ADA"), places of public accommodation must meet certain federal requirements related to access and use by disabled persons. Noncompliance could result in the imposition of fines by the federal government or the award of damages to private litigants. If we are required to make unanticipated expenditures to comply with the ADA, including removing access barriers, then our cash flows and the amounts available for distributions to our shareholders may be adversely affected. While we believe that our properties are currently in material compliance with these regulatory requirements, the requirements may change or new requirements may be imposed that could require significant unanticipated expenditures by us that will affect our cash flows and results of operations.

        We own two of our properties through leasehold interests in the land underlying the buildings and we may acquire additional buildings in the future that are subject to similar ground leases. These properties represent 2.4% of our total annualized rent. As lessee under a ground lease, we are exposed to the possibility of losing the property upon expiration, or an earlier breach by us, of the ground lease, which may have an adverse effect on our business, financial condition and results of operations, our ability to make distributions to our shareholders and the trading price of our common stock.

        In the future, our ground leases may contain certain provisions that may limit our ability to sell certain of our properties. In addition, in the future, in order to assign or transfer our rights and obligations under certain of our ground leases, we may be required to obtain the consent of the landlord which, in turn, could adversely impact the price realized from any such sale.

        We also own one property that benefits from payment in lieu of tax ("PILOT") programs and to facilitate such tax treatment our ownership in this property is structured as a leasehold interest with the relevant municipality serving as lessor. With respect to such arrangement, we have the right to purchase the fee interest in the property for a nominal purchase price, so the risk factors set forth above for

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traditional ground leases are mitigated by our ability to convert such leasehold interest to fee interest. In the event of such a conversion of our ownership interest, however, any preferential tax treatment offered by the PILOT program will be lost.

        We expect to hold the various real properties in which we invest until such time as we decide that a sale or other disposition is appropriate given our investment objectives. Our ability to dispose of properties on advantageous terms depends on factors beyond our control, including competition from other sellers and the availability of attractive financing for potential buyers of our properties. We cannot predict the various market conditions affecting real estate investments which will exist at any particular time in the future. Due to the uncertainty of market conditions which may affect the future disposition of our properties, we cannot assure you that we will be able to sell our properties at a profit in the future. Accordingly, the extent to which you will receive cash distributions and realize potential appreciation on our real estate investments will be dependent upon fluctuating market conditions.

        Furthermore, we may be required to expend funds to correct defects or to make improvements before a property can be sold. We cannot assure you that we will have funds available to correct such defects or to make such improvements.

        We may acquire properties through contracts that could restrict our ability to dispose of the property for a period of time. These "lock-out" provisions could affect our ability to turn our investments into cash and could affect cash available for distributions to you. Lock-out provisions could also impair our ability to take actions during the lock-out period that would otherwise be in the best interest of our shareholders and, therefore, may have an adverse impact on the value of our common stock relative to the value that would result if the lock-out provisions did not exist.

        If we decide to sell any of our properties, we presently intend to use our best efforts to sell them for cash. However, in some instances we may sell our properties by providing financing to purchasers. If we provide financing to purchasers, we will bear the risk that the purchaser may default, which could negatively impact our cash distributions to shareholders and result in litigation and related expenses. Even in the absence of a purchaser default, the distribution of the proceeds of sales to our shareholders, or their reinvestment in other assets, will be delayed until the promissory notes or other property we may accept upon a sale are actually paid, sold, refinanced or otherwise disposed of.

Risks Related to Our Debt Financings

        Our charter and bylaws do not limit the amount or percentage of indebtedness that we may incur, and we are subject to risks normally associated with debt financing, including the risk that our cash flows will be insufficient to meet required payments of principal and interest. There can be no assurance that we will be able to refinance any maturing indebtedness, that such refinancing would be

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on terms as favorable as the terms of the maturing indebtedness or that we will be able to otherwise obtain funds by selling assets or raising equity to make required payments on maturing indebtedness.

        In particular, loans obtained to fund property acquisitions will generally be secured by first mortgages on such properties. If we are unable to make our debt service payments as required, a lender could foreclose on the property or properties securing its debt. This could cause us to lose part or all of our investment, which in turn could cause the value of our common stock and distributions payable to shareholders to be reduced. Certain of our existing and future indebtedness is and may be cross-collateralized and, consequently, a default on this indebtedness could cause us to lose part or all of our investment in multiple properties. See "Policies With Respect to Certain Activities—Financing Policies."

        As of March 31, 2010, we had total pro forma outstanding debt of approximately $230.7 million, and we expect that we will incur additional indebtedness in the future. Interest we pay reduces our cash available for distributions. Certain of our debt issuances bear interest at variable rates and, as of March 31, 2010, we had approximately $1.4 million of variable rate debt outstanding that is not fixed with interest rate swaps. We have entered into interest rate swaps to mitigate the risk of increasing interest rates for approximately $229.3 million of our variable rate debt. Since we have incurred and may continue to incur variable rate debt, increases in interest rates raise our interest costs, which reduces our cash flows and our ability to make distributions to you. If we are unable to refinance our indebtedness at maturity or meet our payment obligations, the amount of our distributable cash flows and our financial condition would be adversely affected, and we may lose the property securing such indebtedness. In addition, if we need to repay existing debt during periods of rising interest rates, we could be required to liquidate one or more of our investments in properties at times which may not permit realization of the maximum return on such investments.

        The terms of our mortgage loans require us to comply with loan-to-collateral-value ratios, debt service coverage ratios and, in the case of an event of default, limitations on the ability of our subsidiaries that are borrowers under our mortgage loans to make distributions to us or our other subsidiaries. In addition, we are currently negotiating with a number of financial institutions regarding the establishment of a secured corporate credit facility prior to or contemporaneously with this offering. Any facility we obtain will likely include a number of additional customary financial and other covenants. Any of our existing loan covenants or future credit facility covenants may limit our flexibility in our operations and prevent us from making distributions to our shareholders, and breaches of these covenants could result in defaults under the instruments governing the applicable indebtedness even if we have satisfied our payment obligations.

        As of March 31, 2010, we had certain non-recourse, secured loans that are cross-collateralized by multiple properties. If we default on any of these loans we may then be required to repay such indebtedness, together with applicable prepayment charges, to avoid foreclosure on all cross-collateralized properties within the applicable pool. Moreover, any future corporate credit facility of ours may contain certain cross-default provisions which are triggered in the event that our other material indebtedness is in default. These cross-default provisions may require us to repay or restructure the facility in addition to any mortgage or other debt that is in default. If our properties

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were foreclosed upon, or if we are unable to refinance our indebtedness at maturity or meet our payment obligations, the amount of our distributable cash flows and our financial condition would be adversely affected.

        We are a holding company and conduct all of our operations through our operating partnership. We do not have, apart from our ownership of our operating partnership, any independent operations. As a result, we will rely on distributions from our operating partnership to pay any dividends we might declare on our common stock. We will also rely on distributions from our operating partnership to meet our debt service and other obligations, including our obligations to make distributions required to maintain our REIT status. The ability of subsidiaries of our operating partnership to make distributions to the operating partnership, and the ability of our operating partnership to make distributions to us in turn, will depend on their operating results and on the terms of any loans that encumber the properties owned by them. Such loans may contain lockbox arrangements, reserve requirements, financial covenants and other provisions that restrict the distribution of funds. In the event of a default under these loans, the defaulting subsidiary would be prohibited from distributing cash. For example, our subsidiaries are party to mortgage loans that prohibit, in the event of default, their distribution of any cash to a related party, including our operating partnership. As a result, a default under any of these loans by the borrower subsidiaries could cause us to have insufficient cash to make distributions on our common stock required to maintain our REIT status.

        Some of our financing arrangements require us to make a lump-sum or "balloon" payment at maturity. Our ability to make a balloon payment at maturity is uncertain and may depend upon our ability to obtain additional financing or our ability to sell the property. At the time the balloon payment is due, we may or may not be able to refinance the existing financing on terms as favorable as the original loan or sell the property at a price sufficient to make the balloon payment. The effect of a refinancing or sale could affect the rate of return to shareholders and the projected time of disposition of our assets. In addition, payments of principal and interest made to service our debts may leave us with insufficient cash to pay the distributions that we are required to pay to maintain our qualification as a REIT.

        If mortgage debt is unavailable at reasonable rates, we may not be able to finance the purchase of properties. In addition, we run the risk of being unable to refinance mortgage debt when the loans come due or of being unable to refinance such debt on favorable terms. If interest rates are higher when we refinance such debt, our income could be reduced. We may be unable to refinance such debt at appropriate times, which may require us to sell properties on terms that are not advantageous to us or could result in the foreclosure of such properties. If any of these events occur, our cash flows would be reduced. This, in turn, would reduce cash available for distribution to you and may hinder our ability to raise more capital by issuing more stock or by borrowing more money.

        We use various derivative financial instruments to provide a level of protection against interest rate risks, but no hedging strategy can protect us completely. These instruments involve risks, such as the

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risk that the counterparties may fail to honor their obligations under these arrangements, that these arrangements may not be effective in reducing our exposure to interest rate changes and that a court could rule that such agreements are not legally enforceable. These instruments may also generate income that may not be treated as qualifying REIT income for purposes of the 75% or 95% REIT income tests. In addition, the nature and timing of hedging transactions may influence the effectiveness of our hedging strategies. Poorly designed strategies or improperly executed transactions could actually increase our risk and losses. Moreover, hedging strategies involve transaction and other costs. We cannot assure you that our hedging strategy and the derivatives that we use will adequately offset the risk of interest rate volatility or that our hedging transactions will not result in losses that may reduce the overall return on your investment.

Risks Related to this Offering

        The purchase price per share of our common stock offered pursuant to this prospectus reflects the result of negotiations between us and the representatives of the underwriters. The purchase price may not accurately reflect the future value of our company, and the offering price may not be realized upon any subsequent disposition of the shares.

        As of the date of this prospectus, we have broadly characterized the amount of the net proceeds of this offering that will be used for the various purposes described under "Use of Proceeds." Our management team will have considerable discretion in the specific application of the net proceeds, may apply the net proceeds in ways other than those we currently expect, and may apply the net proceeds in ways that may not increase our revenue or our market value. You will not have the opportunity, as part of your investment decision, to assess whether the proceeds of this offering are being used appropriately.

        In the future, we may attempt to increase our capital resources by making offerings of debt or additional offerings of equity securities, including commercial paper, senior or subordinated notes and series of preferred stock or common stock. Upon liquidation, holders of our debt securities and shares of preferred stock, if any, and lenders with respect to other borrowings will receive a distribution of our available assets prior to the holders of our common stock. Additional equity offerings may dilute the holdings of our existing shareholders or reduce the market price of our common stock, or both. Preferred stock, if issued, could have a preference on liquidating distributions or a preference on dividend payments or both that could limit our ability to make a dividend distribution to the holders of our common stock. Because our decision to issue securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings. Thus, holders of our common stock bear the risk of our future offerings reducing the market price of our common stock and diluting their stock holdings in us.

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        Sales of substantial amounts of shares of our common stock in the public market, or upon exchange of common units or exercise of any options, or the perception that such sales might occur could adversely affect the market price of our common stock. The exchange of common units for common stock, the exercise of any stock options or the vesting of any restricted stock granted to certain directors, executive officers and other employees under our 2010 Equity Incentive Plan, the issuance of our common stock or common units in connection with property, portfolio or business acquisitions and other issuances of our common stock or common units could have an adverse effect on the market price of the shares of our common stock. Also, continuing investors that will hold shares of our outstanding common stock and            common units on a pro forma basis are parties to agreements that provide for registration rights. The exercise of these registration rights could depress the price of our common stock. The existence of shares of our common stock reserved for issuance as restricted shares or upon exchange of options or common units may adversely affect the terms upon which we may be able to obtain additional capital through the sale of equity securities. In addition, future sales by us of our common stock may be dilutive to existing shareholders.

        Our executive officers and our directors and the owners of the management company, Fund III, Fund IV and STAG GI have entered into lock-up agreements that prohibit them from selling, pledging, transferring or otherwise disposing of our common stock or securities convertible into our common stock for a period of        months after the date of this prospectus. The representatives of the underwriters may, in their discretion, release all or any portion of the common stock subject to the lock-up agreements with our directors and officers and the owners of the management company, Fund III, Fund IV and STAG GI at any time without notice or shareholder approval. If the restrictions under the lock-up agreements are waived or terminated, up to approximately            shares of common stock, including securities convertible into our common stock, will be available for sale into the market, subject only to applicable securities rules and regulations and, in some cases, vesting requirements, which could reduce the market price for our common stock.

        Currently, there is no established trading market for our common stock. We will apply for listing on the New York Stock Exchange ("NYSE") under the symbol "STIR" to be effective upon completion of this offering. We cannot assure you that our listing application will be accepted or that, if accepted, an active trading market for our common stock will develop after the offering or if one does develop, that it will be sustained.

        Even if an active trading market develops, the market price of our common stock may be volatile. In addition, the trading volume in our common stock may fluctuate and cause significant price variations to occur. If the market price of our common stock declines, you may be unable to resell your shares at or above the initial public offering price. We cannot assure you that the market price of our common stock will not fluctuate or decline significantly in the future. Some of the factors that could affect our stock price or result in fluctuations in the price or trading volume of our common stock include:

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        In addition, the stock market has experienced price and volume fluctuations that have affected the market prices of many companies in industries similar or related to ours and may have been unrelated to operating performances of these companies. These broad market fluctuations could reduce the market price of our common stock.

        As of March 31, 2010, the pro forma net tangible book value of the assets to be acquired by us in our formation transactions was approximately $             million, or $            per share of our common stock held by our continuing investors, assuming the exchange of common units for shares of our common stock on a one-for-one basis. As a result, the pro forma net tangible book value per share of our common stock after the consummation of our formation transactions and this offering will be less than the initial public offering price. The purchasers of our common stock offered hereby will experience immediate and substantial dilution of $            per share in the pro forma net tangible book value per share of our common stock.

        One of the factors that will influence the price of our common stock will be the dividend yield on our common stock (as a percentage of the price of our common stock) relative to market interest rates. An increase in market interest rates may lead prospective purchasers of our common stock to expect a higher dividend yield and, if we are unable to pay such yield, the market price of our common stock could decrease.

        The market value of the equity securities of a REIT is based primarily upon the market's perception of the REIT's growth potential and its current and potential future cash distributions, whether from operations, sales or refinancings, and is secondarily based upon the real estate market value of the underlying assets. For that reason, our common stock may trade at prices that are higher or lower than our net asset value per share. To the extent we retain operating cash flow for investment purposes, working capital reserves or other purposes, these retained funds, while increasing the value of our underlying assets, may not correspondingly increase the market price of our common stock. Our failure to meet the market's expectations with regard to future earnings and cash distributions likely would adversely affect the market price of our common stock.

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        Following this offering, we will become subject to reporting and other obligations under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), including the requirements of Section 404 of the Sarbanes-Oxley Act. Section 404 requires annual management assessments of the effectiveness of our internal controls over financial reporting and a report by our independent registered public accounting firm addressing these assessments. These reporting and other obligations will place significant demands on our management, administrative, operational, internal audit and accounting resources and will cause us to incur significant expenses. We may need to upgrade our systems or create new systems; implement additional financial and management controls, reporting systems and procedures; expand our internal audit function; and hire additional accounting, internal audit and finance staff. If we are unable to accomplish these objectives in a timely and effective fashion, our ability to comply with the financial reporting requirements and other rules that apply to reporting companies could be impaired. Any failure to achieve and maintain effective internal controls could have a material adverse effect on our business, operating results and stock price.

U.S. Federal Income Tax Risks

        Our qualification as a REIT will depend upon our ability to meet requirements regarding our organization and ownership, distributions of our income, the nature and diversification of our income and assets and other tests imposed by the Code. If we fail to qualify as a REIT for any taxable year after electing REIT status, we will be subject to U.S. federal income tax on our taxable income at corporate rates. In addition, we would generally be disqualified from treatment as a REIT for the four taxable years following the year of losing our REIT status. Losing our REIT status would reduce our net earnings available for investment or distribution to shareholders because of the additional tax liability. In addition, dividends to shareholders would no longer qualify for the dividends-paid deduction and we would no longer be required to make distributions. If this occurs, we might be required to borrow funds or liquidate some investments in order to pay the applicable tax. For a discussion of the REIT qualification tests and other considerations relating to our election to be taxed as REIT, see "U.S. Federal Income Tax Considerations."

        In the future, we may institute a dividend reinvestment plan, which would allow our shareholders to acquire additional shares of common stock by automatically reinvesting their cash dividends. If our shareholders participate in a dividend reinvestment plan, they will be deemed to have received, and for income tax purposes will be taxed on, the amount reinvested in shares of our common stock to the extent the amount reinvested was not a tax-free return of capital. In addition, our shareholders will be treated for tax purposes as having received an additional distribution to the extent the shares are purchased at a discount to fair market value. As a result, unless a shareholder is a tax-exempt entity, it may have to use funds from other sources to pay its tax liability on the value of the shares of common stock received.

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        Even if we qualify as a REIT for U.S. federal income tax purposes, we may be subject to some U.S. federal, state and local taxes on our income or property. For example:

        We intend to make distributions to our shareholders to comply with the REIT requirements of the Code.

        From time to time, we may generate taxable income greater than our income for financial reporting purposes, or our taxable income may be greater than our cash flow available for distribution to shareholders (for example, where a borrower defers the payment of interest in cash pursuant to a contractual right or otherwise). If we do not have other funds available in these situations we could be required to borrow funds, sell investments at disadvantageous prices or find another alternative source of funds to make distributions sufficient to enable us to pay out enough of our taxable income to satisfy the REIT distribution requirement and to avoid corporate income tax and the 4% excise tax in a particular year. These alternatives could increase our costs or reduce our equity. Thus, compliance with the REIT requirements may hinder our ability to operate solely on the basis of maximizing profits.

        To qualify as a REIT, we must satisfy certain tests on an ongoing basis concerning, among other things, the sources of our income, nature of our assets and the amounts we distribute to our shareholders. We may be required to make distributions to shareholders at times when it would be more advantageous to reinvest cash in our business or when we do not have funds readily available for distribution. Compliance with the REIT requirements may hinder our ability to operate solely on the basis of maximizing profits and the value of our shareholders' investment.

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        We expect to purchase real properties and lease them back to the sellers of such properties. While we will use commercially reasonable efforts to structure any such sale-leaseback transaction such that the lease will be characterized as a "true lease" for tax purposes, thereby allowing us to be treated as the owner of the property for U.S. federal income tax purposes, we cannot assure you that the Internal Revenue Service ("IRS") will not challenge such characterization. In the event that any such sale-leaseback transaction is challenged and recharacterized as a financing transaction or loan for U.S. federal income tax purposes, deductions for depreciation and cost recovery relating to such property would be disallowed. If a sale-leaseback transaction were so recharacterized, we might fail to satisfy the REIT qualification "asset tests" or "income tests" and, consequently, lose our REIT status effective with the year of recharacterization. Alternatively, the amount of our REIT taxable income could be recalculated which might also cause us to fail to meet the distribution requirement for a taxable year.

        We may be deemed to be, or make investments in entities that own or are themselves deemed to be taxable mortgage pools. Similarly, certain of our securitizations or other borrowings could be considered to result in the creation of a taxable mortgage pool for U.S. federal income tax purposes. As a REIT, provided that we own 100% of the equity interests in a taxable mortgage pool, we generally would not be adversely affected by the characterization of the securitization as a taxable mortgage pool. Certain categories of shareholders, however, such as foreign shareholders eligible for treaty or other benefits, shareholders with net operating losses, and certain tax-exempt shareholders that are subject to unrelated business income tax, could be subject to increased taxes on a portion of their dividend income from us that is attributable to the taxable mortgage pool. In addition, to the extent that our stock is owned by tax-exempt "disqualified organizations," such as certain government-related entities that are not subject to tax on unrelated business income, we will incur a corporate-level tax on a portion of our income from the taxable mortgage pool. In that case, we are authorized to reduce and intend to reduce the amount of our distributions to any disqualified organization whose stock ownership gave rise to the tax by the amount of such tax paid by us that is attributable to such shareholder's ownership. Moreover, we would be precluded from selling equity interests in these securitizations to outside investors, or selling any debt securities issued in connection with these securitizations that might be considered to be equity interests for U.S. federal income tax purposes. These limitations may prevent us from using certain techniques to maximize our returns from securitization transactions.

        At any time, the U.S. federal income tax laws or regulations governing REITs or the administrative interpretations of those laws or regulations may be amended. We cannot predict when or if any new U.S. federal income tax law, regulation or administrative interpretation, or any amendment to any existing U.S. federal income tax law, regulation or administrative interpretation, will be adopted, promulgated or become effective and any such law, regulation or interpretation may take effect retroactively. We and our shareholders could be adversely affected by any such change in, or any new, federal income tax law, regulation or administrative interpretation.

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        As a result of our formation transactions described above, the contributors expect to defer approximately $             million of taxable income and taxable gain. The contribution transactions are expected to be tax free, in whole or in part, to us, our operating partnership and the contributors. Our operating partnership will have a carryover basis in the assets of the limited liability companies acquired by us by contribution such that our basis will be the same as the basis immediately before our formation transactions, adjusted upward by the gain, if any, recognized by the contributors. As a result of the contributions, we will have substantial built-in taxable income in our assets immediately after our formation transactions.

        We intend to take the position that each of the contributions of the interests in the limited liability companies qualify as a tax-free transaction, in whole or in part, under the Code. To the extent any of these contributions does not so qualify, then the contribution would be treated as a taxable asset sale in which the contributors would be required to recognize taxable gain. If the contribution is treated as a taxable event, our adjusted tax basis in the assets of the limited liability companies is expected to equal the then fair market value of the consideration paid for such assets.

ERISA Risks

        Fiduciaries of employee benefit plans subject to the Employee Retirement Income Security Act of 1974, as amended ("ERISA") should take into account their fiduciary responsibilities in connection with a decision to invest in our common stock. If such fiduciaries breach their responsibilities, including (among other things) the responsibility to act prudently, to diversify the plan's assets, and to follow plan documents and investment policies, they may be held liable for plan losses and may be subject to civil or criminal penalties and excise taxes. Similar consequences may result if a plan's investment in shares of our stock constitutes a so-called "prohibited transaction" under ERISA. Plans or arrangements that are not subject to ERISA, such as individual retirement accounts, may be subject to Section 4975 of the Code, which contains similar prohibited transaction rules.

        Although it is intended that our underlying assets and our operating partnership's underlying assets will not constitute "plan assets" of ERISA plans within the meaning of Department of Labor regulations and Section 3(42) of ERISA, there can be no assurance in this regard. If our assets or our operating partnership's assets constitute plan assets under ERISA, certain transactions in which we might normally engage could constitute prohibited transactions under ERISA or the Code. If our assets or our operating partnership's assets are plan assets, our managers may be fiduciaries under ERISA.

        Governmental employee benefit plans and certain church plans are exempt from ERISA, but these plans may be subject to federal, state or local laws that are similar to the ERISA laws and regulations discussed above.

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

        We make statements in this prospectus that are forward-looking statements, which are usually identified by the use of words such as "anticipates," "believes," "estimates," "expects," "intends," "may," "plans," "projects," "seeks," "should," "will," and variations of such words or similar expressions. Our forward-looking statements reflect our current views about our plans, intentions, expectations, strategies and prospects, which are based on the information currently available to us and on assumptions we have made. Although we believe that our plans, intentions, expectations, strategies and prospects as reflected in or suggested by our forward-looking statements are reasonable, we can give no assurance that our plans, intentions, expectations, strategies or prospects will be attained or achieved and you should not place undue reliance on these forward-looking statements. Furthermore, actual results may differ materially from those described in the forward-looking statements and may be affected by a variety of risks and factors including, without limitation:

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS


Any forward-looking statement speaks only as of the date on which it is made. New risks and uncertainties arise over time, and it is not possible for us to predict those events or how they may affect us. Except as required by law, we are not obligated to, and do not intend to, update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

        Market data and industry forecasts and projections used in this prospectus have been obtained from CBRE-EA or other independent industry sources. Forecasts, projections and other forward-looking information obtained from CBRE-EA or other sources are subject to similar qualifications and uncertainties as other forward-looking statements in this prospectus.

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USE OF PROCEEDS

        We estimate that the net proceeds we will receive from the sale of shares of our common stock in this offering will be approximately $             million (or approximately $             million if the underwriters exercise their overallotment option in full), in each case assuming a public offering price of $            per share, which is the mid-point of the range set forth on the cover of this prospectus, and after deducting underwriting discounts and commissions of approximately $             million (or approximately $             million if the underwriters exercise their overallotment option in full) and estimated offering expenses of approximately $             million payable by us. We will contribute the net proceeds of this offering to our operating partnership in exchange for common units in our operating partnership.

        We expect our operating partnership will use the net proceeds as follows:

        If the underwriters exercise their overallotment option in full, we expect to use the additional $             million of net proceeds for general corporate purposes.

        The debt repayments described above are estimated based on principal and related accrued interest outstanding as of March 31, 2010. The actual amounts of the debt repayments will depend on the principal and related accrued interest outstanding at the time of payment and may be greater than or less than our estimates above.

        Pending application of cash proceeds, we intend to invest the net proceeds temporarily in interest-bearing, short-term investment-grade securities, money-market accounts or checking accounts, which are consistent with the Company's intention to qualify for taxation as a REIT. Such investments may include, for example, government and government agency certificates, certificates of deposit, interest-bearing bank deposits and mortgage loan participations. These initial investments are expected to provide a lower net return than we will seek to achieve from investments in our properties.

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DISTRIBUTION POLICY

        We intend to elect and qualify to be treated as a REIT for U.S. federal income tax purposes commencing with our taxable year ending December 31, 2010. U.S. federal income tax law generally requires that a REIT distribute annually at least 90% of its REIT taxable income, determined without regard to the deduction for dividends paid and excluding net capital gains. We will not be required to make distributions with respect to income derived from the activities conducted through our TRS that is not distributed to us. Our TRS is the entity through which we will provide any third-party management and advisory services, potentially including management services provided to Fund II, Fund III and Fund IV, unless such services can be provided without jeopardizing our REIT status. To the extent our TRS's income is not distributed and is instead reinvested with the operations of our TRS, the value of our equity interest in our TRS will increase. The aggregate value of the securities that we hold in our TRS may not exceed 25% of the total value of our gross assets. In part because of restrictions applicable to us as a REIT, distributions from our TRS to us will not exceed 25% of our gross income with respect to any given taxable year.

        To satisfy the requirements to qualify as a REIT and generally not be subject to U.S. federal income tax, we intend to make quarterly distributions of all or substantially all of our of our taxable income to holders of our common stock out of assets legally available therefor. We intend to pay a pro rata initial distribution with respect to the period commencing on the completion of this offering and ending at the last day of the then-current fiscal quarter, based on a distribution of $            per share for a full quarter. On an annualized basis, this would be $            per share, or an annual distribution rate of approximately %, based on the midpoint of the range set forth on the cover page of this prospectus. We intend to maintain our initial distribution rate for the 12-month period following completion of this offering unless our actual results of operations, economic conditions or other factors differ materially from the assumptions used in our estimate. Any future distributions we make will be at the discretion of our board of directors and will depend upon our earnings and financial condition, maintenance of REIT qualification and the applicable provisions of the MGCL and such other factors as our board may determine in its sole discretion. Actual distributions may be significantly different from the expected distributions. For more information regarding risk factors that could materially adversely affect our earnings and financial condition, please see "Risk Factors."

        We anticipate that our distributions generally will be taxable as ordinary income to our shareholders, although a portion of the distributions may be designated by us as qualified dividend income, excess inclusion income, or capital gain or may constitute a return of capital. We will furnish annually to each of our shareholders a statement setting forth distributions paid during the preceding year and their characterization as ordinary income, excess inclusion income, return of capital, qualified dividend income and/or capital gains.

        Our cash available for distribution may be less than the amount required to meet the distribution requirements for REITs under the Code, and we may be required to obtain a loan and borrow money or sell assets to pay out enough money to satisfy the distribution requirements.

        The following table describes our pro forma net loss before non-controlling interest for the year ended December 31, 2009, and the adjustments we have made thereto in order to estimate our initial cash available for distribution to the holders or our common stock for the 12 months ending March 31, 2011. The table reflects our consolidated information, including common units in our operating

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partnership. Each common unit in our operating partnership may be redeemed for cash, or at our option, one shares of our common stock, beginning 12 months after completion of this offering.

Pro forma net loss before non-controlling interest for the 12 months ended December 31, 2009

  $    
 

Less: Pro forma net loss before non-controlling interest for the three months ended March 31, 2009

       
 

Add: Pro forma net loss before non-controlling interest for the three months ended March 31, 2010

       
       

Pro forma net loss before non-controlling interest for the 12 months ended March 31, 2010

       
 

Add: Pro forma real estate depreciation and amortization

       
 

Add: Amortization of deferred financing costs and debt premiums and discounts

       
 

Less: Net effects of straight-line rents and amortization of acquired above/below market lease intangibles

       
 

Add: Non-cash compensation expense

       
 

Add: (Gain) loss on interest rate swaps

       
       

Pro forma cash flows provided by operations for the 12 months ended March 31, 2010

       
 

Add: Net increases in rental and related revenue(1)

       
 

Less: Net decreases in contractual rental and related revenue due to lease expirations(2)

       
       

Estimated cash flows provided by operations for the 12 months ending March 31, 2011

       
 

Less: Provision for tenant improvements and leasing commissions(3)

       
 

Less: Estimated annual provision for recurring capital expenditures(4)

       
       

Estimated cash flows used in investing activities for the 12 months ending March 31, 2011

       
 

Add: Estimated proceeds from credit facility to be used in financing activities(5)

       
 

Less: Scheduled debt principal payments(6)

       
       

Estimated cash flows used in financing activities for the 12 months ending March 31, 2011

       
       

Estimated cash available for distribution for the 12 months ending March 31, 2011

  $    
       
 

Estimated annual distribution to non-controlling interest for the 12 months ending March 31, 2011

       
 

Estimated annual distribution to common shareholders for the 12 months ending March 31, 2011

       
       

Estimated annual distribution for the 12 months ending March 31, 2011

  $    
       
 

Estimated distribution per common unit for the 12 months ending March 31, 2011(7)

  $    
 

Estimated distribution per share for the 12 months ending March 31, 2011(7)

  $    
 

Payout ratio based on estimated cash available for distribution to our holders of common stock/common units

       

(1)
Net increases in rental and related revenue consists of contractual increases in rental and related revenue from our real estate portfolio related to increases in rental revenue from leases entered into as of March 31, 2010.

(2)
Net decreases in contractual rental and related revenue are due to lease expirations from our consolidated portfolio. Assuming no new leases and no lease renewals after March 31, 2010, other than renewals of month-to-month leases, unless the new lease or lease renewal was executed and delivered on or before March 31, 2010.

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(3)
Provision for tenant improvements and leasing commissions includes any current contractual tenant improvement or leasing commission costs to be incurred in the 12 months ending March 31, 2011 related to any new leases or lease renewals entered into as of March 31, 2010. During the 12 months ending March 31, 2011, we expect to have additional tenant improvement and leasing commission expenditures related to new and renewal leasing that occur after March 31, 2010. Any increases in such expenditures would be directly related to such new and renewal leasing in that such expenditures would be incurred when a new lease is signed or an expiring lease is renewed, and are not included herein because we have no contractual obligations at this time for such future leasing.

(4)
Estimated annual provision for recurring capital expenditures is based on $            per leasable square foot of such expenditures for our consolidated portfolio. This estimate is based on the historical weighted average of our existing portfolio, on a per square foot basis, of annual recurring capital expenditures from through 2009 and the annualized three months ended March 31, 2010.

(5)
We expect to enter into a new secured corporate credit facility, which will be undrawn at the closing of this offering, assuming that this offering prices at the midpoint of the range set forth on the cover page of this prospectus. If we draw on the facility, the proceeds will be available to finance our acquisition of industrial properties, and to finance working capital needs and for other general corporate purposes, including repayment of maturing debt.

(6)
Estimated cash flows used in financing activities for the 12 months ending March 31, 2011 includes all scheduled debt repayments, including both amortization and other principal repayments and excludes $66.1 million of scheduled debt that we intend to repay with net proceeds of this offering.

(7)
Estimated distribution per share for the 12 months ending March 31, 2011 is based on             shares outstanding following the completion of this offering and estimated distribution per common unit for the 12 months ending March 31, 2011 is based on            common units outstanding following the completion of this offering.

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CAPITALIZATION

        The following table sets forth:

        This table should be read in conjunction with "Use of Proceeds," "Selected Financial Information," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and STAG Predecessor Group's historical audited financial statements and the unaudited pro forma financial information and related notes appearing elsewhere in this prospectus.

 
  As of March 31, 2010  
 
  STAG Predecessor
Group Historical
  Company
Pro Forma As
Adjusted(1)(2)(3)
 
 
   
  (unaudited)
 
 
  (dollars in thousands)
 
 

Notes payable(4)(5)

  $ 211,002        
 

Owners' equity (deficit)

    (3,225 )      
 

Shareholders' equity (deficit):

             
   

Preferred stock, par value $0.01 per share, 10,000,000 shares authorized, no shares issued and outstanding

         
   

Common stock, par value $0.01 per share; 100,000,000 shares authorized, 110 shares issued and outstanding, actual and             common stock issued and outstanding, as adjusted

        $    
   

Additional paid-in capital

             
   

Non-controlling interest in our operating partnership

             
           
   

Total owners' and shareholders' equity (deficit)

    (3,225 )      
           

Total capitalization

  $ 207,777   $    
           

(1)
Assumes                  shares will be sold in this offering at an initial public offering price of $            per share for net proceeds of approximately $             million after deducting the underwriting discounts and estimated organizational and offering expenses of approximately $             million. See "Use of Proceeds."

(2)
Does not include the underwriters' option to purchase up to                  additional shares of common stock.

(3)
The common stock outstanding as shown does not include common units in our operating partnership to be issued in connection with our formation transactions. The common stock outstanding as shown includes (i)                   restricted shares of common stock to be granted to our executive officers and certain employees under our equity incentive plan upon the completion of this offering and (ii)                   restricted shares of common stock to be granted to our independent directors under our equity incentive plan upon the completion of this offering. The common stock outstanding as shown does not include (i)                   LTIP units to be granted to our executive officers under our equity incentive plan or (ii)                   shares of our common stock reserved for issuance under our equity incentive plan. See "Management—Equity Incentive Plan."

(4)
Pro forma balance as of March 31, 2010, which includes an approximately $             million fair value adjustment.

(5)
We also expect to enter into a new secured corporate credit facility, which will be undrawn at the closing of this offering, assuming that this offering prices at the midpoint of the range set forth on the cover page of this prospectus.

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DILUTION

        Purchasers of our common stock offered in this prospectus will experience an immediate and substantial dilution of the net tangible book value of our common stock from the initial public offering price. As of March 31, 2010, we had a pro forma net tangible book value of approximately $             million, or $    per share of our common stock held by continuing investors, assuming the exchange of common units into shares of our common stock on a one-for-one basis. After giving effect to the sale of the shares of our common stock offered hereby, including the use of proceeds as described under "Use of Proceeds," and our formation transactions, the deduction of underwriting discounts and commissions, and estimated formation transaction and offering expenses, the pro forma net tangible book value as of March 31, 2010 attributable to common shareholders, including the effects of the grant of LTIP units and restricted shares of common stock to our executive officers, directors and certain employees, would have been $    , or $    per share of our common stock. This amount represents an immediate increase in net tangible book value of $    per share to continuing investors and an immediate dilution in pro forma net tangible book value of $    per share from the assumed public offering price of $    per share of our common stock to new public investors. See "Risk Factors—Risks Related to this Offering—Differences between the book value of the assets to be acquired in our formation transactions and the price paid for our common stock will result in an immediate and material dilution of the book value of our common stock." The following table illustrates this per share dilution:

Assumed initial public offering price per share

  $    

Net tangible book value per share before our formation transactions and this offering(1)

  $    

Net increase in pro forma net tangible book value per share attributable to our formation transactions and this offering

  $    

Pro forma net tangible book value per share after our formation transactions and this offering(2)

  $    

Dilution in pro forma net tangible book value per shares to new investors(3)

  $    

(1)
Net tangible book value per share of our common stock before our formation transactions and this offering is determined by dividing net tangible book value based on March 31, 2010 net book value of the tangible assets (consisting of total assets less intangible assets, which are comprised of goodwill (if applicable), deferred financing and leasing costs, acquired above-market leases and acquired in place lease value, net of liabilities to be assumed, excluding acquired below market leases and acquired above-market ground leases) of our predecessor by the number of shares of our common stock held by continuing investors after this offering, assuming the conversion into shares of our common stock on a one-for-one basis of the common units to be issued in connection with our formation transactions.

(2)
Based on pro forma net tangible book value of approximately $    divided by the sum of     shares of our common stock and common units to be outstanding after this offering, not including     shares of common stock issuable upon exercise of unvested LTIP units granted under our equity incentive plan.

(3)
Dilution is determined by subtracting pro forma net tangible book value per share of our common stock after giving effect to our formation transactions and this offering from the initial public offering price paid by a new investor for a share of our common stock.

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SELECTED FINANCIAL INFORMATION

        The following table sets forth selected financial and operating data on (i) a pro forma basis for our company and (ii) an historical basis for the STAG Predecessor Group. On a pro forma basis we will own 101 industrial properties consisting of 57 properties owned by STAG Predecessor Group and 44 properties that collectively constitute STAG Acquisition Group and STAG Contribution Group. STAG Predecessor Group is part of our predecessor business and consists of the subsidiaries of Fund III that will be contributed to us by Fund III in our formation transactions. STAG Acquisition Group consists of the properties owned by Fund II that will be sold to us in our formation transactions. STAG Contribution Group consists of the properties owned by Fund IV and STAG GI that will be contributed to us in the formation transactions.

        In the selected financial and operating data, we have not presented historical financial information for STAG Industrial, Inc. because we have not had any corporate activity since our formation other than the issuance of shares of common stock in connection with the initial capitalization of our company and activity in connection with our formation transactions and this offering, and because we believe that a discussion of the results of STAG Industrial, Inc. would not be meaningful.

        We have not presented historical financial information for the management company as its results are not considered significant, and because we believe that a discussion of these results, (which primarily consist of acquisition and asset management fees from Fund II, Fund III and Fund IV and general and administrative costs) would not be meaningful.

        You should read the following selected financial and operating data in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations," our unaudited pro forma consolidated financial statements and related notes, the historical combined financial statements and related notes of STAG Predecessor Group, and the historical combined statements of revenue and certain expenses and related notes of STAG Acquisition Group and STAG Contribution Group.

        The unaudited pro forma condensed consolidated balance sheet data is presented as if this offering and our formation transactions had occurred on March 31, 2010, and the unaudited pro forma statements of operations and other data for the three months ended March 31, 2010 and the year ended December 31, 2009, is presented as if this offering and our formation transactions had occurred on January 1, 2009. The pro forma financial information is not necessarily indicative of what our actual financial condition would have been as of March 31, 2010 or what our actual results of operations would have been assuming this offering and our formation transactions had been completed as of January 1, 2009, nor does it purport to represent our future financial position or results of operations.

        The unaudited selected historical combined balance sheet information as of March 31, 2010 and statement of operations data for the three months ended March 31, 2010 and 2009 have been derived from the unaudited combined financial statements of the STAG Predecessor Group included elsewhere in this prospectus. The selected historical combined balance sheet information as of December 31, 2009 and 2008, and the historical combined statement of operations data for the years ended December 31, 2009, 2008, and 2007, have been derived from the combined financial statements of the STAG Predecessor Group audited by PricewaterhouseCoopers LLP, independent registered public accountants, whose report thereon is included elsewhere in this prospectus. The selected historical combined balance sheet information as of December 31, 2007 and 2006 and the historical combined statement of operations for the period ended December 31, 2006 have been derived from the unaudited combined financial statements of the STAG Predecessor Group, which are not included in this prospectus. Both of the two components were audited.

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        The audited historical financial statements of STAG Predecessor Group in this prospectus, and therefore the historical financial and operating data in the table below exclude the operating results and financial condition of (i) the Option Properties, (ii) the entities that own the Option Properties and (iii) the management company.

 
  Company
Pro Forma
  STAG Predecessor Group
Historical
 
 
  Three Months
Ended
March 31,
  Year Ended
December 31,
  Three Months Ended
March 31,
  Year Ended December 31,   Period Ended
December 31,
 
 
  2010   2009   2010   2009   2009   2008   2007(1)   2006  
 
  (unaudited)
  (unaudited)
  (unaudited)
  (unaudited)
   
   
  (unaudited)
  (unaudited)
 
 
  (dollars in thousands)
 

Statement of Operations Data:

                                                 

Revenue

                                                 

Rental income

              $ 6,323   $ 6,524   $ 25,658   $ 27,319   $ 11,162   $ 941  

Tenant recoveries

                1,360     1,156     4,508     3,951     1,326      

Other

                                     
                                   

Total revenue

                7,683     7,680     30,166     31,270     12,488     941  
                                   

Expenses

                                                 

Property

                2,098     2,344     9,009     6,423     1,681     11  

General and administrative

                189     76     478     502     404     29  

Depreciation and amortization

                2,383     3,216     10,257     12,108     4,687     336  

Loss on impairment of assets

                              3,728          
                                   

Total expenses

                4,670     5,636     19,744     22,761     6,772     376  
                                   

Other income (expense)

                                                 

Interest income

                1     1     66     140     163     4  

Interest expense

                (3,531 )   (3,346 )   (14,328 )   (15,058 )   (7,861 )   (616 )

Gain (loss) on interest rate swaps

                (589 )   493     (1,720 )   (1,275 )        
                                     

Total other income (expense)

                (4,119 )   (2,852 )   (15,982 )   (16,193 )   (7,698 )   (612 )
                                     

Net income (loss)

                (1,106 )   (808 )   (5,560 )   (7,684 )   (1,982 )   (47 )
                                   

Balance Sheet Data (End of Period):

                                                 

Rental property, before accumulated depreciation

                210,067     209,383     210,009     208,948     212,688     31,998  

Rental property, after accumulated depreciation

                194,269     199,213     195,383     200,268     210,294     31,808  

Total assets

                217,572     225,648     220,116     229,731     242,134     35,976  

Notes payable

                211,002     215,460     212,132     216,178     217,360     31,877  

Total liabilities

                220,797     217,961     221,637     223,171     220,548     32,305  

Owners'/shareholders' equity (deficit)

                (3,225 )   7,687     (1,521 )   6,560     21,586     3,671  

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  Company
Pro Forma
  STAG Predecessor Group
Historical
 
 
  Three Months
Ended
March 31,
  Year Ended
December 31,
  Three Months Ended
March 31,
  Year Ended December 31,   Period Ended
December 31,
 
 
  2010   2009   2010   2009   2009   2008   2007(1)   2006  
 
  (unaudited)
  (unaudited)
  (unaudited)
  (unaudited)
   
   
  (unaudited)
  (unaudited)
 
 
  (dollars in thousands)
 

Other Data:

                                                 

Cash flow provided by operating activities

              $ 1,747   $ 2,579   $ 8,365   $ 8,431   $ 3,488   $ 273  

Cash flow used in investing activities

                (718 )   (1,019 )   (2,042 )   (409 )   (203,669 )   (30,041 )

Cash flow (used in) provided by financing activities

                (1,728 )   (1,879 )   (6,921 )   (8,524 )   204,581     35,315  

Total number of in-service properties

                                                 

Total in-service gross leasable area, in square feet

                                                 

NOI(2)

                                                 

Rental revenue

                                                 

Tenant recoveries

                                                 

Other operating revenue

                                                 

Property expenses

                                                 
                                   

NOI

                                                 
                                   

EBITDA(2)

                                                 

Net loss

                                                 

Interest expense

                                                 

Depreciation and amortization

                                                 
                                   

EBITDA

                                                 
                                   

FFO(2)

                                                 

Net loss

                                                 

Depreciation and amortization

                                                 
                                   

FFO

                                                 
                                   

AFFO(2)

                                                 

FFO

                                                 

Impairment charges

                                                 

Straight line rental revenue adjustment

                                                 

Deferred financing cost amortization

                                                 

Above/below market lease amortization

                                                 

Gain (loss) on interest rate swaps

                                                 

Acquisition costs

                                                 

Amortization of non-cash compensation

                                                 

Amortization of debt discount

                                                 

Recurring capital expenditures

                                                 
                                   

AFFO

                                                 
                                   

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(1)
We have prepared the results of operations for the year ended December 31, 2007 by combining amounts for 2007 obtained by adding the audited operating results of the Antecedent for the period of January 1, 2007 to May 31, 2007 and STAG Predecessor Group for the period of June 1, 2007 to December 31, 2007 (since the difference in basis between Antecedent and STAG Predecessor Group were not materially different and under common management). Although this combined presentation does not comply with GAAP, we believe that it provides a meaningful method of comparison. In addition, each of its two components was audited.

(2)
See "Management's Discussion and Analysis of Financial Condition and Results of Operations" for more detailed explanations of NOI, EBITDA, FFO and AFFO, and reconciliations of NOI, EBITDA, FFO and AFFO to net income computed in accordance with GAAP.

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        The following discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in forward-looking statements for many reasons, including the risks described in "Risk Factors" and elsewhere in this prospectus. You should read the following discussion with "Cautionary Note Regarding Forward-Looking Statements" and the combined financial statements and related notes included elsewhere in this prospectus.

        The following discussion and analysis is based on, and should be read in conjunction with, the unaudited financial statements and notes thereto as of March 31, 2010 (and for the three months ended March 31, 2010 and 2009) and the audited financial statements and notes thereto as of December 31, 2009 and 2008 (and for the years ended December 31, 2009, 2008 and 2007) of STAG Predecessor Group. We have not had any corporate activity since our formation, other than the issuance of 110 shares of our common stock in connection with our initial capitalization and activities in preparation for our formation transactions and this offering. Accordingly, we believe that a discussion of our results of operations would not be meaningful, and this discussion and analysis therefore only discusses the combined results of STAG Predecessor Group. For more information regarding these companies, see "Selected Financial Information." All significant intercompany balances and transactions have been eliminated in the financial statements.

Overview

        We are a newly formed, self-administered and self-managed full-service real estate company focused on the acquisition, ownership and management of single-tenant industrial properties throughout the United States. We will continue and grow the single-tenant industrial business conducted by our predecessor business. Mr. Butcher, the Chairman of our board of directors and our Chief Executive Officer and President, together with an affiliate of NED, a real estate development and management company, formed our predecessor business in 2003. Since inception, our predecessor business has deployed more than $1.2 billion of capital, representing the acquisition of more than 200 properties totaling approximately 31.3 rentable square feet in 130 individual transactions.

        Upon completion of our formation transactions and this offering, our portfolio will consist of 101 industrial properties in 24 states with approximately 13.4 million rentable square feet. Our properties consist of 45 warehouse/distribution properties, 29 manufacturing properties and 27 flex/office properties. As of March 31, 2010, our properties were 93.7% leased to 84 tenants, with no single tenant accounting for more than 4.3% of our total annualized rent and no single industry accounting for more than 12.1% of our total annualized rent.

        We intend to continue to target the acquisition of individual Class B, single-tenant industrial properties predominantly in secondary markets throughout the United States with purchase prices ranging from $5 million to $20 million. We believe that, due to observed market inefficiencies, our focus on these properties will allow us to generate higher risk-adjusted returns for our shareholders, when compared to other real estate portfolios.

        We intend to elect and qualify to be taxed as a REIT under the Code for the year ending December 31, 2010, and generally will not be subject to U.S. federal taxes on our income to the extent we currently distribute our income to our shareholders and maintain our qualification as a REIT. We are structured as an UPREIT and will own substantially all of our assets and conduct substantially all of our business through our operating partnership.

        As a result of our formation transactions, our future financial condition and results of operations will differ significantly from, and will not be comparable with, the historical financial position and

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results of operations of STAG Predecessor Group, which will be only a part of our company after the consummation of our formation transactions. Please refer to our unaudited pro forma consolidated financial statements and related notes included elsewhere in this prospectus, which present on a pro forma basis the condition and results of our company as if our formation transactions and this offering and the application of the net proceeds thereof had all occurred on March 31, 2010 for the pro forma consolidated balance sheet and on January 1, 2009 for the pro forma consolidated statements of operations. The pro forma financial information is not necessarily indicative of what our actual financial position and results of operations would have been as of the date or for the periods indicated, nor does it propose to represent our future financial position or results of operations.

        Concurrently with this offering, we will complete our formation transactions, pursuant to which we will acquire, through a series of contribution and sale transactions, direct or indirect interests in the management company (STAG and SCP III) and certain of the industrial properties owned by Fund II, Fund III and Fund IV.

        As a result of our formation transactions, we will acquire our property portfolio together with the other assets and operations of the management company. In consideration for the contributions, we will issue an aggregate of                common units with an aggregate value of $            , assuming an offering price at the mid-point of the range set forth on the cover page of this prospectus, to the contributors of the management company, Fund III, Fund IV and STAG GI. In consideration for the sale of the Fund II properties, we will pay with proceeds of this offering an aggregate of approximately $165.0 million in cash to Fund II. We will also repay with the proceeds of this offering approximately $66.1 million of debt and assume approximately $230.7 million in principal amount of mortgage debt secured by our properties, based on March 31, 2010 balances.

        Our management has determined that common control does not exist among the entities constituting our predecessor business; accordingly, our formation transactions will be accounted for as a business combination. Any interests in the entities contributed by Fund III are presented in the combined financial statements of STAG Predecessor Group, which includes the entity that is considered our accounting acquirer, at historical cost. The contribution of all interests other than those directly owned by STAG Predecessor Group will be accounted for under the purchase method of accounting and recorded at the estimated fair value of acquired assets and assumed liabilities corresponding to their ownership interests. The fair values of tangible assets acquired are determined on an as-if-vacant basis. The as-if-vacant fair value will be allocated to land, building, tenant improvements and the value of in-place leases based on our own market knowledge and published market data, including current rental rates, expected downtime to lease up vacant space, tenant improvement construction costs, leasing commissions and recent sales on a per square foot basis for comparable properties in our sub-markets. The estimated fair value of acquired in-place leases are the costs we would have incurred to lease the property to the occupancy level of the property at the date of acquisition. Such estimates include the fair value of leasing commissions and legal costs that would be incurred to lease this property to this occupancy level. Additionally, we evaluate the time period over which such occupancy level would be achieved and include an estimate of the net operating costs (primarily real estate taxes, insurance and utilities) incurred during the lease-up period, which generally ranges up to eight to 12 months. Above-market and below-market in-place lease values are recorded as an asset or liability based on the present value (using an interest rate which reflects the risks associated with the leases acquired) of the difference between the contractual amounts to be paid pursuant to the in-place leases and our estimate of fair market lease rates for the corresponding in-place leases, measured over a

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period equal to the remaining non-cancelable term of the lease. The fair value of the debt assumed was determined using current market interest rates for comparable debt financings.

        Upon consummation of our formation transactions and this offering, our operations will be carried on through our operating partnership, STAG Industrial Operating Partnership, L.P., which we formed on December 21, 2009. Our formation transactions were designed to:

        As a result, we expect to be a fully integrated, self-administered and self-managed real estate company with 21 employees providing substantial in-house expertise in asset management, property management, leasing, tenant improvement construction, acquisitions, repositioning, redevelopment, legal and financing.

Factors That May Influence Future Results of Operations

        We expect to continue our predecessor business' investment strategy of acquiring individual, Class B single-tenant industrial properties predominantly in secondary markets throughout the United States through third-party purchases and structured sale-leasebacks featuring high initial yields and strong current cash-on-cash returns. We believe that the systematic aggregation of such properties results in a diversified portfolio that will produce sustainable, attractive risk-adjusted returns. Future results of operations may be affected, either positively or negatively, by our ability to execute this strategy.

        We receive income primarily from rental revenue from our properties. The amount of rental revenue generated by the properties in our portfolio depends principally on our ability to maintain the occupancy rates of currently leased space and to lease currently available space and space available from lease terminations. As of March 31, 2010, properties owned by our predecessor business were approximately 93.7% leased. The amount of rental revenue generated by us also depends on our ability to maintain or increase rental rates at our properties. Future economic downturns or regional downturns affecting our submarkets that impair our ability to renew or re-lease space and the ability of our tenants to fulfill their lease commitments, as in the case of tenant bankruptcies, could adversely affect our ability to maintain or increase rental rates at our properties. Negative trends in one or more of these factors could adversely affect our rental revenue in future periods.

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        Our ability to re-lease space subject to expiring leases will impact our results of operations and is affected by economic and competitive conditions in our markets and by the desirability of our individual properties. As of March 31, 2010, in addition to approximately 844,716 rentable square feet of currently available space in our properties, leases representing approximately 5.9% and 12.1% of the rentable square footage of such portfolio are scheduled to expire prior to December 31, 2010 and December 31, 2011, respectively. The leases scheduled to expire prior to December 31, 2010 and December 31, 2011 represent approximately 6.4% and 14.7%, respectively, of the total annualized rent for our portfolio.

        The properties in our portfolio are located in markets throughout the United States. Positive or negative changes in economic or other conditions, adverse weather conditions and natural disasters in these markets may affect our overall performance.

        Our rental expenses generally consist of utilities, real estate taxes, management fees, insurance and site repair and maintenance costs. For the majority of our tenants, our rental expenses are controlled, in part, by the triple net provisions in tenant leases. However, the terms of our leases vary and on some occasions we may absorb rental expenses of our tenants. Our overall performance will be impacted by the extent to which we are able to pass-through rental expenses to our tenants.

        Following this offering, we also will incur increased general and administrative expenses, including legal, accounting and other expenses related to corporate governance, public reporting and compliance with various provisions of the Sarbanes-Oxley Act of 2002. We anticipate that our staffing levels will increase from 21 employees at inception to between 25 and 30 employees during the next 12 to 24 months and, as a result, our general and administrative expenses will further increase.

Critical Accounting Policies

        Our discussion and analysis of the historical financial condition and results of operations of the STAG Predecessor Group are based upon its combined financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements in conformity with GAAP requires management to make estimates and assumptions in certain circumstances that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amount of revenue and expenses in the reporting period. Actual amounts may differ from these estimates and assumptions. We have provided a summary of significant accounting policies in note 2 to the combined financial statements of the STAG Predecessor Group included elsewhere in this prospectus. We have summarized below those accounting policies that require material subjective or complex judgments and that have the most significant impact on financial condition and results of operations. Management evaluates these estimates on an ongoing basis, based upon information currently available and on various assumptions that it believes are reasonable as of the date hereof. In addition, other companies in similar businesses may use different estimation policies and methodologies, which may impact the comparability of our or the STAG Predecessor Group's results of operations and financial condition to those of other companies.

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        The following discussion of critical accounting policies uses "we" and "STAG Predecessor Group" interchangeably. Except where specifically stated to the contrary, we expect the critical accounting policies of STAG Industrial, Inc. to be substantially similar to those of the STAG Predecessor Group.

        Rental property is carried at cost. We review our properties on a periodic basis for impairment and provide a provision if impairments are identified. To determine if an impairment may exist, we review our properties and identify those that have had either an event of change or event of circumstances warranting further assessment of recoverability (such as a decrease in occupancy). If further assessment of recoverability is needed, we estimate the future net cash flows expected to result from the use of the property and its eventual disposition, on an individual property basis. If the sum of the expected future net cash flows (undiscounted and without interest charges) is less than the carrying amount of the property on an individual property basis, we will recognize an impairment loss based upon the estimated fair value of such property as compared to its current carrying value.

        Depreciation expense is computed using the straight-line method based on the following useful lives:

Buildings   40 years
Building and land improvements   5 - 21 years
Tenant improvements   Shorter of useful life or terms of related lease

        Expenditures for tenant improvements, leasehold improvements and leasing commissions are capitalized and amortized or depreciated over the shorter of their useful lives or the terms of each specific lease. Repairs and maintenance are charged to expense when incurred. Expenditures for improvements are capitalized.

        We account for all acquisitions in accordance with the guidance issued by the Financial Accounting Standards Board ("FASB") under FASB Accounting Standard Codification ("ASC"), ASC 805, Business Combinations, (formerly known as Statement of Financial Accounting Standards ("SFAS") No. 141(R)). The FASB issued ASC 805 to improve the relevance, representational faithfulness, and comparability of the information that a reporting entity provides in its financial reports about a business combination and its effects. The statement is to be applied prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. We adopted ASC 805 on January 1, 2009 and the adoption did not have a material effect on the combined financial statements.

        Upon acquisition of a property, we allocate the purchase price of the property based upon the fair value of the assets acquired, which generally consist of land, buildings, tenant improvements and intangible assets including in-place leases, above market and below market leases and tenant relationships. We allocate the purchase price to the fair value of the tangible assets of an acquired property by valuing the property as if it were vacant. Acquired above and below market leases are valued based on the present value of the difference between prevailing market rates and the in-place rates measured over a period equal to the remaining term of the lease for above market leases and the initial term plus the term of any below market fixed rate renewal options for below market leases that are considered bargain renewal options. The above market lease values are amortized as a reduction of rental income over the remaining term of the respective leases, and the below market lease values are amortized as an increase to base rental income over the remaining initial terms plus the terms of any

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below market fixed rate renewal options that are considered bargain renewal options of the respective leases.

        We maintain an allowance for estimated losses that may result from the inability of tenants to make required payments. We regularly assess our ability to collect outstanding payments and in so doing must make estimates of the collectability of tenant accounts receivable. If a tenant fails to make contractual payments beyond any allowance, we may recognize bad debt expense in future periods equal to the amount of unpaid rent and deferred rent.

        Financial instruments include cash and cash equivalents, tenant accounts receivable, interest rate swaps, accounts payable, other accrued expenses and mortgage notes payable. The fair values of the cash and cash equivalents, tenant accounts receivable, accounts payable and other accrued expenses approximate their carrying or contract values.

        We calculate the fair value of mortgage notes payable by discounting the future cash flows using the current rates at which loans would be made to borrowers with similar credit ratings for loans with similar remaining maturities and similar loan-to-value ratios.

        We account for interest rate swaps in accordance with ASC 815, Derivatives and Hedging, (formerly known as SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended by SFAS No. 138, Accounting for Certain Derivative Instruments and Certain Hedging Activities). On January 1, 2009, we adopted SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities, an Amendment of FASB Statement No. 133 (SFAS 161), which changes the disclosure requirements for derivative instruments and hedging activities. The adoption of SFAS 161 (now included in ASC 815) did not have a material impact on our results of operations or financial condition.

        We designate interest rate swaps as non-hedge instruments. Accordingly, we recognize the fair value of the interest rate swap as asset or liability on the combined balance sheets with the changes in fair value recognized in the combined statements of operations.

        We adopted the fair value measurement provisions as of January 1, 2008 for our interest rate swaps recorded at fair value. The new guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. As of December 31, 2009 and 2008, we applied the provisions of this standard to the valuation of our interest rate swaps, which are the only financial instruments measured at fair value on a recurring basis.

        Rental revenue is recognized on a straight-line basis over the term of the lease when collectability is reasonably assured. Differences between rental revenue earned and amounts due under the lease are

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charged or credited, as applicable, to accrued rental revenue. Additional rents from expense reimbursements for insurance, real estate taxes and certain other expenses are recognized in the period in which the related expenses are incurred.

        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 our combined financial 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.

        Lease termination fees are recognized as termination revenue when the related leases are canceled and we have no continuing obligation to provide services to such former tenants. STAG Predecessor Group has no lease termination revenue for the years presented.

        We recognize gains on sales of real estate pursuant to the provisions of ASC 360-20-15, Accounting for Sales of Real Estate (formerly known as SFAS No. 66). The specific timing of a sale is measured against various criteria in ASC 360-20-15 related to the terms of the transaction and any continuing involvement in the form of management or financial assistance associated with the property. If the sales criteria are not met, we defer gain recognition and accounts for the continued operations of the property by applying the finance, installment or cost recovery methods, as appropriate, until the sales criteria are met.

Historical Results of Operations of STAG Predecessor Group

        The following table summarizes our historical results of operations for the three months ended March 31, 2010 and 2009 (unaudited) and the years ended December 31, 2009, 2008, and 2007 (dollars in thousands).

        Certain properties included in the STAG Predecessor Group were owned by a related party for the period August 11, 2006 through May 31, 2007, its commencement date of operations. The period for which certain properties were owned by a related party is labeled Antecedent. The two periods of ownership have been separated by a vertical line on the face of the combined statements of operations to highlight the fact that the financial information for such periods has been prepared under two different historical-cost bases of accounting. We have prepared our discussion of the results of operations for the year ended December 31, 2007 by comparing the results of operations of STAG Predecessor Group for the years ended December 31, 2008 to the combined amounts for 2007 obtained by adding the audited operating results of the Antecedent for the period of January 1, 2007 to May 31, 2007 and STAG Predecessor Group period of June 1, 2007 to December 31, 2007 (since the difference in basis between Antecedent and STAG Predecessor Group were not materially different and under common management). Although this combined presentation does not comply with GAAP, we believe that it provides a meaningful method of comparison.

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  Three Months Ended
March 31,
   
  Year Ended
December 31,
   
   
  Antecedent
January 1,
2007 -
May 31,
2007
   
   
 
 
   
   
  June 1,
2007 -
December 31,
2007
   
   
 
 
  %
Change
  %
Change
  Year Ended
December 31,
2007
  %
Change
 
 
  2010   2009   2009   2008  
 
  (unaudited)
   
   
   
   
   
   
  (unaudited)
   
 
 
  (dollars in thousands)
 

Revenue

                                                             

Rental income

  $ 6,323   $ 6,524     (3 )% $ 25,658   $ 27,319     (6 )%   9,145     2,017     11,162     145 %

Tenant recoveries

    1,360     1,156     18 %   4,508     3,951     14 %   1,326         1,326     198 %
                                           

Total revenue

    7,683     7,680     0 %   30,166     31,270     (4 )%   10,471     2,017     12,488     150 %
                                           

Expenses

                                                             
 

Property

    1,155     1,419     (19 )%   5,342     3,009     78 %   520     32     552     445 %
 

General and administrative

    189     76     149 %   478     502     (5 )%   378     26     404     25 %
 

Real estate taxes and insurance

    795     777     2 %   3,067     2,804     9 %   793     92     885     217 %
 

Asset management fees

    148     148     0 %   600     610     (2 )%   213     31     244     149 %
 

Depreciation and amortization

    2,383     3,216     (26 )%   10,257     12,108     (15 )%   4,029     658     4,687     158 %
 

Loss on impairment of assets

                    3,728                      
                                           

Total expenses

    4,670     5,636     (17 )%   19,744     22,761     (13 )%   5,933     839     6,772     236 %
                                           

Other income (expense)

                                                             
 

Interest income

    1     1     2 %   66     140     (52 )%   142     21     163     (14 )%
 

Interest expense

    (3,531 )   (3,346 )   66     (14,328 )   (15,058 )   (5 )%   (6,501 )   (1,360 )   (7,861 )   92 %
 

Gain (loss) on interest rate swaps

    (589 )   493     (219 )%   (1,720 )   (1,275 )   35 %                
                                           

Total other income (expense)

    (4,119 )   (2,852 )   44 %   (15,982 )   (16,193 )   (1 )%   (6,359 )   (1,339 )   (7,698 )   110 %
                                           

Net loss

    (1,106 )   (808 )   37 %   (5,560 )   (7,684 )   (28 )%   (1,821 )   (161 )   (1,982 )   288 %
                                           

        Total revenue increased by $2,730, or less than 0.1%, to $7.7 million for the three months ended March 31, 2010 compared to $7.7 million for the three months ended March 31, 2009. A detailed analysis of the increase follows.

        Rent.    Rental revenue decreased by $201,053, or 3.1%, to $6.3 million for the three months ended March 31, 2010 compared to $6.5 million for the three months ended March 31, 2009. The decrease was primarily attributable to lower occupancy levels and lower rental rates during the three months ended March 31, 2010.

        Tenant recoveries.    Tenant recoveries increased by $203,783, or 17.6%, to $1.4 million for the three months ended March 31, 2010, compared to $1.2 million for the three months ended March 31, 2009.

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The increase in tenant recoveries was primarily attributable to the amount of tenant specific billings related to real estate tax and insurance recoveries compared to the previous period. The increase was partially offset by a decrease in tenant recoveries attributable to lower occupancy rates.

        Property.    Property expense, which consists of property operation and maintenance expenses and bad debt expense decreased by $265,492, or 18.7%, to $1.2 million for the three months ended March 31, 2010 compared to $1.4 million for the three months ended March 31, 2009. The decrease was primarily attributable to $486,052 in bad debt expense incurred during the three months ended March 31, 2009. The bad debt expense resulted from non-payment of rent and reimbursable expenses from two financially troubled tenants. These decreases were partially offset by an increase in carrying costs related to lower occupancy rates during the three months ended March 31, 2010.

        General and administrative.    General and administrative expenses increased $113,122, or 148.6%, to $189,269 for the three months ended March 31, 2010 from $76,147 for the three months ended March 31, 2009. The increase was primarily attributable to additional legal and accounting fees incurred.

        Real estate taxes and insurance.    Real estate taxes and insurance increased by $18,920, or 2.4%, to $795,448 for the three months ended March 31, 2010 compared to $776,528 for the three months ended March 31, 2009. The increase was primarily attributable to higher real estate tax assessments at various properties, offset by lower insurance fees incurred.

        Asset management fees.    Asset management remained static at $147,913 for the three months ended March 31, 2010 from the three months ended March 31, 2009. The result was attributable to identical asset bases used in determining the fee.

        Depreciation and amortization.    Depreciation and amortization expense decreased $832,387, or 25.9%, to $2.4 million for the three months ended March 31, 2010 compared to $3.2 million for the three months ended March 31, 2009. The decrease was primarily attributable to accelerated amortization of lease intangibles recorded during the three months ended March 31, 2009 in connection with certain lease terminations.

        Interest income.    Interest income decreased 2.0% to $1,131 for the three months ended March 31, 2010 from $1,154 for the three months ended March 31, 2009. The decrease was primarily attributable to declining interest rates on bank deposit accounts.

        Interest expense.    Interest expense increased $184,155, or 5.5%, to $3.5 million for the three months ended March 31, 2010 compared to $3.3 million for the three months ended March 31, 2009. The increase was attributable to a new loan amendment entered into in 2009 with greater interest rate spreads. The increase was partially offset by a reduction in loan balances due to amortized principal payments under amended loan agreements.

        Gain (loss) on interest rate swaps.    Loss on interest rate swaps was $588,750 for the three months ended March 31, 2010 compared to a gain of $493,221 for the three months ended March 31, 2009. The decrease was primarily attributable to larger underlying notional amounts under the swap agreements and an increase in the forward rate of the underlying LIBOR-based floating rate debt.

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        Total revenue decreased by $1.1 million, or 3.5%, to $30.2 million for the year ended December 31, 2009 compared to $31.3 million for the year ended December 31, 2008. A detailed analysis of the decrease follows.

        Rent.    Rent decreased by $1.7 million, or 6.1%, to $25.7 million for the year ended December 31, 2009 compared to $27.3 million for the year ended December 31, 2008. The two primary components of the decrease were lower occupancy levels and the write-off of above market lease intangible assets. Rental revenue decreased $923,000 due to lower occupancy during 2009. Rental revenue decreased $690,000 due to the write-off of above market lease intangible assets related to a lease termination.

        Tenant recoveries.    Tenant recoveries increased by $556,532, or 14.1%, to $4.5 million for the year ended December 31, 2009 compared to $4.0 million for the year ended December 31, 2008. The increase in tenant recoveries was primarily attributable to the amount of tenant specific billings related to real estate tax and insurance recoveries compared to the previous period. The increase was partially offset by a decrease in tenant recoveries attributable to lower occupancy rates.

        Property.    Property expense, which consists of property operation and maintenance expenses and bad debt expense, increased by $2.3 million, or 77.5%, to $5.3 million for the year ended December 31, 2009 compared to $3.0 million for the year ended December 31, 2008. The increase was primarily attributable to an increase of $1.9 million in bad debt expense recorded in 2009. The increase in bad debt expense resulted from nonpayment of rent and reimbursable expenses from five financially troubled tenants. The increase in property expense was also attributable to approximately $250,000 of environmental remediation costs incurred in connection with our Daytona Beach, FL property.

        General and administrative.    General and administrative expenses decreased $24,327, or 4.8%, to $478,141 for the year ended December 31, 2009 from $502,468 for the year ended December 31, 2008. The decrease was primarily attributable to a reduction in legal fees incurred and a reduction in appraisal fees, partially offset by an increase in accounting fees.

        Real estate taxes and insurance.    Real estate taxes and insurance increased by $263,088, or 9.4%, to $3.1 million for the year ended December 31, 2009 compared to $2.8 million for the year ended December 31, 2008. The increase was primarily attributable to a payment made for real estate taxes on our St. Louis, MO property on behalf of a non-paying tenant. This increase was partially offset by lower real estate tax assessments at various other properties.

        Asset management fees.    Asset management fees decreased $9,883, or 1.6%, to $599,869 for the year ended December 31, 2009 from $609,752 for the year ended December 31, 2008.

        Depreciation and amortization.    Depreciation and amortization expense decreased $1.9 million, or 15.3%, to $10.3 million for the year ended December 31, 2009 compared to $12.1 million for the year ended December 31, 2008. The decrease was primarily attributable to accelerated amortization of lease intangibles related to lease terminations during the year ended December 31, 2008. The decrease was also attributable to a reduced asset base for depreciation purposes due to a 2008 asset impairment.

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        Loss on impairment.    There were no impairment charges for the year ended December 31, 2009 compared to $3.7 million for the year ended December 31, 2008. The 2008 impairment charge was attributable to the impairment of our property located in Daytona Beach, Florida. The loss of occupancy, its continued vacancy and lower market rents indicated that the carrying amount of this property had been impaired.

        Interest income.    Interest income decreased $73,632, or 52.4%, to $66,852 for the year ended December 31, 2009 from $140,484 for the year ended December 31, 2008. The decrease was primarily attributable to declining bank deposit balances resulting from an increase in principal payments on debt during the year ended December 31, 2009.

        Interest expense.    Interest expense decreased $729,490, or 4.8%, to $14.3 million for the year ended December 31, 2009 compared to $15.1 million for the year ended December 31, 2008. The decrease was primarily attributable to a reduction in interest rates and loan balances due to amortized principal payments under amended loan agreements.

        Gain (loss) on interest rate swaps.    Our loss on interest rate swaps increased $445,720, or 35.0%, to $1.7 million for the year ended December 31, 2009 compared to $1.3 million for the year ended December 31, 2008. The increase was primarily attributable to larger underlying notional amounts under the swap agreements and an increase in the interest rate swap spread.

        Total revenue increased by $18.8 million, or 150.4%, to $31.3 million for the year ended December 31, 2008 compared to $12.5 million for the year ended December 31, 2007. A detailed analysis of the increase follows.

        Rent.    Rent increased by $16.2 million, or 144.7%, to $27.3 million for the year ended December 31, 2008 compared to $11.2 million for the year ended December 31, 2007. The increase was primarily attributable to the full-year recognition of rental income generated from properties that were acquired during 2007.

        Tenant recoveries.    Tenant recoveries increased by $2.6 million, or 198.1%, to $4.0 million for the year ended December 31, 2008 compared to $1.3 million for the year ended December 31, 2007. The increase was primarily attributable to the full-year recognition of tenant recovery revenue generated from properties that were acquired during 2007.

        Property.    Property expense increased by $2.5 million, or 445.0%, to $3.0 million for the year ended December 31, 2008 compared to $551,593 for the year ended December 31, 2007. The increase was primarily attributable to recognition of a full year of expenses from the properties that were acquired during 2007.

        General and administrative.    Our general and administrative expenses increased $98,829, or 24.5%, to $502,468 for the year ended December 31, 2008 from $403,639 for the year ended December 31,

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2007. The increase was primarily attributable to additional legal and accounting fees incurred, partially offset by a decrease in management company reimbursements.

        Real estate taxes and insurance.    Real estate taxes and insurance increased by $1.9 million, or 217.0%, to $2.8 million for the year ended December 31, 2008 compared to $884,612 for the year ended December 31, 2007. The increase was primarily attributable to recognition of a full year of real estate taxes and insurance expenses for the properties that were acquired during 2007.

        Asset management fees.    Asset management fees increased $364,952, or 149.1%, to $609,752 for the year ended December 31, 2008 from $244,800 for the year ended December 31, 2007. The increase was attributable to the full-year recognition of asset management fees relating to properties acquired during 2007.

        Depreciation and amortization.    Depreciation and amortization expense increased $7.4 million, or 158.3%, to $12.1 million for the year ended December 31, 2008 compared to $4.7 million for the year ended December 31, 2007. The increase was primarily attributable to the full-year recognition of depreciation and amortization expense relating to properties acquired during 2007 and to accelerated amortization in 2008 of lease intangibles related to lease terminations during the year. The increase was partially offset by a reduced asset base for depreciation purposes due to a 2008 asset impairment.

        Loss on impairment.    Our impairment charges were $3.7 million for the year ended December 31, 2008 compared to no impairment charges for the year ended December 31, 2007. The 2008 impairment charge was attributable to the impairment of our property located in Daytona Beach, Florida. The loss of occupancy, its continued vacancy and reduced market rents indicated that the carrying amount of this property had been impaired.

        Interest income.    Interest income decreased $23,016, or 14.1%, to $140,484 for the year ended December 31, 2008 from $163,500 for the year ended December 31, 2007. The decrease was primarily attributable to declining interest rates on bank deposit accounts.

        Interest expense.    Interest expense increased $7.2 million, or 91.5%, to $15.1 million for the year ended December 31, 2008 compared to $7.9 million for the year ended December 31, 2007. The increase was attributable to the full-year recognition of interest expense relating to properties acquired during the year ended December 31, 2007. The increase was partially offset by a decrease in interest expense on our properties on a same store basis as a result of decreased interest rates under our LIBOR-based floating rate loans during 2008.

        Gain (loss) on interest rate swaps.    Our loss on interest rate swaps was $1.3 million for the year ended December 31, 2008 compared to no loss for the year ended December 31, 2007. We swapped $87.6 million of floating rate debt for fixed rate debt during the year ended December 31, 2008. The loss was primarily attributable to a decrease in the forward rate of the underlying LIBOR-based floating rate debt. We were not party to any such agreements during the year ended December 31, 2007.

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Liquidity and Capital Resources

        Our short-term liquidity requirements consist primarily of funds to pay for operating expenses and other expenditures directly associated with our properties, including:

In addition, we will require funds for future dividends expected to be paid to our common shareholders and unit holders in our operating partnership.

        We intend to satisfy our short-term liquidity requirements through our existing cash and cash equivalents, cash flow from operating activities, the proceeds of this offering and borrowings available under a credit facility.

        Our long-term liquidity needs consist primarily of funds necessary to pay for acquisitions, non-recurring capital expenditures and scheduled debt maturities. We intend to satisfy our long-term liquidity needs through cash flow from operations, long-term secured and unsecured borrowings, issuance of equity securities, or, in connection with acquisitions of additional properties, the issuance of common units of the operating partnership property dispositions and joint venture transactions.

        The following table sets forth our principal obligations and commitments, including periodic interest payments related to the indebtedness outstanding as of March 31, 2010, including pro forma paydowns from the proceeds of this offering:

 
  Payments by Period  
 
  Total   Nine
Months
Ended
2010
  2011   2012   Thereafter  
 
  (in thousands)
 

Principal payments(1)(2)

  $ 230,721   $ 2,621   $ 81,007   $ 147,093      

Interest payments—fixed rate debt

    18,516     8,307     9,576     633      

Interest payments—variable rate debt

    76     43     33          
                       

Total

  $ 249,313   $ 10,971   $ 90,616   $ 147,726      
                       

(1)
The terms of the Anglo Master Loan Agreement also stipulate that a capital improvement escrow be funded monthly in an amount equal to the difference between the payments required under a 25-year amortizing loan and a 20-year amortizing loan.

(2)
Principal payments in connection with the Anglo Master Loan Agreement inherent in this table assume that those payments are pro-rated based on the amount of debt remaining after paydown.

        In addition to the contractual obligations set forth in the table above, we expect to enter into employment agreements with certain of our executive officers. These employment agreements provide for salary, bonus, incentive compensation and other benefits, all as more fully described under "Management—Employment Agreements."

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        As of March 31, 2010, we had, after pro forma paydowns, total outstanding debt of approximately $230.7 million secured by 101 of our properties. The weighted average interest rate on our consolidated indebtedness would have been 4.8% (based on the 30-day LIBOR rate as of March 31, 2010 of 0.25% and after giving effect to our interest rate swaps). On a pro forma basis as of March 31, 2010, we had approximately $1.4 million, or 1.0%, of our outstanding long-term debt exposed to fluctuations in short-term interest rates.

        The following table sets forth certain information with respect to the indebtedness outstanding as of March 31, 2010, including pro forma paydowns from the proceeds of this offering:

Loan
  Principal   Fixed/Floating   Rate   Maturity  
 
  (dollars in thousands)
   
   
   
 

Fixed Rate and Variable Rate Swapped to Fixed Rate

                       

Anglo Master Loan Fund III(1)

  $ 153,365   LIBOR + 3.00%(2)     5.17 %   1/31/2012  

RBS Citizens/Bank of America(3)

    45,000   LIBOR + 2.25%(4)     4.23 %   7/25/2011 (11)

RBS Citizens/Bank of America(5)

    31,000   LIBOR + 2.25%(6)     3.92 %   7/25/2011 (11)
                       

Subtotal

  $ 229,365                  
                       

Variable Rate

                       

Anglo Master Loan Fund III(7)

      LIBOR + 3.00%     3.25 %   1/31/2012  

Anglo Bridge Loan Fund III(8)

      LIBOR + 4.25%     4.50 %   1/31/2012  

RBS Citizens/Bank of America(9)

      LIBOR + 2.25%     2.50 %   7/25/2011  

RBS Citizens/Bank of America(10)

    1,356   LIBOR + 3.00%     3.25 %   7/25/2011 (11)
                     

Subtotal

  $ 1,356                  
                     
 

Total/Weighted Average

  $ 230,721         4.8 %      
                     

(1)
Secured by certain properties of Fund III. It is anticipated that $3.5 million of the total loan balance of $156.9 million will be paid down with offering proceeds resulting in a pro forma balance of $153.3 million.

(2)
Swapped for a fixed rate of 2.165% plus the 3.00% spread for an effective fixed rate of 5.165%. The swap expires at the maturity date of the loan.

(3)
Secured by certain properties of Fund IV.

(4)
Swapped for a fixed rate of 1.98% plus the 2.25% spread for an effective fixed rate of 4.23%. The swap expires at the maturity date of the loan.

(5)
Secured by certain properties of Fund IV.

(6)
Swapped for a fixed rate of 1.67% plus the 2.25% spread for an effective fixed rate of 3.92%. The swap expires at the maturity date of the loan.

(7)
It is anticipated this loan balance of $14.7 million will be paid down in full with offering proceeds resulting in a pro forma balance of zero.

(8)
It is anticipated this loan balance of $35.0 million will be paid down in full with offering proceeds resulting in a pro forma balance of zero.

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(9)
It is anticipated this loan balance of $4.0 million will be paid down in full with offering proceeds resulting in a pro forma balance of zero.

(10)
Secured by certain properties of Fund IV. It is anticipated that $1.0 million of the total loan balance of $2.3 million will be paid down with offering proceeds resulting in a pro forma balance of $1.3 million.

(11)
Maturity date subject to two one-year extensions to July 25, 2013. Each extension is subject to timely written notice, payment of an extension fee in the amount of 12.5 basis points, absence of defaults under the loan and a maximum loan-to-value ratio of 70% (65% if there are then five or fewer properties securing the loan), based on updated appraisals of the properties. In the event we exercise our extension option, we will be required to make monthly principal payments throughout the extension term, calculated using a 300 month amortization schedule.

        Certain of our loan agreements contain financial covenants. Our Anglo Master Loan Fund III described above contains a loan-to-value requirement with respect to the collateral properties that is measured annually and a minimum debt service coverage ratio that is measured semi-annually. Our loan with RBS Citizens and Bank of America contains a loan-to-value requirement with respect to the collateral properties that is measured annually and a minimum debt service coverage ratio that is measured quarterly. We are currently in compliance with the financial covenants in our loan agreements.

        We are currently negotiating with a number of financial institutions regarding the establishment of a secured corporate credit facility, prior to or contemporaneously with the closing of this offering. This facility will be used for property acquisitions, working capital requirements and other general corporate purposes. We anticipate that the proposed credit facility will contain customary terms, covenants and other conditions for credit facilities of this type. In addition, we are currently negotiating the refinancing of the Anglo Master Loan Fund III, which matures in 2012. No assurances can be given that we will obtain any credit facility or refinancing or if we do what its amount and terms will be.

Off Balance Sheet Arrangements

        As of March 31, 2010, neither STAG Predecessor Group nor, on a pro forma basis, our company, had any off-balance sheet arrangements.

Interest Rate Risk

        ASC 815, Derivatives and Hedging (formerly known as SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended by SFAS No. 138, Accounting for Certain Derivative Instruments and Certain Hedging Activities), requires us to recognize all derivatives on the balance sheet at fair value. Derivatives that are not hedges must be adjusted to fair value and the changes in fair value must be reflected as income or expense. If the derivative is a hedge, depending on the nature of the hedge, changes in the fair value of derivatives are either offset against the change in fair value of the hedged assets, liabilities, or firm commitments through earnings or recognized in other comprehensive income, which is a component of shareholders equity. The ineffective portion of a derivative's change in fair value is immediately recognized in earnings. Because our predecessor business did not previously prepare financial statements in accordance with GAAP, we did not designate the hedges at the time of inception and therefore, our existing investment in interest rate swaps does not qualify as an effective hedge, and as such, changes in the swaps' fair market value are being recorded in earnings.

        As of March 31, 2010, after pro forma debt paydowns, STAG Predecessor Group had approximately $153.3 million of mortgage debt subject to interest rate swaps with such interest rate swaps having an approximate $(3.6) million net fair value. As these interest rate swaps were entered

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into prior to us reporting on a GAAP basis, they are designated as non-hedge instruments. Accordingly, the changes in the fair value of the interest rate swaps are recognized in the statements of operations. As of March 31, 2010, on a pro forma basis, we had approximately $         million of mortgage debt subject to interest rate swaps with such interest rate swaps having an approximate $         million net fair value.

Cash Flows of the STAG Predecessor Group

        The following table summarizes the historical cash flows of STAG Predecessor Group for the three months ended March 31, 2010 and 2009 and the years ended December 31, 2009, 2008, and 2007:

 
  Three Months Ended March 31,   Year Ended December 31,    
  Antecedent
January 1,
2007 -
May 31,
2007
   
 
 
  June 1,
2007 -
December 31,
2007
  Combined
Year Ended
December 31,
2007(1)
 
 
  2010   2009   2009   2008  
 
  (unaudited)
  (unaudited)
   
   
   
   
  (unaudited)
 
 
  (dollars in thousands)
 

Cash provided by (used in) operating activities

  $ 1,747   $ 2,579   $ 8,365   $ 8,431   $ 3,011   $ 477   $ 3,488  

Cash used in investing activities

    (718 )   (1,019 )   (2,042 )   (409 )   (171,706 )   (31,963 )   (203,669 )

Cash (used in) provided by financing activities

    (1,728 )   (1,879 )   (6,921 )   (8,524 )   172,567     32,014     204,581  

(1)
We have prepared the results of operations for the year ended December 31, 2007 by combining amounts for 2007 obtained by adding the audited operating results of the Antecedent for the period of January 1, 2007 to May 31, 2007 and STAG Predecessor Group for the period of June 1, 2007 to December 31, 2007 (since the difference in basis between Antecedent and STAG Predecessor Group were not materially different and under common management). Although this combined presentation does not comply with GAAP, we believe that it provides a meaningful method of comparison. In addition, both components were audited.

        Net cash provided by operating activities.    Net cash provided by operating activities decreased $0.8 million to $1.7 million for the three months ended March 31, 2010 compared to $2.6 million for the three months ended March 31, 2009. The decrease in cash provided by operating activities was primarily attributable to the net changes in current assets and liabilities.

        Net cash used in investing activities.    Net cash used in investing activities decreased $0.3 million to $0.7 million for the three months ended March 31, 2010 compared to $1.0 million for the three months ended March 31, 2009. The change is attributable to a decrease in building improvements made during the three months ended March 31, 2010.

        Net cash used in financing activities.    Net cash used in financing activities decreased $0.2 million to $(1.7) million for the three months ended March 31, 2010 compared to $(1.9) million for the three months ended March 31, 2009. The decrease was primarily attributable to a decrease in distributions and deferred financing fees, partially offset by an increase in required principal payments on mortgage loans.

        Net cash provided by operating activities.    Net cash provided by operating activities decreased $66,000 to $8.4 million for the year ended December 31, 2009 compared to $8.4 million for the year

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ended December 31, 2008. The decrease in 2009 cash provided by operating activities was primarily attributable to net changes in current assets and liabilities.

        Net cash used in investing activities.    Net cash used in investing activities increased $1.6 million to $(2.0) million for the year ended December 31, 2009 compared to $0.4 million for the year ended December 31, 2008. The change is attributable to an increase in building improvements made during 2008.

        Net cash used in financing activities.    Net cash used in financing activities decreased $1.6 million to $(6.9) million for the year ended December 31, 2009 compared to $(8.5) million for the year ended December 31, 2008. The decrease in cash used in financing activities was primarily attributable to a decrease in distributions of $4.8 million and an increase in proceeds from other notes payable of $4.4 million. The decrease was offset by an increase in deferred financing costs of $0.4 million and an increase in principal payments on mortgage loans of $7.2 million.

        Net cash provided by operating activities.    Net cash provided by operating activities increased $4.9 million to $8.4 million for the year ended December 31, 2008 compared to $3.5 million for the year ended December 31, 2007. The increase was primarily due to the full-year recognition of operating activities in 2008 relating to properties acquired during the year ended December 31, 2007. The increase is also attributable to net changes in current assets and liabilities.

        Net cash used in investing activities.    Net cash used in investing activities decreased $203.3 million to $0.4 million for the year ended December 31, 2008 compared to $(203.7) million for the year ended December 31, 2007. The change is attributable to a decrease in cash used for property acquisitions and deferred costs resulting from the completion of the acquisition phase of our real estate investment program during 2007.

        Net cash provided by (used in) financing activities.    Net cash provided by (used in) financing activities decreased $213.1 million to $(8.5) million for the year ended December 31, 2008 compared to $204.6 million for the year ended December 31, 2007. The change is primarily attributable to a decrease in proceeds from mortgage loans and a decrease in investor contributions resulting from the completion of the acquisition phase of our real estate investment program during 2007. An increase in distributions also contributed to the decrease.

Non-GAAP Financial Measures

        In this prospectus, we disclose and discuss net operating income ("NOI"), earnings before interest, taxes, depreciation and amortization ("EBITDA"), funds from operations ("FFO") and adjusted funds from operations ("AFFO"), all of which meet the definition of "non-GAAP financial measure" set forth in Item 10(e) of Regulation S-K promulgated by the SEC.  As a result we are required to include in this prospectus a statement of why management believes that presentation of these measures provides useful information to investors.

        None of NOI, EBITDA, FFO or AFFO 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, NOI, EBITDA, FFO and AFFO should be compared with our reported net income or net loss and considered in addition to cash flows in accordance with GAAP, as presented in our consolidated financial statements.

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NOI

        We consider NOI to be an appropriate supplemental measure to net income because it helps both investors and management to understand the core operations of our properties. We define NOI as operating revenue (including rental revenue, tenant recoveries and other operating revenue) less property-level operating expenses (which includes management fees and general and administrative expenses). NOI excludes depreciation and amortization, impairments, gain/loss on sale of real estate, interest expense and other non-operating items.

 
  Company
Pro Forma
Three Months
Ended
March 31,
2010
  Company
Pro Forma
Year Ended
December 31,
2009
 
 
  (unaudited)
  (unaudited)
 
 
  (dollars in thousands)
 

Rental revenue

  $     $    

Tenant recoveries

             

Other operating revenue

             
 

Total revenue

             

Property expenses

             
           

Net operating income

  $     $    
           

        The following is a reconciliation from reported net loss, the most direct comparable financial measure calculated and presented in accordance with GAAP, to NOI:

 
  Company
Pro Forma
Three Months
Ended
March 31,
2010
  Company
Pro Forma
Year Ended
December 31,
2009
 
 
  (unaudited)
  (unaudited) (unaudited)
 
 
  (dollars in thousands)
 

Net loss

  $     $    

Interest income

             

Gain (loss) on interest rate swaps

             

Depreciation and amortization

             

Interest expense

             

Other expense

             
           

Net operating income

  $     $    
           

EBITDA

        We believe that EBITDA is helpful to investors as a supplemental measure of the operating performance of a real estate company because it is a direct measure of the actual operating results of our industrial properties. We also use this measure in ratios to compare our performance to that of our

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industry peers. The following table sets forth a reconciliation of our pro forma EBITDA for the periods presented to net loss:

 
  Company
Pro Forma
Three Months
Ended
March 31,
2010
  Company
Pro Forma
Year Ended
December 31,
2009
  Company
Pro Forma
Twelve Months
Ended
March 31,
2010
 
 
  (unaudited)
  (unaudited)
  (unaudited)
 
 
  (dollars in thousands)
 

Net loss

  $     $     $    

Interest expense

                   

Depreciation and amortization

                   
               

EBITDA

  $     $     $    
               

FFO

        We calculate FFO before non-controlling interest 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, real estate related depreciation and amortization (excluding amortization of deferred financing costs) and after adjustments for unconsolidated partnerships and joint ventures.

        Management uses FFO as a supplemental performance measure because, in excluding real estate related depreciation and amortization and gains and losses from property dispositions, it provides a performance measure that, when compared year over year, captures trends in occupancy rates, rental rates and operating costs. We also believe that, as a widely recognized measure of the performance of REITs, FFO will be used by investors as a basis to compare our operating performance with that of other REITs.

        However, because FFO excludes depreciation and amortization and captures neither the changes in the value of our properties that result from use or market conditions nor the level of capital expenditures and leasing commissions necessary to maintain the operating performance of our properties, all of which have real economic effects and could materially impact our results from operations, the utility of FFO as a measure of our performance is limited. Other equity 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. FFO should not be used as a measure of our liquidity, and is not indicative of funds available for our cash needs, including our ability to pay dividends.

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        The following table sets forth a reconciliation of our pro forma FFO before non-controlling interest for the periods presented to net loss, the nearest GAAP equivalent:

 
  Company
Pro Forma
Three Months
Ended
March 31,
2010
  Company
Pro Forma
Year Ended
December 31,
2009
 
 
  (unaudited)
  (unaudited)
 
 
  (dollars in thousands)
 

Net loss

  $     $    

Depreciation and amortization

             
           

FFO

  $     $    
           

AFFO

        In addition to presenting FFO in accordance with the NAREIT definition, we also disclose AFFO, which is FFO after a specific and defined supplemental adjustment (i) to exclude the impact of impairment charges and/or any extraordinary, non-recurring cash expenditures, (ii) to exclude significant non-cash items that were included in net income, and (iii) to include significant cash items that were excluded from net income.

        Although our FFO as adjusted clearly differs from NAREIT's definition of FFO, we believe it provides a meaningful supplemental measure of our operating performance because we believe that, by excluding items noted above, management and investors are presented with an indicator of our operating performance that more closely achieves the objectives of the real estate industry in presenting FFO.

        As with FFO, our reported AFFO may not be comparable to other REITs' AFFO, should not be used as a measure of our liquidity, and is not indicative of our funds available for our cash needs, including our ability to pay dividends.

        The following table sets forth a reconciliation of our pro forma AFFO for the periods presented to FFO:

 
  Company
Pro Forma
Three Months
Ended
March 31,
2010
  Company
Pro Forma
Year Ended
December 31,
2009
 
 
  (unaudited)
  (unaudited)
 
 
  (dollars in thousands)
 

FFO

  $     $    

Impairment charges

             

Straight line rental revenue adjustment

             

Deferred financing cost amortization

             

Above/below market lease amortization

             

Gain (loss) on interest rate swaps

             

Acquisition costs

             

Recurring capital expenditures

             

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  Company
Pro Forma
Three Months
Ended
March 31,
2010
  Company
Pro Forma
Year Ended
December 31,
2009
 
 
  (unaudited)
  (unaudited)
 
 
  (dollars in thousands)
 

Amortization of non-cash compensation

             

Amortization of debt discount

             
           

AFFO

  $     $    
           

Inflation

        The majority of our leases are either triple net or provide for tenant reimbursement for costs related to real estate taxes and operating expenses In addition, most of the leases provide for fixed rent increases. We believe that inflationary increases may be at least partially offset by the contractual rent increases and tenant payment of taxes and expenses described above. We do not believe that inflation has had a material impact on our historical financial position or results of operations.

Newly Issued Accounting Standards

        In June 2009, the FASB issued an accounting standard that requires enterprises to perform a more qualitative approach to determining whether or not a variable interest entity will need to be consolidated. This evaluation will be based on an enterprise's ability to direct and influence the activities of a variable interest entity that most significantly impact its economic performance. It requires ongoing reassessments of whether an enterprise is the primary beneficiary of a variable interest entity. This accounting standard is effective for fiscal years beginning after November 15, 2009. We adopted this guidance and the adoption of this guidance did not have a material impact on our combined financial statements.

        In August 2009, the FASB issued guidance on Fair Value Measurements and Disclosures—Measuring Liabilities at Fair Value. The objective of the new guidance is to provide clarification for the fair value measurement of liabilities, specifically providing clarification that in circumstances in which a quoted price in an active market for an identical liability is not available, a reporting entity is required to measure fair value using certain prescribed techniques. Techniques highlighted include using 1) the quoted price of the identical liability when traded as an asset, 2) quoted prices for similar liabilities or similar liabilities when traded as assets, or 3) another valuation technique that is consistent with the principles of fair value measurements. The new guidance also clarifies that when estimating the fair value of a liability, a reporting entity is not required to include a separate input or adjustment to other inputs relating to the existence of a restriction that prevents the transfer of the liability. Finally, the guidance clarifies that both a quoted price in an active market for the identical liability and the quoted price for the identical liability when traded as an asset in an active market when no adjustment to the quoted price of the asset are required are Level 1 fair value measurements. We adopted this guidance and the adoption of this guidance did not have a material impact on our combined financial statements.

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Quantitative and Qualitative Disclosure About Market Risk

        Our future income, cash flows and fair values relevant to financial instruments are dependent upon prevailing market interest rates. Market risk refers to the risk of loss from adverse changes in market prices and interest rates. We use derivative financial instruments to manage, or hedge, interest rate risks related to our borrowings, primarily through interest rate swaps.

        An interest rate swap is a contractual agreement entered into by two counterparties under which each agrees to make periodic payments to the other for an agreed period of time based on a notional amount of principal. Under the most common form of interest rate swap, known from our perspective as a floating-to-fixed interest rate swap, a series of floating, or variable, rate payments on a notional amount of principal is exchanged for a series of fixed interest rate payments on such notional amount.

        As of December 31, 2009, our predecessor business had hedged a portion of its variable rate mortgage debt through floating-to-fixed interest rate swaps in the aggregate notional amount of approximately $157.8 million whereby, as described above, it swapped the variable rate interest on the hedged debt for a fixed rate of interest. The market values of the swaps depend heavily on the current market fixed rate, the corresponding term structures of variable rates and the expectation of changes in future variable rates. As expectations of future variable rates change, the market values of the swaps change. We will treat the swaps as non-hedge instruments and, accordingly, recognize the fair value of the swaps as assets or liabilities on our balance sheet, with the change in fair value recognized in our statements of operations.

        No assurance can be given that our predecessor business's hedging activities, or any future hedging activities by us, will have the desired beneficial effect on our results of operations or financial condition.

        The variable rate component of the variable rate mortgage debt of our predecessor business is LIBOR based. If LIBOR were to increase by 50 basis points, the increase in interest expense on our pro forma variable rate mortgage debt would decrease our future earnings and cash flows by approximately $7,000 annually. If LIBOR were to decrease by 50 basis points, the decrease in interest expense on our pro forma variable rate mortgage debt would be approximately $7,000 annually.

        Interest risk amounts are our management's estimates and were determined by considering the effect of hypothetical interest rates on our financial instruments. These analyses do not consider the effect of any change in overall economic activity that could occur in that environment. Further, in the event of a change of that magnitude, we may take actions to further mitigate our exposure to the change. However, due to the uncertainty of the specific actions that would be taken and their possible effects, these analyses assume no changes in our financial structure.

        As of March 31, 2010, we had total pro forma outstanding debt of approximately $230.7 million, and we expect that we will incur additional indebtedness in the future. Interest we pay reduces our cash available for distributions. Certain of our debt issuances bear interest at variable rates and, as of March 31, 2010, we had approximately $1.4 million of variable rate debt outstanding that is not fixed with interest rate swaps. We have entered into interest rate swaps to mitigate the risk of increasing interest rates for approximately $229.3 million of our variable rate debt. As of March 31, 2010, the fair value of our pro forma variable rate secured mortgage loans that have been swapped to fixed rates was approximately $226.7 million.

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MARKET OVERVIEW

        Unless otherwise indicated, all information contained in this Market Overview section is derived from a market materials prepared by CBRE-EA as of July 26, 2010, and the projections and beliefs of CBRE-EA stated herein are as of that date.

Market Opportunity

        The single-tenant industrial sector offers investors the opportunity to receive stable income from leases to a variety of firms across a broad spectrum of industrial sub-property types. As compared to multi-tenant and other classes of commercial property, single-tenant industrial buildings are more likely to provide their owners with a relatively high degree of cash flow efficiency, as single-tenant industrial buildings generally do not require the same degree of tenant and capital improvement expenditures on an ongoing basis.

        In recent years, the single-tenant industrial market has attracted a diverse set of buyers and sellers, from private funds, REITs and individual investors, similar to the multi-tenant industrial market. Despite a low level of investment sales recorded in 2009 and early 2010, over the past decade, single-tenant properties have consistently accounted for close to 20% of the total industrial investment sales volume tracked by Real Capital Analytics. As liquidity is gradually restored to the broader commercial real estate market, opportunities for conventional sale and sale-leaseback opportunities from owner-users are likely to increase.

        Due to the recent capital market dislocation on commercial real estate values, the single-tenant industrial market currently offers a favorable investment opportunity, as recent transactions indicate average sales prices have declined and capitalization rates have increased in recent quarters compared with prior years, according to Real Capital Analytics. Recent sales transactions indicate that opportunities exist to acquire select single-tenant industrial assets at a favorable cost basis compared with pre-distortion periods.

        Within the context of the broader real estate market, industrial property has exhibited a number of favorable investment characteristics. Institutionally-held industrial property has generally outperformed commercial property as a whole on a total return basis over the long term by generating high and stable cash-flow yields. Furthermore, "Class B" industrial space and secondary market area locations offer a higher degree of stability in occupancies and rents, relative to "Class A" space and primary market area locations. At the same time, Class B property prices are regularly discounted significantly compared to Class A property prices, providing a compelling investment opportunity for Class B property.

        While current industrial market occupancy and rent conditions remain challenging, statistics compiled by CBRE-EA indicate market rents and occupancies are likely to improve by 2011.

Size of the Industrial Sector

        As of March 31, 2010, the overall U.S. industrial market consisted of approximately 265,000 buildings with more than 14 billion square feet of space. In terms of net rentable area ("NRA"), warehouse/distribution facilities constituted the majority (59.2%) of this space, followed by manufacturing (25.0%), and flex/office (which includes research and development) (11.8%).

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Unclassifiable buildings (industrial facilities such as sewage treatment centers and airport hangars that are not amenable to private real estate investment) represent the remaining 4.0%.

 
  NRA
(square feet in millions)
&nbs