Spirit Realty Capital, Inc. Announces First Quarter of 2019 Financial and Operating Results

– Invested $179 Million in Acquisitions and Revenue Producing Capital
Expenditures –

– Generated Net Income of $0.48 per share, FFO of $0.90 per share and
AFFO of $0.86 per share –

DALLAS–(BUSINESS WIRE)–Spirit Realty Capital, Inc. (NYSE: SRC) (“Spirit” or the “Company”), a
premier net-lease real estate investment trust (“REIT”) that invests in
single-tenant, operationally essential real estate, today reported its
financial and operating results for the three months ended March 31,
2019.

FIRST QUARTER 2019 HIGHLIGHTS

  • Invested $178.6 million, including $160.3 million for the acquisition
    of 22 properties, with an initial weighted average cash yield of 7.16%
    and an economic yield of 7.93%.
  • Issued 0.9 million shares of common stock under the Company’s
    At-the-Market Program (“ATM Program”), generating gross proceeds of
    $34.0 million, during the three months ended March 31, 2019. Total
    2019 activity through April 30th under the ATM Program
    is 2.3 million shares of common stock, including 0.9 million shares
    yet to be settled under forward contracts, at a weighted average share
    price of $39.19 and for expected gross proceeds of approximately $91.0
    million.
  • Generated net income from continuing operations of $0.48 vs $0.39 per
    diluted share, FFO of $0.90 vs $1.18 per share and AFFO of $0.86 vs
    $1.07 per share, compared to same quarter 2018.
  • Disposed of seven properties for $46.5 million in gross proceeds, with
    an overall weighted average capitalization rate of 7.54% on four
    income producing properties.
  • Executed $1.62 billion unsecured credit facility in January 2019,
    comprised of an $800 million unsecured revolving credit facility
    maturing in March 2023, $420 million of unsecured term loans maturing
    in March 2024 and $400 million unsecured delayed draw term loans
    maturing in March 2022.
  • Maintained strong operating results, including portfolio occupancy of
    99.3% as of March 31, 2019 and same store Contractual Rent growth of
    1.8%.
  • Had corporate liquidity of $1.00 billion as of March 31, 2019,
    comprised of availability under the unsecured revolving credit
    facility, delayed draw term loans and cash and cash equivalents.

CEO COMMENTS

“Spirit enjoyed an impressive start to 2019, achieving excellent
operating results while maintaining low leverage. We are very pleased
with our capital deployment, completing $179 million in new acquisitions
and revenue producing capital expenditures during the quarter. In
addition, our success in accessing the equity markets in 2019 allows us
to maintain low leverage and provide growth capital for future
acquisitions. I firmly believe this quarter is indicative of our strong
platform that can continue to deliver consistent results,” stated
Jackson Hsieh, President and Chief Executive Officer.

FINANCIAL RESULTS

Total revenues from continuing operations for the three months ended
March 31, 2019 were $112.6 million, compared to $103.5 million for the
same period in 2018.

Net income attributable to common stockholders for the three months
ended March 31, 2019 was $41.0 million, or $0.48 per diluted share,
compared to $28.1 million, or $0.31 per diluted share, for the same
period in 2018.

FFO for the three months ended March 31, 2019 was $77.2 million, or
$0.90 per diluted share, compared to $105.3 million, or $1.18 per
diluted share, for the same period in 2018.

AFFO for the three months ended March 31, 2019 was $73.8 million, or
$0.86 per diluted share, compared to $95.3 million, or $1.07 per diluted
share, for the same period in 2018.

The Board of Directors declared a quarterly cash dividend of $0.625 per
common share, representing an annualized rate of $2.50 per common share.
The Board of Directors also declared a quarterly cash dividend of $0.375
per preferred share. The quarterly common dividend was paid on April 15,
2019 to shareholders of record as of March 29, 2019 and the preferred
dividend was paid on March 29, 2019 to shareholders of record as of
March 15, 2019.

PORTFOLIO HIGHLIGHTS

During the three months ended March 31, 2019, Spirit invested $160.3
million in the acquisition of 22 properties through six transactions,
with an initial weighted-average cash yield of approximately 7.03%, an
economic yield of 7.93% and a weighted average lease term of 14.8 years.
Additionally, the Company invested $18.3 million in revenue producing
capital expenditures related to ten existing properties.

During the three months ended March 31, 2019, Spirit disposed of seven
properties for $46.5 million in gross proceeds, including the sale of
four income producing properties for $36.2 million, with a weighted
average capitalization rate of 7.54%. One of the disposed properties was
transferred to the CMBS lender, resulting in the resolution of $10.4
million in secured debt.

At March 31, 2019, Spirit’s diversified real estate portfolio was
occupied at 99.3% and was comprised of 1,477 owned properties, of which
ten were vacant, and 51 properties securing mortgage loans.

BALANCE SHEET, LIQUIDITY & CAPITAL MARKETS

  • Unencumbered Assets totaled $4.23 billion as of March 31, 2019,
    representing approximately 81.1% of Spirit’s Real Estate Investment.
  • Issued 0.9 million shares of common stock under the Company’s
    At-the-Market Program (“ATM Program”), generating gross proceeds of
    $34.0 million, during the three months ended March 31, 2019. Total
    2019 activity through April 30th under the ATM Program
    is 2.3 million shares of common stock, including amounts yet to be
    settled under forward contracts, at a weighted average share price of
    $39.19.
  • Extinguished $10.4 million of CMBS debt related to a defaulted loan
    with a default interest rate of 9.85%, and the vacant property
    securing the loan was returned to the lender.
  • Adjusted Debt to Annualized Adjusted EBITDAre was 5.2x at
    March 31, 2019.
  • As of April 30, 2019, Spirit had approximately $13.2 million in cash
    and cash equivalents and $1.04 billion of available borrowing capacity
    under its unsecured credit facility and A-2 Term Loans.
  • As of April 30, 2019, Spirit had additional funds available for
    acquisitions of approximately $7.4 million in its Master Trust 2013
    release account.
  • As of April 30, 2019, Spirit had an outstanding share count of
    87,338,212.

2019 GUIDANCE

The Company is revising its full-year guidance for 2019:

  • AFFO of $3.35 to $3.39 per share (assumes a full year of related party
    fee income and preferred dividend income from SMTA),
  • Capital deployment of $450.0 million to $600.0 million (comprising
    acquisitions, revenue producing capital expenditures and development
    deals),
  • Asset dispositions of $225.0 million to $325.0 million, and
  • Adjusted Debt to Adjusted EBITDAre of 5.0x to 5.4x.

The Company does not provide a reconciliation for its guidance range of
AFFO per diluted share to net income available to common stockholders
per diluted share, the most directly comparable forward looking GAAP
financial measure, due to the inherent variability in timing and/or
amount of various items that could impact net income available to common
stockholders per diluted share, including, for example, gains on debt
extinguishment, impairments and other items that are outside the control
of the Company.

EARNINGS WEBCAST AND CONFERENCE CALL TIME

The Company’s first quarter 2019 earnings conference call is scheduled
for Thursday, May 2, 2019 at 9:30am Eastern Time. Interested parties can
listen to the call via the following:

     
Internet:

Go to www.spiritrealty.com
and select the investor relations page at least 15 minutes prior
to the start time of the call in order to register, download and
install any necessary audio software.

 
Phone: No access code required.
(877) 407-9208 (Domestic) / (201) 493-6784 (International)
 
Replay: Available through May 16, 2019 with access code 13689765.
(844) 512-2921 (Domestic) / (412) 317-6671 (International)
 

SUPPLEMENTAL PACKAGES

A supplemental financial and operating report and associated addenda
that contain non-GAAP measures and other defined terms, along with this
press release, have been posted to the investor relations page of the
Company’s website at www.spiritrealty.com.

ABOUT SPIRIT REALTY

Spirit Realty Capital, Inc. (NYSE: SRC) is a premier net-lease REIT that
primarily invests in high-quality, operationally essential real estate,
subject to long-term, net leases. Over the past decade, Spirit has
become an industry leader and owner of income-producing, strategically
located retail, industrial, office and data center properties.

As of March 31, 2019, our diversified portfolio was comprised of 1,528
properties, including properties securing mortgage loans made by the
Company. Our owned properties, with an aggregate gross leasable area of
28.6 million square feet, are leased to 256 tenants across 49 states and
32 industries. More information about Spirit Realty Capital can be found
on the investor relations page of the Company’s website at www.spiritrealty.com.

FORWARD-LOOKING AND CAUTIONARY STATEMENTS

This press release contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Exchange Act of 1934, as amended. When used in this
press release, the words “estimate,” “anticipate,” “expect,” “believe,”
“intend,” “may,” “will,” “should,” “seek,” “approximately” or “plan,” or
the negative of these words or similar words or phrases that are
predictions of or indicate future events or trends and which do not
relate solely to historical matters are intended to identify
forward-looking statements. You can also identify forward-looking
statements by discussions of strategy, plans or intentions of
management. Forward-looking statements involve numerous risks and
uncertainties and you should not rely on them as predictions of future
events. Forward-looking statements depend on assumptions, data or
methods that may be incorrect or imprecise, and Spirit may not be able
to realize them. Spirit does not guarantee that the transactions and
events described will happen as described (or that they will happen at
all). The following risks and uncertainties, among others, could cause
actual results and future events to differ materially from those set
forth or contemplated in the forward-looking statements: industry and
economic conditions; volatility and uncertainty in the financial
markets, including potential fluctuations in the CPI; Spirit’s success
in implementing its business strategy and its ability to identify,
underwrite, finance, consummate, integrate and manage diversifying
acquisitions or investments; the financial performance of Spirit’s
retail tenants and the demand for retail space, particularly with
respect to challenges being experienced by general merchandise
retailers; Spirit’s ability to diversify its tenant base; the nature and
extent of future competition; increases in Spirit’s costs of borrowing
as a result of changes in interest rates and other factors; Spirit’s
ability to access debt and equity capital markets; Spirit’s ability to
pay down, refinance, restructure and/or extend its indebtedness as it
becomes due; Spirit’s ability and willingness to renew its leases upon
expiration and to reposition its properties on the same or better terms
upon expiration in the event such properties are not renewed by tenants
or Spirit exercises its rights to replace existing tenants upon default;
the impact of any financial, accounting, legal or regulatory issues or
litigation that may affect Spirit or its major tenants; Spirit’s ability
to manage its expanded operations; Spirit’s ability and willingness to
maintain its qualification as a REIT under the Internal Revenue Code of
1986, as amended; the impact of Shopko’s bankruptcy filing on SMTA; the
impact of SMTA’s board of trustees’ decision to accelerate its strategic
plan, including Spirit’s ability to collect amounts to which it is
contractually entitled under the Asset Management Agreement or SMTA
Preferred Stock upon a resolution of SMTA and/or a termination of the
Asset Management Agreement; Spirit’s ability to perform as an external
manager for SMTA; and other risks inherent in the real estate business,
including tenant defaults, potential liability relating to environmental
matters, illiquidity of real estate investments and potential damages
from natural disasters discussed in Spirit’s most recent filings with
the Securities and Exchange Commission, including its Annual Report on
Form 10-K and subsequent Quarterly Reports on Form 10-Q. You are
cautioned not to place undue reliance on forward-looking statements,
which speak only as of the date of this press release. While
forward-looking statements reflect Spirit’s good faith beliefs, they are
not guarantees of future performance. Spirit disclaims any obligation to
publicly update or revise any forward-looking statement to reflect
changes in underlying assumptions or factors, new information, data or
methods, future events or other changes, except as required by law.

NOTICE REGARDING NON-GAAP FINANCIAL MEASURES

In addition to U.S. GAAP financial measures, this press release and the
referenced supplemental financial and operating report and related
addenda contain and may refer to certain non-GAAP financial measures.
These non-GAAP financial measures are in addition to, not a substitute
for or superior to, measures of financial performance prepared in
accordance with GAAP. These non-GAAP financial measures should not be
considered replacements for, and should be read together with, the most
comparable GAAP financial measures. Definitions of non-GAAP financial
measures, reconciliations to the most directly comparable GAAP financial
measures and statements of why management believes these measures are
useful to investors are included in the Appendix of the supplemental
financial and operating report, which can be found in the investor
relations page of our website.

 
SPIRIT REALTY CAPITAL, INC.
Consolidated Statements of Operations
(In Thousands, Except Share and Per Share Data)
(Unaudited)
      Three Months Ended March 31,
2019     2018
Revenues:
Rental income (1) $ 104,067 $ 101,507
Interest income on loans receivable 986 995
Earned income from direct financing leases 396 465
Related party fee income 6,927
Other income 217   572  
Total revenues 112,593 103,539
Expenses:
General and administrative 13,181 15,290
Property costs (including reimbursable) 5,154 5,551
Real estate acquisition costs 71 47
Interest 26,611 23,053
Depreciation and amortization 41,349 40,694
Impairments 3,692   3,497  
Total expenses 90,058 88,132
Other income:
Gain on debt extinguishment 8,783 21,583
Gain on disposition of assets 8,730 1,251
Preferred dividend income from SMTA 3,750    
Total other income 21,263 22,834
Income from continuing operations before income tax expense 43,798 38,241
Income tax expense (220 ) (163 )
Income from continuing operations 43,578 38,078
Loss from discontinued operations   (7,360 )
Net income 43,578 30,718
Dividends paid to preferred shareholders (2,588 ) (2,588 )
Net income attributable to common stockholders $ 40,990   $ 28,130  
 
Net income per share attributable to common stockholders – diluted
Continuing operations $ 0.48 $ 0.39
Discontinued operations   (0.08 )
Net income per share attributable to common stockholders – diluted $ 0.48   $ 0.31  
 
Weighted average shares of common stock outstanding:
Basic 85,497,093 88,975,391
Diluted 85,504,897 89,020,751
 

(1) Included in rental income for the three months ended
March 31, 2019 is $0.9 million of bad debt expense. There was no bad
debt expense included in continuing operations for the three months
ended March 31, 2018.

 
SPIRIT REALTY CAPITAL, INC.
Consolidated Balance Sheets

(In Thousands, Except Share and Per Share Data)

(Unaudited)

     

March 31,
2019

   

December 31,
2018

Assets
Investments:
Real estate investments:
Land and improvements $ 1,645,060 $ 1,632,664
Buildings and improvements 3,159,235   3,125,053  
Total real estate investments 4,804,295 4,757,717
Less: accumulated depreciation (636,780 ) (621,456 )
4,167,515 4,136,261
Loans receivable, net 43,015 47,044
Intangible lease assets, net 291,095 294,463
Real estate assets under direct financing leases, net 20,320 20,289
Real estate assets held for sale, net 94,339   18,203  
Net investments 4,616,284 4,516,260
Cash and cash equivalents 9,376 14,493
Deferred costs and other assets, net 124,085 156,428
Investment in Master Trust 2014 33,512 33,535
Preferred equity investment in SMTA 150,000 150,000
Goodwill 225,600   225,600  
Total assets $ 5,158,857   $ 5,096,316  
 
Liabilities and stockholders’ equity
Liabilities:
Revolving credit facilities $ 206,500 $ 146,300
Term loans, net 413,905 419,560
Senior Unsecured Notes, net 295,882 295,767
Mortgages and notes payable, net 450,534 463,196
Convertible Notes, net 733,412   729,814  
Total debt, net 2,100,233 2,054,637
Intangible lease liabilities, net 114,805 120,162
Accounts payable, accrued expenses and other liabilities 125,183   119,768  
Total liabilities 2,340,221 2,294,567
Stockholders’ equity:
Preferred stock and paid in capital, $0.01 par value, 20,000,000
shares authorized: 6,900,000 shares issued and outstanding at both
March 31, 2019 and December 31, 2018
166,177 166,177
Common stock, $0.05 par value, 750,000,000 shares authorized:
86,811,786 and 85,787,355 shares issued and outstanding at March 31,
2019 and December 31, 2018, respectively
4,341 4,289
Capital in excess of common stock par value 5,031,829 4,995,697
Accumulated deficit (2,371,531 ) (2,357,255 )
Accumulated other comprehensive loss (12,180 ) (7,159 )
Total stockholders’ equity 2,818,636   2,801,749  
Total liabilities and stockholders’ equity $ 5,158,857   $ 5,096,316  
 
 
SPIRIT REALTY CAPITAL, INC.
Reconciliation of Non-GAAP Financial Measures
(In Thousands, Except Share and Per Share Data)
(Unaudited)
 

FFO and AFFO

      Three Months Ended March 31,
2019     2018
Net income attributable to common stockholders $ 40,990 $ 28,130
Add / (less):
Portfolio depreciation and amortization 41,207 61,976
Portfolio impairments 3,692 14,569
Gain (loss) on disposition of assets (8,730 ) 605  
Total adjustments to net income 36,169   77,150  
FFO attributable to common stockholders $ 77,159 $ 105,280
Add / (less):
Gain on debt extinguishment (8,783 ) (21,328 )
Real estate acquisition costs 71 48
Transaction costs 3,932
Non-cash interest expense 4,737 7,541
Accrued interest and fees on defaulted loans 285 556
Straight-line rent, net of related bad debt expense (2,907 ) (4,457 )
Other amortization and non-cash charges (325 ) (605 )
Non-cash compensation expense 3,578   4,366  
Total adjustments to FFO (3,344 ) (9,947 )
AFFO attributable to common stockholders $ 73,815   $ 95,333  
 
Dividends declared to common stockholders $ 54,257 $ 78,581
Dividends declared as a percent of AFFO 74 % 82 %
Net income per share of common stock
Basic (1) $ 0.48 $ 0.31
Diluted (1) $ 0.48 $ 0.31
FFO per share of common stock
Diluted (1) $ 0.90 $ 1.18
AFFO per share of common stock
Diluted (1) $ 0.86 $ 1.07
 
Weighted average shares of common stock outstanding:
Basic 85,497,093 88,975,391
Diluted 85,504,897 89,020,751
 

(1) For the three months ended March 31, 2019 and 2018,
dividends paid to unvested restricted stockholders of $0.3 million and
$0.4 million, respectively, are deducted from FFO and AFFO attributable
to common stockholders in the computation of per share amounts.

For both the three months ended March 31, 2019, and 2018, undistributed
earnings allocated to unvested restricted stockholders of $0.1 million
are deducted from FFO and AFFO attributable to common stockholders in
the computation of per share amounts.

Contacts

Pierre Revol
Investor Relations
(972) 476-1403
InvestorRelations@spiritrealty.com

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