SPIRIT REALTY CAPITAL, INC. [SRC] Filings

10-Q 1 src-10q_20210930.htm 10-Q src-10q_20210930.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2021

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to


Commission file number		001-36004

SPIRIT REALTY CAPITAL, INC.

(Exact name of registrant as specified in its charter)


Maryland		20-1676382

(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

2727 North Harwood Street, Suite 300, Dallas, Texas 75201		(972) 476-1900
(Address of principal executive offices; zip code)		(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, par value $0.05 per share	SRC	New York Stock Exchange
6.000% Series A Cumulative Redeemable Preferred Stock, par value $0.01 per share	SRC-A	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No □

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No □

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.


Large accelerated filer ☒	Accelerated filer □	Non-accelerated filer □


Smaller reporting company ☐		Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. □

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of October 29, 2021, there were 123,315,536 shares of common stock, par value $0.05, of Spirit Realty Capital, Inc. outstanding.

INDEX


Glossary			3
PART I — FINANCIAL INFORMATION			5
	Item 1.	Financial Statements (Unaudited)	5
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	42
	Item 4.	Controls and Procedures	42
PART II — OTHER INFORMATION			43
	Item 1.	Legal Proceedings	43
	Item 1A.	Risk Factors	43
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	43
	Item 3.	Defaults Upon Senior Securities	43
	Item 4.	Mine Safety Disclosures	43
	Item 5.	Other Information	43
	Item 6.	Exhibits	44
		Signatures	45

GLOSSARY

1031 Exchange	Tax-deferred like-kind exchange of properties held for business or investment purposes, pursuant to Section 1031 of the Code
2016 ATM Program	At-the-market equity distribution program established in November 2016, which was terminated upon entry into the 2020 ATM Program
2017 Tax Legislation	Tax Cuts and Jobs Act of 2017
2019 Credit Facility	$800.0 million unsecured revolving credit facility pursuant to the 2019 Revolving Credit and Term Loan Agreement
2019 Revolving Credit and Term Loan Agreement	Revolving credit and term loan agreement between the Operating Partnership and certain lenders dated January 14, 2019, as amended or otherwise modified from time to time
2020 ATM Program	At-the-market equity distribution program established in November 2020, pursuant to which the Corporation may offer and sell registered shares of common stock from time to time
2020 Term Loans	$400.0 million senior unsecured term facility pursuant to the 2020 Term Loan Agreement
2020 Term Loan Agreement	Term loan agreement between the Operating Partnership and certain lenders dated April 2, 2020, as amended or otherwise modified from time to time
2021 Notes	$345.0 million 3.75% convertible notes of the Corporation which matured in May 2021
2026 Senior Notes	$300.0 million aggregate principal amount of the Operating Partnership’s 4.45% senior notes due 2026
2027 Senior Notes	$300.0 million aggregate principal amount of the Operating Partnership’s 3.20% senior notes due 2027
2028 Senior Notes	$450.0 million aggregate principal amount of the Operating Partnership’s 2.10% senior notes due 2028
2029 Senior Notes	$400.0 million aggregate principal amount of the Operating Partnership’s 4.00% senior notes due 2029
2030 Senior Notes	$500.0 million aggregate principal amount of the Operating Partnership’s 3.40% senior notes due 2030
2031 Senior Notes	$450.0 million aggregate principal amount of the Operating Partnership’s 3.20% senior notes due 2031
2032 Senior Notes	$350.0 million aggregate principal amount of the Operating Partnership’s 2.70% senior notes due 2032
Adjusted Debt	Adjusted Debt is a non-GAAP financial measure. See definition in Management's Discussion and Analysis of Financial Condition and Results of Operations
Adjusted EBITDAre	Adjusted EBITDAre is a non-GAAP financial measure. See definition in Management's Discussion and Analysis of Financial Condition and Results of Operations
AFFO	Adjusted Funds From Operations is a non-GAAP financial measure. See definition in Management's Discussion and Analysis of Financial Condition and Results of Operations
Amended Incentive Award Plan	Amended and Restated Spirit Realty Capital, Inc. and Spirit Realty, L.P. 2012 Incentive Award Plan, as amended
Annualized Base Rent (ABR)	Represents Base Rent plus earned income from direct financing leases and deferred revenue from development deals for the final month of the reporting period. It is adjusted to reflect acquisitions and dispositions for that month as if such acquisitions and dispositions had occurred as of the beginning of the month. The total is then multiplied by 12. ABR is used when calculating certain metrics to evaluate portfolio credit and diversification and to manage risk.
AOCL	Accumulated Other Comprehensive Loss
ASC	Accounting Standards Codification
Asset Management Agreement	Asset Management Agreement between Spirit Realty, L.P. and Spirit MTA REIT dated May 31, 2018, subsequently assigned by Spirit Realty, L.P. to Spirit Realty AM Corporation on April 1, 2019 and terminated effective as of September 20, 2019
ASU	Accounting Standards Update
ATM Program	The 2016 ATM Program or the 2020 ATM Program, as applicable
Base Cash Rent	Represents Base Rent reduced for amounts abated and rent deemed not probable of collection
Base Rent	Represents contractual rental income for the period, prior to deferral and abatement agreements, and excluding contingent rents.
CMBS	Commercial Mortgage-Backed Securities
Code	Internal Revenue Code of 1986, as amended
Company	The Corporation and its consolidated subsidiaries

Convertible Notes	The 2021 Notes
Corporation	Spirit Realty Capital, Inc., a Maryland corporation
CPI	Consumer Price Index
EBITDAre	EBITDAre is a non-GAAP financial measure computed in accordance with standards established by NAREIT. See definition in Management's Discussion and Analysis of Financial Condition and Results of Operations
Exchange Act	Securities Exchange Act of 1934, as amended
FASB	Financial Accounting Standards Board
FFO	Funds From Operations is a non-GAAP financial measure. See definition in Management's Discussion and Analysis of Financial Condition and Results of Operations
GAAP	Generally Accepted Accounting Principles in the United States
Interim Management Agreement	Interim Management Agreement between Spirit Realty AM Corporation, a wholly-owned subsidiary of the Company, and Spirit MTA REIT dated June 2, 2019, which was effective from September 20, 2019 through September 4, 2020
LIBOR	London Interbank Offered Rate
NAREIT	National Association of Real Estate Investment Trusts
OP Holdings	Spirit General OP Holdings, LLC
Operating Partnership	Spirit Realty, L.P., a Delaware limited partnership
REIT	Real estate investment trust
S&P	S&P's Global Ratings
SEC	Securities and Exchange Commission
Securities Act	Securities Act of 1933, as amended
Senior Unsecured Notes	2026 Senior Notes, 2027 Senior Notes, 2028 Senior Notes, 2029 Senior Notes, 2030 Senior Notes, 2031 Senior Notes and 2032 Senior Notes, collectively
Series A Preferred Stock	6,900,000 shares of 6.000% Cumulative Redeemable Preferred Stock issued October 3, 2017, with a liquidation preference of $25.00 per share
SMTA	Spirit MTA REIT, a Maryland real estate investment trust, or SMTA Liquidating Trust, a Maryland common law trust, as the context dictates. On January 1, 2020, Spirit MTA REIT transferred all of its assets (subject to all of its liabilities) to SMTA Liquidating Trust
Spin-Off	Creation of an independent, publicly traded REIT, SMTA, through our contribution of certain assets to SMTA followed by the distribution by us to our stockholders of all of the common shares of beneficial interest in SMTA.
TSR	Total Shareholder Return

Unless otherwise indicated or unless the context requires otherwise, all references to the “registrant, the "Company," "Spirit Realty Capital," "we," "us" or "our" refer to the Corporation and its consolidated subsidiaries, including the Operating Partnership. Unless otherwise indicated or unless the context requires otherwise, all references to the "Operating Partnership" refer to Spirit Realty, L.P. and its consolidated subsidiaries.

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

SPIRIT REALTY CAPITAL, INC.

Consolidated Balance Sheets

(In Thousands, Except Share and Per Share Data)

(Unaudited)

	September 30, 2021			December 31, 2020
Assets
Investments:
Real estate investments:
Land and improvements	$	2,371,745		$	2,090,592
Buildings and improvements		4,643,690			4,302,004
Total real estate investments		7,015,435			6,392,596
Less: accumulated depreciation		(982,382	)		(850,320	)
		6,033,053			5,542,276
Intangible lease assets, net		425,442			367,989
Real estate assets under direct financing leases, net		7,443			7,444
Real estate assets held for sale, net		12,970			25,821
Net investments		6,478,908			5,943,530
Cash and cash equivalents		15,564			70,303
Deferred costs and other assets, net		175,161			157,353
Goodwill		225,600			225,600
Total assets	$	6,895,233		$	6,396,786

Liabilities and stockholders’ equity
Liabilities:
Revolving credit facilities	$	49,300		$	—
Term loans, net		—			177,309
Senior Unsecured Notes, net		2,717,693			1,927,348
Mortgages payable, net		5,687			212,582
Convertible Notes, net		—			189,102
Total debt, net		2,772,680			2,506,341
Intangible lease liabilities, net		129,300			121,902
Accounts payable, accrued expenses and other liabilities		154,623			167,423
Total liabilities		3,056,603			2,795,666
Commitments and contingencies (see Note 6)
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 September 30, 2021 and December 31, 2020		166,177			166,177
Common stock, $0.05 par value, 175,000,000 shares authorized: 123,315,721 and 114,812,615 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively		6,166			5,741
Capital in excess of common stock par value		6,472,964			6,126,503
Accumulated deficit		(2,800,129	)		(2,688,647	)
Accumulated other comprehensive loss		(6,548	)		(8,654	)
Total stockholders’ equity		3,838,630			3,601,120
Total liabilities and stockholders’ equity	$	6,895,233		$	6,396,786

See accompanying notes.

SPIRIT REALTY CAPITAL, INC.

Consolidated Statements of Operations

(In Thousands, Except Share and Per Share Data)

(Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020
Revenues:
Rental income	$	151,376		$	112,916		$	450,483		$	351,469
Interest income on loans receivable		—			189			—			998
Earned income from direct financing leases		131			131			394			439
Related party fee income		—			178			—			678
Other income		1,061			327			1,458			1,401
Total revenues		152,568			113,741			452,335			354,985
Expenses:
General and administrative		13,103			10,931			39,599			36,396
Property costs (including reimbursable)		5,862			5,049			17,633			18,219
Deal pursuit costs		361			597			860			1,630
Interest		25,078			26,404			77,872			77,858
Depreciation and amortization		63,061			52,170			180,222			157,566
Impairments		4,435			8,106			18,965			69,929
Total expenses		111,900			103,257			335,151			361,598
Other income:
Gain (loss) on debt extinguishment		1			(7,252	)		(29,186	)		(7,252	)
Gain on disposition of assets		453			10,763			39,796			11,809
Total other income		454			3,511			10,610			4,557
Income (loss) before income tax expense		41,122			13,995			127,794			(2,056	)
Income tax expense		(244	)		(197	)		(461	)		(406	)
Net income (loss)		40,878			13,798			127,333			(2,462	)
Dividends paid to preferred shareholders		(2,587	)		(2,587	)		(7,763	)		(7,763	)
Net income (loss) attributable to common stockholders	$	38,291		$	11,211		$	119,570		$	(10,225	)

Net income (loss) per share attributable to common stockholders:
Basic	$	0.32		$	0.11		$	1.02		$	(0.11	)
Diluted	$	0.32		$	0.11		$	1.02		$	(0.11	)

Weighted average shares of common stock outstanding:
Basic		119,775,871			102,750,120			116,503,634			102,553,798
Diluted		120,302,158			102,938,860			116,870,429			102,553,798

Dividends declared per common share issued	$	0.6380		$	0.6250		$	1.8880		$	1.8750

See accompanying notes.

SPIRIT REALTY CAPITAL, INC.

Consolidated Statements of Comprehensive Income (Loss)

(In Thousands)

(Unaudited)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Net income (loss) attributable to common stockholders	$	38,291	$	11,211	$	119,570	$	(10,225	)
Other comprehensive income:
Net reclassification of amounts from AOCL		702		702		2,106		2,106
Total comprehensive income (loss)	$	38,993	$	11,913	$	121,676	$	(8,119	)

See accompanying notes.

SPIRIT REALTY CAPITAL, INC.

Consolidated Statements of Stockholders' Equity

(In Thousands, Except Share Data)

(Unaudited)

Nine Months Ended September 30, 2021	Preferred Stock				Common Stock
	Shares		Par Value and Capital in Excess of Par Value		Shares			Par Value			Capital in Excess of Par Value		Accumulated Deficit			AOCL			Total Stockholders’ Equity
Balances, December 31, 2020		6,900,000	$	166,177		114,812,615		$	5,741		$	6,126,503	$	(2,688,647	)	$	(8,654	)	$	3,601,120
Net loss		—		—		—			—			—		(1,469	)		—			(1,469	)
Dividends declared on preferred stock		—		—		—			—			—		(2,588	)		—			(2,588	)
Net loss attributable to common stockholders				—					—			—		(4,057	)		—			(4,057	)
Other comprehensive income		—		—		—			—			—		—			702			702
Dividends declared on common stock		—		—		—			—			—		(71,837	)		—			(71,837	)
Tax withholdings related to net stock settlements		—		—		(98,413	)		(6	)		—		(3,837	)		—			(3,843	)
Stock-based compensation, net		—		—		233,784			12			3,366		(407	)		—			2,971
Balances, March 31, 2021		6,900,000	$	166,177		114,947,986		$	5,747		$	6,129,869	$	(2,768,785	)	$	(7,952	)	$	3,525,056
Net income		—		—		—			—			—		87,924			—			87,924
Dividends declared on preferred stock		—		—		—			—			—		(2,588	)		—			(2,588	)
Net income attributable to common stockholders				—					—			—		85,336			—			85,336
Other comprehensive income		—		—		—			—			—		—			702			702
Dividends declared on common stock		—		—		—			—			—		(74,436	)		—			(74,436	)
Tax withholdings related to net stock settlements		—		—		(12,597	)		(1	)		—		(548	)		—			(549	)
Issuance of shares of common stock, net		—		—		4,116,932			206			145,255		—			—			145,461
Stock-based compensation, net		—		—		51,591			3			3,611		(360	)		—			3,254
Balances, June 30, 2021		6,900,000	$	166,177		119,103,912		$	5,955

SPIRIT REALTY CAPITAL, INC. [SRC] Filings
SPIRIT REALTY CAPITAL, INC. [SRC-PA] Filings
10-Q	[2021-11-02]
10-Q	[2021-08-03]
10-Q	[2021-05-05]
10-K	[2021-02-19]
10-Q	[2020-11-02]
10-Q	[2020-07-31]
10-Q	[2020-05-05]
10-K	[2020-02-25]
10-Q	[2019-11-05]
10-Q	[2019-08-07]
10-Q	[2019-05-02]
10-K	[2019-02-21]
10-Q	[2018-11-09]
10-Q	[2018-08-09]
10-Q	[2018-05-03]
10-K	[2018-02-23]
10-Q	[2017-11-02]
10-Q	[2017-08-03]
10-Q	[2017-05-03]
10-K	[2017-02-24]
10-Q	[2016-11-09]
10-Q	[2016-08-05]
10-Q	[2016-05-05]
10-K	[2016-02-26]
10-Q	[2015-11-06]
10-Q	[2015-08-07]
10-Q	[2015-05-08]
10-K	[2015-02-27]
10-Q	[2014-11-05]
10-Q	[2014-08-06]
10-Q	[2014-05-09]
10-K	[2014-03-04]
10-Q	[2013-11-12]
10-Q	[2013-08-09]
10-Q	[2013-05-14]
10-K	[2013-03-07]
10-Q	[2012-11-09]
10-Q	[2012-08-14]
10-Q	[2012-05-15]
10-K	[2012-03-30]

SPIRIT REALTY CAPITAL, INC. [SRC] Filings

SPIRIT REALTY CAPITAL, INC. [SRC-PA] Filings