STAG Industrial Inc (STAG) 2020 Q2 法說會逐字稿

Greetings, and welcome to the STAG Industrial Second Quarter 2020 Earnings Conference Call. (Operator Instructions) As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Matts Pinard, Senior Vice President, Investor Relations. Thank you, sir. You may begin.

Thank you. Welcome to STAG Industrial's conference call covering the second quarter 2020 results. In addition to the press release distributed yesterday, we have posted an unaudited quarterly supplemental information presentation on the company's website at stagindustrial.com under the Investor Relations section.

On today's call, the company's prepared remarks and answers to your questions will contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements address matters that are subject to risks and uncertainties that may cause actual results to differ from those discussed today. Examples of forward-looking statements include statements relating to earnings trends, G&A amounts, acquisition and disposition volumes, retention rates, debt capacity, dividend rates, industry and economic trends and other matters. We encourage all of our listeners to review the more detailed discussion related to these forward-looking statements contained in the company's filings with the SEC and the definitions and reconciliations of non-GAAP measures contained in the supplemental informational package which is available on the company's website. As a reminder, forward-looking statements represent management's estimates as of today. STAG Industrial assumes no obligation to update any forward-looking statements.

On today's call, you will hear from Ben Butcher, our Chief Executive Officer; and Bill Crooker, our Chief Financial Officer. I will now turn the call over to Ben.

Thank you, Matts. Good morning, everybody, and welcome to the second quarter earnings call for STAG Industrial. We are pleased to have you join us and look forward to telling you about our second quarter results. Presenting today in addition to myself will be Bill Crooker, our Chief Financial Officer, who will discuss the bulk of the financial and operational data. Also with me today are Steve Mecke, our Chief Operating Officer; and Dave King, our Director of Real Estate Operations. They will be available to answer questions specific to their areas of focus.

As we enter the month of August, there continue to be more questions than concrete answers around important items that impact all of our daily lives. Will there be a second wave of COVID 19? If so, how will this impact reopening of our economy? Will students return to the classroom or be educated virtually? Will employees return to the office or continue to work from home? On top of these unanswered questions, we have the upcoming presidential election in November amid excessive levels of polarization.

However, we do know that consumer behavior has been changed by necessity and the acceleration of already in place trends. Many of these changes are likely permanent as we settle into the post-COVID new normal. The issue of whether an e-commerce presence and associated supply chain are required is no longer a question. For most businesses of size, an e-commerce presence is required to compete effectively.

Not surprisingly in this environment, Amazon continues to be our largest tenant. This dominant e-commerce company now accounts for 2.5% of our annualized base revenue. This includes the recent leasing activity we have specifically discussed in conference calls and on conference -- and at conferences. Across our platform, we continue to see the buildout of e-commerce supply chain as a large and growing demand driver for industrial real estate.

Let me now go over the leasing status for the 4 buildings that have been highlighted in our recent communications. Our building in Hampstead, Maryland, a 1 million square-foot building to be vacated by Solo Cup in July, has seen a healthy amount of leasing activity over the past 2 months. Our initial expectation was that it would take 12 to 18 months to accomplish the releasing of this building. Based on current information, we expect to outperform that estimate.

Our value-add project in Taunton, Massachusetts, a 350,000 square-foot building, was acquired last year, subject to a short-term lease to a known vacate tenant. The building received strong leasing interest from a variety of tenants, mostly for e-commerce use. We are happy to report that we have signed an 11-year lease to a dominant e-commerce tenant for the full building. In addition, we received a termination fee of over $0.5 million from the vacating tenant. The resulting zero downtime and the achieved rent significantly outperformed our budget and expectations for these metrics.

Our speculative development in Burlington, New Jersey, a 250,000 square-foot building that sits in one of the strongest strategic distribution markets on the East Coast, Exit 6A of the New Jersey Turnpike. We are happy to confirm that we have executed a full building lease to a dominant e-commerce tenant, again, outperforming our expectations on both rent and lease-up time.

Finally, we have determined the optimal path forward for our other building in Burlington, New Jersey, the 1 million square-foot building that GSA will vacate in December. You may recall, this asset also includes 40 acres of land adjacent to the building with development potential of over 500,000 square feet. After evaluating multiple potential paths, we will be moving forward to release the existing building and to separately continue to pursue permitting of the development parcel. This decision was driven by the continued strong leasing velocity in the Exit 6A submarket. This strength has been evidenced by the multiple discussions we were having with potential full building users. We look forward to updating everybody with details on both components in the near future.

In short, on these assets and across the portfolio, some very solid performance by our experienced and capable asset management team. With that, I'll turn it over to Bill, who will discuss our second quarter operational results and updates to our 2020 guidance.

Thank you, Ben. Good morning, everyone.

Core FFO was $0.47 for the quarter, an increase of 4.4% compared to the second quarter of 2019. Leverage remains at the low end of our guidance at quarter end, and we expect leverage to normalize as we increase our acquisition activity moving into the second half of the year.

Net debt to run rate adjusted EBITDA is 4.3x prior to factoring in the outside forward equity proceeds related to our January equity offering and 3.9x when those proceeds are included.

Acquisition volume for the second quarter totaled $11.9 million with stabilized cash and straight-line cap rates of 6.4% and 6.8%, respectively. Year-to-date, our acquisitions totaled $131.3 million. As stated in our guidance, we expect acquisition volume to increase in the second half of the year.

For the quarter, 2.7 million square feet of operating leasing activity commenced with cash and straight-line releasing spreads of 1.6% and 9.6%, respectively. Note that the releasing spreads within our disclosure exclude the impact of short-term leasing. Additionally, we leased 482,000 square feet of value-add buildings during the quarter.

Retention was 100.0% for the quarter and is 95.0% for the year. Same-store cash NOI grew by 2.1% for the quarter and 2.3% year-to-date, largely driven by our retention rate of 95.0%.

For the quarter, we collected 98.0% of our base rental billings. Of the remaining 2% of uncollected rent, 1.4% has been deferred with repayment generally expected by year-end. As of July 28, we have collected 90.9% of our July base rental billings. An additional 4.6% of July base rental billings yet to be received relates to investment-grade tenants and tenants who pay in arrears. We expect these tenants to remit payments within the next 2 weeks, bringing the total to 95.5%. The timing of these expected payments is consistent with past practices. 2.8% of the remaining 4.5% of uncollected base rental billings has been deferred. The remaining uncollected base rental billings is associated with smaller tenants that have been impacted by the pandemic.

To date, we have received rent relief requests totaling 5.3% of ABR, or $21.1 million. Of the $21.1 million of rent relief requested, we have granted rent relief of approximately $2.1 million, equal to 52 basis points ABR. The general framework includes a period of rent deferral as opposed to abatement with the deferred rent amounts repaid within the next 12 months.

As of today, we have 6 tenants on cash basis accounting, given their financial situation and our view of their ability to pay due to the economic climate. We incurred a total of $1.5 million of credit loss related to these 6 tenants. Approximately $900,000 of that loss related to the write-off of straight-line rent, and approximately $600,000 of that loss relates to cash credit loss. The cash credit loss equates to 20 basis points of our current same-store cash NOI credit loss guidance. These specific tenants account for approximately $4.2 million of ABR. Our credit loss guidance for 2020 includes the impact related to these tenants.

Moving to the capital market activity. On April 17, we refinanced term loans B and C, totaling $300 million, which were scheduled to mature this September and March of next year. STAG at its sole discretion has the option to execute 2 1-year extension periods, which if both exercise, would result in an outside maturity date in April of 2023. The term loan is fully swapped with an all-in fixed rate of 1.78% through April 2023. As a result of this transaction, we have no debt maturing until March of 2022 where we exercise our rights to extend.

We have updated guidance based on our view of the remainder of 2020. We acknowledge the continued uncertainty related to the health of the economy, and we'll continue to update the market as warranted. Components of our updated 2020 guidance are as follows. We maintained the expected acquisition volume of between $300 million and $600 million for 2020. We continue to expect all acquisitions to be stabilized assets with an expected cash cap rate range of 6.25% to 6.75%. Due to the expectation we will hold and not sell the GSA building in Burlington, New Jersey, we have reduced our disposition volume range to between $100 million and $150 million. We continue to expect retention to be within a range of 60% and 70%. The drivers for the lower than historical retention include the known non-retentions with Solo Cup and GSA.

We expect the 2020 annual same-store pools cash NOI growth to be between 0 and 100 basis points for the year. This range includes a credit loss range of 100 to 150 basis points. We continue to expect G&A to be between $39 million and $41 million for the year. We expect to run leverage between 4.5x and 5.25x for the year, with leverage increasing from the low end as we acquire more in the second half of the year. Capital expenditures per average square foot is still expected to be between $0.27 and $0.31 for the year. And we continue to expect a range of core FFO per share between $1.80 and $1.88 for the year.

I will now turn it back over to Ben.

Thank you, Bill.

In closing, let me touch on two topics that have been at the forefront of national attention recently: the pandemic and the persistent issues of inequality in our society. Our office has been open for almost 2 months on a voluntary basis. However, for the most part, our employees have continued to work from home and work collaboratively and effectively. We are confident the procedures we have in place will allow a safe return for all employees to our office when conditions permit.

We've always been proud that STAG is a place of opportunity and that we are a company that always tries to err on the side of doing the right thing. We have backed causes we believe in with both direct financial support and with paid volunteer hours. However, recent events have caused us to reflect and made us realize that we could and should do more. More as a company, and for many of us, more as individuals.

Some of the things we're doing as a company. We have significantly increased our annual budget for financial support of social causes. We are also expanding the opportunity for our employees to engage in volunteer work in the community. We will be providing educational opportunities for our employees to further awareness and understanding on these subjects. Our hiring practices are being modified to ensure a broader and more diverse applicant pool for both full-time and intern hiring. We realize that as one small company, there's only so much we can do. We hope that the steps outlined above and others we are taking will add to the progress of making both our community and society more equitable and just.

Thank you for your time this morning, and I'll turn it back to the operator for questions.

(Operator Instructions) Our first question comes from the line of Manny Korchman with Citi.

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

So the retention numbers for the remainder of the year are down in large part because of the 2 known vacates that will occur in the third and fourth quarter: the GSA building in Burlington, New Jersey and the Solo Cup building in Hampstead, Maryland. We're very confident of our operations and execution in those buildings, but those are the big factors that will result in lower retention over the remainder of the year.

Okay. Got it. And then can you discuss the percentage of leases that were signed on a short-term basis this quarter and the economics of those deals?

Yes, I'll give you -- obviously in a downturn or a recession, you always see more short-term leasing activity. I'll ask Dave to provide a little more detail.

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

Our next question comes from the line of Sheila McGrath with Evercore.

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

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

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

So Sheila, as you probably recall, the third and fourth quarter are almost always our biggest quarters in normal times. So there's a little bit of that. But also, we have seen our pipeline reduced during the first onset of the pandemic, but it's now filling back up again. And we're very confident of the -- because of the fact that the pipeline is $1.8 billion today, is still made up of a lot of individual assets, and we're bidding on more assets. I think we're pretty confident of our ability to execute. Bill, do you have something to add to that?

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

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

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

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

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

Elvis, the simple math is, no, we're not limited by capital in our acquisitions. So the simple math is we can do about -- we can stay inside the new guidance, upper end of the new guidance is 5.25% for this year. Longer term our guidance is as high as 6x or 5.75x. But if we can stay at that 5.25% and still acquire $600 million of assets over the remainder of the year from where we are today, that would be well above our total guidance for acquisitions for the year. That will be closer to $0.75 billion for the year.

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

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

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

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

Our next question comes from the line of Brendan Finn with Wells Fargo.

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

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

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

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

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

I think Bill is correct. We haven't had any new deferral requests for some time, or a very limited amount of deferral requests for some time.

The total number of tenants who received deferrals, Brendan, is about 8 -- is 8 tenants to date.

Our next question comes from the line of Michael Carroll with RBC.

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

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

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

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

Great. And then can you remind us where in-place rents are relative to market on that GSA property?

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

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

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

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

We're able to start the process and indeed have started the process of permitting. The process is ongoing.

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

Those are hitting the P&L already, Mike, just because I think one of them has 1 month of free rent, but that's coming in through straight line. So that's starting to hit the P&L. The Taunton one was in Q2 and the Burlington one started in Q3.

Our next question comes from the line of Dave Rodgers with Baird.

I wanted to follow up on something. I think Dave King had said earlier with respect to doing short-term renewals for tenants that had planned to move out to build-to-suit, is that in kind of the Solo Cup nature, or are these additional move-outs we should be expecting 6 months down the road and in the tenant retention? Or is this an early 2021 where we'll see kind of a higher overall proportion of move-outs as you push these leases out a little bit? Any more color would be helpful.

That was just in reference to a couple of instances where we had tenants extend for a year because their projects were not ready. And they're small, 200, 150,000 foot leases.

And there is also activity generally. We haven't seen as much of it, but there's also activity generally in light of the sort of the uncertainty with tenants doing shorter leases. We've actually -- one of the surprises I think to us operationally has been how much demand there has been for longer-term leases in a recession. And again, typical recession playbook is everybody does the shorter leases. But we've seen pretty strong demand for longer leases as evidence in some of our activity.

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

I think that there was certainly a pause at the outset, but I don't think there's been any great diminution. The trend line may be flattened a little, but I don't think it -- certainly didn't turn down.

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

The national absorption and supply numbers, supply and demand numbers, both supply and demand are forecast to be down. We have not seen evidence of that in current leasing market. Maybe they'll both be down at a level where it doesn't really impact pricing.

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

Yes, Dave, the bid-ask spread is pretty narrow in industrial. We were able -- the 2 deals we closed in June, we were able to get some price deducts from pre-COVID pricing; one of them as much as 2.6%. But we're expecting very similar pricings with a slight maybe discount going forward, but nothing material.

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

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

Yes. I mean, not to beat the -- I mean, we're looking for overlays. We're looking to be paid -- overpaid for the risks that we take. So we're -- we have guardrails in there. So we're not taking too much risk, but we're certainly looking to be paid for --. I mean we're happy to buy a 10-year Amazon lease in Ontario, California, but we'd want a 6 cap. Well, probably not a 6 cap, but we'd certainly want to be paid more than what the market is for an asset like that.

Our next question comes from the line of Mike Mueller with JPMorgan.

Just a quick one. I was wondering, can you give us a little color on the negative leasing spreads on the new leases during the quarter?

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

Got it. Okay.

Our next question comes from the line of John Massocca with Ladenburg Thalmann.

Just touching on acquisitions, and just given that you guys didn't close anything subsequent to quarter end as of this point, how should we kind of think about cadence over the remainder of the year? Should it be -- I know 4Q is always your most robust quarter in terms of acquisitions, but it should be almost all weighted towards 4Q? Or would you kind of expect the kind of the pipeline you've been able to put in place since things reopened to kind of come to fruition here in the next 2 months or so?

Yes. Expect some acquisitions to close at the end of Q3 and the bulk of the remaining acquisitions to close in Q4. The 2 that we did close in June, those were deals we had under either price agreement or contract, and we put those deals on hold through middle of May. And then we revisited those deals in the middle of May. We were able to close those in June. So as more transactions started to come to market in May, we started to underwrite, evaluate, and it takes at least 60 days to close those. So end of Q3 and into Q4.

Okay. Understood. And then sorry if I missed this in the prepared remarks, but assuming there's no resumption of rent from the 6 leases that went to cash accounting, what kind of a recovery are you expecting there?

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

But in terms of just either recovery on cost or new leases, what kind of what's baked in that guidance?

It's close to 0 for this year, John. It's just a matter of getting those tenants, whether they vacate the space, and we can get those spaces back and release those. But for the remainder of the year, it's close to 0.

Our next question comes from the line of Bill Crow with Raymond James.

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

Amazon obviously has been a huge, huge absorber of space this year and certainly at the end of last year. Their appetite is -- I can't -- I don't believe it can continue with the pace that it's at today. I've heard $1.5 million a week. Or maybe it's $1.5 million a day, I don't know. It's some very large number. So that the second derivative of Amazon demand is certainly has to -- it has to turn down. They can't continue to absorb at that level forever. But they're not the only engine in town for e-commerce. They're the most aggressive. But we're seeing other tenants with e-commerce demand as part of the interest we've had in some of our big buildings and some of our smaller buildings. So although that's certainly something to watch and they're a very important tenant, they're not the only game in town.

(Operator Instructions) Our next question comes from the line of Chris Lucas with Capital One.

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

The cash or the GAAP side of it? The total termination income was $1 million, of which $740,000 was cash.

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

That's a recurring for GAAP purposes. It's amortized over the life of the contract. And then for cash, it's one time. So for CAD purposes is about $400,000 included in CAD this quarter related to solar income and about $18,000 included in core FFO. So you can see how long those leases are that we're amortizing net income over.

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

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

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