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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 June 30, 2020

OR

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

 

   Spirit Realty Capital, Inc.

001-36004

Spirit Realty, L.P.

333-216815-01

 

SPIRIT REALTY CAPITAL, INC.

SPIRIT REALTY, L.P.

(Exact name of registrant as specified in its charter)

 

 

Spirit Realty Capital, Inc.

 

Maryland

 

20-1676382

Spirit Realty, L.P.

 

Delaware

 

20-1127940

 

 

(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)

 

(Former name, former address and former fiscal year, if changed since last report)

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.    

Spirit Realty Capital, Inc.      Yes    No   

Spirit Realty, L.P.      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).    

Spirit Realty Capital, Inc.      Yes    No   

Spirit Realty, L.P.      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.

Spirit Realty Capital, Inc.

 

 Large accelerated filer

Accelerated filer

Non-accelerated filer

 

Smaller reporting company

Emerging growth company

Spirit Realty, L.P.

 

 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.

 

Spirit Realty Capital, Inc.            

Spirit Realty, L.P.            

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

 

Spirit Realty Capital, Inc.      Yes    No  

Spirit Realty, L.P.      Yes    No  

As of July 28, 2020, there were 103,043,105 shares of common stock, par value $0.05, of Spirit Realty Capital, Inc. outstanding.

 

 


EXPLANATORY NOTE

This report combines the quarterly reports on Form 10-Q for the three and six months ended June 30, 2020 of Spirit Realty Capital, Inc., a Maryland corporation, and Spirit Realty, L.P., a Delaware limited partnership. Unless otherwise indicated or unless the context requires otherwise, all references in this report to “we,” “us,” “our,” or the “Company” refer to Spirit Realty Capital, Inc. together with its consolidated subsidiaries, including Spirit Realty, L.P. Unless otherwise indicated or unless the context requires otherwise, all references to the “Operating Partnership” refer to Spirit Realty, L.P. together with its consolidated subsidiaries.

Spirit General OP Holdings, LLC ("OP Holdings") is the sole general partner of the Operating Partnership. The Company is a real estate investment trust ("REIT") and the sole member of OP Holdings, as well as the special limited partner of the Operating Partnership. As sole member of the general partner of our Operating Partnership, our Company has the full, exclusive and complete responsibility for our Operating Partnership’s day-to-day management and control.

We believe combining the quarterly reports on Form 10-Q of our Company and Operating Partnership into a single report results in the following benefits:

 

enhancing investors’ understanding of our Company and Operating Partnership by enabling investors to view the business as a whole, reflective of how management views and operates the business;

 

eliminating duplicative disclosure and providing a streamlined presentation as a substantial portion of the disclosures apply to both our Company and Operating Partnership; and

 

creating time and cost efficiencies by preparing one combined report in lieu of two separate reports.

There are a few differences between our Company and Operating Partnership, which are reflected in the disclosures in this report. We believe it is important to understand these differences in the context of how we operate as an interrelated, consolidated company. Our Company is a REIT, the only material assets of which are the partnership interests in our Operating Partnership. As a result, our Company does not conduct business itself, other than acting as the sole member of the general partner of our Operating Partnership, issuing equity from time to time and guaranteeing certain debt of our Operating Partnership. Our Operating Partnership holds substantially all the assets of our Company. Our Company issued convertible notes and guarantees some of the debt of our Operating Partnership, see Note 4 to the consolidated financial statements included herein for further discussion. Our Operating Partnership conducts the operations of the business and is structured as a partnership with no publicly traded equity. Except for net proceeds from issuances of convertible notes and equity issuances by our Company, which are generally contributed to our Operating Partnership in exchange for partnership units of our Operating Partnership, our Operating Partnership generates the capital required by our Company’s business through our Operating Partnership’s operations or our Operating Partnership’s incurrence of indebtedness.

The presentation of stockholders’ equity and partners’ capital are the main areas of difference between the consolidated financial statements of our Company and those of our Operating Partnership. The partnership units in our Operating Partnership are accounted for as partners’ capital in our Operating Partnership’s consolidated financial statements. There are no non-controlling interests in the Company or the Operating Partnership.

To help investors understand the significant differences between our Company and our Operating Partnership, this report presents the consolidated financial statements separately for our Company and our Operating Partnership. All other sections of this report, including “Selected Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Quantitative and Qualitative Disclosures About Market Risk,” are presented together for our Company and our Operating Partnership.

In order to establish that the Chief Executive Officer and the Chief Financial Officer of each entity have made the requisite certifications and that our Company and Operating Partnership are compliant with Rule 13a-15 or Rule 15d-15 of the Securities Exchange Act of 1934, or the Exchange Act, and 18 U.S.C. §1350, this report also includes separate “Part 1―Financial Information, Item 4. Controls and Procedures” sections and separate Exhibit 31 and 32 certifications for each of our Company and our Operating Partnership.

 

 

 

 

 

 

 


INDEX

 

Glossary

 

4

PART I — FINANCIAL INFORMATION

 

6

 

Item 1.

 

Financial Statements (Unaudited)

 

6

 

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

36

 

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

56

 

Item 4.

 

Controls and Procedures

 

57

PART II — OTHER INFORMATION

 

58

 

Item 1.

 

Legal Proceedings

 

58

 

Item 1A.

 

Risk Factors

 

58

 

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

60

 

Item 3.

 

Defaults Upon Senior Securities

 

60

 

Item 4.

 

Mine Safety Disclosures

 

60

 

Item 5.

 

Other Information

 

60

 

Item 6.

 

Exhibits

 

61

 

 

 

Signatures

 

63

 

 

 

 

 


GLOSSARY

2015 Credit Agreement

Revolving credit facility agreement between the Operating Partnership and certain lenders dated March 31, 2015, as amended or otherwise modified from time to time, providing for an $800.0 million unsecured credit facility

2015 Term Loan Agreement

Term loan agreement between the Operating Partnership and certain lenders dated November 3, 2015, as amended or otherwise modified from time to time, providing for a $420.0 million unsecured term loan facility

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 Facilities Agreements

2019 Revolving Credit and Term Loan Agreement and A-2 Term Loans

2019 Notes

$402.5 million convertible notes of the Corporation settled in 2019

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 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 convertible notes of the Corporation due in 2021

2026 Senior Notes

$300.0 million aggregate principal amount of senior notes issued in August 2016

2027 Senior Notes

$300.0 million aggregate principal amount of senior notes issued in September 2019

2029 Senior Notes

$400.0 million aggregate principal amount of senior notes issued in June 2019

2030 Senior Notes

$500.0 million aggregate principal amount of senior notes issued in September 2019

A-1 Term Loans

$420.0 million unsecured term loan facility pursuant to the 2019 Revolving Credit and Term Loan Agreement

A-2 Term Loans

$400.0 million unsecured term loan facility pursuant to a term loan agreement between the Operating Partnership and certain lenders dated January 14, 2019, as amended or otherwise modified from time to time

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. 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 and earned income from direct financing leases from the final month of the reporting period, adjusted to exclude amounts from properties sold during that period and to include a full month of rental income for properties acquired during that period. The total is then multiplied by 12. We use ABR when calculating certain metrics that are useful 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

At the Market equity distribution program, pursuant to which the Corporation may offer and sell registered shares of common stock from time to time

Base Rent

Represents rental income for the period, including amounts deferred or abated and excluding percentage rents, from our owned properties recognized during the month. We use Base Rent to monitor cash collection and to evaluate past due receivables.

Base Cash Rent

Represents Base Rent reduced for amounts abated and rent reserved for the period.

CMBS

Commercial Mortgage-Backed Securities

Code

Internal Revenue Code of 1986, as amended

Company

The Corporation and its consolidated subsidiaries

Convertible Notes

The 2019 Notes and 2021 Notes, together

Corporation

Spirit Realty Capital, Inc., a Maryland corporation

CPI

Consumer Price Index

4


 

EBITDAre

EBITDAre is a non-GAAP financial measure and is 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. 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 and effective as of September 20, 2019

LIBOR

London Interbank Offered Rate

Master Trust 2013

The net-lease mortgage securitization trust established in December 2013

Master Trust 2014

The net-lease mortgage securitization trust established in 2005 and amended and restated in 2014

Master Trust Notes

Master Trust 2013 and Master Trust 2014, together

Master Trust Release

Proceeds from the sale of assets securing the Master Trust Notes held in restricted accounts until a qualifying substitution is made or until used for principal reduction

NAREIT

National Association of Real Estate Investment Trusts

Occupancy

The number of economically yielding owned properties divided by total owned properties

OP Holdings

Spirit General OP Holdings, LLC, a Delaware limited liability company

Operating Partnership

Spirit Realty, L.P., a Delaware limited partnership

Property Management and Servicing Agreement

Second amended and restated agreement governing the management services and special services provided to Master Trust 2014 by Spirit Realty, L.P., dated as of May 20, 2014, as amended, supplemented, amended and restated or otherwise modified

Real Estate Investment Value

The gross acquisition cost, including capitalized transaction costs, plus improvements and less impairments, if any

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, 2029 Senior Notes, and 2030 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

Shopko

Specialty Retail Shops Holding Corp. and certain of its affiliates

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 properties leased to Shopko, assets that collateralize Master Trust 2014 and other additional assets to SMTA followed by the distribution by us to our stockholders of all of the common shares of beneficial interest in SMTA.

SubREIT

Spirit MTA SubREIT, Inc., previously a wholly-owned subsidiary of SMTA. SubREIT was dissolved on October 1, 2019

Total Debt

Principal debt outstanding before discounts, premiums or deferred financing costs

TSR

Total Shareholder Return

U.S.

United States

Vacant

Owned properties which are not economically yielding

 

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.

5


 

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

SPIRIT REALTY CAPITAL, INC.

Consolidated Balance Sheets

(In Thousands, Except Share and Per Share Data)

(Unaudited)

 

 

 

June 30,

2020

 

 

December 31,

2019

 

Assets

 

 

 

 

 

 

 

 

Investments:

 

 

 

 

 

 

 

 

Real estate investments:

 

 

 

 

 

 

 

 

Land and improvements

 

$

1,926,442

 

 

$

1,910,287

 

Buildings and improvements

 

 

3,953,843

 

 

 

3,840,220

 

Total real estate investments

 

 

5,880,285

 

 

 

5,750,507

 

Less: accumulated depreciation

 

 

(777,938

)

 

 

(717,097

)

 

 

 

5,102,347

 

 

 

5,033,410

 

Loans receivable, net

 

 

29,163

 

 

 

34,465

 

Intangible lease assets, net

 

 

350,466

 

 

 

385,079

 

Real estate assets under direct financing leases, net

 

 

7,300

 

 

 

14,465

 

Real estate assets held for sale, net

 

 

12,708

 

 

 

1,144

 

Net investments

 

 

5,501,984

 

 

 

5,468,563

 

Cash and cash equivalents

 

 

97,190

 

 

 

14,492

 

Deferred costs and other assets, net

 

 

153,064

 

 

 

124,006

 

Goodwill

 

 

225,600

 

 

 

225,600

 

Total assets

 

$

5,977,838

 

 

$

5,832,661

 

 

 

 

 

 

 

 

 

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

Revolving credit facilities

 

$

 

 

$

116,500

 

Term loans, net

 

 

397,824

 

 

 

 

Senior Unsecured Notes, net

 

 

1,484,884

 

 

 

1,484,066

 

Mortgages and notes payable, net

 

 

214,338

 

 

 

216,049

 

Convertible Notes, net

 

 

339,462

 

 

 

336,402

 

Total debt, net

 

 

2,436,508

 

 

 

2,153,017

 

Intangible lease liabilities, net

 

 

120,934

 

 

 

127,335

 

Accounts payable, accrued expenses and other liabilities

 

 

136,588

 

 

 

139,060

 

Total liabilities

 

 

2,694,030

 

 

 

2,419,412

 

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 June 30, 2020 and December 31, 2019

 

 

166,177

 

 

 

166,177

 

Common stock, $0.05 par value, 175,000,000 shares authorized: 103,043,270 and 102,476,152 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively

 

 

5,152

 

 

 

5,124

 

Capital in excess of common stock par value

 

 

5,710,386

 

 

 

5,686,247

 

Accumulated deficit

 

 

(2,587,850

)

 

 

(2,432,838

)

Accumulated other comprehensive loss

 

 

(10,057

)

 

 

(11,461

)

Total stockholders’ equity

 

 

3,283,808

 

 

 

3,413,249

 

Total liabilities and stockholders’ equity

 

$

5,977,838

 

 

$

5,832,661

 

See accompanying notes.

6


 

SPIRIT REALTY CAPITAL, INC.

Consolidated Statements of Operations

(In Thousands, Except Share and Per Share Data)

(Unaudited)

 

 

 

Three Months Ended

June 30,

 

 

Six Months Ended

June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental income

 

$

117,190

 

 

$

106,506

 

 

$

238,553

 

 

$

210,573

 

Interest income on loans receivable

 

 

390

 

 

 

920

 

 

 

809

 

 

 

1,906

 

Earned income from direct financing leases

 

 

131

 

 

 

308

 

 

 

308

 

 

 

704

 

Related party fee income

 

 

250

 

 

 

7,249

 

 

 

500

 

 

 

14,176

 

Other income

 

 

563

 

 

 

762

 

 

 

1,074

 

 

 

979

 

Total revenues

 

 

118,524

 

 

 

115,745

 

 

 

241,244

 

 

 

228,338

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

General and administrative

 

 

11,975

 

 

 

13,833

 

 

 

25,465

 

 

 

27,014

 

Property costs (including reimbursable)

 

 

7,234

 

 

 

4,407

 

 

 

13,170

 

 

 

9,561

 

Deal pursuit costs

 

 

14

 

 

 

173

 

 

 

1,033

 

 

 

244

 

Interest

 

 

26,095

 

 

 

25,176

 

 

 

51,454

 

 

 

51,787

 

Depreciation and amortization

 

 

53,160

 

 

 

41,342

 

 

 

105,396

 

 

 

82,691

 

Impairments

 

 

21,049

 

 

 

3,607

 

 

 

61,823

 

 

 

7,299

 

Total expenses

 

 

119,527

 

 

 

88,538

 

 

 

258,341

 

 

 

178,596

 

Other income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss on debt extinguishment

 

 

 

 

 

(14,676

)

 

 

 

 

 

(5,893

)

Gain on disposition of assets

 

 

658

 

 

 

29,776

 

 

 

1,046

 

 

 

38,506

 

Preferred dividend income from SMTA

 

 

 

 

 

3,750

 

 

 

 

 

 

7,500

 

Total other income

 

 

658

 

 

 

18,850

 

 

 

1,046

 

 

 

40,113

 

(Loss) income before income tax expense

 

 

(345

)

 

 

46,057

 

 

 

(16,051

)

 

 

89,855

 

Income tax expense

 

 

(68

)

 

 

(320

)

 

 

(209

)

 

 

(540

)

Net (loss) income

 

 

(413

)

 

 

45,737

 

 

 

(16,260

)

 

 

89,315

 

Dividends paid to preferred shareholders

 

 

(2,588

)

 

 

(2,588

)

 

 

(5,176

)

 

 

(5,176

)

Net (loss) income attributable to common stockholders

 

$

(3,001

)

 

$

43,149

 

 

$

(21,436

)

 

$

84,139

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income per share attributable to common stockholders:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.03

)

 

$

0.49

 

 

$

(0.21

)

 

$

0.97

 

Diluted

 

$

(0.03

)

 

$

0.49

 

 

$

(0.21

)

 

$

0.96

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares of common stock outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

102,678,967

 

 

 

87,001,987

 

 

 

102,454,557

 

 

 

86,253,698

 

Diluted

 

 

102,678,967

 

 

 

87,890,699

 

 

 

102,454,557

 

 

 

86,779,297

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends declared per common share issued

 

$

0.6250

 

 

$

0.6250

 

 

$

1.2500

 

 

$

1.2500

 

See accompanying notes.

7


 

SPIRIT REALTY CAPITAL, INC.

Consolidated Statements of Comprehensive (Loss) Income

(In Thousands)

(Unaudited)

 

 

 

Three Months Ended

June 30,

 

 

Six Months Ended

June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Net (loss) income attributable to common stockholders

 

$

(3,001

)

 

$

43,149

 

 

$

(21,436

)

 

$

84,139

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net reclassification of amounts from (to) AOCL

 

 

702

 

 

 

(8,754

)

 

 

1,404

 

 

 

(13,775

)

Total comprehensive (loss) income

 

$

(2,299

)

 

$

34,395

 

 

$

(20,032

)

 

$

70,364

 

See accompanying notes.

 

8


SPIRIT REALTY CAPITAL, INC.

Consolidated Statements of Stockholders' Equity

(In Thousands, Except Share Data)

(Unaudited)

 

Six Months Ended June 30, 2020

 

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, 2019

 

 

6,900,000

 

 

$

166,177

 

 

 

102,476,152

 

 

$

5,124

 

 

$

5,686,247

 

 

$

(2,432,838

)

 

$

(11,461

)

 

$

3,413,249

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(15,847

)

 

 

 

 

 

(15,847

)

Dividends declared on preferred stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,588

)

 

 

 

 

 

(2,588

)

Net loss attributable to common stockholders

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(18,435

)

 

 

 

 

 

(18,435

)

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

702

 

 

 

702

 

Dividends declared on common stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(64,338

)

 

 

 

 

 

(64,338

)

Tax withholdings related to net stock settlements

 

 

 

 

 

 

 

 

(44,488

)

 

 

(2

)

 

 

 

 

 

(2,347

)

 

 

 

 

 

(2,349

)

Issuance of shares of common stock, net

 

 

 

 

 

 

 

 

362,481

 

 

 

18

 

 

 

17,580

 

 

 

 

 

 

 

 

 

17,598

 

Stock-based compensation, net

 

 

 

 

 

 

 

 

148,017

 

 

 

7

 

 

 

3,444

 

 

 

(470

)

 

 

 

 

 

2,981

 

Balances, March 31, 2020

 

 

6,900,000

 

 

$

166,177

 

 

 

102,942,162

 

 

$

5,147

 

 

$

5,707,271

 

 

$

(2,518,428

)

 

$

(10,759

)

 

$

3,349,408

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(413

)

 

 

 

 

 

(413

)

Dividends declared on preferred stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,588

)

 

 

 

 

 

(2,588

)

Net loss attributable to common stockholders

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,001

)

 

 

 

 

 

(3,001

)

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

702

 

 

 

702

 

Dividends declared on common stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(64,402

)

 

 

 

 

 

(64,402

)

Tax withholdings related to net stock settlements

 

 

 

 

 

 

 

 

(73,055

)

 

 

(4

)

 

 

 

 

 

(2,027

)

 

 

 

 

 

(2,031

)

Issuance of shares of common stock, net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(185

)

 

 

 

 

 

 

 

 

(185

)

Stock-based compensation, net

 

 

 

 

 

 

 

 

174,163

 

 

 

9

 

 

 

3,300

 

 

 

8

 

 

 

 

 

 

3,317

 

Balances, June 30, 2020

 

 

6,900,000

 

 

$

166,177

 

 

 

103,043,270

 

 

$

5,152

 

 

$

5,710,386

 

 

$

(2,587,850

)

 

$

(10,057

)

 

$

3,283,808

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

9


 

SPIRIT REALTY CAPITAL, INC.

Consolidated Statements of Stockholders' Equity

(In Thousands, Except Share Data)

(Unaudited)

 

Six Months Ended June 30, 2019

 

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, 2018

 

 

6,900,000

 

 

$

166,177

 

 

 

85,787,355

 

 

$

4,289

 

 

$

4,995,697

 

 

$

(2,357,255

)

 

$

(7,159

)

 

$

2,801,749

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

43,578

 

 

 

 

 

 

43,578

 

Dividends declared on preferred stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,588

)

 

 

 

 

 

(2,588

)

Net income attributable to common stockholders

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

40,990

 

 

 

 

 

 

40,990

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(5,021

)

 

 

(5,021

)

Dividends declared on common stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(54,254

)

 

 

 

 

 

(54,254

)

Tax withholdings related to net stock settlements

 

 

 

 

 

 

 

 

(17,800

)

 

 

(1

)

 

 

 

 

 

(703

)

 

 

 

 

 

(704

)

Issuance of shares of common stock, net

 

 

 

 

 

 

 

 

893,526

 

 

 

45

 

 

 

32,641

 

 

 

 

 

 

 

 

 

32,686

 

Other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(79

)

 

 

 

 

 

 

 

 

(79

)

Stock-based compensation, net

 

 

 

 

 

 

 

 

148,705

 

 

 

8

 

 

 

3,570

 

 

 

(309

)

 

 

 

 

 

3,269

 

Balances, March 31, 2019

 

 

6,900,000

 

 

$

166,177

 

 

 

86,811,786

 

 

$

4,341

 

 

$

5,031,829

 

 

$

(2,371,531

)

 

$

(12,180

)

 

$

2,818,636

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

45,737

 

 

 

 

 

 

45,737

 

Dividends declared on preferred stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,588

)

 

 

 

 

 

(2,588

)

Net income attributable to common stockholders

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

43,149

 

 

 

 

 

 

43,149

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(8,754

)

 

 

(8,754

)

Dividends declared on common stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(56,318

)

 

 

 

 

 

(56,318

)

Tax withholdings related to net stock settlements

 

 

 

 

 

 

 

 

(16,367

)

 

 

(1

)

 

 

 

 

 

(677

)

 

 

 

 

 

(678

)

Issuance of shares of common stock, net

 

 

 

 

 

 

 

 

3,292,102

 

 

 

165

 

 

 

129,685

 

 

 

 

 

 

 

 

 

129,850

 

Stock-based compensation, net

 

 

 

 

 

 

 

 

23,206

 

 

 

1

 

 

 

3,882

 

 

 

(308

)

 

 

 

 

 

3,575

 

Balances, June 30, 2019

 

 

6,900,000

 

 

$

166,177

 

 

 

90,110,727

 

 

$

4,506

 

 

$

5,165,396

 

 

$

(2,385,685

)

 

$

(20,934

)

 

$

2,929,460

 

 

See accompanying notes.

 

10


SPIRIT REALTY CAPITAL, INC.

Consolidated Statements of Cash Flows

(In Thousands)

(Unaudited)

 

 

 

Six Months Ended

June 30,

 

 

 

2020

 

 

2019

 

Operating activities

 

 

 

 

 

 

 

 

Net (loss) income

 

$

(16,260

)

 

$

89,315

 

Adjustments to reconcile net (loss) income to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

105,396

 

 

 

82,691

 

Impairments

 

 

61,823

 

 

 

7,299

 

Amortization of deferred financing costs

 

 

2,598

 

 

 

3,805

 

Amortization of debt discounts

 

 

2,466

 

 

 

4,626

 

Amortization of deferred losses on interest rate swaps

 

 

1,404

 

 

 

 

Stock-based compensation expense

 

 

6,760

 

 

 

7,461

 

Loss on debt extinguishment

 

 

 

 

 

5,893

 

Gain on dispositions of real estate and other assets

 

 

(1,046

)

 

 

(38,506

)

Non-cash revenue

 

 

(5,518

)

 

 

(8,237

)

Bad debt expense and other

 

 

236

 

 

 

162

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Deferred costs and other assets, net

 

 

(23,658

)

 

 

(1,313

)

Accounts payable, accrued expenses and other liabilities

 

 

(1,190

)

 

 

(8,921

)

Net cash provided by operating activities

 

 

133,011

 

 

 

144,275

 

Investing activities

 

 

 

 

 

 

 

 

Acquisitions of real estate

 

 

(218,935

)

 

 

(447,499

)

Capitalized real estate expenditures

 

 

(8,296

)

 

 

(25,680

)

Collections of principal on loans receivable

 

 

2,710

 

 

 

8,080

 

Proceeds from dispositions of real estate and other assets, net

 

 

17,681

 

 

 

163,165

 

Net cash used in investing activities

 

 

(206,840

)

 

 

(301,934

)

Financing activities

 

 

 

 

 

 

 

 

Borrowings under revolving credit facilities

 

 

1,123,000

 

 

 

615,700

 

Repayments under revolving credit facilities

 

 

(1,239,500

)

 

 

(762,000

)

Repayments under mortgages and notes payable

 

 

(2,021

)

 

 

(171,279

)

Borrowings under term loans

 

 

400,000

 

 

 

820,000

 

Repayments under term loans

 

 

 

 

 

(420,000

)

Repayments under Convertible Notes

 

 

 

 

 

(402,500

)

Borrowings under Senior Unsecured Notes

 

 

 

 

 

399,696

 

Debt extinguishment costs

 

 

 

 

 

(12,314

)

Deferred financing costs

 

 

(2,377

)

 

 

(13,916

)

Proceeds from issuance of common stock, net of offering costs

 

 

17,553

 

 

 

162,270

 

Repurchase of shares of common stock, including tax withholdings related to net stock settlements

 

 

(4,380

)

 

 

(1,382

)

Common stock dividends paid

 

 

(129,908

)

 

 

(107,872

)

Preferred stock dividends paid

 

 

(5,176

)

 

 

(5,176

)

Net cash provided by financing activities

 

 

157,191

 

 

 

101,227

 

Net increase (decrease) in cash, cash equivalents and restricted cash

 

 

83,362

 

 

 

(56,432

)

Cash, cash equivalents and restricted cash, beginning of period

 

 

26,023

 

 

 

77,421

 

Cash, cash equivalents and restricted cash, end of period

 

$

109,385

 

 

$

20,989

 

 

 

 

 

 

 

 

 

 

Cash paid for interest

 

$

40,992

 

 

$

43,242

 

Cash paid for income taxes

 

$

910

 

 

$

1,045

 

 

 

 

 

11


 

SPIRIT REALTY CAPITAL, INC.

Consolidated Statements of Cash Flows

(In Thousands)

(Unaudited)

 

Supplemental Disclosures of Non-Cash Activities:

 

Six Months Ended

June 30,

 

 

 

2020

 

 

2019

 

Dividends declared and unpaid

 

$

64,402

 

 

$

56,318

 

Relief of debt through sale or foreclosure of real estate properties

 

 

 

 

 

10,368

 

Net real estate and other collateral assets sold or surrendered to lender

 

 

 

 

 

654

 

Cash flow hedge changes in fair value

 

 

 

 

 

14,326

 

Accrued interest capitalized to principal (1)

 

 

 

 

 

251

 

Accrued market-based award dividend rights

 

 

462

 

 

 

616

 

Accrued capitalized costs

 

 

457

 

 

 

3,270

 

Accrued deferred financing costs

 

 

106

 

 

 

1,109

 

Right-of-use lease assets

 

 

 

 

 

6,143

 

Lease liabilities

 

 

 

 

 

6,143

 

Reclass of residual value from direct financing lease to operating lease

 

 

6,831

 

 

 

3,960

 

Receivable for disposal of real estate property

 

 

2,000

 

 

 

 

(1)

Accrued and overdue interest on certain CMBS notes that were intentionally placed in default.

See accompanying notes.

12


 

SPIRIT REALTY, L.P.

Consolidated Balance Sheets

(In Thousands, Except Unit and Per Unit Data)

(Unaudited)

 

 

 

June 30,

2020

 

 

December 31,

2019

 

Assets

 

 

 

 

 

 

 

 

Investments:

 

 

 

 

 

 

 

 

Real estate investments:

 

 

 

 

 

 

 

 

Land and improvements

 

$

1,926,442

 

 

$

1,910,287

 

Buildings and improvements

 

 

3,953,843

 

 

 

3,840,220

 

Total real estate investments

 

 

5,880,285

 

 

 

5,750,507

 

Less: accumulated depreciation

 

 

(777,938

)

 

 

(717,097

)

 

 

 

5,102,347

 

 

 

5,033,410

 

Loans receivable, net

 

 

29,163

 

 

 

34,465

 

Intangible lease assets, net

 

 

350,466

 

 

 

385,079

 

Real estate assets under direct financing leases, net

 

 

7,300

 

 

 

14,465

 

Real estate assets held for sale, net

 

 

12,708

 

 

 

1,144

 

Net investments

 

 

5,501,984

 

 

 

5,468,563

 

Cash and cash equivalents

 

 

97,190

 

 

 

14,492

 

Deferred costs and other assets, net

 

 

153,064

 

 

 

124,006

 

Goodwill

 

 

225,600

 

 

 

225,600

 

Total assets

 

$

5,977,838

 

 

$

5,832,661

 

 

 

 

 

 

 

 

 

 

Liabilities and partners' capital

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

Revolving credit facilities

 

$

 

 

$

116,500

 

Term loans, net

 

 

397,824

 

 

 

 

Senior Unsecured Notes, net

 

 

1,484,884

 

 

 

1,484,066

 

Mortgages and notes payable, net

 

 

214,338

 

 

 

216,049

 

Notes payable to Spirit Realty Capital, Inc., net

 

 

339,462

 

 

 

336,402

 

Total debt, net

 

 

2,436,508

 

 

 

2,153,017

 

Intangible lease liabilities, net

 

 

120,934

 

 

 

127,335

 

Accounts payable, accrued expenses and other liabilities

 

 

136,588

 

 

 

139,060

 

Total liabilities

 

 

2,694,030

 

 

 

2,419,412

 

Commitments and contingencies (see Note 6)

 

 

 

 

 

 

 

 

Partners' capital:

 

 

 

 

 

 

 

 

Partnership units

 

 

 

 

 

 

 

 

General partner's capital: 797,644 units issued and outstanding as of both June 30, 2020 and December 31, 2019

 

 

21,236

 

 

 

22,389

 

Limited partners' preferred capital: 6,900,000 units issued and outstanding as of both June 30, 2020 and December 31, 2019

 

 

166,177

 

 

 

166,177

 

Limited partners' common capital: 102,245,626 and 101,678,508 units issued and outstanding as of June 30, 2020 and December 31, 2019, respectively

 

 

3,096,395

 

 

 

3,224,683

 

Total partners' capital

 

 

3,283,808

 

 

 

3,413,249

 

Total liabilities and partners' capital

 

$

5,977,838

 

 

$

5,832,661

 

See accompanying notes.

13


 

SPIRIT REALTY, L.P.

Consolidated Statements of Operations

(In Thousands, Except Unit and Per Unit Data)

(Unaudited)

  

 

 

Three Months Ended

June 30,

 

 

Six Months Ended

June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental income

 

$

117,190

 

 

$

106,506

 

 

$

238,553

 

 

$

210,573

 

Interest income on loans receivable

 

 

390

 

 

 

920

 

 

 

809

 

 

 

1,906

 

Earned income from direct financing leases

 

 

131

 

 

 

308

 

 

 

308

 

 

 

704

 

Related party fee income

 

 

250

 

 

 

7,249

 

 

 

500

 

 

 

14,176

 

Other income

 

 

563

 

 

 

762

 

 

 

1,074

 

 

 

979

 

Total revenues

 

 

118,524

 

 

 

115,745

 

 

 

241,244

 

 

 

228,338

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

General and administrative

 

 

11,975

 

 

 

13,833

 

 

 

25,465

 

 

 

27,014

 

Property costs (including reimbursable)

 

 

7,234

 

 

 

4,407

 

 

 

13,170

 

 

 

9,561

 

Deal pursuit costs

 

 

14

 

 

 

173

 

 

 

1,033

 

 

 

244

 

Interest

 

 

26,095

 

 

 

25,176

 

 

 

51,454

 

 

 

51,787

 

Depreciation and amortization

 

 

53,160

 

 

 

41,342

 

 

 

105,396

 

 

 

82,691

 

Impairments

 

 

21,049

 

 

 

3,607

 

 

 

61,823

 

 

 

7,299

 

Total expenses

 

 

119,527

 

 

 

88,538

 

 

 

258,341

 

 

 

178,596

 

Other income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss on debt extinguishment

 

 

 

 

 

(14,676

)

 

 

 

 

 

(5,893

)

Gain on disposition of assets

 

 

658

 

 

 

29,776

 

 

 

1,046

 

 

 

38,506

 

Preferred dividend income from SMTA

 

 

 

 

 

3,750

 

 

 

 

 

 

7,500

 

Total other income

 

 

658

 

 

 

18,850

 

 

 

1,046

 

 

 

40,113

 

(Loss) income before income tax expense

 

 

(345

)

 

 

46,057

 

 

 

(16,051

)

 

 

89,855

 

Income tax expense

 

 

(68

)

 

 

(320

)

 

 

(209

)

 

 

(540

)

Net (loss) income

 

 

(413

)

 

 

45,737

 

 

 

(16,260

)

 

 

89,315

 

Preferred distributions

 

 

(2,588

)

 

 

(2,588

)

 

 

(5,176

)

 

 

(5,176

)

Net (loss) income after preferred distributions

 

$

(3,001

)

 

$

43,149

 

 

$

(21,436

)

 

$

84,139

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income attributable to the general partner

 

$

(23

)

 

$

394

 

 

$

(166

)

 

$

774

 

Net (loss) income attributable to the limited partners

 

$

(390

)

 

$

45,343

 

 

$

(16,094

)

 

$

88,541

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income per partnership unit:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.03

)

 

$

0.49

 

 

$

(0.21

)

 

$

0.97

 

Diluted

 

$

(0.03

)

 

$

0.49

 

 

$

(0.21

)

 

$

0.96

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average partnership units outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

102,678,967

 

 

 

87,001,987

 

 

 

102,454,557

 

 

 

86,253,698

 

Diluted

 

 

102,678,967

 

 

 

87,890,699

 

 

 

102,454,557

 

 

 

86,779,297

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends declared per partnership unit issued

 

$

0.6250

 

 

$

0.6250

 

 

$

1.2500

 

 

$

1.2500

 

   See accompanying notes.

14


 

SPIRIT REALTY, L.P.

Consolidated Statements of Comprehensive (Loss) Income

(In Thousands)

(Unaudited)

 

 

 

Three Months Ended

June 30,

 

 

Six Months Ended

June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Net (loss) income after preferred distributions

 

$

(3,001

)

 

$

43,149

 

 

$

(21,436

)

 

$

84,139

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net reclassification of amounts from (to) AOCL

 

 

702

 

 

 

(8,754

)

 

 

1,404

 

 

 

(13,775

)

Total comprehensive (loss) income

 

$

(2,299

)

 

$

34,395

 

 

$

(20,032

)

 

$

70,364

 

See accompanying notes.

 

15


SPIRIT REALTY, L.P.

Consolidated Statements of Partners' Capital

(In Thousands, Except Unit Data)

(Unaudited)

 

 

Six Months Ended June 30, 2020

Preferred Units

 

 

Common Units

 

 

 

 

 

 

Limited Partners' Capital (1)

 

 

General Partner's Capital (2)

 

 

Limited Partners' Capital (1)

 

 

Total Partnership

 

 

Units

 

 

Amount

 

 

Units

 

 

Amount

 

 

Units

 

 

Amount

 

 

Capital

 

Balances, December 31, 2019

 

6,900,000

 

 

$

166,177

 

 

 

797,644

 

 

$

22,389

 

 

 

101,678,508

 

 

$

3,224,683

 

 

$

3,413,249

 

Net loss

 

 

 

 

 

 

 

 

 

 

(143

)

 

 

 

 

 

(15,704

)

 

 

(15,847

)

Partnership distributions declared on preferred units

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,588

)

 

 

(2,588

)

Net loss after preferred distributions

 

 

 

 

 

 

 

 

 

 

 

 

(143

)

 

 

 

 

 

 

(18,292

)

 

 

(18,435

)

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

5

 

 

 

 

 

 

697

 

 

 

702

 

Partnership distributions declared on common units

 

 

 

 

 

 

 

 

 

 

(499

)

 

 

 

 

 

(63,839

)

 

 

(64,338

)

Tax withholdings related to net settlement of common units

 

 

 

 

 

 

 

 

 

 

 

 

 

(44,488

)

 

 

(2,349

)

 

 

(2,349

)

Issuance of common units, net

 

 

 

 

 

 

 

 

 

 

 

 

 

362,481

 

 

 

17,598

 

 

 

17,598

 

Stock-based compensation, net

 

 

 

 

 

 

 

 

 

 

 

 

 

148,017

 

 

 

2,981

 

 

 

2,981

 

Balances, March 31, 2020

 

6,900,000

 

 

$

166,177

 

 

 

797,644

 

 

$

21,752

 

 

 

102,144,518

 

 

$

3,161,479

 

 

$

3,349,408

 

Net loss

 

 

 

 

 

 

 

 

 

 

(23

)

 

 

 

 

 

(390

)

 

 

(413

)

Partnership distributions declared on preferred units

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,588

)

 

 

(2,588

)

Net loss after preferred distributions

 

 

 

 

 

 

 

 

 

 

 

 

(23

)

 

 

 

 

 

 

(2,978

)

 

 

(3,001

)

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

5

 

 

 

 

 

 

697

 

 

 

702

 

Partnership distributions declared on common units

 

 

 

 

 

 

 

 

 

 

(498

)

 

 

 

 

 

(63,904

)

 

 

(64,402

)

Tax withholdings related to net settlement of common units

 

 

 

 

 

 

 

 

 

 

 

 

 

(73,055

)

 

 

(2,031

)

 

 

(2,031

)

Issuance of common units, net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(185

)

 

 

(185

)

Stock-based compensation, net

 

 

 

 

 

 

 

 

 

 

 

 

 

174,163

 

 

 

3,317

 

 

 

3,317

 

Balances, June 30, 2020

 

6,900,000

 

 

$

166,177

 

 

 

797,644

 

 

$

21,236

 

 

 

102,245,626

 

 

$

3,096,395

 

 

$

3,283,808

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

16


 

SPIRIT REALTY, L.P.

Consolidated Statements of Partners' Capital

(In Thousands, Except Unit Data)

(Unaudited)

 

Six Months Ended June 30, 2019

Preferred Units

 

 

Common Units

 

 

 

 

 

 

Limited Partners' Capital (1)

 

 

General Partner's Capital (2)

 

 

Limited Partners' Capital (1)

 

 

Total Partnership

 

 

Units

 

 

Amount

 

 

Units

 

 

Amount

 

 

Units

 

 

Amount

 

 

Capital

 

Balances, December 31, 2018

 

6,900,000

 

 

$

166,177

 

 

 

797,644

 

 

$

23,061

 

 

 

84,989,711

 

 

$

2,612,511

 

 

$

2,801,749

 

Net income

 

 

 

 

 

 

 

 

 

 

380

 

 

 

 

 

 

43,198

 

 

 

43,578

 

Partnership distributions declared on preferred units

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,588

)

 

 

(2,588

)

Net income after preferred distributions

 

 

 

 

 

 

 

 

 

 

 

 

380

 

 

 

 

 

 

 

40,610

 

 

 

40,990

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

(47

)

 

 

 

 

 

(4,974

)

 

 

(5,021

)

Partnership distributions declared on common units

 

 

 

 

 

 

 

 

 

 

(504

)

 

 

 

 

 

(53,750

)

 

 

(54,254

)

Tax withholdings related to net settlement of common units

 

 

 

 

 

 

 

 

 

 

 

 

 

(17,800

)

 

 

(704

)

 

 

(704

)

Issuance of common units, net

 

 

 

 

 

 

 

 

 

 

 

 

 

893,526

 

 

 

32,686

 

 

 

32,686

 

Other

 

 

 

 

 

 

 

 

 

 

(1

)

 

 

 

 

 

(78

)

 

 

(79

)

Stock-based compensation, net

 

 

 

 

 

 

 

 

 

 

 

 

 

148,705

 

 

 

3,269

 

 

 

3,269

 

Balances, March 31, 2019

 

6,900,000

 

 

$

166,177

 

 

 

797,644

 

 

$

22,889

 

 

 

86,014,142

 

 

$

2,629,570

 

 

$

2,818,636

 

Net income

 

 

 

 

 

 

 

 

 

 

394

 

 

 

 

 

 

45,343

 

 

 

45,737

 

Partnership distributions declared on preferred units

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,588

)

 

 

(2,588

)

Net income after preferred distributions

 

 

 

 

 

 

 

 

 

 

 

 

394

 

 

 

 

 

 

 

42,755

 

 

 

43,149

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

(80

)

 

 

 

 

 

(8,674

)

 

 

(8,754

)

Partnership distributions declared on common units

 

 

 

 

 

 

 

 

 

 

(513

)

 

 

 

 

 

(55,805

)

 

 

(56,318

)

Tax withholdings related to net settlement of common units

 

 

 

 

 

 

 

 

 

 

 

 

 

(16,367

)

 

 

(678

)

 

 

(678

)

Issuance of common units, net

 

 

 

 

 

 

 

 

 

 

 

 

 

3,292,102

 

 

 

129,850

 

 

 

129,850

 

Stock-based compensation, net

 

 

 

 

 

 

 

 

 

 

 

 

 

23,206

 

 

 

3,575

 

 

 

3,575

 

Balances, June 30, 2019

 

6,900,000

 

 

$

166,177

 

 

 

797,644

 

 

$

22,690

 

 

 

89,313,083

 

 

$

2,740,593

 

 

$

2,929,460

 

(1)

Consists of limited partnership interests held by the Corporation and Spirit Notes Partner, LLC.

(2)

Consists of general partnership interests held by OP Holdings.

See accompanying notes.

 

17


SPIRIT REALTY, L.P.

Consolidated Statements of Cash Flows

(In Thousands)

(Unaudited)

 

 

 

Six Months Ended

June 30,

 

 

 

2020

 

 

2019

 

Operating activities

 

 

 

 

 

 

 

 

Net (loss) income

 

$

(16,260

)

 

$

89,315

 

Adjustments to reconcile net (loss) income to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

105,396

 

 

 

82,691

 

Impairments

 

 

61,823

 

 

 

7,299

 

Amortization of deferred financing costs

 

 

2,598

 

 

 

3,805

 

Amortization of debt discounts

 

 

2,466

 

 

 

4,626

 

Amortization of deferred losses on interest rate swaps

 

 

1,404

 

 

 

 

Stock-based compensation expense

 

 

6,760

 

 

 

7,461

 

Loss on debt extinguishment

 

 

 

 

 

5,893

 

Gain on dispositions of real estate and other assets

 

 

(1,046

)

 

 

(38,506

)

Non-cash revenue

 

 

(5,518

)

 

 

(8,237

)

Bad debt expense and other

 

 

236

 

 

 

162

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Deferred costs and other assets, net

 

 

(23,658

)

 

 

(1,313

)

Accounts payable, accrued expenses and other liabilities

 

 

(1,190

)

 

 

(8,921

)

Net cash provided by operating activities

 

 

133,011

 

 

 

144,275

 

Investing activities

 

 

 

 

 

 

 

 

Acquisitions of real estate

 

 

(218,935

)

 

 

(447,499

)

Capitalized real estate expenditures

 

 

(8,296

)

 

 

(25,680

)

Collections of principal on loans receivable

 

 

2,710

 

 

 

8,080

 

Proceeds from dispositions of real estate and other assets, net

 

 

17,681

 

 

 

163,165

 

Net cash used in investing activities

 

 

(206,840

)

 

 

(301,934

)

Financing activities

 

 

 

 

 

 

 

 

Borrowings under revolving credit facilities

 

 

1,123,000

 

 

 

615,700

 

Repayments under revolving credit facilities

 

 

(1,239,500

)

 

 

(762,000

)

Repayments under mortgages and notes payable

 

 

(2,021

)

 

 

(171,279

)

Borrowings under term loans

 

 

400,000

 

 

 

820,000

 

Repayments under term loans

 

 

 

 

 

(420,000

)

Repayments under Convertible Notes

 

 

 

 

 

(402,500

)

Borrowings under Senior Unsecured Notes

 

 

 

 

 

399,696

 

Debt extinguishment costs

 

 

 

 

 

(12,314

)

Deferred financing costs

 

 

(2,377

)

 

 

(13,916

)

Proceeds from issuance of partnership units, net of offering costs

 

 

17,553

 

 

 

162,270

 

Repurchase of partnership units, including tax withholdings related to net settlement of common units

 

 

(4,380

)

 

 

(1,382

)

Common distributions paid

 

 

(129,908

)

 

 

(107,872

)

Preferred distributions paid

 

 

(5,176

)

 

 

(5,176

)

Net cash provided by financing activities

 

 

157,191

 

 

 

101,227

 

Net increase (decrease) in cash, cash equivalents and restricted cash

 

 

83,362

 

 

 

(56,432

)

Cash, cash equivalents and restricted cash, beginning of period

 

 

26,023

 

 

 

77,421

 

Cash, cash equivalents and restricted cash, end of period

 

$

109,385

 

 

$

20,989

 

 

 

 

 

 

 

 

 

 

Cash paid for interest

 

$

40,992

 

 

$

43,242

 

Cash paid for income taxes

 

$

910

 

 

$

1,045

 

18


 

SPIRIT REALTY, L.P.

Consolidated Statements of Cash Flows

(In Thousands)

(Unaudited)

 

Supplemental Disclosures of Non-Cash Activities:

 

Six Months Ended

June 30,

 

 

 

2020

 

 

2019

 

Distributions declared and unpaid

 

$

64,402

 

 

$

56,318

 

Relief of debt through sale or foreclosure of real estate properties

 

 

 

 

 

10,368

 

Net real estate and other collateral assets sold or surrendered to lender

 

 

 

 

 

654

 

Cash flow hedge changes in fair value

 

 

 

 

 

14,326

 

Accrued interest capitalized to principal (1)

 

 

 

 

 

251

 

Accrued market-based award dividend rights

 

 

462

 

 

 

616

 

Accrued capitalized costs

 

 

457

 

 

 

3,270

 

Accrued deferred financing costs

 

 

106

 

 

 

1,109

 

Right-of-use lease assets

 

 

 

 

 

6,143

 

Lease liabilities

 

 

 

 

 

6,143

 

Reclass of residual value from direct financing lease to operating lease

 

 

6,831

 

 

 

3,960

 

Receivable for disposal of real estate property

 

 

2,000

 

 

 

 

 

(1)

Accrued and overdue interest on certain CMBS notes that were intentionally placed in default.

See accompanying notes.

 

 

19


SPIRIT REALTY CAPITAL, INC. and SPIRIT REALTY, L.P.

Notes to Consolidated Financial Statements

June 30, 2020

(Unaudited)

NOTE 1. ORGANIZATION

Organization and Operations

Spirit Realty Capital, Inc. (the "Corporation" or "Spirit" or, with its consolidated subsidiaries, the "Company") operates as a self-administered and self-managed REIT that seeks to generate and deliver sustainable and attractive returns for stockholders by primarily investing in and managing a portfolio of single-tenant, operationally essential real estate throughout the U.S. that is generally leased on a long-term, triple-net basis to tenants operating within retail, industrial, office and other property types. Single tenant, operationally essential real estate generally refers to free-standing, commercial real estate facilities where tenants conduct activities that are essential to the generation of their sales and profits.

The Company’s operations are generally carried out through Spirit Realty, L.P. (the "Operating Partnership") and its subsidiaries. Spirit General OP Holdings, LLC, one of the Corporation’s wholly-owned subsidiaries, is the sole general partner and owns approximately 1% of the Operating Partnership. The Corporation and a wholly-owned subsidiary (Spirit Notes Partner, LLC) are the only limited partners and together own the remaining 99% of the Operating Partnership.

On May 31, 2018, the Company completed the spin-off (the "Spin-Off") of the assets that collateralized Master Trust 2014, properties leased to Shopko, and certain other assets into an independent, publicly traded REIT, Spirit MTA REIT ("SMTA"). The Company formed Spirit Realty AM Corporation (“SRAM”), a wholly-owned taxable REIT subsidiary. The rights and obligations of the Asset Management Agreement were transferred to SRAM on April 1, 2019, which was subsequently terminated and simultaneously replaced by the Interim Management Agreement between SRAM and SMTA, effective as of September 20, 2019. The Company allocates personnel and other general and administrative costs to SRAM for management services provided to SMTA.

NOTE 2. SUMMARY OF SIGNIFICANT ACOUNTING POLICIES

Basis of Accounting and Principles of Consolidation

The accompanying consolidated financial statements of the Company and the Operating Partnership have been prepared pursuant to the rules and regulations of the SEC. In the opinion of management, the consolidated financial statements include the normal, recurring adjustments necessary for a fair statement of the information required to be set forth therein. The results for interim periods are not necessarily indicative of the results for the entire year. Certain information and note disclosures, normally included in financial statements prepared in accordance with GAAP, have been condensed or omitted from these statements pursuant to SEC rules and regulations and, accordingly, these financial statements should be read in conjunction with the Company’s audited consolidated financial statements as filed with the SEC in its Annual Report on Form 10-K for the year ended December 31, 2019.

The consolidated financial statements of the Company include the accounts of the Corporation and its wholly-owned subsidiaries. The consolidated financial statements of the Operating Partnership include the accounts of the Operating Partnership and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. All expenses incurred by the Company have been allocated to the Operating Partnership in accordance with the Operating Partnership's first amended and restated agreement of limited partnership, which management determined to be a reasonable method of allocation. Therefore, expenses incurred would not be materially different if the Operating Partnership had operated as an unaffiliated entity.

These consolidated financial statements include certain special purpose entities that were formed to acquire and hold real estate encumbered by indebtedness (see Note 4). Each special purpose entity is a separate legal entity and is the sole owner of its assets and responsible for its liabilities. The assets of these special purpose entities are not available to pay, or otherwise satisfy obligations to, the creditors of any affiliate or owner of another entity unless the special purpose entities have expressly agreed and are permitted to do so under their governing documents. As of June 30, 2020 and December 31, 2019, net assets totaling $0.35 billion and $0.38 billion, respectively, were held, and net liabilities totaling $0.22 billion and $0.23 billion, respectively, were owed by these encumbered special purpose entities and are included in the accompanying consolidated balance sheets.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Although management believes its estimates are reasonable, actual results could differ from those estimates.

20


 

Segment Reporting

The Company views its operations as one segment, which consists of net leasing operations. The Company has no other reportable segments.

Revenue Recognition

Rental Income: Cash and Straight-line Rent

The Company primarily leases real estate to its tenants under long-term, triple-net leases that are classified as operating leases. To evaluate lease classification, the Company assesses the terms and conditions of the lease to determine the appropriate lease term. The Company does not include options to extend, terminate or purchase in its evaluation for lease classification purposes or for recognizing rental income unless the Company is reasonably certain the tenant will exercise the option.       

Another component of lease classification that requires judgment is the residual value of the property at the end of the lease term. For acquisitions, the Company assumes a value that is equal to the tangible value of the property at the date of the assessment. For lease modifications, the Company generally uses sales comparables or a direct capitalization approach to determine fair value.

The Company’s leases generally provide for rent escalations throughout the term of the lease. For leases with fixed rent escalators, rental income is recognized on a straight-line basis to produce a constant periodic rent over the term of the lease. Accordingly, accrued rental revenue, calculated as the aggregate difference between the rental revenue recognized on a straight-line basis and scheduled rents, represents unbilled rent receivables that the Company will receive only if the tenants make all rent payments required through the expiration of the initial term of the leases.

For leases with contingent rent escalators, rental income typically increases at a multiple of any increase in the CPI over a specified period and may adjust over a one-year period or over multiple-year periods. Because of the volatility and uncertainty with respect to future changes in the CPI and the Company’s inability to determine the extent to which any specific future change in the CPI is probable at each rent adjustment date during the entire term of these leases, increases in rental revenue from leases with this type of escalator are recognized when the changes in the rental rates have occurred.

Some of the Company’s leases also provide for contingent rent based on a percentage of the tenant’s gross sales, which the Company recognizes as rental income when the change in the factor on which the contingent lease payment is based actually occurs.

Rental income is subject to an evaluation for collectability, which includes management’s estimates of amounts that will not be realized based on an assessment of the risks inherent in the portfolio, considering historical experience, as well as the tenant's payment history and financial condition. The Company records a provision for losses against rental income for amounts that are not probable of collection.

Rental Income: Tenant Reimbursement Revenue

Under a triple-net lease, the tenant is typically responsible for all improvements and is contractually obligated to pay all property operating expenses, such as real estate taxes, insurance premiums and repair and maintenance costs. Certain leases contain additional amounts recoverable from tenants for common area maintenance expenses and certain other recoverable expenses, which are non-lease components. The Company has elected to combine all its non-lease components, which were determined to have the same pattern of transfer as the related operating lease component, into a single combined lease component. Tenant reimbursement revenue is variable and is recognized as revenue in the period in which the related expenses are incurred, with the related expenses included in property costs (including reimbursable) on the Company’s consolidated statements of operations. Tenant reimbursements are recorded on a gross basis in instances when our tenants reimburse us for property costs which we incur. Tenant receivables are carried net of the allowances for amounts that are not probable of collection.

Rental Income: Intangible Amortization

Initial direct costs associated with the origination of a lease are deferred and amortized over the related lease term as an adjustment to rental revenue. In-place lease intangibles are amortized on a straight-line basis over the remaining term of the related lease and included in depreciation and amortization expense. Above-market lease intangibles are amortized over the remaining term of the respective leases as a decrease in rental revenue, and below-market lease intangibles are amortized as an increase to rental revenue over the remaining term of the respective leases. The remaining term includes the initial term of the lease but may also include the renewal periods if the Company believes it is reasonably certain the tenant will exercise the renewal option. If the Company subsequently determines it is reasonably certain that the tenant will

21


 

not exercise the renewal option, the unamortized portion of any related lease intangible is accelerated over the remaining initial term of the lease. If the Company believes the intangible balance is no longer recoverable, the unamortized portion of any related lease intangible is immediately recognized in impairments in the Company’s consolidated statements of operations.

Cash, Cash Equivalents and Restricted Cash

Cash and cash equivalents include cash and highly liquid investment securities with maturities at acquisition of three months or less. The Company invests cash primarily in money market funds of major financial institutions with fund investments consisting of highly-rated money market instruments and other short-term investments. Restricted cash is classified within deferred costs and other assets, net in the accompanying consolidated balance sheets. Cash, cash equivalents and restricted cash consisted of the following (in thousands):

 

 

June 30,

2020

 

 

December 31,

2019

 

 

June 30,

2019

 

Cash and cash equivalents

 

$

97,190

 

 

$

14,492

 

 

$

9,984

 

Restricted cash:

 

 

 

 

 

 

 

 

 

 

 

 

Collateral deposits (1)

 

 

426

 

 

 

347

 

 

 

440

 

Tenant improvements, repairs and leasing commissions (2)

 

 

11,769

 

 

 

10,877

 

 

 

9,985

 

Other (3)

 

 

 

 

 

307

 

 

 

580

 

Total cash, cash equivalents and restricted cash

 

$

109,385

 

 

$

26,023

 

 

$

20,989

 

(1) Funds held in lender-controlled accounts generally used to meet future debt service or certain property operating expenses.

(2)

Deposits held as additional collateral support by lenders to fund improvements, repairs and leasing commissions incurred to secure a new tenant.

(3)

Funds held in lender-controlled accounts released after scheduled debt service requirements are met.

Allowance for Doubtful Accounts

The Company reviews its rent and other tenant receivables for collectability on a regular basis, taking into consideration changes in factors such as the tenant’s payment history, the financial condition of the tenant, business conditions in the industry in which the tenant operates, and economic conditions in the area in which the tenant operates. If the collectability of a receivable with respect to any tenant is in doubt, a provision for uncollectible amounts will be established or a direct write-off of the specific receivable will be made. The Company provided for reserves for uncollectible amounts totaling $7.2 million and $3.8 million at June 30, 2020 and December 31, 2019, respectively, against accounts receivable balances of $39.3 million and $11.4 million, respectively. Receivables are recorded within deferred cost and other assets, net in the accompanying consolidated balance sheets. Receivables are written off against the reserves for uncollectible amounts when all possible means of collection have been exhausted.

For receivable balances related to the straight-line method of reporting rental revenue, the collectability is generally assessed in conjunction with the evaluation of rental income as described above. The Company has a reserve for losses of $6.7 million and $0.4 million at June 30, 2020 and December 31, 2019, respectively, against straight-line rent receivables of $95.8 million and $84.0 million, respectively. These receivables are recorded within deferred costs and other assets, net in the accompanying consolidated balance sheets.

Goodwill

Goodwill arises from business combinations and represents the excess of the cost of an acquired entity over the net fair value amounts that were assigned to the identifiable assets acquired and the liabilities assumed. In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment. ASU 2017-04 simplifies the accounting for goodwill impairment by eliminating the Step 2 requirement to calculate the implied fair value of goodwill. Instead, an entity should perform its annual or interim goodwill impairment test by comparing the fair value of each reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. The Company adopted ASU 2017-04 effective January 1, 2020. Goodwill is tested for impairment at the reporting unit level on an annual basis and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying value. No impairment was recorded for the periods presented.

Income Taxes

The Corporation has elected to be taxed as a REIT under the Code. As a REIT, the Corporation generally will not be subject to federal income tax provided it continues to satisfy certain tests concerning the Company’s sources of income, the nature of the Company’s assets, the amounts distributed to the Corporation’s stockholders and the ownership of Corporation stock. Management believes the Corporation has qualified and will continue to qualify as a REIT and, therefore, no provision has

22


 

been made for federal income taxes in the accompanying consolidated financial statements. Even if the Corporation qualifies for taxation as a REIT, it may be subject to state and local income and franchise taxes, and to federal income tax and excise tax on its undistributed income.

Taxable income earned by any of the Company's taxable REIT subsidiaries, including from non-REIT activities, is subject to federal, state and local taxes. The rights and obligations of the Asset Management Agreement were transferred to SRAM, a wholly-owned taxable REIT subsidiary of Spirit, on April 1, 2019, which was subsequently terminated and simultaneously replaced by the Interim Management Agreement between SRAM and SMTA, effective as of September 20, 2019. Accordingly, commencing from April 1, 2019, all asset management fees, including the termination fee income, were subject to income tax.  

The Operating Partnership is a partnership for federal income tax purposes. Partnerships are pass-through entities and are not subject to U.S. federal income taxes, therefore no provision has been made for federal income taxes in the accompanying financial statements. Although most states and cities where the Operating Partnership operates follow the U.S. federal income tax treatment, there are certain jurisdictions such as Texas, Tennessee and Ohio that impose income or franchise taxes on a partnership.

Franchise taxes are included in general and administrative expenses on the accompanying consolidated statements of operations.

New Accounting Pronouncements  

In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments, which requires more timely recognition of credit losses associated with financial assets. ASU 2016-13 requires financial assets (or a group of financial assets) measured at an amortized cost basis to be presented at the net amount expected to be collected. ASU 2016-13 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, and as such, the Company adopted ASU 2016-13 effective January 1, 2020. Per the subsequently issued ASU 2018-19, receivables arising from operating leases are not within the scope of ASU 2016-13. As such, the Company reviewed receivables within the scope of ASU 2016-13 totaling $40.3 million, which were comprised of loans receivable and real estate assets held under direct financing lease. The Company determined the key credit quality indicator was the credit rating of the borrower, coupled with remaining time to maturity. As a result, the adoption of the new guidance resulted in the recognition of a loss of $0.3 million on January 1, 2020, which is recorded in impairments on the accompanying consolidated statement of operations.

In April 2020, the FASB released a Staff Q&A regarding the accounting for lease concessions related to the effects of the COVID-19 pandemic. The FASB noted that the underlying premise in requiring a modified lease to be accounted for as if it were a new lease under ASC 842 is that the modified terms and conditions affect the economics of the lease for the remainder of the lease term. As such, the FASB staff clarified that it would be acceptable for entities to make an election to account for lease concessions related to the effects of the COVID-19 pandemic consistent with how those concessions would be accounted for under ASC 842 as though enforceable rights and obligations for those concessions existed (regardless of whether those enforceable rights and obligations for the concessions explicitly exist in the contract). The Company made this election and accounts for rent deferrals by increasing the rent receivables as receivables accrue and continuing to recognize income during the deferral period, resulting in $22.3 million of deferrals being recognized in rental income for the three and six months ended June 30, 2020. The deferral periods range generally from one to six months, with an average deferral period of three months and an average repayment period of 12 months. Lease concessions other than rent deferrals are evaluated to determine if a substantive change to the consideration in the original lease contract has occurred and should be accounted for as a lease modification. Management continues to evaluate any amounts recognized for collectability, regardless of whether accounted for as a lease modification or not, and records a provision for losses against rental income for amounts that are not probable of collection. For lease concessions granted in conjunction with the COVID-19 pandemic, management reviewed all amounts recognized on a tenant-by-tenant basis for collectability.

NOTE 3. INVESTMENTS

Owned Properties

As of June 30, 2020, the Company's gross investment in owned real estate properties totaled approximately $6.3 billion. The gross investment is comprised of land, buildings, lease intangible assets and lease intangible liabilities, as adjusted for any impairment, and real estate assets held under direct financing leases and real estate assets held for sale. The portfolio is geographically dispersed throughout 48 states with Texas, at 11.6%, as the only state with a gross investment greater than 10.0% of the total gross investment of the Company's entire portfolio.

23


 

During the six months ended June 30, 2020, the Company had the following real estate activity, net of accumulated depreciation and amortization (dollars in thousands):

 

 

Number of Properties

 

 

Dollar Amount of Investments

 

 

 

Held in Use

 

 

Held for Sale

 

 

Total

 

 

Held in Use

 

 

Held for Sale

 

 

Total

 

Gross balance, December 31, 2019

 

 

1,750

 

 

 

2

 

 

 

1,752

 

 

$

6,140,775

 

 

$

1,223

 

 

$

6,141,998

 

Acquisitions/improvements (1)

 

 

29

 

 

 

 

 

 

29

 

 

 

228,812

 

 

 

 

 

 

228,812

 

Dispositions of real estate (2)

 

 

(7

)

 

 

(3

)

 

 

(10

)

 

 

(19,239

)

 

 

(1,842

)

 

 

(21,081

)

Transfers to Held for Sale

 

 

(8

)

 

 

8

 

 

 

 

 

 

(13,705

)

 

 

13,705

 

 

 

 

Transfers from Held for Sale

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Impairments (3)

 

 

 

 

 

 

 

 

 

 

 

(61,708

)

 

 

(32

)

 

 

(61,740

)

Reset of gross balances(4)

 

 

 

 

 

 

 

 

 

 

 

(33,918

)

 

 

(6

)

 

 

(33,924

)

Other

 

 

 

 

 

 

 

 

 

 

 

(1,337

)

 

 

 

 

 

(1,337

)

Gross balance, June 30, 2020

 

 

1,764

 

 

 

7

 

 

 

1,771

 

 

 

6,239,680

 

 

 

13,048

 

 

 

6,252,728

 

Accumulated depreciation and amortization

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(900,501

)

 

 

(340

)

 

 

(900,841

)

Net balance, June 30, 2020 (5)

 

 

 

 

 

 

 

 

 

 

 

 

 

$

5,339,179

 

 

$

12,708

 

 

$

5,351,887

 

 

(1)

Includes investments of $7.6 million in revenue producing capitalized expenditures, as well as $2.4 million of non-revenue producing capitalized expenditures during the six months ended June 30, 2020.

(2)

For the six months ended June 30, 2020, the total gain on disposal of assets for properties held in use and held for sale was $1.1 million and $0.1 million, respectively.

(3)

Impairments on owned real estate is comprised of $61.4 million of real estate and intangible asset impairment and $0.3 million of allowance for credit losses on direct financing leases.  

(4)

Represents write-off of gross investment balances against the related accumulated depreciation and amortization balances as a result of basis reset due to impairment or intangibles which have been fully amortized.

(5)

Reconciliation of total owned investments to the accompanying consolidated balance sheet at June 30, 2020 is as follows:

Operating lease held in use land and buildings, net

 

$

5,102,347

 

Intangible lease assets, net

 

 

 

 

350,466

 

Real estate assets under direct financing leases, net

 

 

 

 

7,300

 

Real estate assets held for sale, net

 

 

 

 

12,708

 

Intangible lease liabilities, net

 

 

 

 

(120,934

)

Net balance

 

 

 

$

5,351,887

 

Operating Leases

As of June 30, 2020 and December 31, 2019, the Company held 1,756 and 1,745 properties under operating leases, respectively. The following table summarizes the components of rental income recognized on these operating leases in the accompanying consolidated statements of operations (in thousands):

 

 

Three Months Ended

June 30,

 

 

Six Months Ended

June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Base Cash Rent(1)

 

$

110,166

 

 

$

98,418

 

 

$

226,712

 

 

$

195,217

 

Variable cash rent (including reimbursables)

 

 

2,404

 

 

 

2,942

 

 

 

5,793

 

 

 

6,580

 

Straight-line rent, net of uncollectible reserve(2)

 

 

4,392

 

 

 

4,485

 

 

 

5,486

 

 

 

7,392

 

Amortization of above- and below- market lease intangibles, net (3)

 

 

228

 

 

 

661

 

 

 

562

 

 

 

1,384

 

Total rental income

 

$

117,190

 

 

$

106,506

 

 

$

238,553

 

 

$

210,573

 

(1)

Includes rent reserved as uncollectible of $4.8 million and net recoveries of $0.8 million for the three months ended June 30, 2020 and 2019, respectively, and reserves of $5.6 million and net recoveries of $1.0 million for the six months ended June 30, 2020 and 2019, respectively.

(2)

Includes net uncollectible reserve/(recovery) of $2.4 million and $(0.6 million) for the three months ended June 30, 2020 and 2019, respectively, and $6.7 million and $0.3 million for the six months ended June 30, 2020 and 2019, respectively.

(3)

Excludes amortization of in-place leases of $8.7 million and $6.5 million for the three months ended June 30, 2020 and 2019, respectively, and $17.5 million and $13.2 million for the six months ended June 30, 2020 and 2019, respectively, which is included in depreciation and amortization expense in the accompanying consolidated statements of operations.

24


 

Scheduled minimum future rent to be received under the remaining non-cancellable term of these operating leases (including contractual fixed rent increases occurring on or after July 1, 2020) at June 30, 2020 are as follows (in thousands):

 

 

June 30, 2020

 

Remainder of 2020

 

$

237,029

 

2021

 

 

466,427

 

2022

 

 

449,638

 

2023

 

 

429,129

 

2024

 

 

405,130

 

Thereafter

 

 

3,066,883

 

Total future minimum rentals

 

$

5,054,236

 

Because lease renewal periods are exercisable at the lessees' options, the preceding table presents future minimum lease payments due during the initial lease term only. In addition, the future minimum rentals do not include any contingent rentals based on a percentage of the lessees' gross sales or lease escalations based on future changes in the CPI.

The following table details lease intangible assets and liabilities, net of accumulated amortization (in thousands):

 

 

June 30,

2020

 

 

December 31,

2019

 

In-place leases

 

$

441,072

 

 

$

457,616

 

Above-market leases

 

 

84,385

 

 

 

95,002

 

Less: accumulated amortization

 

 

(174,991

)

 

 

(167,539

)

Intangible lease assets, net

 

$

350,466

 

 

$

385,079

 

 

 

 

 

 

 

 

 

 

Below-market leases

 

$

173,362

 

 

$

176,816

 

Less: accumulated amortization

 

 

(52,428

)

 

 

(49,481

)

Intangible lease liabilities, net

 

$

120,934

 

 

$

127,335

 

Direct Financing Leases

As of June 30, 2020, the Company held one property under a direct financing lease, which was held in use. As of June 30, 2020, this property had $3.8 million in scheduled minimum future payments to be received under the remaining non-cancellable terms of its lease. The Company evaluated the collectability of the amounts receivable under the direct financing lease, and recorded a reserve for uncollectible amounts totaling $0.3 million against the net investment balance of $7.6 million as of June 30, 2020, primarily as a result of the borrower’s credit rating being non-investment grade and the initial term extending until 2027.     

Loans Receivable

As of June 30, 2020, the Company held two first-priority mortgage loans. The mortgage loans are secured by single-tenant commercial properties and have fixed interest rates over the term of the loans. As of June 30, 2020, these loans had an outstanding principal balance of $29.1 million and an unamortized premium balance of $0.2 million. The Company evaluated the collectability of the amounts receivable under the loans receivable and recorded an allowance for loan losses of $0.3 million on January 1, 2020, primarily driven by the borrowers’ having investment grade credit ratings and maturities in 2020. The Company reversed $0.2 million of the reserve in the second quarter of 2020 due to the shorter time to maturity and no change in the borrower’s credit ratings. As of June 30, 2020, there was a remaining allowance of $0.1 million against the carrying value of $29.3 million.   

Impairments and Allowance for Credit Losses

The following table summarizes total impairments and allowance for credit losses recognized in the accompanying consolidated statements of operations (in thousands):

 

 

Three Months Ended

June 30,

 

 

Six Months Ended

June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Real estate and intangible asset impairment

 

$

21,272

 

 

$

3,607

 

 

$

61,436

 

 

$

7,299

 

Allowance for credit losses on direct financing leases

 

 

 

 

 

 

 

 

304

 

 

 

 

(Reversal)/allowance for credit losses on loans receivable

 

 

(223

)

 

 

 

 

 

83

 

 

 

 

Total impairment loss

 

$

21,049

 

 

$

3,607

 

 

$

61,823

 

 

$

7,299

 

 

25


 

NOTE 4. DEBT

The debt of the Company and the Operating Partnership are the same, except for the presentation of the Convertible Notes which were issued by the Company. Subsequently, an intercompany note between the Company and the Operating Partnership was executed with terms identical to those of the Convertible Notes. Therefore, in the consolidated balance sheet of the Operating Partnership, the amounts related to the Convertible Notes are reflected as notes payable to Spirit Realty Capital, Inc., net. The Company's debt is summarized below (dollars in thousands):

 

 

Weighted Average Effective Interest Rates (1)

 

 

Weighted Average Stated Interest Rates (2)

 

 

Weighted Average Remaining Years to Maturity (3)

 

 

June 30,

2020

 

 

December 31,

2019

 

Revolving credit facilities

 

3.66%

 

 

 

 

 

 

2.8

 

 

$

 

 

$

116,500

 

Term loans

 

1.96%

 

 

1.69%

 

 

 

1.8

 

 

 

400,000

 

 

 

 

Senior Unsecured Notes

 

3.85%

 

 

3.73%

 

 

 

8.1

 

 

 

1,500,000

 

 

 

1,500,000

 

CMBS

 

5.81%

 

 

5.47%

 

 

 

3.3

 

 

 

216,316

 

 

 

218,338

 

Convertible Notes

 

5.64%

 

 

3.75%

 

 

 

0.9

 

 

 

345,000

 

 

 

345,000

 

Total debt

 

4.10%

 

 

3.55%

 

 

 

5.7

 

 

 

2,461,316

 

 

 

2,179,838

 

Debt discount, net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(6,804

)

 

 

(9,272

)

Deferred financing costs, net (4)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(18,004

)

 

 

(17,549

)

Total debt, net

 

 

 

 

 

 

 

 

 

 

 

 

 

$

2,436,508

 

 

$

2,153,017

 

(1)

The effective interest rates include amortization of debt discount/premium, amortization of deferred financing costs, facility fees, and non-utilization fees, where applicable, calculated for the six months ended June 30, 2020 and based on the average principal balance outstanding during the period.

(2)

Represents the weighted average stated interest rate based on the outstanding principal balance as of June 30, 2020.

(3)

Represents the weighted average remaining years to maturity based on the outstanding principal balance as of June 30, 2020.

(4)

The Company records deferred financing costs for its revolving credit facilities in deferred costs and other assets, net on its consolidated balance sheets.

Revolving Credit Facilities

On January 14, 2019, the Operating Partnership entered into the 2019 Revolving Credit and Term Loan Agreement, comprised of the 2019 Credit Facility and the A-1 Term Loans, which replaced the 2015 Credit Agreement and 2015 Term Loan Agreement, respectively. The 2019 Credit Facility is comprised of $800.0 million of aggregate revolving commitments and an accordion feature providing for an additional $400.0 million of revolving borrowing capacity, subject to satisfying certain requirements and obtaining additional lender commitments. The 2019 Credit Facility has an initial maturity date of March 31, 2023 and includes two six-month extensions that can be exercised at the Company’s option. Borrowings may be repaid, in whole or in part, at any time, without premium or penalty, but subject to applicable LIBOR breakage fees, if any.

As of June 30, 2020, the outstanding loans under the 2019 Credit Facility bore interest at LIBOR plus an applicable margin of 0.90% per annum and the aggregate revolving commitments incurred a facility fee of 0.20% per annum, in each case, based on the Operating Partnership's credit rating, which was upgraded to BBB by S&P in May 2019. Prior to the upgrade, the 2019 Credit Facility bore interest at LIBOR plus an applicable margin of 1.10% per annum and the aggregate revolving commitments incurred a facility fee of 0.25% per annum.

Deferred financing costs incurred in connection with entering into the 2019 Credit Facility are being amortized to interest expense over its remaining initial term. The unamortized deferred financing costs were $3.1 million as of June 30, 2020, compared to $3.7 million as of December 31, 2019, and are recorded in deferred costs and other assets, net on the accompanying consolidated balance sheets.

As of June 30, 2020, the full $800.0 million of borrowing capacity was available under the 2019 Credit Facility. No outstanding letters of credit existed under the agreement as of June 30, 2020. The Operating Partnership's ability to borrow under the 2019 Credit Facility is subject to ongoing compliance with a number of customary financial covenants and other customary affirmative and negative covenants. As of June 30, 2020, the Company and the Operating Partnership were in compliance with these financial covenants.

26


 

Term Loans

On April 2, 2020, the Operating Partnership entered into the 2020 Term Loan Agreement, which provided for $200 million of unsecured term loans and has a maturity date of April 2, 2022. The 2020 Term Loan Agreement also had an accordion feature to increase the available term loans up to an aggregate of $400 million, which the Operating Partnership fully exercised in the second quarter of 2020 to borrow an additional $200 million of term loans. As of June 30, 2020, the 2020 Term Loans bore interest at LIBOR plus an applicable margin of 1.5% per annum, based on the Operating Partnership’s credit rating. If any 2020 Term Loans are outstanding after April 2, 2021, the Operating Partnership will be required to pay a one-time fee in an amount equal to 0.20% of the outstanding principal amount of the loans.

In connection with entering into the 2020 Term Loan Agreement, the Company incurred $2.5 million in deferred financing costs, which are being amortized to interest expense over the 2020 Term Loans’ remaining initial term. As of June 30, 2020, the unamortized deferred financing costs were $2.2 million and are recorded net against the Term loan principal balance on the accompanying consolidated balance sheets.

In connection with the borrowings under the 2020 Term Loan Agreement, the Company and Operating Partnership are subject to ongoing compliance with a number of customary financial covenants and other customary affirmative and negative covenants. As of June 30, 2020, the Company and the Operating Partnership were in compliance with these financial covenants.

Senior Unsecured Notes       

The Senior Unsecured Notes were issued by the Operating Partnership and guaranteed by the Company. The following is a summary of the Senior Unsecured Notes outstanding (dollars in thousands):

 

 

Maturity Date

 

Stated Interest Rate

 

 

June 30,

2020

 

 

December 31,

2019

 

2026 Senior Notes

 

September 15, 2026

 

4.45%

 

 

$

300,000

 

 

$

300,000

 

2027 Senior Notes

 

January 15, 2027

 

3.20%

 

 

 

300,000

 

 

 

300,000

 

2029 Senior Notes

 

July 15, 2029

 

4.00%

 

 

 

400,000

 

 

 

400,000

 

2030 Senior Notes

 

January 15, 2030

 

3.40%

 

 

 

500,000

 

 

 

500,000

 

Total Senior Unsecured Notes

 

 

 

3.73%

 

 

$

1,500,000

 

 

$

1,500,000

 

The Senior Unsecured Notes are payable on January 15 and July 15 of each year, except for the 2026 Senior Notes, which are payable on March 15 and September 15 of each year. The Senior Unsecured Notes are redeemable in whole at any time or in part from time to time, at the Operating Partnership’s option, at a redemption price equal to the sum of: 100% of the principal amount of the respective Senior Unsecured Notes to be redeemed plus accrued and unpaid interest and liquidated damages, if any, up to, but not including, the redemption date; and a make-whole premium. If any of the Senior Unsecured Notes are redeemed three months or less (or two months or less in the case of the 2027 Senior Notes) prior to their respective maturity dates, the redemption price will not include a make-whole premium.  

Deferred financing costs and offering discounts incurred in connection with the issuance the Senior Unsecured Notes are being amortized to interest expense over the lives of the respective Senior Unsecured Notes. As of June 30, 2020 and December 31, 2019, the unamortized deferred financing costs were $12.3 million and $12.9 million, respectively, and the unamortized discount was $2.9 million and $3.0 million, respectively. Both the deferred financing costs and offering discount are recorded net against the Senior Unsecured Notes principal balance on the accompanying consolidated balance sheets.

In connection with the issuance of the Senior Unsecured Notes, the Company and Operating Partnership are subject to ongoing compliance with a number of customary financial covenants and other customary affirmative and negative covenants. As of June 30, 2020, the Company and the Operating Partnership were in compliance with these financial covenants.

CMBS

As of June 30, 2020, indirect wholly-owned special purpose entity subsidiaries of the Company were borrowers under five fixed-rate non-recourse loans, which have been securitized into CMBS and are secured by the borrowers' respective leased properties and related assets. The stated interest rates as of June 30, 2020 for the loans ranged from 5.23% to 6.00%, with a weighted average stated rate of 5.47%. As of June 30, 2020, the loans were secured by 88 properties. As of June 30, 2020 and December 31, 2019, the unamortized deferred financing costs associated with the CMBS loans were $2.2 million and $2.6 million, respectively, and the unamortized net offering premium was $0.3 million as of both periods. Both the deferred financing costs and offering premium were recorded net against the principal balance of the mortgages and notes payable on the accompanying consolidated balance sheets and are being amortized to interest expense over the term of the respective loans.

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Convertible Notes

In May 2014, the Company issued $402.5 million aggregate principal amount of 2.875% convertible notes due in 2019 and $345.0 million aggregate principal amount of 3.75% convertible notes due in 2021. Proceeds from the issuance were contributed to the Operating Partnership and are recorded as a note payable to Spirit Realty Capital, Inc. on the consolidated balance sheets of the Operating Partnership. The 2019 Notes matured on May 15, 2019 and were settled in cash. The 2021 Notes will mature on May 15, 2021 and interest is payable semi-annually in arrears on May 15 and November 15 of each year.

The 2021 Notes are convertible only during certain periods and, subject to certain circumstances, into cash, shares of the Corporation’s common stock, or a combination thereof. The conversion rate is subject to adjustment for certain anti-dilution events, including special distributions and regular quarterly cash dividends exceeding a current threshold of $0.73026 per share. As of June 30, 2020, the conversion rate was 17.4458 per $1,000 principal note, which reflects the adjustment from the SMTA dividend distribution related to the Spin-Off, in addition to the other regular dividends declared during the life of the Convertible Notes. Earlier conversion may be triggered if shares of the Corporation’s common stock trade higher than the established thresholds, if the 2021 Notes trade below established thresholds, or certain corporate events occur.

Offering discount and deferred financing costs incurred in connection with the issuance of the Convertible Notes are being amortized to interest expense over the term of the respective Convertible Notes and, as such, the amounts related to the 2019 Notes were fully amortized in May 2019. As of June 30, 2020 and December 31, 2019, the unamortized discount was $4.2 million and $6.5 million, respectively. As of June 30, 2020 and December 31, 2019, the unamortized deferred financing costs were $1.3 million and $2.1 million, respectively. These amounts are shown net against the aggregate outstanding principal balance of the Convertible Notes on the accompanying consolidated balance sheets. The equity component of the conversion feature was $55.1 million as of both June 30, 2020 and December 31, 2019 and is recorded in capital in excess of par value in the accompanying consolidated balance sheets, net of financing transaction costs.

Debt Extinguishment

During the six months ended June 30, 2020, we did not extinguish any debt.

During the six months ended June 30, 2019, the Company retired the Master Trust 2013 notes, resulting in a loss on debt extinguishment of $14.7 million. The Company also extinguished a total of $10.4 million aggregate principal amount of CMBS indebtedness on one defaulted loan, which was secured by one property. The loan had a default interest rate of 9.85% and resulted in a gain on debt extinguishment of $9.5 million. Finally, as a result of the termination of the 2015 Credit Agreement and the 2015 Term Loan Agreement, the Company recognized a loss on debt extinguishment of $0.7 million.

Debt Maturities

As of June 30, 2020, scheduled debt maturities, including balloon payments, were as follows (in thousands):

 

 

Scheduled

Principal

 

 

Balloon

Payment

 

 

Total

 

Remainder of 2020

 

$

2,078

 

 

$

 

 

$

2,078

 

2021

 

 

4,365

 

 

 

345,000

 

 

 

349,365

 

2022

 

 

4,617

 

 

 

400,000

 

 

 

404,617

 

2023

 

 

3,074

 

 

 

197,912

 

 

 

200,986

 

2024

 

 

590

 

 

 

 

 

 

590

 

Thereafter

 

 

3,610

 

 

 

1,500,070

 

 

 

1,503,680

 

Total

 

$

18,334

 

 

$

2,442,982

 

 

$

2,461,316

 

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Interest Expense

The following table is a summary of the components of interest expense related to the Company's borrowings (in thousands):

 

 

Three Months Ended

June 30,

 

 

Six Months Ended

June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Interest expense – revolving credit facilities (1)

 

$

804

 

 

$

1,798

 

 

$

2,860

 

 

$

3,976

 

Interest expense – term loans

 

 

1,671

 

 

 

5,691

 

 

 

1,671

 

 

 

9,669

 

Interest expense – Senior Unsecured Notes

 

 

13,987

 

 

 

3,515

 

 

 

27,975

 

 

 

6,853

 

Interest expense – mortgages and notes payable

 

 

2,998

 

 

 

5,829

 

 

 

6,011

 

 

 

12,082

 

Interest expense – Convertible Notes (2)

 

 

3,235

 

 

 

4,649

 

 

 

6,469

 

 

 

10,776

 

Non-cash interest expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of deferred financing costs

 

 

1,456

 

 

 

1,774

 

 

 

2,598

 

 

 

3,805

 

Amortization of debt discount, net

 

 

1,242

 

 

 

1,920

 

 

 

2,466

 

 

 

4,626

 

Amortization of net losses related to interest rate swaps

 

 

702

 

 

 

 

 

 

1,404

 

 

 

 

Total interest expense

 

$

26,095

 

 

$

25,176

 

 

$

51,454

 

 

$

51,787

 

 

(1)

Includes facility fees of approximately $0.4 million and $0.5 million for the three months ended June 30, 2020 and 2019, respectively, and $0.8 million and $1.2 million for the six months ended June 30, 2020 and 2019, respectively.

(2)

Included in interest expense on the Operating Partnership's consolidated statements of operations are amounts paid to the Company by the Operating Partnership related to the notes payable to Spirit Realty Capital, Inc.

NOTE 5. STOCKHOLDERS’ EQUITY AND PARTNERS' CAPITAL

Common Stock

During the six months ended June 30, 2020, portions of awards of restricted common stock and market-based share awards granted to certain of the Company's officers and other employees vested. The vesting of these awards, granted pursuant to the Amended Incentive Award Plan, resulted in federal and state income tax liabilities for the recipients. As permitted by the terms of the Amended Incentive Award Plan and the award grants, certain executive officers and employees elected to surrender 117.5 thousand shares of common stock valued at $4.4 million, solely to pay the associated statutory tax withholdings during the six months ended June 30, 2020.               

In June 2020, the Company entered into forward sale agreements with certain financial institutions acting as forward purchasers in connection with an offering of 9.2 million shares of common stock at an initial public offering price of $37.35 per share, before underwriting discounts and offering expenses.The Company did not receive any proceeds from the sale of its shares of common stock by the forward purchasers at the time of the offering. The forward sale price that the Company will receive upon physical settlement of the agreements, which was initially $35.856 per share, will be subject to adjustment for (i) a floating interest rate factor equal to a specified daily rate less a spread, (ii) the forward purchasers' stock borrowing costs and (iii) scheduled dividends during the term of the forward sale agreements. As of June 30, 2020, none of these shares had been settled.

In November 2016, the Board of Directors approved a $500 million ATM Program. The agreement provides for the offer and sale of shares of the Corporation’s common stock having an aggregate gross sales price of up to $500.0 million through the agents, as its sales agents or, if applicable, as forward sellers for forward purchasers, or directly to the agents acting as principals. The Company may sell shares in amounts and at times to be determined by the Company but has no obligation to sell any shares in the ATM program. Since inception of the ATM Program through June 30, 2020, 5.6 million shares of the Corporation’s common stock have been sold, of which 0.4 million were sold during the six months ended June 30, 2020 at a weighted average price per share of $49.30, generating $17.9 million in gross proceeds. 3.8 million of these sales were through forward sales agreements, including all of the shares sold during the six months ended June 30, 2020. There were no open forward sales agreements under the ATM Program as of June 30, 2020. Aggregate gross proceeds capacity of $246.3 million remained available under the program as of June 30, 2020.

Preferred Stock

As of June 30, 2020, the Company had 6.9 million shares of 6.00% Series A Preferred Stock outstanding. The Series A Preferred Stock pays cumulative cash dividends at the rate of 6.00% per annum on the liquidation preference of $25.00 per share (equivalent to $0.375 per share on a quarterly basis and $1.50 per share on an annual basis).  

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Dividends Declared

For the six months ended June 30, 2020, the Company's Board of Directors declared the following dividends:

Declaration Date

 

Dividend Per Share

 

 

Record Date

 

Total Amount

(in thousands)

 

 

Payment Date

Common Stock

 

 

 

 

 

 

 

 

 

 

 

 

February 27, 2020

 

$

0.625

 

 

March 31, 2020

 

$

64,338

 

 

April 15, 2020

May 22, 2020

 

$

0.625

 

 

June 30, 2020

 

$

64,402

 

 

July 15, 2020

Preferred Stock

 

 

 

 

 

 

 

 

 

 

 

 

February 27, 2020

 

$

0.375

 

 

March 13, 2020

 

$

2,588

 

 

March 31, 2020

May 22, 2020

 

$

0.375

 

 

June 15, 2020

 

$

2,588

 

 

June 30, 2020

The common stock dividend declared on May 22, 2020 is included in accounts payable, accrued expenses and other liabilities in the consolidated balance sheets as of June 30, 2020.

NOTE 6. COMMITMENTS AND CONTINGENCIES

The Company is periodically subject to claims or litigation in the ordinary course of business, including claims generated from business conducted by tenants on real estate owned by the Company. In these instances, the Company is typically indemnified by the tenant against any losses that might be suffered, and the Company and/or the tenant are typically insured against such claims. The Company is contingently liable for $5.7 million of debt owed by one of its former tenants until the maturity of the debt on March 15, 2022. The Company has accrued the full $5.7 million liability in accounts payable, accrued expenses and other liabilities in the consolidated balance sheet as of both June 30, 2020 and December 31, 2019.

The Company estimates future costs for known environmental remediation requirements when it is probable that the Company has incurred a liability and the related costs can be reasonably estimated. The Company considers various factors when estimating its environmental liabilities, and adjustments are made when additional information becomes available that affects the estimated costs to study or remediate any environmental issues. When only a wide range of estimated amounts can be reasonably established and no other amount within the range is better than another, the low end of the range is recorded in the consolidated financial statements. As of June 30, 2020, no accruals have been made.

As of June 30, 2020, there were no outstanding claims against the Company that are expected to have a material adverse effect on the Company’s financial position, results of operations or cash flows.

Purchase and Capital Improvement Commitments

As of June 30, 2020, the Company had commitments totaling $13.0 million, all of which are to fund improvements on properties the Company currently owns. $11.8 million of these commitments are expected to be funded during fiscal year 2020, with the remainder to be funded by the end of 2021.

Lessee Contracts

The Company leases its current corporate office space and certain office equipment, which are classified as operating leases. The Company's lease of its corporate office space has an initial term that expires on January 31, 2027 and is renewable at the Company's option for two additional periods of five years each after the initial term. The corporate office lease contains a variable lease cost related to the lease of parking spaces and a non-lease component related to the reimbursement of certain common area maintenance expenses, both of which are recognized as incurred.

The Company is also a lessee under five long-term, non-cancellable ground leases under which it is obligated to pay monthly rent as of June 30, 2020. For all five of the ground leases, rental expenses are reimbursed by unrelated third parties, and the corresponding rental revenue is recorded in rental income on the accompanying consolidated statements of operations. All leases are classified as operating leases and have a weighted average remaining lease term of 7.2 years.

As of June 30, 2020, the Company had a right-of-use lease asset balance of $5.0 million and total operating lease liabilities of $6.9 million for these lessee contracts.

NOTE 7. DERIVATIVE AND HEDGING ACTIVITIES

The Company uses interest rate derivative contracts to manage its exposure to changes in interest rates on its variable rate debt. These derivatives are considered cash flow hedges and are recorded on a gross basis at fair value. Assessments of hedge effectiveness are performed quarterly using either a qualitative or quantitative approach. The Company recognizes the entire change in the fair value in AOCL and the change is reflected as cash flow hedge changes in fair value in the supplemental disclosures of non-cash investing and financing activities in the consolidated statement of cash flows.

30


 

Amounts will subsequently be reclassified to earnings when the hedged item affects earnings. The Company does not enter into derivative contracts for speculative or trading purposes and does not have derivative netting arrangements.

The Company is exposed to credit risk in the event of non-performance by its derivative counterparties. The Company evaluates counterparty credit risk through monitoring the creditworthiness of counterparties, which includes review of debt ratings and financial performance. To mitigate credit risk, the Company enters into agreements with counterparties it considers credit-worthy, such as large financial institutions with favorable credit ratings.

In December 2018, the Company entered into interest rate swap agreements. In the third quarter of 2019, the Company terminated its interest rate swaps and accelerated the reclassification of a loss of $12.5 million from AOCL to termination of interest rate swaps as a result of a portion of the hedged forecasted transactions becoming probable not to occur. There were no events of default related to the interest rate swaps prior to their termination. Given that a proportion of the hedged transactions remained probable to occur, $12.3 million of the loss was deferred in other comprehensive loss and will be amortized over the remaining initial term of the interest rate swaps, which ends March 31, 2024. As of June 30, 2020, the unamortized portion of loss in AOCL related to terminated interest rate swaps was $10.1 million.

The following table provides information about the amounts recorded in AOCL, as well as the loss recorded in operations, when reclassified out of AOCL or recognized in earnings immediately (in thousands):

 

 

Three Months Ended

June 30,

 

 

Six Months Ended

June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Gross amount of loss recognized in AOCL on derivatives

 

$

 

 

$

(9,097

)

 

$

 

 

$

(14,326

)

Amount of loss reclassified from AOCL to termination of interest rate swaps

 

 

 

 

 

343

 

 

 

 

 

 

551

 

Amount of loss reclassified from AOCL to interest (1)

 

 

702

 

 

 

 

 

 

1,404

 

 

 

 

Net reclassification of amounts from (to) AOCL

 

$

702

 

 

$

(8,754

)

 

$

1,404

 

 

$

(13,775

)

(1)

Interest expense for the three and six months ended June 30, 2020 was $26.1 million and $51.5 million, respectively.

During the next 12 months, we estimate that approximately $2.8 million will be reclassified as an increase to interest expense related to terminated hedges of existing floating-rate debt.

NOTE 8. FAIR VALUE MEASUREMENTS

Nonrecurring Fair Value Measurements

Fair value measurement of an asset on a nonrecurring basis occurs when events or changes in circumstances related to an asset indicate that the carrying amount of the asset is no longer recoverable. Real estate assets and their related intangible assets are evaluated for impairment based on certain indicators including, but not limited to: the asset being held for sale, vacant or non-operating, tenant bankruptcy or delinquency, and leases expiring in 60 days or less. The fair values of impaired real estate and intangible assets were determined by using the following information, depending on availability, in order of preference: signed purchase and sale agreements (“PSA”) or letters of intent (“LOI”); broker opinions of value (“BOV”); recently quoted bid or ask prices, or market prices for comparable properties; estimates of discounted cash flows, which consider, among other things, contractual and forecasted rental revenues, leasing assumptions, expenses based upon market conditions and capitalization rates; and expectations for the use of the real estate. Based on these inputs, the Company determined that its valuation of the impaired real estate and intangible assets falls within Level 3 of the fair value hierarchy. The following table sets forth the Company’s assets that were accounted for at fair value on a nonrecurring basis as of their respective measurement dates (in thousands):

 

 

 

 

 

 

Fair Value Hierarchy Level

 

Description

 

Fair Value

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Assets held at June 30, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Impaired at March 31, 2020

 

$

52,131

 

 

$

 

 

$

 

 

$

52,131

 

Impaired at June 30, 2020

 

$

10,294

 

 

$

 

 

$

 

 

$

10,294

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets held at December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Impaired at June 30, 2019

 

$

1,893

 

 

$

 

 

$

 

 

$

1,893

 

Impaired at September 30, 2019

 

$

1,093

 

 

$

 

 

$

 

 

$

1,093

 

Impaired at December 31, 2019

 

$

11,594

 

 

$

 

 

$

 

 

$

11,594

 

As of June 30, 2020, the Company held 24 properties that were impaired during 2020. As of December 31, 2019, the Company held 16 properties that were impaired during 2019. For one of the properties held at June 30, 2020, the Company estimated fair value using a capitalization rate of 10.06% based on comparative capitalization rates from market

31


 

comparables. For one of the properties held at December 31, 2019, the Company estimated fair value using a capitalization rate of 9.62% based on comparative capitalization rates from market comparables. For the remaining properties, the Company estimated property fair value using price per square foot from unobservable inputs and, for the properties valued using comparable properties at June 30, 2020, the price per square foot includes a discount of 0-10% to account for the market impact of COVID-19. The unobservable inputs for the remaining properties are as follows:

 

Unobservable Input

 

Asset Type

 

Property Count

 

 

Price Per Square Foot Range

 

Weighted Average Price Per Square Foot

 

Square Footage

 

June 30, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comparable Properties

 

Retail

 

 

14

 

 

$4.35 - $320.89

 

$49.77

 

 

573,784

 

PSA, LOI or BOV

 

Retail

 

 

7

 

 

$30.66 - $349.62

 

$44.57

 

 

349,609

 

PSA, LOI or BOV

 

Industrial

 

 

1

 

 

$13.79

 

$13.79

 

 

35,551

 

PSA, LOI or BOV

 

Office

 

 

1

 

 

$96.39

 

$96.39

 

 

4,310

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comparable Properties

 

Retail

 

 

4

 

 

$34.45 - $740.74

 

$104.84

 

 

35,885

 

PSA, LOI or BOV

 

Retail

 

 

10

 

 

$24.78 - $323.00

 

$50.71

 

 

165,773

 

PSA, LOI or BOV

 

Office

 

 

1

 

 

$99.37

 

$99.37

 

 

4,310

 

Estimated Fair Value of Financial Instruments

Financial assets and liabilities for which the carrying values approximate their fair values include cash and cash equivalents, restricted cash and escrow deposits, and accounts receivable and payable. Generally, these assets and liabilities are short-term in duration and are recorded at cost, which approximates fair value, on the accompanying consolidated balance sheets.

In addition, companies are required to disclose the estimated fair values of all financial instruments, even if they are not carried at their fair values. The fair values of financial instruments are estimates based upon market conditions and perceived risks at June 30, 2020 and December 31, 2019. These estimates require management’s judgment and may not be indicative of the future fair values of the assets and liabilities. The estimated fair values of these financial instruments have been derived either based on (i) market quotes for identical or similar instruments in markets that are not active or (ii) discounted cash flow analyses using estimates of the amount and timing of future cash flows, market rates and credit spreads. These measurements are classified as Level 2 of the fair value hierarchy. The following table discloses fair value information for these financial instruments (in thousands):  

 

 

June 30, 2020

 

 

December 31, 2019

 

 

 

Carrying

Value

 

 

Estimated

Fair Value

 

 

Carrying

Value

 

 

Estimated

Fair Value

 

Loans receivable, net

 

$

29,163

 

 

$

29,823

 

 

$

34,465

 

 

$

35,279

 

2019 Credit Facility

 

 

 

 

 

 

 

 

116,500

 

 

 

119,802

 

2020 Term Loans

 

 

397,824

 

 

 

400,231

 

 

 

 

 

 

 

Senior Unsecured Notes, net (1)

 

 

1,484,884

 

 

 

1,455,070

 

 

 

1,484,066

 

 

 

1,543,919

 

Mortgages and notes payable, net (1)

 

 

214,338

 

 

 

228,768

 

 

 

216,049

 

 

 

235,253

 

Convertible Notes, net (1)

 

 

339,462

 

 

 

344,597

 

 

 

336,402

 

 

 

356,602

 

(1)

The carrying value of the debt instruments are net of unamortized deferred financing costs and certain debt discounts/premiums.

NOTE 9. INCENTIVE AWARD PLAN

Restricted Shares of Common Stock

During the six months ended June 30, 2020, the Company granted 148 thousand restricted shares under the Amended Incentive Award Plan to certain executive officers, directors and employees. The Company recorded $6.9 million in deferred compensation associated with these grants. Deferred compensation for restricted shares will be recognized in expense over the requisite service period. As of June 30, 2020, there were approximately 296 thousand unvested restricted shares outstanding.

32


 

Market-Based Awards

During the six months ended June 30, 2020, the Board of Directors, or committee thereof, approved target grants of 88 thousand market-based awards to executive officers of the Company. The performance period of these grants runs primarily through December 31, 2022. Potential shares of the Corporation’s common stock that each participant is eligible to receive is based on the initial target number of shares granted, multiplied by a percentage range between 0% and 300%. Grant date fair value of the market-based share awards was calculated using the Monte Carlo simulation model, which incorporated stock price volatility of the Company and each of the Company’s peers and other variables over the time horizons matching the performance periods. Significant inputs for the calculation were expected volatility of the Company of 25.2% and expected volatility of the Company's peers, ranging from 18.1% to 27.3%, with an average volatility of 21.7% and a risk-free interest rate of 1.07%. The fair value of the market-based award per share was $67.30 as of the grant date. Stock-based compensation expense associated with unvested market-based share awards is recognized on a straight-line basis over the minimum required service period, which is generally three years.

Approximately $1.6 million and $2.7 million in dividend rights have been accrued as of June 30, 2020 and December 31, 2019, respectively. For outstanding non-vested awards at June 30, 2020, 0.4 million shares would have been released based on the Corporation’s TSR relative to the specified peer groups through that date.

Stock-based Compensation Expense

For the three months ended June 30, 2020 and 2019, the Company recognized $3.3 million and $3.9 million, respectively, in stock-based compensation expense, and for the six months ended June 30, 2020 and 2019, the Company recognized $6.8 million and $7.5 million, respectively. These amounts are included in general and administrative expenses in the accompanying consolidated statements of operations. As of June 30, 2020, the remaining unamortized stock-based compensation expense totaled $18.4 million, comprised of $9.7 million related to restricted stock awards and $8.7 million related to market-based awards. As of December 31, 2019, the unamortized stock-based compensation expense totaled $12.6 million, comprised of $6.6 million related to restricted stock awards and $6.0 million related to market-based awards. Amortization is recognized on a straight-line basis over the service period of each applicable award.

NOTE 10. INCOME PER SHARE AND PARTNERSHIP UNIT

Income per share and unit has been computed using the two-class method, which is computed by dividing the sum of distributed earnings to common stockholders and undistributed earnings allocated to common stockholders by the weighted average number of shares of common stock outstanding for the period. In applying the two-class method, undistributed earnings are allocated to both shares of common stock and participating securities based on the weighted average shares outstanding during the period. Classification of the Company's unvested restricted stock, which contain rights to receive nonforfeitable dividends, are deemed participating securities under the two-class method. Under the two-class method, earnings attributable to unvested restricted shares are deducted from income from continuing operations in the computation of net income attributable to common stockholders.

33


 

The table below is a reconciliation of the numerator and denominator used in the computation of basic and diluted net (loss) income per share and unit computed using the two-class method (dollars in thousands):

 

 

Three Months Ended

June 30,

 

 

Six Months Ended

June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Basic and diluted (loss) income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Loss) income from continuing operations

 

$

(413

)

 

$

45,737

 

 

$

(16,260

)

 

$

89,315

 

Less: dividends paid to preferred stockholders

 

 

(2,588

)

 

 

(2,588

)

 

 

(5,176

)

 

 

(5,176

)

Less: dividends attributable to unvested restricted stock

 

 

(185

)

 

 

(250

)

 

 

(392

)

 

 

(522

)

Net (loss) income attributable to common stockholders used in basic and diluted (loss) income per share

 

$

(3,186

)

 

$

42,899

 

 

$

(21,828

)

 

$

83,617

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic weighted average shares of common stock outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares of common stock outstanding

 

 

102,980,619

 

 

 

87,422,369

 

 

 

102,765,967

 

 

 

86,673,672

 

Less: unvested weighted average shares of restricted stock

 

 

(301,652

)

 

 

(420,382

)

 

 

(311,410

)

 

 

(419,974

)

Basic weighted average shares of common stock outstanding

 

 

102,678,967

 

 

 

87,001,987

 

 

 

102,454,557

 

 

 

86,253,698

 

Net (loss) income per share attributable to common stockholders - basic

 

$

(0.03

)

 

$

0.49

 

 

$

(0.21

)

 

$

0.97

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted weighted average shares of common stock outstanding: (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Plus: unsettled shares under open forward equity contracts

 

 

 

 

 

772,040

 

 

 

 

 

 

328,617

 

Plus: unvested market-based awards

 

 

 

 

 

116,672

 

 

 

 

 

 

196,982

 

Diluted weighted average shares of common stock outstanding

 

 

102,678,967

 

 

 

87,890,699

 

 

 

102,454,557

 

 

 

86,779,297

 

Net (loss) income per share attributable to common stockholders - diluted

 

$

(0.03

)

 

$

0.49

 

 

$

(0.21

)

 

$

0.96

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Potentially dilutive shares of common stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unvested shares of restricted stock, less shares assumed repurchased at market

 

 

 

 

 

160,606

 

 

 

66,920

 

 

 

191,215

 

Unsettled shares under open forward equity contracts

 

 

 

 

 

 

 

 

607,636

 

 

 

 

Unvested shares of market-based awards

 

 

83,625

 

 

 

 

 

 

230,537

 

 

 

 

 

(1)

Assumes the most dilutive issuance of potentially issuable shares between the two-class and treasury stock method unless the result would be anti-dilutive.

The Corporation intends to satisfy its exchange obligation for the principal amount of the 2021 Convertible Notes to the note holders entirely in cash; therefore, the "if-converted" method does not apply and the treasury stock method is being used. For the six months ended June 30, 2020 and 2019, the Corporation’s average stock price was below the conversion price, resulting in zero potentially dilutive shares related to the conversion spread of the 2021 Convertible Notes.

Note 11. Related Party Transactions and Arrangements

Continuing Involvement

Subsequent to the Spin-Off, the Company has had continuing involvement with SMTA through related party agreements. The Company had cash inflows from SMTA of $0.8 million and cash outflows to SMTA of $4 thousand for the six months ended June 30, 2020. The Company had cash inflows from SMTA of $22.7 million and cash outflows to SMTA of $22.7 million for the six months ended June 30, 2019.

Cost Sharing Arrangements

In conjunction with the Spin-Off, the Company and SMTA entered into certain agreements, including the Separation and Distribution Agreement, Tax Matters Agreement, Registration Rights Agreement and Insurance Sharing Agreement. These agreements provide a framework for the relationship between the Company and SMTA after the Spin-Off, by which Spirit may incur certain expenses on behalf of SMTA that must be reimbursed in a timely manner. These agreements, except for the Tax Matters Agreement, were terminated in conjunction with the termination of the Asset Management Agreement.   

34


 

Asset Management Agreement and Interim Management Agreement

In conjunction with the Spin-Off, the Company entered into the Asset Management Agreement pursuant to which the Operating Partnership provided various management services to SMTA. On June 2, 2019, concurrently with SMTA’s entry into an agreement to sell Master Trust 2014, the Company entered into a termination agreement of the Asset Management Agreement, which became effective on September 20, 2019. On June 2, 2019, the Company and SMTA also entered into an Interim Management Agreement, which became effective on September 20, 2019, and which provides that the Company is entitled to an annual management fee of $1 million for the initial one-year term thereof and $4 million per annum for any renewal term, in each case plus certain cost reimbursements. The Interim Management Agreement is terminable at any time by SMTA and may be terminated at any time upon 180 days’ prior written notice by the Company, in each case without payment of a termination fee. On March 18, 2020, the Company notified SMTA of its intention to terminate the Interim Asset Management Agreement effective as of September 14, 2020. Management fees of $0.2 million and $0.5 million were earned during the three and six months ended June 30, 2020, respectively, compared to $5.0 million and $10.0 million during the three and six months ended June 30, 2019, respectively, and are included in related party fee income in the consolidated statements of operations. As of both June 30, 2020 and December 31, 2019, the Company did not have material accrued receivable balances related to the Interim Management Agreement.

Property Management and Servicing Agreement

Prior to September 20, 2019, the Operating Partnership provided property management services and special services for Master Trust 2014. The property management fees accrued daily at 0.25% per annum of the collateral value of the Master Trust 2014 collateral pool less any specially serviced assets, and the special servicing fees accrued daily at 0.75% per annum of the collateral value of any assets deemed to be specially serviced per the terms of the Property Management and Servicing Agreement dated May 20, 2014. Property management fees of $1.4 million and $3.0 million were earned during the three and six months ended June 30, 2019, respectively, and special servicing fees of $0.4 million and $0.8 million were earned during the three and six months ended June 30, 2019, respectively. These fees are included in related party fee income in the consolidated statements of operations. In conjunction with SMTA’s sale of Master Trust 2014 on September 20, 2019, the notes were retired and the Property Management and Servicing Agreement was terminated.

 

 

35


 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Special Note Regarding Forward-looking Statements

This quarterly report contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. When used in this quarterly report, 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 which may be incorrect or imprecise and we may not be able to realize them. We do 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;

 

our success in implementing our business strategy and our ability to identify, underwrite, finance, consummate, integrate and manage diversifying acquisitions or investments;

 

the financial performance of our retail tenants and the demand for retail space, particularly with respect to challenges being experienced by general merchandise retailers;

 

our ability to diversify our tenant base;

 

the nature and extent of future competition;

 

increases in our costs of borrowing as a result of changes in interest rates and other factors;

 

our ability to access debt and equity capital markets;

 

our ability to pay down, refinance, restructure and/or extend our indebtedness as it becomes due;

 

our ability and willingness to renew our leases upon expiration and to reposition our properties on the same or better terms upon expiration in the event such properties are not renewed by tenants or we exercise our rights to replace existing tenants upon default;

 

the impact of any financial, accounting, legal or regulatory issues or litigation that may affect us or our major tenants;

 

our ability to manage our expanded operations;

 

our ability and willingness to maintain our qualification as a REIT;

 

our ability to manage and liquidate the remaining SMTA assets;

 

the impact on our business and those of our tenants from epidemics, pandemics or other outbreaks of illness, disease or virus (such as the strain of coronavirus known as COVID-19); 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.

The factors included in this quarterly report, including the documents incorporated by reference, and documents we subsequently file with the SEC and incorporate by reference, are not exhaustive and additional factors could adversely affect our business and financial performance. Additional factors that may cause risks and uncertainties include those discussed in the sections entitled "Business", "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our most recent Annual Report on Form 10-K and this report and subsequent filings with the SEC. All forward-looking statements are based on information that was available, and speak only, to the date on which they were made. We disclaim 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.

36


 

Overview

Spirit Realty Capital, Inc. is a New York Stock Exchange listed company under the ticker symbol "SRC." We are a self-administered and self-managed REIT with in-house capabilities including acquisition, credit research, asset management, portfolio management, real estate research, legal, finance and accounting functions. We primarily invest in single-tenant real estate assets throughout the U.S., which are generally acquired through sale-leaseback transactions and subsequently leased on a long-term, triple-net basis to high quality tenants with business operations within retail, industrial, office and other industries.

Single tenant, operationally essential real estate consists of properties that are generally free-standing, commercial real estate facilities where our tenants conduct activities that are essential to the generation of their sales and profits. Under a triple-net lease, the tenant is typically responsible for all improvements and is contractually obligated to pay all property operating expenses, such as real estate taxes, insurance premiums and repair and maintenance costs.

As of June 30, 2020, our owned real estate represented investments in 1,771 properties. Our properties are leased to 294 tenants across 48 states and 28 retail industries. As of June 30, 2020, our owned properties were approximately 99.2% occupied (based on the number of economically yielding properties). In addition, our investment in real estate includes commercial mortgage and other loans primarily secured by 43 real estate properties or other related assets.

Our operations are carried out through the Operating Partnership. OP Holdings, one of our wholly-owned subsidiaries, is the sole general partner and owns approximately 1% of the Operating Partnership. We and one of our wholly-owned subsidiaries are the only limited partners, and together own the remaining 99% of the Operating Partnership. Although the Operating Partnership is wholly-owned by us, in the future, we may issue partnership interests in the Operating Partnership to third parties in exchange for property owned by such third parties. In general, any partnership interests in the Operating Partnership issued to third parties would be exchangeable for cash or, at our election, shares of our common stock at specified ratios set when such partnership interests in the Operating Partnership are issued.

We have elected to be taxed as a REIT for federal income tax purposes and believe we have been organized and have operated in a manner that allows us to qualify as a REIT for federal income tax purposes.

On May 31, 2018, we completed a Spin-Off of all our interests in the assets that collateralized Master Trust 2014, our properties leased to Shopko, and certain other assets into an independent, publicly traded REIT, SMTA. In conjunction with the Spin-Off, we entered into the Asset Management Agreement with SMTA, pursuant to which the Company acted as external asset manager for SMTA for an annual management fee of $20.0 million. In September 2019, SMTA sold the assets held in Master Trust 2014 and approved a plan of liquidation. The Asset Management Agreement was terminated, and the Interim Management Agreement with SMTA became effective. Pursuant to the Interim Management Agreement, we are entitled to receive $1 million during the initial one-year term and $4 million for any renewal one-year term, plus certain cost reimbursements, to manage and liquidate the remaining SMTA assets. On March 18, 2020, we provided notification that we intend to terminate the Interim Management Agreement, effective as of September 14, 2020.

Given the timing of the onset in the U.S., the COVID-19 pandemic had a minimal impact on our first quarter 2020 results. During the second quarter of 2020, business disruption across our tenant base accelerated, as certain of our tenants, especially those in industries considered “non-essential” under varying state “shelter-in-place” and “stay-at-home” orders and other restrictions, experienced occupancy challenges or even closures. As a result, many of our tenants requested rent deferrals (and other forms of relief). Our discussions with tenants requesting relief have substantially focused on industries that are directly disrupted by the COVID-19 pandemic and restrictions intended to prevent its spread, particularly health and fitness, movie theaters, quick service and casual dining restaurants, entertainment, car washes, dealerships, home décor, home furnishings, department stores and education. These and other industries may be further impacted in the future depending on various factors, including the duration of the COVID-19 pandemic and further restrictions intended to prevent its spread. Even after certain of such restrictions are lifted or reduced, the willingness of customers to visit our tenants’ businesses may be reduced due to lingering concerns regarding the continued risk of COVID-19 transmission and heightened sensitivity to risks associated with the transmission of other diseases. We are not able to predict the duration of such customer behavior or the COVID-19 pandemic.    

As of July 27, 2020, we have collected approximately 75% of second quarter 2020 Base Rent of $117.4 million, deferred or approved deferrals for approximately 19% and abated or approved abatements for approximately 2%. There is currently a lesser impact to the second half of 2020, for which we have $9.7 million of rent deferred (including the maximum impact of arrangements that have a sliding scale based on performance of the underlying property) and $1.3 million of rent abated. For the remaining deferred rent, the deferral periods range generally from one to six months, with an average deferral period of three months and an average repayment period of 12 months. Of the tenants who we have granted rent deferrals, 20% are public companies and the weighted average remaining lease term of leases with deferrals is 7.6 years (based on Base Rent). Although we are and will continue to be actively engaged in rent collection efforts related to uncollected rent, as well

37


 

as working with certain tenants who have requested rent deferrals, we can provide no assurance that such efforts or our efforts in future periods will be successful, particularly in the event that the COVID-19 pandemic and restrictions intended to prevent its spread continue for a prolonged period. Refer to “Part II—Other Information, Item 1A. Risk Factors” for additional information about the potential impact of the COVID-19 pandemic and restrictions intended to prevent its spread on our business, financial condition, results of operations, cash flows, liquidity and ability to satisfy our debt service obligations and make distributions to our stockholders.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with GAAP requires management to use judgment in the application of accounting policies, including making estimates and assumptions. We base estimates on the best information available to us at the time, our experience and various other assumptions deemed reasonable under the circumstances. From time to time, we re-evaluate our estimates and assumptions. In the event estimates or assumptions prove to be different from actual results, adjustments are made in subsequent periods to reflect more current estimates and assumptions about matters that are inherently uncertain. A summary of our critical accounting policies is included in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2019. We have not made any material changes to these policies during the periods covered by this quarterly report.

Results of Operations

Comparison of Three Months Ended June 30, 2020 to Three Months Ended June 30, 2019

 

 

Three Months Ended June 30,

 

(In Thousands)

 

2020

 

 

2019

 

 

Change

 

 

% Change

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental income

 

$

117,190

 

 

$

106,506

 

 

$

10,684

 

 

 

10.0

%

Interest income on loans receivable

 

 

390

 

 

 

920

 

 

 

(530

)

 

 

(57.6

)%

Earned income from direct financing leases

 

 

131

 

 

 

308

 

 

 

(177

)

 

 

(57.5

)%

Related party fee income

 

 

250

 

 

 

7,249

 

 

 

(6,999

)

 

 

(96.6

)%

Other income

 

 

563

 

 

 

762

 

 

 

(199

)

 

 

(26.1

)%

Total revenues

 

 

118,524

 

 

 

115,745

 

 

 

2,779

 

 

 

2.4

%

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

General and administrative

 

 

11,975

 

 

 

13,833

 

 

 

(1,858

)

 

 

(13.4

)%

Property costs (including reimbursable)

 

 

7,234

 

 

 

4,407

 

 

 

2,827

 

 

 

64.1

%

Deal pursuit costs

 

 

14

 

 

 

173

 

 

 

(159

)

 

 

(91.9

)%

Interest

 

 

26,095

 

 

 

25,176

 

 

 

919

 

 

 

3.7

%

Depreciation and amortization

 

 

53,160

 

 

 

41,342

 

 

 

11,818

 

 

 

28.6

%

Impairments

 

 

21,049

 

 

 

3,607

 

 

 

17,442

 

 

NM

 

Total expenses

 

 

119,527

 

 

 

88,538

 

 

 

30,989

 

 

 

35.0

%

Other income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss on debt extinguishment

 

 

 

 

 

(14,676

)

 

 

14,676

 

 

 

(100.0

)%

Gain on disposition of assets

 

 

658

 

 

 

29,776

 

 

 

(29,118

)

 

 

(97.8

)%

Preferred dividend income from SMTA

 

 

 

 

 

3,750

 

 

 

(3,750

)

 

 

(100.0

)%

Total other income

 

 

658

 

 

 

18,850

 

 

 

(18,192

)

 

 

(96.5

)%

(Loss) income before income tax expense

 

 

(345

)

 

 

46,057

 

 

 

(46,402

)

 

NM

 

Income tax expense

 

 

(68

)

 

 

(320

)

 

 

252

 

 

 

(78.8

)%

Net (loss) income

 

$

(413

)

 

$

45,737

 

 

$

(46,150

)

 

NM

 

 

NM - Percentages over 100% are not displayed.

38


 

REVENUES

Rental income

 

 

Three Months Ended June 30,

 

(In Thousands)

 

2020

 

 

2019

 

Base Cash Rent

 

$

110,166

 

 

$

98,418

 

Variable cash rent (including reimbursables)

 

 

2,404

 

 

 

2,942

 

Straight-line rent, net of uncollectible reserve

 

 

4,392

 

 

 

4,485

 

Amortization of above- and below- market lease intangibles, net

 

 

228

 

 

 

661

 

Total rental income

 

$

117,190

 

 

$

106,506

 

We were a net acquirer of income-producing real estate over the trailing twelve-month period, resulting in an increase in our Base Cash Rent period-over-period. During the trailing twelve months ended June 30, 2020, we acquired 237 properties, with a Real Estate Investment Value of $1.06 billion, and disposed of 29 properties, with a Real Estate Investment Value of $115.0 million. The increase was partially offset by an increase in reserves on rental income driven by tenant credit issues from the COVID-19 pandemic from a net recovery of $0.8 million for the three months ended June 30, 2019 to net reserves of $4.8 million for three months ended June 30, 2020. The increase period-over-period was also reduced by $2.4 million of rent abatements for the three months ended June 30, 2020, executed as relief due to the COVID-19 pandemic. Finally, included in the Base Cash Rent for the three months ended June 30, 2020 are rent deferrals related to the effects of the COVID-19 pandemic of $22.3 million.

The primary component of variable cash rent is tenant reimbursements, where our tenants are obligated under the lease agreement to reimburse us for certain property costs we incur, and non-cash rental income. Tenant reimbursement income was $2.4 million and $2.8 million for the three months ended June 30, 2020 and 2019, respectively, and was driven by the tenant reimbursable property costs described below. These amounts represented approximately 2.0% and 2.6% of rental income for the three months ended June 30, 2020 and 2019, respectively.

Non-cash rental income consists of straight-line rental revenue, amortization of above- and below-market lease intangibles and bad debt expense. Non-cash rental income remained relatively flat period-over-period as the increase in straight-line rental revenue related to net acquisitions was almost fully offset by an increase in reserves on straight-line rental revenue period-over-period as a result of increased tenant credit issues.

Related party fee income

In conjunction with the Spin-Off, we entered into the Asset Management Agreement with SMTA pursuant to which we provided a management team responsible for implementing SMTA ’s business strategy and performing certain services for SMTA. Under this agreement, we recognized $5.0 million of revenues during the three months ended June 30, 2019. Additionally, under the terms of this agreement, we recognized $0.4 million of stock compensation awarded by SMTA to an employee of Spirit for the three months ended June 30, 2019, which was fully offset by $0.4 million in general and administrative expenses recognized for other compensation. This agreement was terminated in conjunction with SMTA’s sale of Master Trust 2014 on September 20, 2019. We entered into an Interim Management Agreement for an initial annual fee of $1.0 million, under which we agreed to manage and liquidate the remaining SMTA assets. Under this agreement, we recognized $0.2 million of revenues for the three months ended June 30, 2020. On March 18, 2020, we provided notification to SMTA that we intend to terminate the Interim Management Agreement, effective as of September 14, 2020.

Additionally, we provided property management services and special services for Master Trust 2014, which was contributed to SMTA as part of the Spin-Off. As a result, for the three months ended June 30, 2019, we recognized $1.9 million in revenue under the terms of the Property Management and Servicing Agreement. This agreement was terminated in the third quarter of 2019 in conjunction with SMTA’s sale of Master Trust 2014.

EXPENSES

General and administrative

Period-over-period general and administrative expenses decreased, driven by a decrease in compensation expenses of $2.1 million, primarily as a result of decreased accruals for market-based and merit-based compensation, as well as a decrease of $0.2 million in travel expenses as a result of the COVID-19 pandemic. This decrease was partially offset by $0.7 million of expenses recognized during the three months ended June 30, 2020 related to the COVID-19 pandemic, primarily as a result of increased legal fees for executing rent deferral or abatement agreements.

39


 

Property costs (including reimbursable)

For the three months ended June 30, 2020, property costs were $7.2 million (including $3.0 million of tenant reimbursable expenses), compared to $4.4 million (including $3.5 million of tenant reimbursable expenses) for the same period in 2019. As such, reimbursable property costs decreased period-over-period, primarily due to certain property taxes no longer being considered recoverable. The increase in non-reimbursable costs of $3.3 million was driven primarily by an increase in non-reimbursable property taxes of $2.7 million due to bankruptcies and tenant credit issues from the COVID-19 pandemic, as well as an increase in non-reimbursable property-level legal expenses of $0.6 million.

Interest

The increase in interest expense was driven by the issuance of the 2029 Senior Notes in the second quarter of 2019, the 2027 Senior Notes and 2030 Senior Notes in the third quarter of 2019 and the 2020 Term Loans in the second quarter of 2020. The increase was partially offset by the following:

 

the maturity and repayment of the $402.5 million aggregate principal amount of 2.875% Convertible 2019 Notes on May 15, 2019,

 

the early repayment of the Master Trust 2013 notes on June 20, 2019, and

 

the repayment and termination of the A-1 Term Loans and A-2 Term Loans on September 16, 2019,

 

and lower usage under the revolving credit facilities period-over-period.  

The following table summarizes our interest expense on related borrowings:

 

 

Three Months Ended

June 30,

 

(In Thousands)

 

2020

 

 

2019

 

Interest expense – revolving credit facilities (1)

 

$

804

 

 

$

1,798

 

Interest expense – term loans

 

 

1,671

 

 

 

5,691

 

Interest expense – Senior Unsecured Notes

 

 

13,987

 

 

 

3,515

 

Interest expense – mortgages and notes payable

 

 

2,998

 

 

 

5,829

 

Interest expense – Convertible Notes

 

 

3,235

 

 

 

4,649

 

Non-cash interest expense

 

 

3,400

 

 

 

3,694

 

Total interest expense

 

$

26,095

 

 

$

25,176

 

(1)

Includes facility fees of approximately $0.4 million and $0.5 million for the three months ended June 30, 2020 and 2019, respectively.

Depreciation and amortization

We were a net acquirer during the trailing twelve-month period of $949.3 million of Real Estate Investment Value, resulting in an increase period-over-period in depreciation and amortization. The following table summarizes our depreciation and amortization expense:

 

 

Three Months Ended

June 30,

 

(In Thousands)

 

2020

 

 

2019

 

Depreciation of real estate assets

 

$

44,360

 

 

$

34,737

 

Amortization of lease intangibles

 

 

8,654

 

 

 

6,463

 

Other depreciation

 

 

146

 

 

 

142

 

Total depreciation and amortization

 

$

53,160

 

 

$

41,342

 

Impairments

During the three months ended June 30, 2020, we recorded impairment losses of $21.0 million. Impairment of $1.0 million was recorded on three Vacant properties held for use. Impairment of $1.6 million was recorded on underperforming properties, comprised of $1.6 million on two underperforming properties held for use and a de minimis amount on one underperforming property held for sale. Impairment of $18.6 million was recorded on lease intangible assets, primarily as a result of a tenant bankruptcy that had credit issues prior to the COVID-19 pandemic that resulted in the termination of the lease for four properties. Finally, we reversed $0.2 million of previously recorded allowance for loan loss as a result of the loan nearing its maturity without changes to the borrower’s credit quality indicators.  

During the three months ended June 30, 2019, we recorded impairment losses of $3.6 million. Impairment of $0.1 million was recorded on one Vacant property held for use. Impairment of $3.2 million was recorded on underperforming properties, comprised of $2.5 million recorded on five underperforming properties held for use and $0.7 million recorded on one underperforming property held for sale. The remaining impairment charges of $0.3 million were recorded on lease intangible assets.

40


 

Loss on debt extinguishment

During the three months ended June 30, 2020, we did not extinguish any debt. During the three months ended June 30, 2019, we retired the remaining Master Trust 2013 notes, which had $158.5 million of aggregate principal outstanding and a stated interest rate of 5.27%. This resulted in a loss on debt of extinguishment of $14.7 million, primarily as a result of early repayment penalties.

Gain on disposition of assets

During the three months ended June 30, 2020, we disposed of three Vacant properties, resulting in net gains totaling $0.7 million. For the same period in 2019, we disposed of 18 properties and recorded net gains totaling $29.8 million. There were $28.6 million in net gains on the sale of eight active properties and $1.2 million in net gains on the sale of ten Vacant properties.

Preferred dividend income from SMTA

As part of the Spin-Off, SMTA issued to us 10% Series A preferred shares with an aggregate liquidation preference of $150.0 million. For the three months ended June 30, 2019, we recognized preferred dividend income of $3.8 million from these shares. In September 2019, in conjunction with SMTA’s sale of Master Trust 2014, SMTA repurchased the preferred shares at their aggregate liquidation preference.

Comparison of Six Months Ended June 30, 2020 to Six Months Ended June 30, 2019

 

 

Six Months Ended June 30,

 

(In Thousands)

 

2020

 

 

2019

 

 

Change

 

 

% Change

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental income

 

$

238,553

 

 

$

210,573

 

 

$

27,980

 

 

 

13.3

%

Interest income on loans receivable

 

 

809

 

 

 

1,906

 

 

 

(1,097

)

 

 

(57.6

)%

Earned income from direct financing leases

 

 

308

 

 

 

704

 

 

 

(396

)

 

 

(56.3

)%

Related party fee income

 

 

500

 

 

 

14,176

 

 

 

(13,676

)

 

 

(96.5

)%

Other income

 

 

1,074

 

 

 

979

 

 

 

95

 

 

 

9.7

%

Total revenues

 

 

241,244

 

 

 

228,338

 

 

 

12,906

 

 

 

5.7

%

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

General and administrative

 

 

25,465

 

 

 

27,014

 

 

 

(1,549

)

 

 

(5.7

)%

Property costs (including reimbursable)

 

 

13,170

 

 

 

9,561

 

 

 

3,609

 

 

 

37.7

%

Deal pursuit costs

 

 

1,033

 

 

 

244

 

 

 

789

 

 

NM

 

Interest

 

 

51,454

 

 

 

51,787

 

 

 

(333

)

 

 

(0.6

)%

Depreciation and amortization

 

 

105,396

 

 

 

82,691

 

 

 

22,705

 

 

 

27.5

%

Impairments

 

 

61,823

 

 

 

7,299

 

 

 

54,524

 

 

NM

 

Total expenses

 

 

258,341

 

 

 

178,596

 

 

 

79,745

 

 

 

44.7

%

Other income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss on debt extinguishment

 

 

 

 

 

(5,893

)

 

 

5,893

 

 

 

(100.0

)%

Gain on disposition of assets

 

 

1,046

 

 

 

38,506

 

 

 

(37,460

)

 

 

(97.3

)%

Preferred dividend income from SMTA

 

 

 

 

 

7,500

 

 

 

(7,500

)

 

 

(100.0

)%

Total other income

 

 

1,046

 

 

 

40,113

 

 

 

(39,067

)

 

 

(97.4

)%

(Loss) income before income tax expense

 

 

(16,051

)

 

 

89,855

 

 

 

(105,906

)

 

NM

 

Income tax expense

 

 

(209

)

 

 

(540

)

 

 

331

 

 

 

(61.3

)%

Net (loss) income

 

$

(16,260

)

 

$

89,315

 

 

$

(105,575

)

 

NM

 

NM - Percentages over 100% are not displayed.

REVENUES

Rental income

 

 

Six Months Ended June 30,

 

(In Thousands)

 

2020

 

 

2019

 

Base Cash Rent

 

$

226,712

 

 

$

195,217

 

Variable cash rent (including reimbursables)

 

 

5,793

 

 

 

6,580

 

Straight-line rent, net of uncollectible reserve

 

 

5,486

 

 

 

7,392

 

Amortization of above- and below- market lease intangibles, net

 

 

562

 

 

 

1,384

 

Total rental income

 

$

238,553

 

 

$

210,573

 

41


 

We were a net acquirer of income-producing real estate over the trailing twelve-month period, resulting in an increase in our Base Cash Rent period-over-period. During the trailing twelve months ended June 30, 2020, we acquired 237 properties, with a Real Estate Investment Value of $1.06 billion, and disposed of 29 properties, with a Real Estate Investment Value of $115.0 million. The increase was partially offset by an increase in reserves on rental income driven by tenant credit issues from the COVID-19 pandemic from a net recovery of $1.0 million for the six months ended June 30, 2019 to net reserves of $5.6 million for six months ended June 30, 2020. The increase period-over-period was also reduced by $2.4 million of rent abatements for the six months ended June 30, 2020, executed as relief due to the COVID-19 pandemic. Finally, included in the Base Cash Rent for the six months ended June 30, 2020 are rent deferrals related to the effects of the COVID-19 pandemic of $22.3 million.

The primary component of variable cash rent is tenant reimbursements, where our tenants are obligated under the lease agreement to reimburse us for certain property costs we incur, and non-cash rental income. Tenant reimbursement income was $5.5 million and $6.3 million for the six months ended June 30, 2020 and 2019, respectively, and was driven by the tenant reimbursable property costs described below. These amounts represented approximately 2.3% and 3.0% of rental income for the six months ended June 30, 2020 and 2019, respectively.

Non-cash rental income consists of straight-line rental revenue, amortization of above- and below-market lease intangibles and bad debt expense. The remaining decrease in non-cash rental income was primarily driven by an increase in reserves on straight-line rental revenue period-over-period as a result of increased tenant credit issues, which was partially offset by an increase in straight-line rental revenue related to net acquisitions.

Related party fee income

In conjunction with the Spin-Off, we entered into the Asset Management Agreement with SMTA pursuant to which we provided a management team responsible for implementing SMTA’s business strategy and performing certain services for SMTA. Under this agreement, we recognized $10.0 million of revenues during the six months ended June 30, 2019. Additionally, under the terms of this agreement, we recognized $0.4 million of stock compensation awarded by SMTA to an employee of Spirit for the six months ended June 30, 2019, which was fully offset by $0.4 million in general and administrative expenses recognized for other compensation. This agreement was terminated in conjunction with SMTA’s sale of Master Trust 2014 on September 20, 2019. We entered into an Interim Management Agreement for an initial annual fee of $1.0 million, under which we agreed to manage and liquidate the remaining SMTA assets. Under this agreement, we recognized $0.5 million of revenues for the six months ended June 30, 2020. On March 18, 2020, we provided notification to SMTA that we intend to terminate the Interim Management Agreement, effective as of September 14, 2020.

Additionally, we provided property management services and special services for Master Trust 2014, which was contributed to SMTA as part of the Spin-Off. As a result, for the six months ended June 30, 2019, we recognized $3.8 million in revenue under the terms of the Property Management and Servicing Agreement. This agreement was terminated in the third quarter of 2019 in conjunction with SMTA’s sale of Master Trust 2014.

EXPENSES

General and administrative

Period-over-period general and administrative expenses decreased, driven by a decrease in compensation expenses of $2.5 million, primarily as a result of decreased accruals for market-based and merit-based compensation, as well as a decrease of $0.3 million in travel expenses as a result of the COVID-19 pandemic. This decrease was partially offset by $0.7 million of expenses recognized during the three months ended June 30, 2020 related to the COVID-19 pandemic, primarily as a result of increased legal fees for executing rent deferral or abatement agreements.

Property costs (including reimbursable)

For the six months ended June 30, 2020, property costs were $13.2 million (including $6.6 million of tenant reimbursable expenses) compared to $9.6 million (including $7.6 million of tenant reimbursable expenses) for the same period in 2019. As such, reimbursable property costs decreased period-over-period, primarily due to certain property taxes no longer being considered recoverable. The increase in non-reimbursable costs of $4.6 million was driven primarily by an increase in non-reimbursable property taxes of $4.0 million due to bankruptcies and tenant credit issues from the COVID-19 pandemic, as well as an increase in non-reimbursable property-level legal expenses of $0.6 million.

Interest

The decrease in interest expense was driven by the following:

 

the extinguishment of $10.4 million aggregate principal amount of CMBS indebtedness on one defaulted loan in the first quarter of 2019, which had a default interest rate of 9.85%,

42


 

 

the maturity and repayment of the $402.5 million aggregate principal amount of 2.875% Convertible 2019 Notes on May 15, 2019,

 

the early repayment of the Master Trust 2013 notes on June 20, 2019, and

 

the repayment and termination of the A-1 Term Loans and A-2 Term Loans on September 16, 2019.  

The decrease was partially offset by the issuance of the 2029 Senior Notes in the second quarter of 2019, the 2027 Senior Notes and 2030 Senior Notes in the third quarter of 2019 and the 2020 Term Loans in the second quarter of 2020.

The following table summarizes our interest expense on related borrowings:

 

 

Six Months Ended

June 30,

 

(In Thousands)

 

2020

 

 

2019

 

Interest expense – revolving credit facilities (1)

 

$

2,860

 

 

$

3,976

 

Interest expense – term loans

 

 

1,671

 

 

 

9,669

 

Interest expense – Senior Unsecured Notes

 

 

27,975

 

 

 

6,853

 

Interest expense – mortgages and notes payable

 

 

6,011

 

 

 

12,082

 

Interest expense – Convertible Notes

 

 

6,469

 

 

 

10,776

 

Non-cash interest expense

 

 

6,468

 

 

 

8,431

 

Total interest expense

 

$

51,454

 

 

$

51,787

 

(1)

Includes facility fees of approximately $0.8 million and $1.2 million for the six months ended June 30, 2020 and 2019, respectively.

Depreciation and amortization

We were a net acquirer during the trailing twelve-month period of $949.3 million of Real Estate Investment Value, resulting in an increase period-over-period in depreciation and amortization. The following table summarizes our depreciation and amortization expense:

 

 

Six Months Ended June 30,

 

(In Thousands)

 

2020

 

 

2019

 

Depreciation of real estate assets

 

$

87,636

 

 

$

69,206

 

Amortization of lease intangibles

 

 

17,469

 

 

 

13,201

 

Other depreciation

 

 

291

 

 

 

284

 

Total depreciation and amortization

 

$

105,396

 

 

$

82,691

 

Impairments

During the six months ended June 30, 2020, we recorded impairment losses of $61.8 million. Impairment of $1.3 million was recorded on five Vacant properties held for use. Impairment of $41.3 million was recorded on underperforming properties, comprised of $41.2 million on 20 underperforming properties held for use and $0.1 on one underperforming property held for sale. Impairment of $18.8 million was recorded on lease intangible assets, primarily as a result of a tenant bankruptcy that had credit issues prior to the COVID-19 pandemic that resulted in the termination of the lease for four properties. Finally, we recorded allowances for credit losses of $0.3 million on our direct financing lease and $0.1 million on our remaining loans receivable.

During the six months ended June 30, 2019, we recorded impairment losses of $7.3 million. Impairment of $1.2 million was recorded on Vacant properties, comprised of $0.2 million recorded on two Vacant held for use properties and $1.0 million recorded on one Vacant held for sale property. Impairment of $6.3 million was recorded on underperforming properties, comprised of $2.5 million recorded on five underperforming properties held for use and $3.8 million recorded on nine underperforming properties held for sale. These impairment charges were partially offset by $0.2 million of net impairment on lease intangible liabilities.

Loss on debt extinguishment

During the six months ended June 30, 2020, we did not extinguish any debt. During the six months ended June 30, 2019, we retired the remaining Master Trust 2013 notes, which had $158.5 million of aggregate principal outstanding and a stated interest rate of 5.27%. This resulted in a loss on debt of extinguishment of $14.7 million, primarily as a result of early repayment penalties. Additionally, we incurred a loss on debt extinguishment of $0.7 million as a result of the termination of the 2015 Credit Agreement and 2015 Term Loan Agreement in conjunction with entering into the 2019 Revolving Credit and Term Loan Agreement. These losses were partially offset by a gain on debt extinguishment of $9.5 million as a result of extinguishing $10.4 million aggregate principal amount of CMBS indebtedness on one defaulted loan, which was secured by one property.

43


 

Gain on disposition of assets

During the six months ended June 30, 2020, we disposed of ten properties, resulting in net gains totaling $1.0 million. There were $1.4 million in net gains on the sale of six Vacant properties and minimal net gains on the sale of four active properties. These gains were partially offset by a $0.2 million loss recorded on the sale of a notes receivable and $0.2 million in other net losses.  

For the same period in 2019, we disposed of 25 properties and recorded net gains totaling $38.5 million. There were $37.3 million in net gains on the sale of 12 active properties and $1.2 million in net gains on the sale of ten Vacant properties. One property was returned to the lender in conjunction with CMBS debt extinguishment and two properties were leasehold interests that were surrendered to the lessors, which did not result in a gain/loss on disposition.

Preferred dividend income from SMTA

As part of the Spin-Off, SMTA issued to us 10% Series A preferred shares with an aggregate liquidation preference of $150.0 million. For the six months ended June 30, 2019, we recognized preferred dividend income of $7.5 million from these shares. In September 2019, in conjunction with SMTA’s sale of Master Trust 2014, SMTA repurchased the preferred shares at their aggregate liquidation preference.

Property Portfolio Information

 

 

 

 

 

 

1,771

99.2%

48

294

28

Owned Properties

Occupancy

States

Tenants

Retail Industries

Diversification By Tenant

The following table sets forth a summary of tenant concentration for our owned real estate properties as of June 30, 2020:

Tenant (1)

 

Number of

Properties

 

 

Total Square Feet

(in thousands)

 

 

Percent of

ABR

 

Cajun Global LLC

 

 

167

 

 

 

240

 

 

 

2.8

%

The Home Depot, Inc.

 

 

7

 

 

 

848

 

 

 

2.4

%

Walgreen Co.

 

 

36

 

 

 

517

 

 

 

2.4

%

Alimentation Couche-Tard, Inc.

 

 

76

 

 

 

230

 

 

 

2.3

%

GPM Investments, LLC

 

 

113

 

 

 

306

 

 

 

2.1

%

At Home Group Inc.

 

 

12

 

 

 

1,487

 

 

 

2.1

%

Dollar Tree, Inc.

 

 

106

 

 

 

927

 

 

 

2.1

%

CVS Caremark Corporation

 

 

34

 

 

 

422

 

 

 

2.0

%

Life Time Fitness, Inc

 

 

5

 

 

 

588

 

 

 

1.9

%

Party City Holdings Inc.

 

 

3

 

 

 

1,090

 

 

 

1.8

%

Other

 

 

1,198

 

 

 

29,072

 

 

 

78.1

%

Vacant

 

 

14

 

 

 

509

 

 

 

 

Total

 

 

1,771

 

 

 

36,236

 

 

 

100.0

%

(1) Tenants represent legal entities ultimately responsible for obligations under the lease agreements or affiliated entities. Other tenants may operate the same or similar business concepts or brands set forth above.

44


 

Lease Expirations

The following table sets forth a summary of lease expirations for our owned real estate as of June 30, 2020. As of June 30, 2020, the weighted average remaining non-cancelable initial term of our leases (based on ABR) was 9.9 years. The information set forth in the table assumes that tenants do not exercise renewal options and or any early termination rights:

Leases Expiring In:

 

Number of

Properties

 

 

ABR

(in thousands) (1)

 

 

Total Square Feet

(in thousands)

 

 

Percent of

ABR

 

Remainder of 2020

 

 

11

 

 

$

2,112

 

 

 

285

 

 

 

0.5

%

2021

 

 

74

 

 

 

22,564

 

 

 

2,010

 

 

 

4.8

%

2022

 

 

44

 

 

 

17,015

 

 

 

1,591

 

 

 

3.6

%

2023

 

 

116

 

 

 

34,492

 

 

 

3,079

 

 

 

7.3

%

2024

 

 

50

 

 

 

20,411

 

 

 

1,813

 

 

 

4.4

%

2025

 

 

49

 

 

 

18,425

 

 

 

1,483

 

 

 

3.9

%

2026

 

 

91

 

 

 

29,035

 

 

 

2,112

 

 

 

6.2

%

2027

 

 

124

 

 

 

36,807

 

 

 

2,471

 

 

 

7.8

%

2028

 

 

108

 

 

 

26,906

 

 

 

1,919

 

 

 

5.7

%

2029

 

 

323

 

 

 

42,081

 

 

 

2,752

 

 

 

9.0

%

Thereafter

 

 

767

 

 

 

219,772

 

 

 

16,212

 

 

 

46.8

%

Vacant

 

 

14

 

 

 

 

 

 

509

 

 

 

 

Total owned properties

 

 

1,771

 

 

$

469,620

 

 

 

36,236

 

 

 

100.0

%

(1) ABR is not adjusted for the impact of abatements provided as relief due to the COVID-19 pandemic. As of the date of this report, SRC has agreed to a total of $1.4 million of abatements for the period from July 1, 2020 – June 30, 2021.  

45


 

Diversification By Asset Type and Tenant Industry

The following table sets forth a summary of asset types, and for retail assets the tenant industry concentration, for our owned properties as of June 30, 2020:

Asset Type

Tenant Industry

Number of

Properties

 

 

Total Square Feet

(in thousands)

 

 

Percent of

ABR

 

Retail

 

 

1,659

 

 

 

25,227

 

 

 

80.7

%

 

Convenience Stores

 

332

 

 

 

1,048

 

 

 

8.4

%

 

Restaurants - Quick Service

 

367

 

 

 

800

 

 

 

7.0

%

 

Health and Fitness

 

42

 

 

 

2,185

 

 

 

6.9

%

 

Restaurants - Casual Dining

 

135

 

 

 

956

 

 

 

6.1

%

 

Movie Theaters

 

37

 

 

 

1,953

 

 

 

5.7

%

 

Drug Stores / Pharmacies

 

80

 

 

 

1,034

 

 

 

5.0

%

 

Grocery

 

39

 

 

 

1,792

 

 

 

3.8

%

 

Entertainment

 

24

 

 

 

1,022

 

 

 

3.7

%

 

Car Washes

 

65

 

 

 

308

 

 

 

3.4

%

 

Dealerships

 

24

 

 

 

796

 

 

 

3.2

%

 

Home Improvement

 

14

 

 

 

1,595

 

 

 

3.1

%

 

Dollar Stores

 

162

 

 

 

1,481

 

 

 

3.1

%

 

Home Décor

 

15

 

 

 

2,049

 

 

 

2.7

%

 

Specialty Retail

 

53

 

 

 

1,142

 

 

 

2.5

%

 

Warehouse Club and Supercenters

 

12

 

 

 

1,319

 

 

 

2.4

%

 

Automotive Service

 

70

 

 

 

592

 

 

 

2.3

%

 

Department Stores

 

14

 

 

 

1,281

 

 

 

2.0

%

 

Home Furnishings

 

18

 

 

 

865

 

 

 

1.9

%

 

Sporting Goods

 

14

 

 

 

739

 

 

 

1.7

%

 

Education

 

36

 

 

 

427

 

 

 

1.7

%

 

Automotive Parts

 

55

 

 

 

388

 

 

 

1.2

%

 

Office Supplies

 

16

 

 

 

351

 

 

 

0.8

%

 

Other

 

8

 

 

 

251

 

 

 

0.7

%

 

Medical Office

 

5

 

 

 

65

 

 

 

0.6

%

 

Pet Supplies & Service

 

4

 

 

 

133

 

 

 

0.5

%

 

Apparel

 

5

 

 

 

150

 

 

 

0.3

%

 

Vacant

 

13

 

 

 

505

 

 

 

0.0

%

Industrial

 

 

69

 

 

 

8,994

 

 

 

11.6

%

Office and Other

 

 

43

 

 

 

2,015

 

 

 

7.7

%

 

Total

 

1,771

 

 

 

36,236

 

 

 

100.0

%

46


 

Diversification By Geography

The following map and table set forth a summary of geographic concentration for our owned real estate properties as of June 30, 2020:

Location

 

Number of

Properties

 

 

Total Square Feet

(in thousands)

 

 

Percent of

ABR

 

 

Location

(continued)

 

Number of

Properties

 

 

Total Square Feet

(in thousands)

 

 

Percent of

ABR

 

Texas

 

 

259

 

 

 

4,275

 

 

 

11.7

%

 

Louisiana

 

 

23

 

 

 

368

 

 

 

1.4

%

Florida

 

 

121

 

 

 

2,132

 

 

 

7.8

%

 

Utah

 

 

18

 

 

 

333

 

 

 

1.3

%

Georgia

 

 

122

 

 

 

1,983

 

 

 

6.5

%

 

Pennsylvania

 

 

20

 

 

 

488

 

 

 

1.2

%

Ohio

 

 

86

 

 

 

2,396

 

 

 

5.5

%

 

Alaska

 

 

9

 

 

 

319

 

 

 

1.1

%

California

 

 

24

 

 

 

1,236

 

 

 

4.8

%

 

New Hampshire

 

 

16

 

 

 

640

 

 

 

1.1

%

Tennessee

 

 

105

 

 

 

1,798

 

 

 

4.2

%

 

Idaho

 

 

16

 

 

 

273

 

 

 

1.0

%

Illinois

 

 

50

 

 

 

1,258

 

 

 

3.8

%

 

Kansas

 

 

18

 

 

 

345

 

 

 

0.8

%

Michigan

 

 

85

 

 

 

1,511

 

 

 

3.7

%

 

Connecticut

 

 

5

 

 

 

686

 

 

 

0.8

%

New York

 

 

30

 

 

 

1,895

 

 

 

3.7

%

 

Wisconsin

 

 

10

 

 

 

391

 

 

 

0.7

%

Arizona

 

 

45

 

 

 

824

 

 

 

3.1

%

 

Washington

 

 

8

 

 

 

185

 

 

 

0.6

%

South Carolina

 

 

42

 

 

 

677

 

 

 

2.8

%

 

Maine

 

 

26

 

 

 

76

 

 

 

0.5

%

Virginia

 

 

44

 

 

 

1,335

 

 

 

2.6

%

 

Oregon

 

 

4

 

 

 

144

 

 

 

0.4

%

North Carolina

 

 

57

 

 

 

1,138

 

 

 

2.6

%

 

West Virginia

 

 

13

 

 

 

202

 

 

 

0.4

%

Maryland

 

 

9

 

 

 

714

 

 

 

2.5

%

 

Nebraska

 

 

9

 

 

 

221

 

 

 

0.4

%

Alabama

 

 

93

 

 

 

618

 

 

 

2.5

%

 

Montana

 

 

3

 

 

 

152

 

 

 

0.4

%

Missouri

 

 

65

 

 

 

966

 

 

 

2.5

%

 

Massachusetts

 

 

2

 

 

 

131

 

 

 

0.4

%

Minnesota

 

 

25

 

 

 

936

 

 

 

2.3

%

 

Iowa

 

 

12

 

 

 

194

 

 

 

0.4

%

Colorado

 

 

25

 

 

 

978

 

 

 

2.2

%

 

North Dakota

 

 

3

 

 

 

105

 

 

 

0.3

%

New Mexico

 

 

28

 

 

 

583

 

 

 

1.8

%

 

Rhode Island

 

 

3

 

 

 

95

 

 

 

0.3

%

Indiana

 

 

40

 

 

 

830

 

 

 

1.7

%

 

Wyoming

 

 

1

 

 

 

35

 

 

 

0.1

%

Oklahoma

 

 

51

 

 

 

448

 

 

 

1.6

%

 

U.S. V.I.

 

 

1

 

 

 

38

 

 

 

0.1

%

Mississippi

 

 

50

 

 

 

421

 

 

 

1.6

%

 

South Dakota

 

 

1

 

 

 

20

 

 

 

0.1

%

Kentucky

 

 

37

 

 

 

482

 

 

 

1.6

%

 

Delaware

 

 

1

 

 

 

5

 

 

 

0.1

%

Arkansas

 

 

42

 

 

 

637

 

 

 

1.6

%

 

Vermont

 

 

1

 

 

 

2

 

 

*

 

New Jersey

 

 

13

 

 

 

717

 

 

 

1.4

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

*

Less than 0.1%

47


 

Liquidity and Capital Resources

FORWARD EQUITY OFFERING

In June 2020, we entered into forward sale agreements with certain financial institutions acting as forward purchasers in connection with an offering of 9.2 million shares of common stock at an initial public offering price of $37.35 per share, before underwriting discounts and offering expenses. The forward purchasers borrowed and sold an aggregate of 9.2 million shares of common stock in the offering. We did not receive any proceeds from the sale of our shares of common stock by the forward purchasers at the time of the offering. We intend (subject to our right to elect cash or net share settlement subject to certain conditions) to deliver, upon physical settlement of the forward sale agreements on one or more dates specified by us occurring no later than December 8, 2021, an aggregate of 9.2 million shares of our common stock to the forward purchasers in exchange for cash proceeds per share equal to the applicable forward sale price. The forward sale price that we will receive upon physical settlement of the agreements, which was initially $35.856 per share, will be subject to adjustment for (i) a floating interest rate factor equal to a specified daily rate less a spread, (ii) the forward purchasers' stock borrowing costs and (iii) scheduled dividends during the term of the forward sale agreements. As of June 30, 2020, none of these shares had been settled.

ATM PROGRAM

In November 2016, the Board of Directors approved a $500.0 million ATM Program. In February 2019, we updated the ATM Program, pursuant to which we may from time to time offer and sell shares of our common stock having an aggregate gross sales price of up to $500.0 million through the agents, as our sales agents or, if applicable, as forward sellers, or directly to the agents acting as principals. Sales of shares of our common stock under the ATM Program may be made in sales deemed to be “at the market offerings” as defined in Rule 415 under the Securities Act.

The ATM Program contemplates that, in addition to the issuance and sale by us of shares of our common stock to or through the agents, we may enter into separate forward sale agreements with one of the agents or one of their respective affiliates (in such capacity, each, a “forward purchaser” and, collectively, the “forward purchasers”). When we enter into a forward sale agreement with any forward purchaser, we expect that such forward purchaser will attempt to borrow from third parties and sell, through the relevant agent, acting as sales agent for such forward purchaser, shares of our common stock to hedge such forward purchaser's exposure under such forward sale agreement. We will not initially receive any proceeds from any sale of shares of our common stock borrowed by a forward purchaser and sold through a forward seller.

We currently expect to fully physically settle any forward sale agreement with the relevant forward purchaser on one or more dates specified by us on or prior to the maturity date of such forward sale agreement, in which case we expect to receive aggregate net cash proceeds at settlement equal to the number of shares specified in such forward sale agreement multiplied by the relevant forward price per share. However, subject to certain exceptions, we may also elect, in our sole discretion, to cash settle or net share settle all or any portion of our obligations under any forward sale agreement, in which case we may not receive any proceeds (in the case of cash settlement) or will not receive any proceeds (in the case of net share settlement), and we may owe cash (in the case of cash settlement) or shares of our common stock (in the case of net share settlement) to the relevant forward purchaser.

As of June 30, 2020, 5.6 million shares of our common stock have been sold under the ATM Program. 3.8 million of the sales were sold by forward purchasers through agents under the ATM Program and pursuant to forward sales agreements. The forward sale price that we received upon physical settlement of the agreements was subject to adjustment for (i) a floating interest rate factor equal to a specified daily rate less a spread, (ii) the forward purchasers’ stock borrowing costs and (iii) scheduled dividends during the term of the forward sale agreements. 0.4 million of the shares were sold during the six months ended June 30, 2020, all under forward sales agreements, for net proceeds of $17.6 million, after giving effect to sales agent commissions and other issuance fees of $0.3 million. As of June 30, 2020, we had physically settled our obligations under our existing forward sales agreements and there were no open forward sales agreements. We had remaining capacity to sell common stock having an aggregate gross sales price of up to $246.3 million under the ATM Program as of June 30, 2020.

SHORT-TERM LIQUIDITY AND CAPITAL RESOURCES

On a short-term basis, our principal demands for funds will be for operating expenses, acquisitions, distributions to stockholders and payment of interest and principal on current and any future debt financings. We expect to fund these demands primarily through cash provided by operating activities, borrowings under the 2019 Credit Facility and, when market conditions warrant, issuances of equity securities, including shares of our common stock under our ATM program. As of June 30, 2020, available liquidity was comprised of $97.2 million in cash and cash equivalents, $800.0 million of borrowing capacity under the 2019 Credit Facility and $12.2 million in restricted cash and restricted cash equivalents. We also have remaining capacity to sell common stock having an aggregate gross sales price of up to $246.3 million under our

48


 

ATM Program as of June 30, 2020 and $324.0 million of expected proceeds available assuming the full physical settlement of our open forward equity contracts. We believe that this available liquidity makes us well positioned to navigate any macroeconomic uncertainty resulting from the COVID-19 pandemic restrictions intended to prevent its spread.

LONG-TERM LIQUIDITY AND CAPITAL RESOURCES

We plan to meet our long-term capital needs, including long-term financing of property acquisitions, by issuing registered debt or equity securities, by obtaining asset level financing and by issuing fixed-rate secured or unsecured notes and bonds. In the future, some of our property acquisitions could be made by issuing partnership interests of our Operating Partnership in exchange for property owned by third parties. These partnership interests would be exchangeable for cash or, at our election, shares of our common stock. We continually evaluate financing alternatives and believe that we can obtain financing on reasonable terms. However, we cannot be sure that we will have access to the capital markets at times and on terms that are acceptable to us. Refer to “Part II, Item 1A. Risk Factors” of our Quarterly Report on Form 10-Q for the period ended March 31, 2020 for additional information about the potential impact of the COVID-19 pandemic and restrictions intended to prevent its spread on our business, financial condition, results of operations, cash flows, liquidity and ability to satisfy our debt service obligations and make distributions to our stockholders. We expect that our primary uses of capital will be for property and other asset acquisitions, the payment of tenant improvements, operating expenses, debt service payments and distributions to our stockholders.

DESCRIPTION OF CERTAIN DEBT

The following descriptions of debt should be read in conjunction with Note 4 to the consolidated financial statements herein.

2019 Credit Facility

As of June 30, 2020, the aggregate gross commitment under the 2019 Credit Facility was $800.0 million, which may be increased up to $1.2 billion by exercising an accordion feature, subject to satisfying certain requirements and obtaining additional lender commitments. The 2019 Credit Facility has a maturity of March 31, 2023 and includes two six-month extensions that can be exercised at our option.

We may voluntarily prepay the 2019 Credit Facility, in whole or in part, at any time without premium or penalty. Payment of the 2019 Credit Facility is unconditionally guaranteed by the Company and material subsidiaries that meet certain conditions (as defined in the 2019 Facilities Agreements). As of June 30, 2020, there were no subsidiaries that met this requirement.

As of June 30, 2020, the 2019 Credit Facility bore interest at 1-Month LIBOR plus 0.90%, with no borrowings outstanding, and a ratings-based facility fee in the amount of 0.20% per annum. As of June 30, 2020, there were no letters of credit outstanding.

Term Loans

As of June 30, 2020, the full borrowing capacity of $400.0 million under the 2020 Term Loan Agreement was drawn. The 2020 Term Loans have a maturity of April 2, 2022 and bear interest at a rate of LIBOR plus an applicable margin of 1.50% per annum. If any loans are outstanding after April 2, 2021, the Operating Partnership will be required to pay a one-time fee in an amount equal to 0.20% of the outstanding principal amount of loans.

Senior Unsecured Notes

As of June 30, 2020, we had the following Senior Unsecured Notes outstanding (dollars in thousands):

 

 

Maturity Date

 

Stated Interest Rate

 

 

June 30,

2020

 

2026 Senior Notes

 

September 15, 2026

 

4.45%

 

 

$

300,000

 

2027 Senior Notes

 

January 15, 2027

 

3.20%

 

 

$

300,000

 

2029 Senior Notes

 

July 15, 2029

 

4.00%

 

 

$

400,000

 

2030 Senior Notes

 

January 15, 2030

 

3.40%

 

 

$

500,000

 

Total Senior Unsecured Notes

 

 

 

3.73%

 

 

$

1,500,000

 

The Senior Unsecured Notes are payable on January 15 and July 15 of each year, except for the 2026 Senior Notes, which are payable on March 15 and September 15 of each year. The Senior Unsecured Notes are redeemable in whole at any time or in part from time to time, at the Operating Partnership’s option, at a redemption price equal to the sum of: an amount equal to 100% of the principal amount of the respective Senior Unsecured Notes to be redeemed plus accrued and unpaid interest and liquidated damages, if any, up to, but not including, the redemption date; and a make-whole premium calculated in accordance with the respective indenture. Notwithstanding the foregoing, if any of the Senior Unsecured Notes are

49


 

redeemed three months or less (or two months or less in the case of the 2027 Senior Notes) prior to their respective maturity dates, the redemption price will not include a make-whole premium.

CMBS

In general, the obligor of our asset level debt is a special purpose entity that holds the real estate and other collateral securing the indebtedness. Each special purpose entity is a bankruptcy remote separate legal entity and is the sole owner of its assets and solely responsible for its liabilities other than typical non-recurring covenants.

As of June 30, 2020, we had five fixed-rate CMBS loans with $216.3 million of aggregate outstanding principal, a weighted-average contractual interest rate of 5.47% and a weighted-average maturity of 3.3 years. Approximately 87.06% of this debt is partially amortizing and requires a balloon payment at maturity. The following table shows the scheduled principal repayments, including amortization, of the CMBS fixed-rate loans as of June 30, 2020 (dollars in thousands):

Year of Maturity

 

Number of

Loans

 

 

Number of

Properties

 

 

Stated Interest

Rate Range

 

Weighted

Average

Stated Rate

 

 

Scheduled

Principal

 

 

Balloon

 

 

Total

 

Remainder of 2020

 

 

 

 

 

 

 

—%

 

 

%

 

$

2,078

 

 

$

 

 

$

2,078

 

2021

 

 

 

 

 

 

 

—%

 

 

 

 

 

4,365

 

 

 

 

 

 

4,365

 

2022

 

 

 

 

 

 

 

—%

 

 

 

 

 

4,617

 

 

 

 

 

 

4,617

 

2023

 

 

3

 

 

 

86

 

 

5.23%-5.50%

 

 

5.46

 

 

 

3,074

 

 

 

197,912

 

 

 

200,986

 

2024

 

 

 

 

 

 

 

—%

 

 

 

 

 

590

 

 

 

 

 

 

590

 

Thereafter

 

 

2

 

 

 

2

 

 

5.80%-6.00%

 

 

5.83

 

 

 

3,610

 

 

 

70

 

 

 

3,680

 

Total

 

 

5

 

 

 

88

 

 

 

 

 

5.47

%

 

$

18,334

 

 

$

197,982

 

 

$

216,316

 

Convertible Notes

As of June 30, 2020, the Convertible Notes were comprised of $345.0 million aggregate principal amount of 3.75% convertible notes maturing on May 15, 2021. Interest on the 2021 Notes is payable semiannually in arrears on May 15 and November 15 of each year.

Holders may convert the 2021 Notes prior to November 15, 2020 only under specific circumstances: (1) if the closing price of our common stock for each of at last 20 trading days (whether or not consecutive) during the last 30 consecutive trading days in the quarter is greater than or equal to 130% of the conversion price for the Convertible Notes; (2) during the five business day period after any 10 consecutive trading day period in which the trading price per $1,000 principal amount of the Convertible Notes for each trading day of the measurement period was less than 98% of the product of the last closing price of our common stock and the conversion rate for the Convertible Notes; (3) if we call any or all of the Convertible Notes for redemption prior to the redemption date; or (4) upon the occurrence of specified corporate events as described in the Convertible Notes prospectus supplement. On or after November 15, 2020, until the close of business on the second scheduled trading day immediately preceding the maturity date of the 2021 Notes, holders may convert the 2021 Notes at any time, regardless of the foregoing circumstances. Upon conversion, we will pay or deliver cash, shares of common stock or a combination of cash and shares of common stock, at our election.

The conversion rate is subject to adjustment for some events, including dividends paid in excess of threshold amounts stipulated in the agreement, but will not be adjusted for any accrued and unpaid interest. As of June 30, 2020, the conversion rate was 17.4458 per $1,000 principal note. If we undergo a fundamental change (as defined in the 2021 Notes’ supplemental indenture), holders may require us to repurchase all or any portion of their notes at a repurchase price equal to 100% of the principal amount of such notes to be repurchased, plus accrued and unpaid interest.

DEBT MATURITIES

Future principal payments due on our various types of debt outstanding as of June 30, 2020 (in thousands):

 

 

Total

 

 

Remainder of 2020

 

 

2021

 

 

2022

 

 

2023

 

 

2024

 

 

Thereafter

 

2019 Credit Facility

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

2020 Term Loans

 

 

400,000

 

 

 

 

 

 

 

 

 

400,000

 

 

 

 

 

 

 

 

 

 

Senior Unsecured Notes

 

 

1,500,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,500,000

 

CMBS

 

 

216,316

 

 

 

2,078

 

 

 

4,365

 

 

 

4,617

 

 

 

200,986

 

 

 

590

 

 

 

3,680

 

Convertible Notes

 

 

345,000

 

 

 

 

 

 

345,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

2,461,316

 

 

$

2,078

 

 

$

349,365

 

 

$

404,617

 

 

$

200,986

 

 

$

590

 

 

$

1,503,680

 

 

50


 

CONTRACTUAL OBLIGATIONS

As discussed above, during the six months ended June 30, 2020, we entered into the 2020 Term Loan Agreement to reduce the amounts drawn under the 2019 Credit Facility. There were no other material changes outside the ordinary course of business to the information regarding specified contractual obligations contained in our Annual Report on Form 10-K for the year ended December 31, 2019, as filed with the SEC.

We may enter into commitments to purchase goods and services in connection with the operations of our properties. Those commitments generally have terms of one-year or less and reflect expenditure levels comparable to our historical expenditures.

DISTRIBUTION POLICY

Distributions from our current or accumulated earnings are generally classified as ordinary income, whereas distributions in excess of our current and accumulated earnings, to the extent of a stockholder’s federal income tax basis in our common stock, are generally characterized as a return of capital. Under the 2017 Tax Legislation, U.S. stockholders that are individuals, trusts and estates generally may deduct up to 20% of the ordinary dividends (e.g., dividends not designated as capital gain dividends or qualified dividend income) received from a REIT for taxable years beginning after December 31, 2017 and before January 1, 2026. Distributions in excess of a stockholder’s federal income tax basis in our common stock are generally characterized as capital gain.

We are required to distribute 90% of our taxable income (subject to certain adjustments and excluding net capital gains) on an annual basis to maintain qualification as a REIT for federal income tax purposes and are required to pay federal income tax at regular corporate rates to the extent we distribute less than 100% of our taxable income (including capital gains).

We intend to make distributions that will enable us to meet the distribution requirements applicable to REITs and to eliminate or minimize our obligation to pay corporate-level federal income and excise taxes.

Any distributions will be at the sole discretion of our Board of Directors, and their form, timing and amount, if any, will depend upon a number of factors, including our actual and projected results of operations, FFO, liquidity, cash flows and financial condition, the revenue we actually receive from our properties, our operating expenses, our debt service requirements, our capital expenditures, prohibitions and other limitations under our financing arrangements, our REIT taxable income, the annual REIT distribution requirements, applicable laws and such other factors as our Board of Directors deems relevant. Refer to “Part II, Item 1A. Risk Factors” of our Quarterly Report on Form 10-Q for the period ended March 31, 2020 for additional information about the potential impact of the COVID-19 pandemic and restrictions intended to prevent its spread on our business, financial condition, results of operations, cash flows, liquidity and ability to satisfy our debt service obligations and make distributions to our stockholders.

Cash Flows

The following table presents a summary of our cash flows for the six months ended June 30, 2020 and June 30, 2019, respectively (in thousands):

 

 

Six Months Ended June 30,

 

 

 

 

 

 

 

2020

 

 

2019

 

 

Change

 

Net cash provided by operating activities

 

$

133,011

 

 

$

144,275

 

 

$

(11,264

)

Net cash used in investing activities

 

 

(206,840

)

 

 

(301,934

)

 

 

95,094

 

Net cash provided by financing activities

 

 

157,191

 

 

 

101,227

 

 

 

55,964

 

Net increase (decrease) in cash, cash equivalents and restricted cash

 

$

83,362

 

 

$

(56,432

)

 

$

139,794

 

As of June 30, 2020, we had $109.4 million of cash, cash equivalents and restricted cash as compared to $26.0 million as of December 31, 2019 and $21.0 million as of June 30, 2019.

Operating Activities

Our cash flows from operating activities are primarily dependent upon the occupancy level of our portfolio, the rental rates specified in our leases, the collectability of rent and the level of our operating expenses and other general and administrative costs.

The decrease in net cash provided by operating activities was primarily attributable to the following:

 

a decrease in related party fee income of $13.7 million as a result of the termination of the Asset Management Agreement in September 2019, which was replaced by the Interim Management Agreement, and

51


 

 

a decrease in preferred dividends received from SMTA of $7.5 million as a result of SMTA repurchasing the preferred shares in September 2019.

The decrease was partially offset by the following:

 

a net increase in cash rental revenue of $7.9 million, driven by net acquisitions over the trailing twelve month period, but partially offset by $22.1 million of rent deferred and $2.4 million of rent abated during the three months ended June 30, 2020 as a result of the COVID-19 pandemic, and

 

a decrease in cash interest paid of $2.3 million, driven by decreases from the retirement of the Master Trust 2013 notes, 2019 Notes, and A-1 Term Loans which were partially offset by the issuance of the 2027 Senior Notes, 2029 Senior Notes and 2030 Senior Notes.  

Investing Activities

Cash used in investing activities is generally used to fund property acquisitions, for investments in loans receivable and for capital expenditures. Cash provided by investing activities generally relates to the disposition of real estate and other assets.

Net cash used in investing activities during the six months ended June 30, 2020 included $218.9 million for the acquisition of 29 properties and $8.3 million of capitalized real estate expenditures. These outflows were partially offset by the $17.7 million in net proceeds from the disposition of 10 properties and the sale of one loan receivable. Additionally, the outflows were further offset by the collection of $2.7 million of principal on loans receivable.

During the same period in 2019, net cash used in investing activities included $447.5 million for the acquisition of 126 properties and $25.7 million of capitalized real estate expenditures. These outflows were partially offset by $163.2 million in net proceeds from the disposition of 25 properties and $8.1 million in collections of principal on loans receivable.

Financing Activities

Generally, our net cash provided by or used in financing activities is impacted by our borrowings under our revolving credit facilities and term loans, issuances of net-lease mortgage notes, common stock and debt offerings and repurchases and dividend payments on our common and preferred stock.

Net cash provided by financing activities during the six months ended June 30, 2020 was primarily attributable to borrowings of $400.0 million under term loans and net proceeds from the issuance of common stock of $17.6 million. These amounts were partially offset by net repayments of $116.5 million on our revolving credit facilities, payment of dividends to equity owners of $135.1 million, deferred financing costs of $2.4 million, repayment of $2.0 million on mortgages and notes payable and common stock repurchases for employee tax withholdings totaling $4.4 million.

During the same period in 2019, net cash provided by financing activities was primarily attributable to net borrowings of $400.0 million under term loans, issuance of $399.7 million of Senior Unsecured Notes and net proceeds from the issuance of common stock of $162.3 million. These amounts were partially offset by the payment of dividends to equity owners of $113.0 million, repayment of $171.3 million on mortgages and notes payable, net repayments of $146.3 million on our revolving credit facilities, repayment of $402.5 million on convertible notes, deferred financing costs of $13.9 million, debt extinguishment costs of $12.3 million and common stock share repurchases for employee tax withholdings totaling $1.4 million.

Off-Balance Sheet Arrangements

As of June 30, 2020, we did not have any material off-balance sheet arrangements.

New Accounting Pronouncements

See Note 2 to the consolidated financial statements herein.

Non-GAAP Financial Measures

FFO: We calculate FFO in accordance with the standards established by NAREIT. FFO represents net income (loss) attributable to common stockholders (computed in accordance with GAAP), excluding real estate-related depreciation and amortization, impairment charges and net (gains) losses from property dispositions. We use FFO as a supplemental performance measure because we believe that FFO is beneficial to investors as a starting point in measuring our operational performance. Specifically, in excluding real estate-related depreciation and amortization, impairment charges

52


 

and net (gains) losses from property dispositions, which do not relate to or are not indicative of operating performance, FFO 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 equity REITs, FFO will be used by investors as a basis to compare our operating performance with that of other equity REITs. However, because FFO excludes depreciation and amortization and does not capture the changes in the value of our properties that result from use or market conditions, 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.

AFFO: AFFO is a non-GAAP financial measure of operating performance used by many companies in the REIT industry. We adjust FFO to eliminate the impact of certain items that we believe are not indicative of our core operating performance, such as debt extinguishment gains (losses), costs associated with termination of interest rate swaps, costs related to the COVID-19 pandemic and certain non-cash items. These certain non-cash items include non-cash revenues (comprised of straight-line rents net of bad debt expense and amortization of lease and loan receivable intangibles), non-cash interest expense (comprised of amortization of deferred financing costs and debt discounts/premiums) and non-cash compensation expense. Other equity REITs may not calculate FFO and AFFO as we do, and, accordingly, our FFO and AFFO may not be comparable to such other equity REITs’ FFO and AFFO. FFO and AFFO do not represent cash generated from operating activities determined in accordance with GAAP, are not necessarily indicative of cash available to fund cash needs and should only be considered a supplement, and not an alternative, to net income (loss) attributable to common stockholders (computed in accordance with GAAP) as a performance measure.

Adjusted Debt: Adjusted Debt represents interest bearing debt (reported in accordance with GAAP) adjusted to exclude unamortized debt discount/premium and deferred financing costs and reduced by cash and cash equivalents and cash reserves on deposit with lenders as additional security. The result provides an estimate of the contractual amount of borrowed capital to be repaid, net of cash available to repay it. We believe this calculation constitutes a beneficial supplemental non-GAAP financial disclosure to investors in understanding our financial condition.

EBITDAre: EBITDAre is computed in accordance with standards established by NAREIT. EBITDAre is computed as net income (loss) (computed in accordance with GAAP), plus interest expense, income tax expense (if any), depreciation and amortization, impairments of depreciated property and plus/(minus) losses/(gains) on the disposition of depreciated property.

Adjusted EBITDAre: Adjusted EBITDAre represents EBITDAre as adjusted for revenue producing acquisitions and dispositions for the quarter as if such acquisitions and dispositions had occurred as of the beginning of the quarter and for certain items that we believe are not indicative of our core operating performance, such as debt extinguishment gains (losses) and costs related to the COVID-19 pandemic. We believe that excluding these items, which are not key drivers of our investment decisions and may cause short-term fluctuations in net income, provides a useful supplemental measure to investors and analysts in assessing the net earnings contribution of our real estate portfolio. Because these measures do not represent net income (loss) that is computed in accordance with GAAP, they should only be considered a supplement, and not an alternative, to net income (loss) (computed in accordance with GAAP) as a performance measure.

Annualized Adjusted EBITDAre: Annualized Adjusted EBITDAre is calculated as Adjusted EBITDAre for the quarter, adjusted for items where annualization would not be appropriate, multiplied by four. Our computation of Adjusted EBITDAre and Annualized Adjusted EBITDAre may differ from the methodology used by other equity REITs to calculate these measures and, therefore, may not be comparable to such other REITs.

Adjusted Debt to Annualized Adjusted EBITDAre: Adjusted Debt to Annualized Adjusted EBITDAre is a supplemental non-GAAP financial measure we use to evaluate the level of borrowed capital being used to increase the potential return of our real estate investments, and a proxy for a measure we believe is used by many lenders and ratings agencies to evaluate our ability to repay and service our debt obligations over time. We believe the ratio is a beneficial disclosure to investors as a supplemental means of evaluating our ability to meet obligations senior to those of our equity holders. Our computation of this ratio may differ from the methodology used by other equity REITs, and, therefore, may not be comparable to such other REITs.

53


 

FFO and AFFO

 

 

Three Months Ended

June 30,

 

 

Six Months Ended

June 30,

 

(Dollars in thousands)

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Net (loss) income attributable to common stockholders

 

$

(3,001

)

 

$

43,149

 

 

$

(21,436

)

 

$

84,139

 

Portfolio depreciation and amortization

 

 

53,014

 

 

 

41,200

 

 

 

105,105

 

 

 

82,407

 

Portfolio impairments

 

 

21,049

 

 

 

3,607

 

 

 

61,823

 

 

 

7,299

 

Gain on disposition of assets

 

 

(658

)

 

 

(29,776

)

 

 

(1,046

)

 

 

(38,506

)

FFO attributable to common stockholders

 

$

70,404

 

 

$

58,180

 

 

$

144,446

 

 

$

135,339

 

Loss on debt extinguishment

 

 

 

 

 

14,676

 

 

 

 

 

 

5,893

 

Deal pursuit costs

 

 

14

 

 

 

173

 

 

 

1,033

 

 

 

244

 

Non-cash interest expense

 

 

3,400

 

 

 

3,694

 

 

 

6,468

 

 

 

8,431

 

Accrued interest and fees on defaulted loans

 

 

 

 

 

 

 

 

 

 

 

285

 

Straight-line rent, net of related bad debt expense

 

 

(4,392

)

 

 

(4,485

)

 

 

(5,486

)

 

 

(7,392

)

Other amortization and non-cash charges

 

 

133

 

 

 

(270

)

 

 

170

 

 

 

(595

)

Non-cash compensation expense

 

 

3,308

 

 

 

3,883

 

 

 

6,759

 

 

 

7,461

 

Costs related to COVID-19(1)

 

 

738

 

 

 

 

 

 

738

 

 

 

 

AFFO attributable to common stockholders (2)

 

$

73,605

 

 

$

75,851

 

 

$

154,128

 

 

$

149,666

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income per share of common stock - Diluted

 

$

(0.03

)

 

$

0.49

 

 

$

(0.21

)

 

$

0.96

 

FFO per share of common stock - Diluted (3)

 

$

0.68

 

 

$

0.66

 

 

$

1.39

 

 

$

1.55

 

AFFO per share of common stock - Diluted (3)

 

$

0.71

 

 

$

0.86

 

 

$

1.49

 

 

$

1.72

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares of common stock outstanding - Diluted

 

 

102,678,967

 

 

 

87,890,699

 

 

 

102,454,557

 

 

 

86,779,297

 

Weighted average shares of common stock outstanding for non-GAAP measures - Diluted (3)

 

 

102,762,592

 

 

 

87,890,699

 

 

 

103,292,730

 

 

 

86,779,297

 

 

(1)

Costs related to COVID-19 are included in general and administrative expense and primarily relate to legal fees for executing rent deferral or abatement agreements.

(2)

AFFO for the three and six months ended June 30, 2020 includes $22.3 million of deferred rental income recognized in conjunction with the FASB’s relief for deferral agreements extended as a result of the COVID-19 pandemic.

(3)

Weighted average shares of common stock for non-GAAP measures includes unvested market-based awards for the three and six months ended June 30, 2020 and unsettled forward equity contracts for the six months ended June 30, 2020, which are dilutive for the non-GAAP calculations. Dividends paid and undistributed earnings allocated, if any, to unvested restricted stockholders are deducted from FFO and AFFO for the computation of the per share amounts. The following amounts were deducted:

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

2020

 

2019

 

2020

 

2019

FFO

 

$0.2 million

 

$0.2 million

 

$0.4 million

 

$0.6 million

AFFO

 

$0.2 million

 

$0.3 million

 

$0.5 million

 

$0.7 million

54


 

Adjusted Debt, Adjusted EBITDAre and Annualized Adjusted EBITDAre

 

 

June 30,

 

(Dollars in thousands)

 

2020

 

 

2019

 

Revolving credit facilities

 

$

 

 

$

 

Term loans

 

 

397,824

 

 

 

814,336

 

Senior Unsecured Notes, net

 

 

1,484,884

 

 

 

691,940

 

Mortgages and notes payable, net

 

 

214,338

 

 

 

286,312

 

Convertible Notes, net

 

 

339,462

 

 

 

333,427

 

Total debt, net

 

 

2,436,508

 

 

 

2,126,015

 

Unamortized debt discount, net

 

 

6,804

 

 

 

10,411

 

Unamortized deferred financing costs

 

 

18,004

 

 

 

17,681

 

Cash and cash equivalents

 

 

(97,190

)

 

 

(9,984

)

Restricted cash balances held for the benefit of lenders

 

 

(12,195

)

 

 

(11,005

)

Adjusted Debt

 

$

2,351,931

 

 

$

2,133,118

 

 

 

 

Three Months Ended June 30,

 

(Dollars in thousands)

 

2020

 

 

2019

 

Net (loss) income

 

$

(413

)

 

$

45,737

 

Interest

 

 

26,095

 

 

 

25,176

 

Depreciation and amortization

 

 

53,160

 

 

 

41,342

 

Income tax expense

 

 

68

 

 

 

320

 

Gain on disposition of assets

 

 

(658

)

 

 

(29,776

)

Portfolio impairments

 

 

21,049

 

 

 

3,607

 

EBITDAre

 

$

99,301

 

 

$

86,406

 

Adjustments to revenue producing acquisitions and dispositions

 

 

85

 

 

 

4,537

 

Deal pursuit costs

 

 

14

 

 

 

173

 

Loss on debt extinguishment

 

 

 

 

 

14,676

 

Costs related to COVID-19(1)

 

 

738

 

 

 

 

Adjusted EBITDAre

 

$

100,138

 

 

$

105,792

 

Adjustments related to straight-line rent (2)

 

 

1,112

 

 

 

(659

)

Other adjustments for Annualized EBITDAre (3)

 

 

1,493

 

 

 

(947

)

Annualized Adjusted EBITDAre

 

$

410,972

 

 

$

416,744

 

Adjusted Debt / Annualized Adjusted EBITDAre (4)

 

 

5.7

x

 

 

5.1

x

(1)

Costs related to COVID-19 are included in general and administrative expense and primarily relate to legal fees for executing rent deferral or abatement agreements.

 

(2)

Adjustment for the three months ended June 30, 2020 relates to $4.0 million of bad debt expense on straight-line rent receivable balances, where only $1.3 million of the expense relates to straight-line rent that would have been recognized during the three months ended June 30, 2020. As such, annualization of the $2.7 million of bad debt expense related to straight-line rental revenue recognized in previous periods would not be appropriate. The $2.7 million adjustment was partially offset by $1.6 million of straight-line rental revenue recognized during the three months ended June 30, 2020 for certain leases accounted for as lease modifications.  

 

   Adjustment for the three months ended June 30, 2019 relates to $0.9 million of bad debt expense on straight-line rent receivable balances, where annualization would only be appropriate for $0.2 million.   

(3)

Adjustments for the three months ended June 30, 2020 are comprised of certain other property costs and general and administrative expenses where annualization would not be appropriate. Adjustments for the three months ended June 30, 2019 are comprised of reserves and other adjustments where annualization would not be appropriate.

 

(4) Adjusted Debt / Annualized Adjusted EBITDAre would be 4.9x if all 9.2 million shares under open forward sales agreements had been settled on June 30, 2020 at the current forward sale price of $35.219 per share.

 

 

 

55


 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to financial market risks, including interest rate risk. Interest rates and other factors, such as occupancy, rental rates and the financial condition of our tenants, influence our performance more so than does inflation. Changes in interest rates do not necessarily correlate with inflation rates or changes in inflation rates. As described above, we generally offer leases that provide for payments of base rent with scheduled increases and, to a lesser extent, contingent rent based on a percentage of the tenant’s gross sales to help mitigate the effect of inflation. Because the properties in our portfolio are generally leased to tenants under triple-net leases, our exposure to rising property operating costs due to inflation is mitigated.

Interest rates are highly sensitive to many factors, including governmental monetary policies and domestic and global economic and political conditions, which are beyond our control. Our operating results depend heavily on the difference between the revenue from our assets and the interest expense incurred on our borrowings. We may incur additional variable rate debt in the future, including amounts that we may borrow under our 2019 Credit Facility. In addition, decreases in interest rates may lead to additional competition for the acquisition of real estate due to a reduction in desirable alternative income-producing investments, which may lead to a decrease in the yields on real estate we have targeted for acquisition. In such circumstances, if we are not able to offset the decrease in yields by obtaining lower interest costs on our borrowings, our results of operations will be adversely affected. Significant increases in interest rates may also have an adverse impact on our earnings if we are unable to acquire real estate with rental rates high enough to offset the increase in interest rates on our borrowings.

In the event interest rates rise significantly or there is an economic downturn, defaults may increase and result in credit losses, which may adversely affect our liquidity and operating results. In a decreasing interest rate environment, borrowers are generally more likely to prepay their loans in order to obtain financing at lower interest rates. However, the vast majority of our mortgage notes payable have prepayment clauses that make refinancing during a decreasing interest rate environment uneconomical. Investments in our mortgage loans receivable also have significant prepayment protection in the form of yield maintenance provisions, which provide us with substantial yield protection in a decreasing interest rate environment with respect to this portion of our investment portfolio.

As of June 30, 2020, our assets were primarily long-term, fixed-rate leases (though most have scheduled rental increases during the terms of the leases). As of June 30, 2020, $2.1 billion of our indebtedness outstanding was fixed-rate, consisting of our Senior Unsecured Notes, mortgages and notes payable and Convertible Notes, with a weighted average stated interest rate of 3.92%, excluding amortization of deferred financing costs and debt discounts/premiums. As of June 30, 2020, $400.0 million of our indebtedness was variable-rate, consisting of our 2020 Term Loans, with a weighted average stated interest rate of 1.69%.

The estimated fair values of our debt instruments have been derived based on market quotes for comparable instruments or discounted cash flow analysis using estimates of the amount and timing of future cash flows, market rates and credit spreads. The debt instrument balances as of June 30, 2020 are as follows (in thousands):

 

 

Carrying

Value

 

 

Estimated

Fair Value

 

2019 Credit Facility

 

$

 

 

$

 

2020 Term Loans, net (1)

 

 

397,824

 

 

 

400,231

 

Senior Unsecured Notes, net (1)

 

 

1,484,884

 

 

 

1,455,070

 

Mortgages and notes payable, net (1)

 

 

214,338

 

 

 

228,768

 

Convertible Notes, net (1)

 

 

339,462

 

 

 

344,597

 

(1)

The carrying value of the debt instruments are net of unamortized deferred financing costs and certain debt discounts/premiums.


56


 

Item 4. Controls and Procedures

SPIRIT REALTY CAPITAL, INC.

Evaluation of Disclosure Controls and Procedures

An evaluation was performed under the supervision and with the participation of Spirit Realty Capital, Inc.'s management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness as of June 30, 2020 of the design and operation of Spirit Realty Capital, Inc.'s disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the design and operation of these disclosure controls and procedures were effective as of the end of the period covered by this quarterly report.

Changes in Internal Control over Financial Reporting

There were no changes to Spirit Realty Capital, Inc.'s internal control over financial reporting (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) that occurred during the quarter ended June 30, 2020 that have materially affected, or are reasonably likely to materially affect, Spirit Realty Capital, Inc.'s internal control over financial reporting.

SPIRIT REALTY, L.P.

Evaluation of Disclosure Controls and Procedures

An evaluation was performed under the supervision and with the participation of Spirit Realty, L.P.'s management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness as of June 30, 2020 of the design and operation of Spirit Realty, L.P.'s disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the design and operation of these disclosure controls and procedures were effective as of the end of the period covered by this quarterly report.

Changes in Internal Control over Financial Reporting

There were no changes to Spirit Realty, L.P.'s internal control over financial reporting (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) that occurred during the quarter ended June 30, 2020 that have materially affected, or are reasonably likely to materially affect, Spirit Realty, L.P.'s internal control over financial reporting.

57


 

PART II — OTHER INFORMATION

From time-to-time, we may be subject to certain claims and lawsuits in the ordinary course of business, the outcome of which cannot be determined at this time. We are not currently a party as plaintiff or defendant to any legal proceedings that we believe to be material or that individually or in the aggregate would be expected to have a material effect on our business, financial condition or results of operations if determined adversely to us.

Item 1A. Risk Factors.

There have been no material changes to the risk factors as disclosed in Part I, Item 1A. Risk Factors in our most recent Annual Report on Form 10-K, other than as set forth below, which supplements the above referenced risk factors disclosed in our most recent Annual Report on Form 10-K.

Actual or perceived threats associated with epidemics, pandemics or public health crises, including the ongoing COVID-19 pandemic, could have a material adverse effect on our and our tenants’ businesses, financial condition, results of operations, cash flow, liquidity and ability to access the capital markets and satisfy debt service obligations and make distributions to our stockholders.

Epidemics, pandemics or other public health crises, including the ongoing COVID-19 pandemic, that impact economic and market conditions, particularly in markets where our properties are located, and preventative measures taken to alleviate any public health crises, including “shelter-in-place” or “stay-at-home” orders, density limitations or social distancing measures, issued by local, state or federal authorities, may have a material adverse effect on our and our tenants’ businesses, financial condition, results of operations, liquidity and ability to access capital markets and satisfy our debt service obligations and make distributions to our stockholders, and may affect our ability as a net-lease real estate investment trust to acquire properties or lease properties to our tenants, who may be unable, as a result of any economic downturn occasioned by public health crises, to make rental payments when due.

The ongoing COVID-19 pandemic, and restrictions intended to prevent its spread, has already had a significant adverse impact on economic and market conditions around the world in the first half of 2020, including the United States and the markets in which we own properties. Certain of our tenants, especially those in industries considered “non-essential” under varying state and local “shelter-in-place” and “stay-at-home” orders and other restrictions on types of business that may continue to operate, have experienced and continue to experience challenges or even closures as a result of the COVID-19 pandemic, which has had, and we anticipate will continue to have, an impact on their financial condition, results of operations, liquidity, ability to pay rent and creditworthiness. That impact has directly resulted, and may continue to result, in a reduction in our rental income and/or an increase in our property costs and impairments. In addition, that impact has resulted, and may continue to result, in an increase in our general and administrative expenses, as we have incurred and may continue to incur costs to negotiate rent deferrals, lease restructures and/or lease terminations and/or enforce our contractual rights (including through litigation), as we deem appropriate on a case-by-case basis. Although some state governments and other authorities were in varying stages of lifting or modifying some of these measures and some have already been forced to, and others may in the future, reinstitute these measures or impose new, more restrictive measures, if the risks, or the perception of the risks, related to the COVID-19 pandemic worsen at any time. As of the date of this report, our discussions with tenants requesting rent deferrals (and other forms of relief) have been substantially focused on industries that are directly disrupted by the COVID-19 pandemic and restrictions intended to prevent its spread, particularly health and fitness, movie theaters, quick service and casual dining restaurants, entertainment, car washes, dealerships, home décor, home furnishings, department stores and education. These and other industries may be further impacted in the future depending on various factors, including the duration of the COVID-19 pandemic and restrictions intended to prevent its spread, and even after certain of such restrictions are lifted or modified, the willingness of customers to visit our tenants’ businesses may be reduced due to lingering concerns regarding the continued risk of COVID-19 transmission and heightened sensitivity to risks associated with the transmission of other diseases. We are not able to predict the duration of such customer behavior.

As of July 27, 2020, we have collected approximately 75% of second quarter 2020 Base Rent of $117.4 million, deferred or approved deferrals for approximately 19% and abated or approved abatements for approximately 2%. Additionally, for the second half of 2020, we have deferred an additional $9.7 million of rent and abated $1.3 million. The deferral periods range generally from one to six months, with an average deferral period of three months and an average repayment period of 12 months. Of the tenants who we have granted rent deferrals, 20% are public companies, and the weighted average remaining lease term of leases for such tenants is 7.6 years (based on Base Rent). Although we are and will continue to be actively engaged in rent collection efforts related to uncollected rent, as well as working with certain tenants who have requested rent deferrals, we can provide no assurance that such efforts or our efforts in future periods will be successful,

58


 

particularly in the event that the COVID-19 pandemic and restrictions intended to prevent its spread continue for a prolonged period.    

The ongoing COVID-19 pandemic and related restrictions could trigger a period of sustained global and U.S. economic downturn or recession. Moreover, the ongoing COVID-19 pandemic and restrictions intended to prevent its spread could have significant adverse impacts on our business, financial condition, results of operations, cash flows, liquidity and ability to access the capital markets and satisfy our debt service obligations and make distributions to our stockholders in a variety of ways that are difficult to predict. Such adverse impacts could depend on, among other factors:

 

the financial condition and viability of our tenants – many of which are in the retail industry – and their ability or willingness to pay rent in full on a timely basis;

 

state, local, federal and industry-initiated efforts that may adversely affect landlords, including us, and their ability to collect rent and/or enforce remedies for the failure to pay rent;

 

our need to restructure leases with our tenants and our ability to do so on favorable terms or at all;

 

our ability to renew leases or re-lease available space in our properties on favorable terms or at all in the event of nonrenewal or in the event we exercise our right to replace an existing tenant, and obligations we may incur in connection with the replacement of an existing tenant, including as a result of a general decrease in demand for our retail space, deterioration in the economic and market conditions in markets where our properties are located or due to restrictions intended to prevent the spread of COVID-19 that frustrate our leasing activities, particularly in light of the adverse impact to the financial health of many of our tenants or potential tenants that has occurred and continues to occur as a result of the COVID-19 pandemic and the significant uncertainty as to when and the conditions under which potential tenants will be able to operate in future;

 

a severe and prolonged disruption and instability in the global financial markets, including the debt and equity capital markets, all of which have already experienced and may continue to experience significant volatility, or deteriorations in credit and financing conditions, as well as the recent significant decline in our share price from prices prior to the spread of the COVID-19 pandemic, may affect our or our tenants’ ability to access capital necessary to fund our respective business operations or retire, replace or renew maturing liabilities on a timely basis, on attractive terms or at all and may adversely affect the valuation of financial assets and liabilities, any of which could affect our and/or our tenants’ ability to meet liquidity and capital expenditure requirements;

 

a refusal or failure of one or more lenders under the 2019 Revolving Credit and Term Loan Agreement to fund their respective financing commitment to us may affect our ability to access capital necessary to fund our business operations and to meet our liquidity and capital expenditure requirements;

 

the broader impact of the severe economic contraction due to the COVID-19 pandemic and restrictions intended to prevent its spread, the resulting increase in unemployment that has occurred and its effect on consumer behavior, and negative consequences that will occur if these trends are not timely reversed;

 

complete or partial shutdowns of one or more of our tenants’ facilities or distribution centers, temporary or long-term disruptions in our tenants’ supply chains from local, national and international suppliers or delays in the delivery of products, services or other materials necessary for our tenants’ operations, which could force our tenants’ to reduce, delay or eliminate offerings of their products and services, reduce or eliminate their revenues and liquidity and/or result in their bankruptcy or insolvency;

 

the further utilization of e-commerce in certain industries as a result of the temporary closure of many retail properties, which may lead to the closure of underperforming properties by retailers;

 

our and our tenants’ ability to manage our respective businesses to the extent our and their management or personnel (including on-site employees) are impacted in significant numbers by the COVID-19 pandemic and are otherwise not willing, available or allowed to conduct work; and

 

our and our tenants’ ability to ensure business continuity in the event our continuity of operations plan is not effective or improperly implemented or deployed during the COVID-19 pandemic.

The rapid development and fluidity of this situation precludes any prediction as to the ultimate adverse impact of the COVID-19 pandemic or restrictions intended to prevent its spread, and we are not able to predict whether other epidemics, pandemics or other public health crises will occur in the future that may have similar impacts. Nevertheless, the ongoing COVID-19 pandemic and restrictions intended to prevent its spread and the current financial, economic and capital markets environment and future developments in these and other areas present material risks and uncertainties with respect to our business, financial condition, results of operations, cash flows, liquidity and ability to access the capital markets and satisfy our debt service obligations and make distributions to our stockholders and could also have a material adverse effect on the market value of our securities. Moreover, to the extent any of these risks and uncertainties adversely impact us in the ways described above or otherwise, they may also have the effect of heightening many of the other risks set forth in this “Risk Factors” section and in the section entitled “Part I, Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2019.

59


 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

None.

Item 5. Other Information.

None.

60


 

Item 6. Exhibits.

 

Exhibit No.

Description

 

 

3.1

Articles of Restatement of Spirit Realty Capital, Inc. filed as Exhibit 3.1 to the Company's Registration Statement on Form S-3 on November 8, 2013 and incorporated herein by reference.

 

 

3.2

Articles of Amendment of Spirit Realty Capital, Inc. filed as Exhibit 3.1 to the Company's Form 8-K on May 13, 2014 and incorporated herein by reference.

 

 

3.3

Articles Supplementary of Spirit Realty Capital, Inc. filed as Exhibit 3.1 to the Company's Current Report on Form 8-K on March 3, 2017 and incorporated herein by reference.

 

 

3.4

Fifth Amended and Restated Bylaws of Spirit Realty Capital, Inc. filed as Exhibit 3.1 to the Company’s Form 8-K on August 15, 2017 and incorporated herein by reference.

 

 

3.5

Second Amended and Restated Agreement of Limited Partnership of Spirit Realty, L.P. filed as Exhibit 3.1 to the Operating Partnership's Form 8-K on October 3, 2017 and incorporated herein by reference.

 

 

3.6

Articles Supplementary designating Spirit Realty Capital, Inc.'s 6.000% Series A Cumulative Redeemable Preferred Stock filed as Exhibit 3.4 to the Company's Registration Statement on Form 8-A on October 2, 2017 and incorporated herein by reference.

 

 

3.7

Certificate of Limited Partnership of Spirit Realty, L.P. dated September 25, 2012, filed as Exhibit 4.5 to the Company's Form S-4 on March 20, 2017 and incorporated herein by reference.

 

 

3.8

Articles of Amendment of Spirit Realty Capital, Inc. filed as Exhibit 3.1 to the Company's Form 8-K on April 29, 2019 and incorporated herein by reference.

 

 

10.1

Term Loan Agreement among Spirit Realty, L.P., JPMorgan Chase Bank, N.A., as administrative agent and the financial institutions party thereto as lenders from time to time, dated April 2, 2020, filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K on April 7, 2020 and incorporated herein by reference.

 

 

10.2

Guaranty between Spirit Realty Capital, Inc. and JPMorgan Chase Bank, N.A, and acknowledged by Spirit Realty, L.P., dated April 2, 2020, filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K on April 7, 2020 and incorporated herein by reference.

 

 

10.3*

Amendment No. 1 to Term Loan Agreement among Spirit Realty, L.P., JPMorgan Chase Bank, N.A., as administrative agent and the financial institutions party thereto as lenders from time to time, dated May 5, 2020.

 

 

10.4*

Amendment No. 2 to Term Loan Agreement among Spirit Realty, L.P., JPMorgan Chase Bank, N.A., as administrative agent and the financial institutions party thereto as lenders from time to time, dated May 5, 2020.

 

 

10.5*

Amendment No. 3 to Term Loan Agreement among Spirit Realty, L.P., JPMorgan Chase Bank, N.A., as administrative agent and the financial institutions party thereto as lenders from time to time, dated May 5, 2020.

 

 

31.1*

Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) under the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for Spirit Realty Capital, Inc.

 

 

31.2*

Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) under the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for Spirit Realty Capital, Inc.

 

 

31.3*

Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) under the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for Spirit Realty, L.P.

 

 

31.4*

Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) under the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for Spirit Realty, L.P.

 

 

32.1*

Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for Spirit Realty Capital, Inc.

 

 

32.2*

Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for Spirit Realty, L.P.

 

 

101.INS*

Inline XBRL Instance Document – The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.

 

 

101.SCH*

Inline XBRL Taxonomy Extension Schema

61


 

Exhibit No.

Description

 

 

101.CAL*

Inline XBRL Taxonomy Extension Calculation Linkbase

 

 

101.DEF*

Inline XBRL Taxonomy Extension Definition Linkbase

 

 

101.LAB*

Inline XBRL Taxonomy Extension Label Linkbase

 

 

101.PRE*

Inline XBRL Taxonomy Extension Presentation Linkbase

 

 

104.1*

Cover Page Interactive Data File - The cover page interactive data file does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.

 

 

*

Filed herewith.

 

62


 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrants have duly caused this report to be signed on their behalf by the undersigned thereunto duly authorized.

 

 

SPIRIT REALTY CAPITAL, INC.

 

(Registrant)

 

 

 

 

 

By:

 

/s/ Prakash J. Parag

 

Name:

 

Prakash J. Parag

 

Title:

 

Senior Vice President and Chief Accounting Officer

 

 

 

(Principal Accounting Officer)

 

 

SPIRIT REALTY, L.P.

 

(Registrant)

 

 

 

 

 

By:

 

Spirit Realty Capital, Inc. in its capacity as sole member of Spirit General OP Holdings, LLC, as general partner and behalf of Spirit Realty, L.P.

 

 

 

 

 

 

 

/s/ Prakash J. Parag

 

 

 

Prakash J. Parag

 

 

 

Senior Vice President and Chief Accounting Officer

 

 

 

(Principal Accounting Officer)

 

Date: July 31, 2020

63

src-ex103_152.htm

Exhibit 10.3

AMENDMENT NO. 1 TO TERM LOAN AGREEMENT

This AMENDMENT NO. 1 TO TERM LOAN AGREEMENT, dated as of April 10, 2020 (this “Amendment No. 1”), is by and among SPIRIT REALTY, L.P., a Delaware limited partnership (the “Borrower”), JPMORGAN CHASE BANK, N.A., as administrative agent for the Lenders (as defined below) (the “Administrative Agent”), the Lenders party hereto, and REGIONS BANK (the “New Term Lender”), with Regions Bank also serving as an additional Syndication Agent and Regions Capital Markets serving as an additional Joint Lead Arranger under the Credit Agreement described below.  Reference is made to that certain Term Loan Agreement, dated as of April 2, 2020 (as amended, restated, amended and restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), among the Borrower, the several banks, financial institutions and other entities from time to time party thereto (collectively, the “Lenders”), and the Administrative Agent.  Capitalized terms used herein without definition shall have the same meanings as set forth in the Credit Agreement, as amended hereby.

RECITALS

WHEREAS, pursuant to Section 2.12 of the Credit Agreement, the Borrower has requested, and the New Term Lender has agreed, to establish an Incremental Commitment under the Credit Agreement;

NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, the parties hereto agree as follows:

SECTION 1.  AMENDMENT TO CREDIT Agreement.  As of the Amendment Effective Date (as defined in Section 3 hereof), the Credit Agreement is hereby amended as follows:

Section 1.01.  Incremental Commitment.  As of the Amendment Effective Date, the New Term Lender shall have an Incremental Commitment in the amount set forth opposite its name in Schedule 1 attached hereto.  

Section 1.02.  Making of the New Term Loan.  On the Amendment Effective Date, and so long as the conditions set forth in Section 2.12 of the Credit Agreement are satisfied, the New Term Lender shall make a New Term Loan to the Borrower pursuant to Section 2.12 of the Credit Agreement in the amount equal to its Incremental Commitment.  Such New Term Loans shall have the same terms and provisions (including, without limitation, the same Maturity Date) and shall be considered the same tranche as and pari passu with the existing Loans under the Credit Agreement.  From and after the Amendment Effective Date, each reference to the Loans in the Credit Agreement shall be deemed to include the New Term Loan made by the New Term Lender.

Section 1.03.  New Term Lender.  From and after the Amendment Effective Date, the New Term Lender shall be deemed to be a Lender for all purposes of the Credit Agreement, and each reference to the Lenders in the Credit Agreement shall be deemed to include the New Term Lender.  Without limiting the generality of the foregoing, the New Term Lender confirms its appointment of JPMorgan Chase Bank, N.A., as the Administrative Agent in accordance with Article XII of the Credit Agreement.

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Section 1.04.  Representations, Warranties and Agreements of New Term Lender.  The New Term Lender (a) represents and warrants that (i) it has full power and authority, and has taken all action necessary, to execute and deliver this Amendment No. 1 and to consummate the transactions contemplated hereby and to become a Lender under the Credit Agreement, (ii) it satisfies the requirements, if any, specified in the Credit Agreement and under applicable law that are required to be satisfied by it in order to become a Lender, (iii) from and after the Amendment Effective Date, it shall be bound by the provisions of the Credit Agreement as a Lender thereunder and, to the extent of its Incremental Commitment and New Term Loans, shall have the obligations of a Lender thereunder, (iv) it has received a copy of the Credit Agreement, and has received or has been accorded the opportunity to receive copies of the most recent financial statements delivered pursuant to Section 6.1 of the Credit Agreement, and such other documents and information as it deems appropriate to make its own credit analysis and decision to enter into this Amendment No. 1, and (v) it has, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Amendment No. 1; and (b) agrees that (i) it will, independently and without reliance upon the Administrative Agent or any other Lender and their Related Parties, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Loan Documents, and (ii) it will perform in accordance with their terms all of the obligations which by the terms of the Loan Documents are required to be performed by it as a Lender.

Section 1.05.  Request under Section 2.12 of Credit Agreement.  This Amendment No. 1 is and shall be deemed to be for all purposes of the Credit Agreement the first and partial exercise by the Borrower of its rights under Section 2.12 of the Credit Agreement to request Incremental Commitments.  From and after the Amendment Effective Date (and after giving effect to the New Term Loans), $100,000,000 of the Incremental Commitments shall remain available to be requested by the Borrower pursuant to Section 2.12 of the Credit Agreement.

Section 1.06.  Amended and Restated Schedule 7.1(z).  Schedule 7.1(z) to the Credit Agreement is hereby amended and restated as attached hereto as Exhibit A.

SECTION 2.  REPRESENTATIONS AND WARRANTIES OF THE BORROWER

In order to induce the New Term Lender and Administrative Agent to enter into this Amendment No. 1, the Borrower represents and warrants to the New Term Lender and the Administrative Agent as follows:

(i)The Borrower has the right and power, and has taken, and has caused Spirit REIT to take, all necessary action to authorize it to borrow the New Term Loans hereunder.  The Borrower and each other Loan Party has the right and power, and has taken all necessary action to authorize it, to execute, deliver and perform its obligations under each of this Amendment No. 1, the Credit Agreement, as amended by this Amendment No. 1 (the “Amended Credit Agreement”) and the Note described in Section 3D below (collectively, the “Amendment Documents”) to which it is a party in accordance with its terms and to consummate the transactions contemplated hereby and thereby.  The Amendment Documents to which the Borrower or any other Loan Party is a party have been duly executed and delivered by the duly authorized officers of such Person and

 

2

DB1/ 113349710.6

 

 


 

each is a legal, valid and binding obligation of such Person enforceable against such Person in accordance with its terms, except as the same may be limited by bankruptcy, insolvency and other similar laws affecting the rights of creditors generally and the availability of equitable remedies for the enforcement of certain obligations contained herein or therein and as may be limited by equitable principles generally;

(ii)The execution, delivery and performance of this Amendment No. 1 and the other Amendment Documents to which any Loan Party is a party in accordance with their respective terms and the borrowings of the New Term Loans hereunder do not and will not, by the passage of time, the giving of notice, or both:  (i) require any Governmental Approval or violate any Applicable Law (including all Environmental Laws) relating to the Borrower or any other Loan Party; (ii) conflict with, result in a breach of or constitute a default under (A) the organizational documents of any Loan Party or (B) any indenture, agreement or other instrument to which the Borrower or any other Loan Party is a party or by which it or any of its respective properties may be bound, except under this clause (B) as could not reasonably be expected to have a Material Adverse Effect; or (iii) result in or require the creation or imposition of any Lien upon or with respect to any property now owned or hereafter acquired by any Loan Party other than in favor of the Administrative Agent for its benefit and the benefit of the other Lender Parties;

(iii)Each of the representations and warranties made by the Borrower in or pursuant to the Loan Documents are true and correct in all material respects (or, in the case of any representation and warranty that is qualified as to “materiality,” “Material Adverse Effect” or similar language, true and correct (after giving effect to any qualification therein) in all respects) on and as of the Amendment Effective Date as if made on and as of such date except for representations and warranties expressly stated to relate to a specific earlier date, in which case such representations and warranties were true and correct in all material respects (or, in the case of any representation and warranty that is qualified as to “materiality,” “Material Adverse Effect” or similar language, true and correct (after giving effect to any qualification therein) in all respects) as of such earlier date; and

(iv)No Default or Event of Default has occurred and is continuing on the Amendment Effective Date and after giving effect to this Amendment No. 1.

SECTION 3.  CONDITIONS TO EFFECTIVENESS

This Amendment No. 1 shall become effective as of the date hereof (the “Amendment Effective Date”), subject to the satisfaction (or waiver by the Administrative Agent and the New Term Lender) of the following conditions precedent:

A.  the Borrower, the Administrative Agent, the Requisite Lenders, and the New Term Lender shall have indicated their consent hereto by the execution and delivery of the signature pages hereof to the Administrative Agent, and, in the case of Spirit REIT, by the execution and delivery to the Administrative Agent of the signature page to the Reaffirmation of Guaranty attached to this Amendment No. 1;

B.  the Administrative Agent shall have received a certificate of a Responsible Officer of the Borrower and Spirit REIT (i) either confirming that there have been no changes to

 

3

DB1/ 113349710.6

 

 


 

their organizational documents since April 2, 2020, or if there have been changes to their organizational documents since such date, certifying as to such changes, and (ii) certifying as to authorization, good standing and incumbency of officers with respect to this Amendment No. 1 and the transactions contemplated hereby;

C.  the Administrative Agent shall have received all reasonable, documented out-of-pocket costs and expenses incurred in connection with this Amendment No. 1 for which the Borrower is responsible pursuant to Section 13.2 of the Credit Agreement and for which invoices have been presented at least one Business Day prior to the Amendment Effective Date (including the reasonable fees and expenses of legal counsel to the Administrative Agent for which the Borrower agrees it is responsible pursuant to Section 13.2 of the Credit Agreement);

D.  execution and delivery to the Administrative Agent of a Note made by the Borrower in favor of the New Term Lender in an amount equal to its Incremental Commitment hereunder;

E.  delivery to the Administrative Agent by each of Latham & Watkins LLP and Ballard Spahr LLP, as counsel to the Borrower, of an opinion addressed to the New Term Lender and the Administrative Agent in form and substance reasonably satisfactory to the Administrative Agent;

F.  payment by the Borrower of any agreed upon compensation to the New Term Lender and the Administrative Agent due and payable on the Amendment Effective Date in respect of the Incremental Commitment;

G.  each of the representations and warranties made by the Borrower in or pursuant to the Loan Documents are true and correct in all material respects (or, in the case of any representation and warranty that is qualified as to “materiality,” “Material Adverse Effect” or similar language, true and correct (after giving effect to any qualification therein) in all respects) on and as of the Amendment Effective Date as if made on and as of such date except for representations and warranties expressly stated to relate to a specific earlier date, in which case such representations and warranties were true and correct in all material respects (or, in the case of any representation and warranty that is qualified as to “materiality,” “Material Adverse Effect” or similar language, true and correct (after giving effect to any qualification therein) in all respects) as of such earlier date;

H.  (i) no Default or Event of Default has occurred and is continuing on the Amendment Effective Date or after giving effect thereto and (ii) the Borrower would be in compliance with each financial covenant set forth in Section 10.1 of the Credit Agreement if the ratio or amount referred to therein were to be calculated as of the most recent test period as to which a compliance certificate has been delivered pursuant to Section 9.3 of the Credit Agreement after giving pro forma effect to the incurrence of Indebtedness under the New Term Loans on the Amendment Effective Date, and the use of proceeds thereof; and

I.  the Administrative Agent shall have received a certificate of a Responsible Officer of the Borrower certifying that the conditions contained in Section 2.12(a) and (b) of the Credit Agreement have been satisfied.

 

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SECTION 4.  MISCELLANEOUS

A.  Reference to and Effect on the Credit Agreement and the Other Loan Documents.

(i)On and after the effective date of this Amendment No. 1, each reference in the Credit Agreement to “this Agreement”, “hereunder”, “hereof”, “herein” or words of like import referring to the Credit Agreement and each reference in the other Loan Documents to the “Credit Agreement”, “thereunder”, “thereof” or words of like import referring to the Credit Agreement shall mean and be a reference to the Amended Credit Agreement.  This Amendment No. 1 shall be deemed to be a “Loan Document” under the Credit Agreement.

(ii)Except as specifically amended by this Amendment No. 1, the Credit Agreement and the other Loan Documents shall remain in full force and effect and are hereby ratified and confirmed.  

(iii)The execution, delivery and performance of this Amendment No. 1 shall not, except as expressly provided herein, constitute a waiver of any provision of, or operate as a waiver of any right, power or remedy of the Administrative Agent or any Lender Party under the Credit Agreement or any of the other Loan Documents.

B.  Headings.  Section and subsection headings in this Amendment No. 1 are included herein for convenience of reference only and shall not constitute a part of this Amendment No. 1 for any other purpose or be given any substantive effect.

C.  Applicable Law.  THIS AMENDMENT NO. 1 AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

D.  Counterparts; Effectiveness.  This Amendment No. 1 may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument; signature pages may be detached from multiple separate counterparts and attached to a single counterpart so that all signature pages are physically attached to the same document.  Delivery of an executed counterpart of a signature page to this Amendment No. 1 by telecopy or other electronic means in accordance with Section 13.18 of the Credit Agreement shall be effective as delivery of a manually executed counterpart of this Amendment No. 1.

E.  Jurisdictions; Immunities.  The provisions of Section 13.4 of the Credit Agreement shall apply to this Amendment No. 1 and are hereby incorporated by reference.

[Signature Pages Follow]

 

5

DB1/ 113349710.6

 

 


 

IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 1 to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first written above.

SPIRIT REALTY, L.P.,

a Delaware limited partnership

 

By:Spirit General OP Holdings, LLC,

 

a Delaware limited liability company, its general partner

 

 

By:

Name:

Title:

 

 

 

[Signature Page to Amendment No. 1 to Term Loan Agreement]

DB1/ 113349710.6

 

 


 

JPMORGAN CHASE BANK, N.A., as Administrative Agent and as a Lender

 

 

By: ______________________________

Name:

Title:

 

[Signature Page to Amendment No. 1 to Term Loan Agreement]

DB1/ 113349710.6

 

 


 

REGIONS BANK, as the New Term Lender

 

By: ______________________________

Name:

Title:  

 

 

[Signature Page to Amendment No. 1 to Term Loan Agreement]

DB1/ 113349710.6

 

 


 

TRUIST BANK, as a Lender

 

By: ______________________________

Name:

Title:  

 


[Signature Page to Amendment No. 1 to Term Loan Agreement]

DB1/ 113349710.6

 

 


 

Reaffirmation of Guaranty

 

 

The undersigned Guarantor hereby (a) acknowledges the foregoing Amendment No. 1, (b) reaffirms its guaranty of the Guarantied Obligations (as defined in the Guaranty, dated as of April 2, 2020 (the “Guaranty”), executed and delivered by such Guarantor) under or in connection with the Credit Agreement, as modified by the foregoing Amendment No. 1, in accordance with the Guaranty, and (c) confirms that its Guaranty shall remain in full force and effect after giving effect to the foregoing Amendment No. 1.

 

 

 

 

SPIRIT REALTY CAPITAL, INC.

 

 

By:  _______________________

Name:  

Title:  

 

 

 

 

 

 

DB1/ 113349710.6

 

 


 

Schedule 1

 

Incremental Commitment

 

 

New Term LenderCommitment Amount

 

Regions Bank$100,000,000.00

 

Total$100,000,000.00

 

 

DB1/ 113349710.6

 

 


 

SCHEDULE 7.1(z)

MATERIAL CONTRACTS

 

 

 

1.

Indenture, dated as of May 20, 2014, by Spirit REIT in favor of Wilmington Trust, National Association (“2014 Notes Trustee”), as supplemented by that certain second supplemental indenture, dated as of May 20, 2014, by Spirit REIT in favor of the 2014 Notes Trustee related to 3.75% Convertible Senior Notes due 2021.

 

2.

Indenture, dated as of August 18, 2016, by the Borrower in favor of U.S. Bank National Association (“2016 Notes Trustee”), as supplemented by (i) that certain first supplemental indenture, dated as of August 18, 2016, by the Borrower and Spirit REIT, in its capacity as guarantor, in favor of the 2016 Notes Trustee related to 4.450% Notes due 2026, (ii) that certain second supplemental indenture, dated as of June 27, 2019, by the Borrower and Spirit REIT, in its capacity as guarantor, in favor of the 2016 Notes Trustee related to 4.000% Notes due 2029, (iii) that certain third supplemental indenture, dated as of September 16, 2019, by the Borrower and Spirit REIT, in its capacity as guarantor, in favor of the 2016 Notes Trustee related to 3.200% Notes due 2027 and (iv) that certain fourth supplemental indenture, dated as of September 16, 2019, by the Borrower and Spirit REIT, in its capacity as guarantor, in favor of the 2016 Notes Trustee related to 3.400% Notes due 2030.

 

3.

Revolving Credit and Term Loan Agreement, dated as of January 14, 2019, by and among the Borrower, JPMorgan Chase Bank, N.A., as administrative agent, and the lenders and other parties party thereto, and the Loan Documents entered into pursuant thereto.

 

 

 

DB1/ 113349710.6

 

 

src-ex104_150.htm

Exhibit 10.4

AMENDMENT NO. 2 TO TERM LOAN AGREEMENT

This AMENDMENT NO. 2 TO TERM LOAN AGREEMENT, dated as of May 5, 2020 (this “Amendment No. 2”), is by and among SPIRIT REALTY, L.P., a Delaware limited partnership (the “Borrower”), JPMORGAN CHASE BANK, N.A., as administrative agent for the Lenders (as defined below) (the “Administrative Agent”), and FIFTH THIRD BANK, NATIONAL ASSOCIATION (the “New Term Lender”).  Reference is made to that certain Term Loan Agreement, dated as of April 2, 2020, as amended by Amendment No. 1 to Term Loan Agreement dated as of April 10, 2020 (as so amended, and as further amended, restated, amended and restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), among the Borrower, the several banks, financial institutions and other entities from time to time party thereto (collectively, the “Lenders”), and the Administrative Agent.  Capitalized terms used herein without definition shall have the same meanings as set forth in the Credit Agreement, as amended hereby.

RECITALS

WHEREAS, pursuant to Section 2.12 of the Credit Agreement, the Borrower has requested, and the New Term Lender has agreed, to establish an Incremental Commitment under the Credit Agreement;

NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, the parties hereto agree as follows:

SECTION 1.  AMENDMENT TO CREDIT Agreement.  As of the Amendment Effective Date (as defined in Section 3 hereof), the Credit Agreement is hereby amended as follows:

Section 1.01.  Incremental Commitment.  As of the Amendment Effective Date, the New Term Lender shall have an Incremental Commitment in the amount set forth opposite its name in Schedule 1 attached hereto.

Section 1.02.  Making of the New Term Loan.  On the Amendment Effective Date, and so long as the conditions set forth in Section 2.12 of the Credit Agreement are satisfied, the New Term Lender shall make a New Term Loan to the Borrower pursuant to Section 2.12 of the Credit Agreement in the amount equal to its Incremental Commitment.  Such New Term Loans shall have the same terms and provisions (including, without limitation, the same Maturity Date) and shall be considered the same tranche as and pari passu with the existing Loans under the Credit Agreement.  From and after the Amendment Effective Date, each reference to the Loans in the Credit Agreement shall be deemed to include the New Term Loan made by the New Term Lender.

Section 1.03.  New Term Lender.  From and after the Amendment Effective Date, the New Term Lender shall be deemed to be a Lender for all purposes of the Credit Agreement, and each reference to the Lenders in the Credit Agreement shall be deemed to include the New Term Lender.  Without limiting the generality of the foregoing, the New Term Lender confirms its appointment of JPMorgan Chase Bank, N.A., as the Administrative Agent in accordance with Article XII of the Credit Agreement.

DB1/ 113500392.4

 

 


 

Section 1.04.  Representations, Warranties and Agreements of New Term Lender.  The New Term Lender (a) represents and warrants that (i) it has full power and authority, and has taken all action necessary, to execute and deliver this Amendment No. 2 and to consummate the transactions contemplated hereby and to become a Lender under the Credit Agreement, (ii) it satisfies the requirements, if any, specified in the Credit Agreement and under applicable law that are required to be satisfied by it in order to become a Lender, (iii) from and after the Amendment Effective Date, it shall be bound by the provisions of the Credit Agreement as a Lender thereunder and, to the extent of its Incremental Commitment and New Term Loans, shall have the obligations of a Lender thereunder, (iv) it has received a copy of the Credit Agreement, and has received or has been accorded the opportunity to receive copies of the most recent financial statements delivered pursuant to Section 6.1 of the Credit Agreement, and such other documents and information as it deems appropriate to make its own credit analysis and decision to enter into this Amendment No. 2, and (v) it has, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Amendment No. 2; and (b) agrees that (i) it will, independently and without reliance upon the Administrative Agent or any other Lender and their Related Parties, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Loan Documents, and (ii) it will perform in accordance with their terms all of the obligations which by the terms of the Loan Documents are required to be performed by it as a Lender.

Section 1.05.  Request under Section 2.12 of Credit Agreement.  This Amendment No. 2 is and shall be deemed to be for all purposes of the Credit Agreement the second and partial exercise by the Borrower of its rights under Section 2.12 of the Credit Agreement to request Incremental Commitments.  From and after the Amendment Effective Date (and after giving effect to the New Term Loans), $50,000,000 of the Incremental Commitments shall remain available to be requested by the Borrower pursuant to Section 2.12 of the Credit Agreement.

SECTION 2.  REPRESENTATIONS AND WARRANTIES OF THE BORROWER

In order to induce the New Term Lender and Administrative Agent to enter into this Amendment No. 2, the Borrower represents and warrants to the New Term Lender and the Administrative Agent as follows:

(i)The Borrower has the right and power, and has taken, and has caused Spirit REIT to take, all necessary action to authorize it to borrow the New Term Loans hereunder.  The Borrower and each other Loan Party has the right and power, and has taken all necessary action to authorize it, to execute, deliver and perform its obligations under each of this Amendment No. 2, the Credit Agreement, as amended by this Amendment No. 2 (the “Amended Credit Agreement”) and the Note described in Section 3D below (collectively, the “Amendment Documents”) to which it is a party in accordance with its terms and to consummate the transactions contemplated hereby and thereby.  The Amendment Documents to which the Borrower or any other Loan Party is a party have been duly executed and delivered by the duly authorized officers of such Person and each is a legal, valid and binding obligation of such Person enforceable against such Person in accordance with its terms, except as the same may be limited by bankruptcy, insolvency and other similar laws affecting the rights of creditors generally and the availability of equitable remedies

 

2

DB1/ 113500392.4

 

 


 

for the enforcement of certain obligations contained herein or therein and as may be limited by equitable principles generally;

(ii)The execution, delivery and performance of this Amendment No. 2 and the other Amendment Documents to which any Loan Party is a party in accordance with their respective terms and the borrowings of the New Term Loans hereunder do not and will not, by the passage of time, the giving of notice, or both:  (i) require any Governmental Approval or violate any Applicable Law (including all Environmental Laws) relating to the Borrower or any other Loan Party; (ii) conflict with, result in a breach of or constitute a default under (A) the organizational documents of any Loan Party or (B) any indenture, agreement or other instrument to which the Borrower or any other Loan Party is a party or by which it or any of its respective properties may be bound, except under this clause (B) as could not reasonably be expected to have a Material Adverse Effect; or (iii) result in or require the creation or imposition of any Lien upon or with respect to any property now owned or hereafter acquired by any Loan Party other than in favor of the Administrative Agent for its benefit and the benefit of the other Lender Parties;

(iii)Each of the representations and warranties made by the Borrower in or pursuant to the Loan Documents are true and correct in all material respects (or, in the case of any representation and warranty that is qualified as to “materiality,” “Material Adverse Effect” or similar language, true and correct (after giving effect to any qualification therein) in all respects) on and as of the Amendment Effective Date as if made on and as of such date except for representations and warranties expressly stated to relate to a specific earlier date, in which case such representations and warranties were true and correct in all material respects (or, in the case of any representation and warranty that is qualified as to “materiality,” “Material Adverse Effect” or similar language, true and correct (after giving effect to any qualification therein) in all respects) as of such earlier date; and

(iv)No Default or Event of Default has occurred and is continuing on the Amendment Effective Date and after giving effect to this Amendment No. 2.

SECTION 3.  CONDITIONS TO EFFECTIVENESS

This Amendment No. 2 shall become effective as of the date hereof (the “Amendment Effective Date”), subject to the satisfaction (or waiver by the Administrative Agent and the New Term Lender) of the following conditions precedent:

A.  the Borrower, the Administrative Agent, and the New Term Lender shall have indicated their consent hereto by the execution and delivery of the signature pages hereof to the Administrative Agent, and, in the case of Spirit REIT, by the execution and delivery to the Administrative Agent of the signature page to the Reaffirmation of Guaranty attached to this Amendment No. 2;

B.  the Administrative Agent shall have received a certificate of a Responsible Officer of the Borrower and Spirit REIT (i) either confirming that there have been no changes to their organizational documents since April 2, 2020, or if there have been changes to their organizational documents since such date, certifying as to such changes, and (ii) certifying as to

 

3

DB1/ 113500392.4

 

 


 

authorization, good standing and incumbency of officers with respect to this Amendment No. 2 and the transactions contemplated hereby;

C.  the Administrative Agent shall have received all reasonable, documented out-of-pocket costs and expenses incurred in connection with this Amendment No. 2 for which the Borrower is responsible pursuant to Section 13.2 of the Credit Agreement and for which invoices have been presented at least one Business Day prior to the Amendment Effective Date (including the reasonable fees and expenses of legal counsel to the Administrative Agent for which the Borrower agrees it is responsible pursuant to Section 13.2 of the Credit Agreement);

D.  execution and delivery to the Administrative Agent of a Note made by the Borrower in favor of the New Term Lender in an amount equal to its Incremental Commitment hereunder;

E.  delivery to the Administrative Agent by each of Latham & Watkins LLP and Ballard Spahr LLP, as counsel to the Borrower, of an opinion addressed to the New Term Lender and the Administrative Agent in form and substance reasonably satisfactory to the Administrative Agent;

F.  payment by the Borrower of any agreed upon compensation to the New Term Lender and the Administrative Agent due and payable on the Amendment Effective Date in respect of the Incremental Commitment;

G.  each of the representations and warranties made by the Borrower in or pursuant to the Loan Documents are true and correct in all material respects (or, in the case of any representation and warranty that is qualified as to “materiality,” “Material Adverse Effect” or similar language, true and correct (after giving effect to any qualification therein) in all respects) on and as of the Amendment Effective Date as if made on and as of such date except for representations and warranties expressly stated to relate to a specific earlier date, in which case such representations and warranties were true and correct in all material respects (or, in the case of any representation and warranty that is qualified as to “materiality,” “Material Adverse Effect” or similar language, true and correct (after giving effect to any qualification therein) in all respects) as of such earlier date;

H.  (i) no Default or Event of Default has occurred and is continuing on the Amendment Effective Date or after giving effect thereto and (ii) the Borrower would be in compliance with each financial covenant set forth in Section 10.1 of the Credit Agreement if the ratio or amount referred to therein were to be calculated as of the most recent test period as to which a compliance certificate has been delivered pursuant to Section 9.3 of the Credit Agreement after giving pro forma effect to the incurrence of Indebtedness under the New Term Loans on the Amendment Effective Date, and the use of proceeds thereof; and

I.  the Administrative Agent shall have received a certificate of a Responsible Officer of the Borrower certifying that the conditions contained in Section 2.12(a) and (b) of the Credit Agreement have been satisfied.

 

4

DB1/ 113500392.4

 

 


 

SECTION 4.  MISCELLANEOUS

A.  Reference to and Effect on the Credit Agreement and the Other Loan Documents.

(i)On and after the effective date of this Amendment No. 2, each reference in the Credit Agreement to “this Agreement”, “hereunder”, “hereof”, “herein” or words of like import referring to the Credit Agreement and each reference in the other Loan Documents to the “Credit Agreement”, “thereunder”, “thereof” or words of like import referring to the Credit Agreement shall mean and be a reference to the Amended Credit Agreement.  This Amendment No. 2 shall be deemed to be a “Loan Document” under the Credit Agreement.

(ii)Except as specifically amended by this Amendment No. 2, the Credit Agreement and the other Loan Documents shall remain in full force and effect and are hereby ratified and confirmed.  

(iii)The execution, delivery and performance of this Amendment No. 2 shall not, except as expressly provided herein, constitute a waiver of any provision of, or operate as a waiver of any right, power or remedy of the Administrative Agent or any Lender Party under the Credit Agreement or any of the other Loan Documents.

B.  Headings.  Section and subsection headings in this Amendment No. 2 are included herein for convenience of reference only and shall not constitute a part of this Amendment No. 2 for any other purpose or be given any substantive effect.

C.  Applicable Law.  THIS AMENDMENT NO. 2 AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

D.  Counterparts; Effectiveness.  This Amendment No. 2 may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument; signature pages may be detached from multiple separate counterparts and attached to a single counterpart so that all signature pages are physically attached to the same document.  Delivery of an executed counterpart of a signature page to this Amendment No. 2 by telecopy or other electronic means in accordance with Section 13.18 of the Credit Agreement shall be effective as delivery of a manually executed counterpart of this Amendment No. 2.

E.  Jurisdictions; Immunities.  The provisions of Section 13.4 of the Credit Agreement shall apply to this Amendment No. 2 and are hereby incorporated by reference.

[Signature Pages Follow]

 

5

DB1/ 113500392.4

 

 


 

IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 2 to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first written above.

SPIRIT REALTY, L.P.,

a Delaware limited partnership

 

By:Spirit General OP Holdings, LLC,

 

a Delaware limited liability company, its general partner

 

 

By:

Name:

Title:

 

 

 

[Signature Page to Amendment No. 2 to Term Loan Agreement]

DB1/ 113500392

 

 


 

JPMORGAN CHASE BANK, N.A., as Administrative Agent

 

 

By: ______________________________

Name:

Title:

 

[Signature Page to Amendment No. 2 to Term Loan Agreement]

DB1/ 113500392

 

 


 

FIFTH THIRD BANK, NATIONAL ASSOCIATION, as the New Term Lender

 

By: ______________________________

Name:

Title:  

 

 

[Signature Page to Amendment No. 2 to Term Loan Agreement]

DB1/ 113500392

 

 


 

Reaffirmation of Guaranty

 

 

The undersigned Guarantor hereby (a) acknowledges the foregoing Amendment No. 2, (b) reaffirms its guaranty of the Guarantied Obligations (as defined in the Guaranty, dated as of April 2, 2020 (the “Guaranty”), executed and delivered by such Guarantor) under or in connection with the Credit Agreement, as modified by the foregoing Amendment No. 2, in accordance with the Guaranty, and (c) confirms that its Guaranty shall remain in full force and effect after giving effect to the foregoing Amendment No. 2.

 

 

 

 

SPIRIT REALTY CAPITAL, INC.

 

 

By:  _______________________

Name:  

Title:  

 

 

 

 

 

 

[Signature Page to Amendment No. 2 to Term Loan Agreement]

DB1/ 113500392

 

 


 

Schedule 1

 

Incremental Commitment

 

 

New Term LenderCommitment Amount

 

Fifth Third Bank, National Association$50,000,000.00

 

Total$50,000,000.00

 

DB1/ 113500392.4

 

 

src-ex105_151.htm

Exhibit 10.5

 

AMENDMENT NO. 3 TO TERM LOAN AGREEMENT

This AMENDMENT NO. 3 TO TERM LOAN AGREEMENT, dated as of June 5, 2020 (this “Amendment No. 3”), is by and among SPIRIT REALTY, L.P., a Delaware limited partnership (the “Borrower”), JPMORGAN CHASE BANK, N.A., as administrative agent for the Lenders (as defined below) (the “Administrative Agent”), and WELLS FARGO BANK, NATIONAL ASSOCIATION (the “New Term Lender”).  Reference is made to that certain Term Loan Agreement, dated as of April 2, 2020, as amended by Amendment No. 1 to Term Loan Agreement dated as of April 10, 2020 and Amendment No. 2 to the Term Loan Agreement dated as of May 5, 2020 (as so amended, and as further amended, restated, amended and restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), among the Borrower, the several banks, financial institutions and other entities from time to time party thereto (collectively, the “Lenders”), and the Administrative Agent.  Capitalized terms used herein without definition shall have the same meanings as set forth in the Credit Agreement, as amended hereby.

RECITALS

WHEREAS, pursuant to Section 2.12 of the Credit Agreement, the Borrower has requested, and the New Term Lender has agreed, to establish an Incremental Commitment under the Credit Agreement;

NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, the parties hereto agree as follows:

SECTION 1.  AMENDMENT TO CREDIT Agreement.  As of the Amendment Effective Date (as defined in Section 3 hereof), the Credit Agreement is hereby amended as follows:

Section 1.01.  Incremental Commitment.  As of the Amendment Effective Date, the New Term Lender shall have an Incremental Commitment in the amount set forth opposite its name in Schedule 1 attached hereto.

Section 1.02.  Making of the New Term Loan.  On the Amendment Effective Date, and so long as the conditions set forth in Section 2.12 of the Credit Agreement are satisfied, the New Term Lender shall make a New Term Loan to the Borrower pursuant to Section 2.12 of the Credit Agreement in the amount equal to its Incremental Commitment.  Such New Term Loans shall have the same terms and provisions (including, without limitation, the same Maturity Date) and shall be considered the same tranche as and pari passu with the existing Loans under the Credit Agreement.  From and after the Amendment Effective Date, each reference to the Loans in the Credit Agreement shall be deemed to include the New Term Loan made by the New Term Lender.

Section 1.03.  New Term Lender.  From and after the Amendment Effective Date, the New Term Lender shall be deemed to be a Lender for all purposes of the Credit Agreement, and each reference to the Lenders in the Credit Agreement shall be deemed to include the New Term Lender.  Without limiting the generality of the foregoing, the New Term Lender confirms its appointment of JPMorgan Chase Bank, N.A., as the Administrative Agent in accordance with Article XII of the Credit Agreement.

DB1/ 114279694.2

 

 


 

Section 1.04.  Representations, Warranties and Agreements of New Term Lender.  The New Term Lender (a) represents and warrants that (i) it has full power and authority, and has taken all action necessary, to execute and deliver this Amendment No. 3 and to consummate the transactions contemplated hereby and to become a Lender under the Credit Agreement, (ii) it satisfies the requirements, if any, specified in the Credit Agreement and under applicable law that are required to be satisfied by it in order to become a Lender, (iii) from and after the Amendment Effective Date, it shall be bound by the provisions of the Credit Agreement as a Lender thereunder and, to the extent of its Incremental Commitment and New Term Loans, shall have the obligations of a Lender thereunder, (iv) it has received a copy of the Credit Agreement, and has received or has been accorded the opportunity to receive copies of the most recent financial statements delivered pursuant to Section 6.1 of the Credit Agreement, and such other documents and information as it deems appropriate to make its own credit analysis and decision to enter into this Amendment No. 3, and (v) it has, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Amendment No. 3; and (b) agrees that (i) it will, independently and without reliance upon the Administrative Agent or any other Lender and their Related Parties, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Loan Documents, and (ii) it will perform in accordance with their terms all of the obligations which by the terms of the Loan Documents are required to be performed by it as a Lender.

Section 1.05.  Request under Section 2.12 of Credit Agreement.  This Amendment No. 3 is and shall be deemed to be for all purposes of the Credit Agreement the final exercise by the Borrower of its rights under Section 2.12 of the Credit Agreement to request Incremental Commitments.  From and after the Amendment Effective Date (and after giving effect to the New Term Loans), no further Incremental Commitments shall remain available to be requested by the Borrower pursuant to Section 2.12 of the Credit Agreement.

SECTION 2.  REPRESENTATIONS AND WARRANTIES OF THE BORROWER

In order to induce the New Term Lender and Administrative Agent to enter into this Amendment No. 3, the Borrower represents and warrants to the New Term Lender and the Administrative Agent as follows:

(i)The Borrower has the right and power, and has taken, and has caused Spirit REIT to take, all necessary action to authorize it to borrow the New Term Loans hereunder.  The Borrower and each other Loan Party has the right and power, and has taken all necessary action to authorize it, to execute, deliver and perform its obligations under each of this Amendment No. 3, the Credit Agreement, as amended by this Amendment No. 3 (the “Amended Credit Agreement”) and the Note described in Section 3D below (collectively, the “Amendment Documents”) to which it is a party in accordance with its terms and to consummate the transactions contemplated hereby and thereby.  The Amendment Documents to which the Borrower or any other Loan Party is a party have been duly executed and delivered by the duly authorized officers of such Person and each is a legal, valid and binding obligation of such Person enforceable against such Person in accordance with its terms, except as the same may be limited by bankruptcy, insolvency and other similar laws affecting the rights of creditors generally and the availability of equitable remedies

 

2

DB1/ 114279694.2

 

 


 

for the enforcement of certain obligations contained herein or therein and as may be limited by equitable principles generally;

(ii)The execution, delivery and performance of this Amendment No. 3 and the other Amendment Documents to which any Loan Party is a party in accordance with their respective terms and the borrowings of the New Term Loans hereunder do not and will not, by the passage of time, the giving of notice, or both:  (i) require any Governmental Approval or violate any Applicable Law (including all Environmental Laws) relating to the Borrower or any other Loan Party; (ii) conflict with, result in a breach of or constitute a default under (A) the organizational documents of any Loan Party or (B) any indenture, agreement or other instrument to which the Borrower or any other Loan Party is a party or by which it or any of its respective properties may be bound, except under this clause (B) as could not reasonably be expected to have a Material Adverse Effect; or (iii) result in or require the creation or imposition of any Lien upon or with respect to any property now owned or hereafter acquired by any Loan Party other than in favor of the Administrative Agent for its benefit and the benefit of the other Lender Parties;

(iii)Each of the representations and warranties made by the Borrower in or pursuant to the Loan Documents are true and correct in all material respects (or, in the case of any representation and warranty that is qualified as to “materiality,” “Material Adverse Effect” or similar language, true and correct (after giving effect to any qualification therein) in all respects) on and as of the Amendment Effective Date as if made on and as of such date except for representations and warranties expressly stated to relate to a specific earlier date, in which case such representations and warranties were true and correct in all material respects (or, in the case of any representation and warranty that is qualified as to “materiality,” “Material Adverse Effect” or similar language, true and correct (after giving effect to any qualification therein) in all respects) as of such earlier date; and

(iv)No Default or Event of Default has occurred and is continuing on the Amendment Effective Date and after giving effect to this Amendment No. 3.

SECTION 3.  CONDITIONS TO EFFECTIVENESS

This Amendment No. 3 shall become effective as of the date hereof (the “Amendment Effective Date”), subject to the satisfaction (or waiver by the Administrative Agent and the New Term Lender) of the following conditions precedent:

A.  the Borrower, the Administrative Agent, and the New Term Lender shall have indicated their consent hereto by the execution and delivery of the signature pages hereof to the Administrative Agent, and, in the case of Spirit REIT, by the execution and delivery to the Administrative Agent of the signature page to the Reaffirmation of Guaranty attached to this Amendment No. 3;

B.  the Administrative Agent shall have received a certificate of a Responsible Officer of the Borrower and Spirit REIT (i) either confirming that there have been no changes to their organizational documents since April 2, 2020, or if there have been changes to their organizational documents since such date, certifying as to such changes, and (ii) certifying as to

 

3

DB1/ 114279694.2

 

 


 

authorization, good standing and incumbency of officers with respect to this Amendment No. 3 and the transactions contemplated hereby;

C.  the Administrative Agent shall have received all reasonable, documented out-of-pocket costs and expenses incurred in connection with this Amendment No. 3 for which the Borrower is responsible pursuant to Section 13.2 of the Credit Agreement and for which invoices have been presented at least one Business Day prior to the Amendment Effective Date (including the reasonable fees and expenses of legal counsel to the Administrative Agent for which the Borrower agrees it is responsible pursuant to Section 13.2 of the Credit Agreement);

D.  execution and delivery to the Administrative Agent of a Note made by the Borrower in favor of the New Term Lender in an amount equal to its Incremental Commitment hereunder;

E.  delivery to the Administrative Agent by each of Latham & Watkins LLP and Ballard Spahr LLP, as counsel to the Borrower, of an opinion addressed to the New Term Lender and the Administrative Agent in form and substance reasonably satisfactory to the Administrative Agent;

F.  payment by the Borrower of any agreed upon compensation to the New Term Lender and the Administrative Agent due and payable on the Amendment Effective Date in respect of the Incremental Commitment;

G.  each of the representations and warranties made by the Borrower in or pursuant to the Loan Documents are true and correct in all material respects (or, in the case of any representation and warranty that is qualified as to “materiality,” “Material Adverse Effect” or similar language, true and correct (after giving effect to any qualification therein) in all respects) on and as of the Amendment Effective Date as if made on and as of such date except for representations and warranties expressly stated to relate to a specific earlier date, in which case such representations and warranties were true and correct in all material respects (or, in the case of any representation and warranty that is qualified as to “materiality,” “Material Adverse Effect” or similar language, true and correct (after giving effect to any qualification therein) in all respects) as of such earlier date;

H.  (i) no Default or Event of Default has occurred and is continuing on the Amendment Effective Date or after giving effect thereto and (ii) the Borrower would be in compliance with each financial covenant set forth in Section 10.1 of the Credit Agreement if the ratio or amount referred to therein were to be calculated as of the most recent test period as to which a compliance certificate has been delivered pursuant to Section 9.3 of the Credit Agreement after giving pro forma effect to the incurrence of Indebtedness under the New Term Loans on the Amendment Effective Date, and the use of proceeds thereof; and

I.  the Administrative Agent shall have received a certificate of a Responsible Officer of the Borrower certifying that the conditions contained in Section 2.12(a) and (b) of the Credit Agreement have been satisfied.

 

4

DB1/ 114279694.2

 

 


 

SECTION 4.  MISCELLANEOUS

A.  Reference to and Effect on the Credit Agreement and the Other Loan Documents.

(i)On and after the effective date of this Amendment No. 3, each reference in the Credit Agreement to “this Agreement”, “hereunder”, “hereof”, “herein” or words of like import referring to the Credit Agreement and each reference in the other Loan Documents to the “Credit Agreement”, “thereunder”, “thereof” or words of like import referring to the Credit Agreement shall mean and be a reference to the Amended Credit Agreement.  This Amendment No. 3 shall be deemed to be a “Loan Document” under the Credit Agreement.

(ii)Except as specifically amended by this Amendment No. 3, the Credit Agreement and the other Loan Documents shall remain in full force and effect and are hereby ratified and confirmed.  

(iii)The execution, delivery and performance of this Amendment No. 3 shall not, except as expressly provided herein, constitute a waiver of any provision of, or operate as a waiver of any right, power or remedy of the Administrative Agent or any Lender Party under the Credit Agreement or any of the other Loan Documents.

B.  Headings.  Section and subsection headings in this Amendment No. 3 are included herein for convenience of reference only and shall not constitute a part of this Amendment No. 3 for any other purpose or be given any substantive effect.

C.  Applicable Law.  THIS AMENDMENT NO. 3 AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

D.  Counterparts; Effectiveness.  This Amendment No. 3 may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument; signature pages may be detached from multiple separate counterparts and attached to a single counterpart so that all signature pages are physically attached to the same document.  Delivery of an executed counterpart of a signature page to this Amendment No. 3 by telecopy or other electronic means in accordance with Section 13.18 of the Credit Agreement shall be effective as delivery of a manually executed counterpart of this Amendment No. 3.

E.  Jurisdictions; Immunities.  The provisions of Section 13.4 of the Credit Agreement shall apply to this Amendment No. 3 and are hereby incorporated by reference.

[Signature Pages Follow]

 

5

DB1/ 114279694.2

 

 


 

IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 3 to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first written above.

SPIRIT REALTY, L.P.,

a Delaware limited partnership

 

By:Spirit General OP Holdings, LLC,

 

a Delaware limited liability company, its general partner

 

 

By:

Name:

Title:

 

 

 

[Signature Page to Amendment No. 3 to Term Loan Agreement]

DB1/ 114279694.2

 

 


 

JPMORGAN CHASE BANK, N.A., as Administrative Agent

 

 

By: ______________________________

Name:

Title:

 

[Signature Page to Amendment No. 3 to Term Loan Agreement]

DB1/ 114279694.2

 

 


 

WELLS FARGO BANK, NATIONAL ASSOCIATION, as the New Term Lender

 

By: ______________________________

Name:

Title:  

 

 

[Signature Page to Amendment No. 3 to Term Loan Agreement]

DB1/ 114279694.2

 

 


 

Reaffirmation of Guaranty

 

 

The undersigned Guarantor hereby (a) acknowledges the foregoing Amendment No. 3, (b) reaffirms its guaranty of the Guarantied Obligations (as defined in the Guaranty, dated as of April 2, 2020 (the “Guaranty”), executed and delivered by such Guarantor) under or in connection with the Credit Agreement, as modified by the foregoing Amendment No. 3, in accordance with the Guaranty, and (c) confirms that its Guaranty shall remain in full force and effect after giving effect to the foregoing Amendment No. 3.

 

 

 

 

SPIRIT REALTY CAPITAL, INC.

 

 

By:  _______________________

Name:  

Title:  

 

 

 

 

 

 

[Signature Page to Amendment No. 3 to Term Loan Agreement]

DB1/ 114279694.2

 

 


 

Schedule 1

 

Incremental Commitment

 

 

New Term LenderCommitment Amount

 

Wells Fargo Bank, National Association$50,000,000.00

 

Total$50,000,000.00

 

DB1/ 114279694.2

 

 

src-ex311_7.htm

Exhibit 31.1

CERTIFICATIONS OF PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Jackson Hsieh, certify that:

 

1.

I have reviewed this Quarterly Report on Form 10-Q of Spirit Realty Capital, Inc.;

 

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

(c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

(d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date:

July 31, 2020

/s/ Jackson Hsieh

 

 

Jackson Hsieh

 

 

President and Chief Executive Officer

 

src-ex312_9.htm

Exhibit 31.2

CERTIFICATIONS OF PRINCIPAL FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Michael Hughes, certify that:

 

1.

I have reviewed this Quarterly Report on Form 10-Q of Spirit Realty Capital, Inc.;

 

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

(c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

(d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date:

July 31, 2020

/s/ Michael Hughes

 

 

Michael Hughes

 

 

Chief Financial Officer and Executive Vice President

 

 

 

 

src-ex313_10.htm

Exhibit 31.3

CERTIFICATIONS OF PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Jackson Hsieh, certify that:

 

1.

I have reviewed this Quarterly Report on Form 10-Q of Spirit Realty, L.P.;

 

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

(c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

(d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date:

July 31, 2020

/s/ Jackson Hsieh

 

 

Name:

Jackson Hsieh

 

 

Title:

President and Chief Executive Officer

 

 

 

Spirit Realty Capital, Inc., in its capacity as sole member of Spirit General OP Holdings, LLC, as sole general partner and on behalf of Spirit Realty, L.P.

 

src-ex314_12.htm

Exhibit 31.4

CERTIFICATIONS OF PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Michael Hughes, certify that:

 

1.

I have reviewed this Quarterly Report on Form 10-Q of Spirit Realty, L.P.;

 

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

(c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

(d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date:

July 31, 2020

/s/ Michael Hughes

 

 

Name:

Michael Hughes

 

 

Title:

Chief Financial Officer and Executive Vice President

 

 

 

Spirit Realty Capital, Inc., in its capacity as sole member of Spirit General OP Holdings, LLC, as sole general partner and on behalf of Spirit Realty, L.P.

 

src-ex321_11.htm

Exhibit 32.1

 

CERTIFICATIONS OF PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

(18 U.S.C 1350)

Each of the undersigned officers of Spirit Realty Capital, Inc. (the “Company”) hereby certifies, for purposes of Section 1350 of Chapter 63 of Title 18 of the United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to his knowledge:

 

 

(i)

the accompanying Quarterly Report on Form 10-Q of the Company for the period ended June 30, 2020 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended, and

 

(ii)

the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Date:

July 31, 2020

/s/ Jackson Hsieh

 

 

Jackson Hsieh

 

 

President and Chief Executive Officer

 

 

 

 

 

/s/ Michael Hughes

 

 

Michael Hughes

 

 

Chief Financial Officer and Executive Vice President

 

The foregoing certification is being furnished with the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2020 pursuant to 18 U.S.C. Section 1350. It is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and it is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

src-ex322_8.htm

Exhibit 32.2

 

CERTIFICATIONS OF PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

(18 U.S.C 1350)

Each of the undersigned officers of Spirit Realty Capital, Inc., the sole member of Spirit General OP Holdings, LLC, the general partner of Spirit Realty, L.P. (the “Company”), hereby certifies, for purposes of Section 1350 of Chapter 63 of Title 18 of the United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to his knowledge:

 

(i)

the accompanying Quarterly Report on Form 10-Q of the Company for the period ended June 30, 2020 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended, and

 

(ii)

the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Date:

July 31, 2020

/s/ Jackson Hsieh

 

 

Name:

Jackson Hsieh

 

 

Title:

President and Chief Executive Officer

 

 

 

Spirit Realty Capital, Inc., in its capacity as sole member of Spirit General OP Holdings, LLC, as sole general partner and on behalf of Spirit Realty, L.P.

 

 

 

 

 

 

/s/ Michael Hughes

 

 

Name:

Michael Hughes

 

 

Title:

Chief Financial Officer and Executive Vice President

 

 

 

Spirit Realty Capital, Inc., in its capacity as sole member of Spirit General OP Holdings, LLC, as sole general partner and on behalf of Spirit Realty, L.P.

 

The foregoing certification is being furnished with the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2020 pursuant to 18 U.S.C. Section 1350. It is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and it is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

v3.20.2
Document and Entity Information - shares
6 Months Ended
Jun. 30, 2020
Jul. 28, 2020
Document Information [Line Items]    
Entity Registrant Name SPIRIT REALTY CAPITAL, INC.  
Entity Central Index Key 0001308606  
Entity Current Reporting Status Yes  
Current Fiscal Year End Date --12-31  
Entity Filer Category Large Accelerated Filer  
Document Type 10-Q  
Document Period End Date Jun. 30, 2020  
Document Fiscal Year Focus 2020  
Document Fiscal Period Focus Q2  
Amendment Flag false  
Entity Emerging Growth Company false  
Entity Small Business false  
Entity Shell Company false  
Entity Common Stock, Shares Outstanding   103,043,105
Entity File Number 001-36004  
Entity Tax Identification Number 20-1676382  
Entity Incorporation, State or Country Code MD  
Entity Address, Address Line One 2727 North Harwood Street  
Entity Address, Address Line Two Suite 300  
Entity Address, City or Town Dallas  
Entity Address, State or Province TX  
Entity Address, Postal Zip Code 75201  
City Area Code 972  
Local Phone Number 476-1900  
Document Quarterly Report true  
Document Transition Report false  
Entity Interactive Data Current Yes  
Common Stock    
Document Information [Line Items]    
Trading Symbol SRC  
Title of 12(b) Security Common stock, par value $0.05 per share  
Security Exchange Name NYSE  
6.000% Series A Cumulative Redeemable Preferred Stock    
Document Information [Line Items]    
Trading Symbol SRC-A  
Title of 12(b) Security 6.000% Series A Cumulative Redeemable Preferred Stock, par value $0.01 per share  
Security Exchange Name NYSE  
Spirit Realty, L.P.    
Document Information [Line Items]    
Entity Registrant Name SPIRIT REALTY, L.P.  
Entity Current Reporting Status Yes  
Current Fiscal Year End Date --12-31  
Entity Filer Category Non-accelerated Filer  
Document Type 10-Q  
Document Period End Date Jun. 30, 2020  
Document Fiscal Year Focus 2020  
Document Fiscal Period Focus Q2  
Amendment Flag false  
Entity Emerging Growth Company false  
Entity Small Business false  
Entity Shell Company false  
Entity File Number 333-216815-01  
Entity Tax Identification Number 20-1127940  
Entity Incorporation, State or Country Code DE  
Entity Interactive Data Current Yes  
v3.20.2
Consolidated Balance Sheets - USD ($)
$ in Thousands
Jun. 30, 2020
Dec. 31, 2019
Real estate investments:    
Land and improvements $ 1,926,442 $ 1,910,287
Buildings and improvements 3,953,843 3,840,220
Total real estate investments 5,880,285 5,750,507
Less: accumulated depreciation (777,938) (717,097)
Net real estate held for investment 5,102,347 5,033,410
Loans receivable, net 29,163 34,465
Intangible lease assets, net 350,466 385,079
Real estate assets under direct financing leases, net 7,300 14,465
Real estate assets held for sale, net 12,708 1,144
Net investments 5,501,984 5,468,563
Cash and cash equivalents 97,190 14,492
Deferred costs and other assets, net 153,064 124,006
Goodwill 225,600 225,600
Total assets 5,977,838 5,832,661
Liabilities:    
Revolving credit facilities   116,500
Term loans, net 397,824  
Senior Unsecured Notes, net 1,484,884 1,484,066
Mortgages and notes payable, net 214,338 216,049
Convertible Notes, net 339,462 336,402
Total debt, net 2,436,508 2,153,017
Intangible lease liabilities, net 120,934 127,335
Accounts payable, accrued expenses and other liabilities 136,588 139,060
Total liabilities 2,694,030 2,419,412
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 June 30, 2020 and December 31, 2019 166,177 166,177
Common stock, $0.05 par value, 175,000,000 shares authorized: 103,043,270 and 102,476,152 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively 5,152 5,124
Capital in excess of common stock par value 5,710,386 5,686,247
Accumulated deficit (2,587,850) (2,432,838)
Accumulated other comprehensive loss (10,057) (11,461)
Total stockholders’ equity 3,283,808 3,413,249
Partnership units    
Total liabilities and stockholders’ equity/partners' capital 5,977,838 5,832,661
Spirit Realty, L.P.    
Real estate investments:    
Land and improvements 1,926,442 1,910,287
Buildings and improvements 3,953,843 3,840,220
Total real estate investments 5,880,285 5,750,507
Less: accumulated depreciation (777,938) (717,097)
Net real estate held for investment 5,102,347 5,033,410
Loans receivable, net 29,163 34,465
Intangible lease assets, net 350,466 385,079
Real estate assets under direct financing leases, net 7,300 14,465
Real estate assets held for sale, net 12,708 1,144
Net investments 5,501,984 5,468,563
Cash and cash equivalents 97,190 14,492
Deferred costs and other assets, net 153,064 124,006
Goodwill 225,600 225,600
Total assets 5,977,838 5,832,661
Liabilities:    
Revolving credit facilities   116,500
Term loans, net 397,824  
Senior Unsecured Notes, net 1,484,884 1,484,066
Notes payable to Spirit Realty Capital, Inc., net 339,462 336,402
Mortgages and notes payable, net 214,338 216,049
Total debt, net 2,436,508 2,153,017
Intangible lease liabilities, net 120,934 127,335
Accounts payable, accrued expenses and other liabilities 136,588 139,060
Total liabilities 2,694,030 2,419,412
Commitments and contingencies (see Note 6)
Partnership units    
General partner's capital: 797,644 units issued and outstanding as of both June 30, 2020 and December 31, 2019 21,236 22,389
Limited partners' preferred capital: 6,900,000 units issued and outstanding as of both June 30, 2020 and December 31, 2019 166,177 166,177
Limited partners' common capital: 102,245,626 and 101,678,508 units issued and outstanding as of June 30, 2020 and December 31, 2019, respectively 3,096,395 3,224,683
Total partners' capital 3,283,808 3,413,249
Total liabilities and stockholders’ equity/partners' capital $ 5,977,838 $ 5,832,661
v3.20.2
Consolidated Balance Sheets (Parenthetical) - $ / shares
Jun. 30, 2020
Dec. 31, 2019
Stockholders’ equity:    
Preferred stock, par value (in USD per share) $ 0.01 $ 0.01
Preferred stock, shares authorized 20,000,000 20,000,000
Preferred stock, shares issued 6,900,000 6,900,000
Preferred stock, shares outstanding 6,900,000 6,900,000
Common stock, par value per share (in USD per share) $ 0.05 $ 0.05
Common stock, shares authorized 175,000,000 175,000,000
Common stock, shares issued 103,043,270 102,476,152
Common stock, shares outstanding 103,043,270 102,476,152
Spirit Realty, L.P. | General Partner's Capital    
Partnership units    
General partners' capital, units issued 797,644 797,644
General partners' capital, units outstanding [1] 797,644 797,644
Spirit Realty, L.P. | Limited Partners' Capital    
Partnership units    
Limited partners' common capital, units issued 102,245,626 101,678,508
Limited partners' common capital, units outstanding [2] 102,245,626 101,678,508
Spirit Realty, L.P. | Limited Partners' Capital | Limited Partner Series A Preferred Units    
Partnership units    
Limited partners' preferred capital, units issued 6,900,000 6,900,000
Limited partners' preferred capital, units outstanding [2] 6,900,000 6,900,000
[1] Consists of general partnership interests held by OP Holdings.
[2] Consists of limited partnership interests held by the Corporation and Spirit Notes Partner, LLC.
v3.20.2
Consolidated Statements of Operations - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Revenues:        
Rental income $ 117,190 $ 106,506 $ 238,553 $ 210,573
Interest income on loans receivable 390 920 809 1,906
Earned income from direct financing leases 131 308 308 704
Related party fee income 250 7,249 500 14,176
Other income 563 762 1,074 979
Total revenues 118,524 115,745 241,244 228,338
Expenses:        
General and administrative 11,975 13,833 25,465 27,014
Property costs (including reimbursable) 7,234 4,407 13,170 9,561
Deal pursuit costs 14 173 1,033 244
Interest 26,095 25,176 51,454 51,787
Depreciation and amortization 53,160 41,342 105,396 82,691
Impairments 21,049 3,607 61,823 7,299
Total expenses 119,527 88,538 258,341 178,596
Other income:        
Loss on debt extinguishment   (14,676)   (5,893)
Gain on disposition of assets 658 29,776 1,046 38,506
Preferred dividend income from SMTA   3,750   7,500
Total other income 658 18,850 1,046 40,113
(Loss) income before income tax expense (345) 46,057 (16,051) 89,855
Income tax expense (68) (320) (209) (540)
Net (loss) income (413) 45,737 (16,260) 89,315
Dividends paid to preferred shareholders (2,588) (2,588) (5,176) (5,176)
Net (loss) income attributable to common stockholders/after preferred distributions $ (3,001) $ 43,149 $ (21,436) $ 84,139
Net (loss) income per share attributable to common stockholders:        
Basic (in USD per share) $ (0.03) $ 0.49 $ (0.21) $ 0.97
Diluted (in USD per share) $ (0.03) $ 0.49 $ (0.21) $ 0.96
Weighted average shares of common stock outstanding:        
Basic (in shares) 102,678,967 87,001,987 102,454,557 86,253,698
Diluted (in shares) 102,678,967 87,890,699 102,454,557 86,779,297
Weighted average partnership units outstanding:        
Dividends declared per common share/per partnership unit issued (in USD per share) $ 0.6250 $ 0.6250 $ 1.2500 $ 1.2500
Spirit Realty, L.P.        
Revenues:        
Rental income $ 117,190 $ 106,506 $ 238,553 $ 210,573
Interest income on loans receivable 390 920 809 1,906
Earned income from direct financing leases 131 308 308 704
Related party fee income 250 7,249 500 14,176
Other income 563 762 1,074 979
Total revenues 118,524 115,745 241,244 228,338
Expenses:        
General and administrative 11,975 13,833 25,465 27,014
Property costs (including reimbursable) 7,234 4,407 13,170 9,561
Deal pursuit costs 14 173 1,033 244
Interest 26,095 25,176 51,454 51,787
Depreciation and amortization 53,160 41,342 105,396 82,691
Impairments 21,049 3,607 61,823 7,299
Total expenses 119,527 88,538 258,341 178,596
Other income:        
Loss on debt extinguishment   (14,676)   (5,893)
Gain on disposition of assets 658 29,776 1,046 38,506
Preferred dividend income from SMTA   3,750   7,500
Total other income 658 18,850 1,046 40,113
(Loss) income before income tax expense (345) 46,057 (16,051) 89,855
Income tax expense (68) (320) (209) (540)
Net (loss) income (413) 45,737 (16,260) 89,315
Dividends paid to preferred shareholders (2,588) (2,588) (5,176) (5,176)
Net (loss) income attributable to common stockholders/after preferred distributions (3,001) 43,149 (21,436) 84,139
Net (loss) income attributable to the general partner (23) 394 (166) 774
Net (loss) income attributable to the limited partners $ (390) $ 45,343 $ (16,094) $ 88,541
Net (loss) income per partnership unit:        
Basic $ (0.03) $ 0.49 $ (0.21) $ 0.97
Diluted $ (0.03) $ 0.49 $ (0.21) $ 0.96
Weighted average partnership units outstanding:        
Basic 102,678,967 87,001,987 102,454,557 86,253,698
Diluted 102,678,967 87,890,699 102,454,557 86,779,297
Dividends declared per common share/per partnership unit issued (in USD per share) $ 0.6250 $ 0.6250 $ 1.2500 $ 1.2500
v3.20.2
Consolidated Statements of Comprehensive (Loss) Income - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Net (loss) income available to common stockholders $ (3,001) $ 43,149 $ (21,436) $ 84,139
Other comprehensive income (loss):        
Net reclassification of amounts from (to) AOCL 702 (8,754) 1,404 (13,775)
Total comprehensive (loss) income (2,299) 34,395 (20,032) 70,364
Spirit Realty, L.P.        
Net (loss) income available to common stockholders (3,001) 43,149 (21,436) 84,139
Other comprehensive income (loss):        
Net reclassification of amounts from (to) AOCL 702 (8,754) 1,404 (13,775)
Total comprehensive (loss) income $ (2,299) $ 34,395 $ (20,032) $ 70,364
v3.20.2
Consolidated Statements of Stockholders' Equity - USD ($)
$ in Thousands
Total
Preferred Stock
Common Stock
Capital in Excess of Par Value
Accumulated Deficit
AOCL
Beginning balance, value at Dec. 31, 2018 $ 2,801,749 $ 166,177 $ 4,289 $ 4,995,697 $ (2,357,255) $ (7,159)
Preferred shares outstanding, beginning balance at Dec. 31, 2018   6,900,000        
Common shares outstanding, beginning balance at Dec. 31, 2018     85,787,355      
Increase (Decrease) in Stockholders' Equity [Roll Forward]            
Net (loss) income 43,578       43,578  
Dividends declared on preferred stock (2,588)       (2,588)  
Net (loss) income attributable to common stockholders/after preferred distributions 40,990       40,990  
Other comprehensive income (loss) (5,021)         (5,021)
Dividends declared on common stock (54,254)       (54,254)  
Tax withholdings related to net stock settlements (704)   $ (1)   (703)  
Tax withholdings related to net stock settlements (in shares)     (17,800)      
Issuance of stock 32,686   $ 45 32,641    
Issuance of stock (in shares)     893,526      
Other (79)     (79)    
Stock-based compensation, net 3,269   $ 8 3,570 (309)  
Stock-based compensation, net (in shares)     148,705      
Ending balance, value at Mar. 31, 2019 2,818,636 $ 166,177 $ 4,341 5,031,829 (2,371,531) (12,180)
Preferred shares outstanding, ending balance at Mar. 31, 2019   6,900,000        
Common shares outstanding, ending balance at Mar. 31, 2019     86,811,786      
Beginning balance, value at Dec. 31, 2018 2,801,749 $ 166,177 $ 4,289 4,995,697 (2,357,255) (7,159)
Preferred shares outstanding, beginning balance at Dec. 31, 2018   6,900,000        
Common shares outstanding, beginning balance at Dec. 31, 2018     85,787,355      
Increase (Decrease) in Stockholders' Equity [Roll Forward]            
Net (loss) income 89,315          
Net (loss) income attributable to common stockholders/after preferred distributions 84,139          
Ending balance, value at Jun. 30, 2019 2,929,460 $ 166,177 $ 4,506 5,165,396 (2,385,685) (20,934)
Preferred shares outstanding, ending balance at Jun. 30, 2019   6,900,000        
Common shares outstanding, ending balance at Jun. 30, 2019     90,110,727      
Beginning balance, value at Mar. 31, 2019 2,818,636 $ 166,177 $ 4,341 5,031,829 (2,371,531) (12,180)
Preferred shares outstanding, beginning balance at Mar. 31, 2019   6,900,000        
Common shares outstanding, beginning balance at Mar. 31, 2019     86,811,786      
Increase (Decrease) in Stockholders' Equity [Roll Forward]            
Net (loss) income 45,737       45,737  
Dividends declared on preferred stock (2,588)       (2,588)  
Net (loss) income attributable to common stockholders/after preferred distributions 43,149       43,149  
Other comprehensive income (loss) (8,754)         (8,754)
Dividends declared on common stock (56,318)       (56,318)  
Tax withholdings related to net stock settlements (678)   $ (1)   (677)  
Tax withholdings related to net stock settlements (in shares)     (16,367)      
Issuance of stock 129,850   $ 165 129,685    
Issuance of stock (in shares)     3,292,102      
Stock-based compensation, net 3,575   $ 1 3,882 (308)  
Stock-based compensation, net (in shares)     23,206      
Ending balance, value at Jun. 30, 2019 2,929,460 $ 166,177 $ 4,506 5,165,396 (2,385,685) (20,934)
Preferred shares outstanding, ending balance at Jun. 30, 2019   6,900,000        
Common shares outstanding, ending balance at Jun. 30, 2019     90,110,727      
Beginning balance, value at Dec. 31, 2019 $ 3,413,249 $ 166,177 $ 5,124 5,686,247 (2,432,838) (11,461)
Preferred shares outstanding, beginning balance at Dec. 31, 2019 6,900,000 6,900,000        
Common shares outstanding, beginning balance at Dec. 31, 2019 102,476,152   102,476,152      
Increase (Decrease) in Stockholders' Equity [Roll Forward]            
Net (loss) income $ (15,847)       (15,847)  
Dividends declared on preferred stock (2,588)       (2,588)  
Net (loss) income attributable to common stockholders/after preferred distributions (18,435)       (18,435)  
Other comprehensive income (loss) 702         702
Dividends declared on common stock (64,338)       (64,338)  
Tax withholdings related to net stock settlements (2,349)   $ (2)   (2,347)  
Tax withholdings related to net stock settlements (in shares)     (44,488)      
Issuance of stock 17,598   $ 18 17,580    
Issuance of stock (in shares)     362,481      
Stock-based compensation, net 2,981   $ 7 3,444 (470)  
Stock-based compensation, net (in shares)     148,017      
Ending balance, value at Mar. 31, 2020 3,349,408 $ 166,177 $ 5,147 5,707,271 (2,518,428) (10,759)
Preferred shares outstanding, ending balance at Mar. 31, 2020   6,900,000        
Common shares outstanding, ending balance at Mar. 31, 2020     102,942,162      
Beginning balance, value at Dec. 31, 2019 $ 3,413,249 $ 166,177 $ 5,124 5,686,247 (2,432,838) (11,461)
Preferred shares outstanding, beginning balance at Dec. 31, 2019 6,900,000 6,900,000        
Common shares outstanding, beginning balance at Dec. 31, 2019 102,476,152   102,476,152      
Increase (Decrease) in Stockholders' Equity [Roll Forward]            
Net (loss) income $ (16,260)          
Net (loss) income attributable to common stockholders/after preferred distributions $ (21,436)          
Tax withholdings related to net stock settlements (in shares) (117,500)          
Ending balance, value at Jun. 30, 2020 $ 3,283,808 $ 166,177 $ 5,152 5,710,386 (2,587,850) (10,057)
Preferred shares outstanding, ending balance at Jun. 30, 2020 6,900,000 6,900,000        
Common shares outstanding, ending balance at Jun. 30, 2020 103,043,270   103,043,270      
Beginning balance, value at Mar. 31, 2020 $ 3,349,408 $ 166,177 $ 5,147 5,707,271 (2,518,428) (10,759)
Preferred shares outstanding, beginning balance at Mar. 31, 2020   6,900,000        
Common shares outstanding, beginning balance at Mar. 31, 2020     102,942,162      
Increase (Decrease) in Stockholders' Equity [Roll Forward]            
Net (loss) income (413)       (413)  
Dividends declared on preferred stock (2,588)       (2,588)  
Net (loss) income attributable to common stockholders/after preferred distributions (3,001)       (3,001)  
Other comprehensive income (loss) 702         702
Dividends declared on common stock (64,402)       (64,402)  
Tax withholdings related to net stock settlements (2,031)   $ (4)   (2,027)  
Tax withholdings related to net stock settlements (in shares)     (73,055)      
Issuance of stock (185)     (185)    
Stock-based compensation, net 3,317   $ 9 3,300 8  
Stock-based compensation, net (in shares)     174,163      
Ending balance, value at Jun. 30, 2020 $ 3,283,808 $ 166,177 $ 5,152 $ 5,710,386 $ (2,587,850) $ (10,057)
Preferred shares outstanding, ending balance at Jun. 30, 2020 6,900,000 6,900,000        
Common shares outstanding, ending balance at Jun. 30, 2020 103,043,270   103,043,270      
v3.20.2
Consolidated Statements of Cash Flows - USD ($)
$ in Thousands
6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Operating activities    
Net (loss) income $ (16,260) $ 89,315
Adjustments to reconcile net (loss) income to net cash provided by operating activities:    
Depreciation and amortization 105,396 82,691
Impairments 61,823 7,299
Amortization of deferred financing costs 2,598 3,805
Amortization of debt discounts 2,466 4,626
Amortization of deferred losses on interest rate swaps 1,404  
Stock-based compensation expense 6,760 7,461
Loss on debt extinguishment   5,893
Gain on dispositions of real estate and other assets (1,046) (38,506)
Non-cash revenue (5,518) (8,237)
Bad debt expense and other 236 162
Changes in operating assets and liabilities:    
Deferred costs and other assets, net (23,658) (1,313)
Accounts payable, accrued expenses and other liabilities (1,190) (8,921)
Net cash provided by operating activities 133,011 144,275
Investing activities    
Acquisitions of real estate (218,935) (447,499)
Capitalized real estate expenditures (8,296) (25,680)
Collections of principal on loans receivable 2,710 8,080
Proceeds from dispositions of real estate and other assets, net 17,681 163,165
Net cash used in investing activities (206,840) (301,934)
Financing activities    
Borrowings under revolving credit facilities 1,123,000 615,700
Repayments under revolving credit facilities (1,239,500) (762,000)
Repayments under mortgages and notes payable (2,021) (171,279)
Borrowings under term loans 400,000 820,000
Repayments under term loans   (420,000)
Repayments under Convertible Notes   (402,500)
Borrowings under Senior Unsecured Notes   399,696
Debt extinguishment costs   (12,314)
Deferred financing costs (2,377) (13,916)
Proceeds from issuance of common stock, net of offering costs 17,553 162,270
Repurchase of shares of common stock, including tax withholdings related to net stock settlements (4,380) (1,382)
Common stock dividends paid (129,908) (107,872)
Preferred stock dividends paid (5,176) (5,176)
Net cash provided by financing activities 157,191 101,227
Net increase (decrease) in cash, cash equivalents and restricted cash 83,362 (56,432)
Cash, cash equivalents and restricted cash, beginning of period 26,023 77,421
Cash, cash equivalents and restricted cash, end of period 109,385 20,989
Cash paid for interest 40,992 43,242
Cash paid for income taxes 910 1,045
Supplemental Disclosures of Non-Cash Activities:    
Dividends / Distributions declared and unpaid 64,402 56,318
Relief of debt through sale or foreclosure of real estate properties   10,368
Net real estate and other collateral assets sold or surrendered to lender   654
Cash flow hedge changes in fair value   14,326
Accrued interest capitalized to principal [1]   251
Accrued market-based award dividend rights 462 616
Accrued capitalized costs 457 3,270
Accrued deferred financing costs 106 1,109
Right-of-use lease assets   6,143
Lease liabilities   6,143
Reclass of residual value from direct financing lease to operating lease 6,831 3,960
Receivable for disposal of real estate property 2,000  
Spirit Realty, L.P.    
Operating activities    
Net (loss) income (16,260) 89,315
Adjustments to reconcile net (loss) income to net cash provided by operating activities:    
Depreciation and amortization 105,396 82,691
Impairments 61,823 7,299
Amortization of deferred financing costs 2,598 3,805
Amortization of debt discounts 2,466 4,626
Amortization of deferred losses on interest rate swaps 1,404  
Stock-based compensation expense 6,760 7,461
Loss on debt extinguishment   5,893
Gain on dispositions of real estate and other assets (1,046) (38,506)
Non-cash revenue (5,518) (8,237)
Bad debt expense and other 236 162
Changes in operating assets and liabilities:    
Deferred costs and other assets, net (23,658) (1,313)
Accounts payable, accrued expenses and other liabilities (1,190) (8,921)
Net cash provided by operating activities 133,011 144,275
Investing activities    
Acquisitions of real estate (218,935) (447,499)
Capitalized real estate expenditures (8,296) (25,680)
Collections of principal on loans receivable 2,710 8,080
Proceeds from dispositions of real estate and other assets, net 17,681 163,165
Net cash used in investing activities (206,840) (301,934)
Financing activities    
Borrowings under revolving credit facilities 1,123,000 615,700
Repayments under revolving credit facilities (1,239,500) (762,000)
Repayments under mortgages and notes payable (2,021) (171,279)
Borrowings under term loans 400,000 820,000
Repayments under term loans   (420,000)
Repayments under Convertible Notes   (402,500)
Borrowings under Senior Unsecured Notes   399,696
Debt extinguishment costs   (12,314)
Deferred financing costs (2,377) (13,916)
Proceeds from issuance of common stock, net of offering costs 17,553 162,270
Repurchase of shares of common stock, including tax withholdings related to net stock settlements (4,380) (1,382)
Common stock dividends paid (129,908) (107,872)
Preferred stock dividends paid (5,176) (5,176)
Net cash provided by financing activities 157,191 101,227
Net increase (decrease) in cash, cash equivalents and restricted cash 83,362 (56,432)
Cash, cash equivalents and restricted cash, beginning of period 26,023 77,421
Cash, cash equivalents and restricted cash, end of period 109,385 20,989
Cash paid for interest 40,992 43,242
Cash paid for income taxes 910 1,045
Supplemental Disclosures of Non-Cash Activities:    
Dividends / Distributions declared and unpaid 64,402 56,318
Relief of debt through sale or foreclosure of real estate properties   10,368
Net real estate and other collateral assets sold or surrendered to lender   654
Cash flow hedge changes in fair value   14,326
Accrued interest capitalized to principal [1]   251
Accrued market-based award dividend rights 462 616
Accrued capitalized costs 457 3,270
Accrued deferred financing costs 106 1,109
Right-of-use lease assets   6,143
Lease liabilities   6,143
Reclass of residual value from direct financing lease to operating lease 6,831 $ 3,960
Receivable for disposal of real estate property $ 2,000  
[1] Accrued and overdue interest on certain CMBS notes that were intentionally placed in default.
v3.20.2
Consolidated Statements of Partners' Capital - USD ($)
$ in Thousands
Total
Spirit Realty, L.P.
Spirit Realty, L.P.
Limited Partners' Capital
Spirit Realty, L.P.
General Partner's Capital
Limited Partner Series A Preferred Units
Spirit Realty, L.P.
Limited Partners' Capital
Beginning balance, value at Dec. 31, 2018   $ 2,801,749 $ 2,612,511 [1] $ 23,061 [2] $ 166,177 [1]
Limited partners' preferred units, beginning balance at Dec. 31, 2018 [1]         6,900,000
General partners' common units, beginning balance at Dec. 31, 2018 [2]       797,644  
Limited partners' common units, beginning balance at Dec. 31, 2018 [1]     84,989,711    
Increase (Decrease) in Stockholders' Equity [Roll Forward]          
Net (loss) income $ 43,578 43,578 $ 43,198 [1] $ 380 [2]  
Dividends declared on preferred stock (2,588) (2,588) (2,588) [1]    
Net (loss) income attributable to common stockholders/after preferred distributions 40,990 40,990 40,610 [1] 380 [2]  
Other comprehensive income (loss) (5,021) (5,021) (4,974) [1] (47) [2]  
Dividends declared on common stock (54,254) (54,254) (53,750) [1] (504) [2]  
Tax withholdings related to net stock settlements (704) (704) $ (704) [1]    
Tax withholdings related to net stock settlements (in shares) [1]     (17,800)    
Issuance of common units, net   32,686 $ 32,686 [1]    
Issuance of common units, net (in shares) [1]     893,526    
Other   (79) $ (78) [1] (1) [2]  
Stock-based compensation, net   3,269 $ 3,269 [1]    
Stock-based compensation, net (in shares) [1]     148,705    
Ending balance, value at Mar. 31, 2019   2,818,636 $ 2,629,570 [1] $ 22,889 [2] $ 166,177 [1]
Limited partners' preferred units, ending balance at Mar. 31, 2019 [1]         6,900,000
General partners' common units, ending balance at Mar. 31, 2019 [2]       797,644  
Limited partners' common units, ending balance at Mar. 31, 2019 [1]     86,014,142    
Beginning balance, value at Dec. 31, 2018   2,801,749 $ 2,612,511 [1] $ 23,061 [2] $ 166,177 [1]
Limited partners' preferred units, beginning balance at Dec. 31, 2018 [1]         6,900,000
General partners' common units, beginning balance at Dec. 31, 2018 [2]       797,644  
Limited partners' common units, beginning balance at Dec. 31, 2018 [1]     84,989,711    
Increase (Decrease) in Stockholders' Equity [Roll Forward]          
Net (loss) income 89,315 89,315      
Net (loss) income attributable to common stockholders/after preferred distributions 84,139 84,139      
Ending balance, value at Jun. 30, 2019   2,929,460 $ 2,740,593 [1] $ 22,690 [2] $ 166,177 [1]
Limited partners' preferred units, ending balance at Jun. 30, 2019 [1]         6,900,000
General partners' common units, ending balance at Jun. 30, 2019 [2]       797,644  
Limited partners' common units, ending balance at Jun. 30, 2019 [1]     89,313,083    
Beginning balance, value at Mar. 31, 2019   2,818,636 $ 2,629,570 [1] $ 22,889 [2] $ 166,177 [1]
Limited partners' preferred units, beginning balance at Mar. 31, 2019 [1]         6,900,000
General partners' common units, beginning balance at Mar. 31, 2019 [2]       797,644  
Limited partners' common units, beginning balance at Mar. 31, 2019 [1]     86,014,142    
Increase (Decrease) in Stockholders' Equity [Roll Forward]          
Net (loss) income 45,737 45,737 $ 45,343 [1] $ 394 [2]  
Dividends declared on preferred stock (2,588) (2,588) (2,588) [1]    
Net (loss) income attributable to common stockholders/after preferred distributions 43,149 43,149 42,755 [1] 394 [2]  
Other comprehensive income (loss) (8,754) (8,754) (8,674) [1] (80) [2]  
Dividends declared on common stock (56,318) (56,318) (55,805) [1] (513) [2]  
Tax withholdings related to net stock settlements (678) (678) $ (678) [1]    
Tax withholdings related to net stock settlements (in shares) [1]     (16,367)    
Issuance of common units, net   129,850 $ 129,850 [1]    
Issuance of common units, net (in shares) [1]     3,292,102    
Stock-based compensation, net   3,575 $ 3,575 [1]    
Stock-based compensation, net (in shares) [1]     23,206    
Ending balance, value at Jun. 30, 2019   2,929,460 $ 2,740,593 [1] $ 22,690 [2] $ 166,177 [1]
Limited partners' preferred units, ending balance at Jun. 30, 2019 [1]         6,900,000
General partners' common units, ending balance at Jun. 30, 2019 [2]       797,644  
Limited partners' common units, ending balance at Jun. 30, 2019 [1]     89,313,083    
Beginning balance, value at Dec. 31, 2019   3,413,249 $ 3,224,683 [1] $ 22,389 [2] $ 166,177 [1]
Limited partners' preferred units, beginning balance at Dec. 31, 2019 [1]         6,900,000
General partners' common units, beginning balance at Dec. 31, 2019 [2]       797,644  
Limited partners' common units, beginning balance at Dec. 31, 2019 [1]     101,678,508    
Increase (Decrease) in Stockholders' Equity [Roll Forward]          
Net (loss) income (15,847) (15,847) $ (15,704) [1] $ (143) [2]  
Dividends declared on preferred stock (2,588) (2,588) (2,588) [1]    
Net (loss) income attributable to common stockholders/after preferred distributions (18,435) (18,435) (18,292) [1] (143) [2]  
Other comprehensive income (loss) 702 702 697 [1] 5 [2]  
Dividends declared on common stock (64,338) (64,338) (63,839) [1] (499) [2]  
Tax withholdings related to net stock settlements (2,349) (2,349) $ (2,349) [1]    
Tax withholdings related to net stock settlements (in shares) [1]     (44,488)    
Issuance of common units, net   17,598 $ 17,598 [1]    
Issuance of common units, net (in shares) [1]     362,481    
Stock-based compensation, net   2,981 $ 2,981 [1]    
Stock-based compensation, net (in shares) [1]     148,017    
Ending balance, value at Mar. 31, 2020   3,349,408 $ 3,161,479 [1] $ 21,752 [2] $ 166,177 [1]
Limited partners' preferred units, ending balance at Mar. 31, 2020 [1]         6,900,000
General partners' common units, ending balance at Mar. 31, 2020 [2]       797,644  
Limited partners' common units, ending balance at Mar. 31, 2020 [1]     102,144,518    
Beginning balance, value at Dec. 31, 2019   3,413,249 $ 3,224,683 [1] $ 22,389 [2] $ 166,177 [1]
Limited partners' preferred units, beginning balance at Dec. 31, 2019 [1]         6,900,000
General partners' common units, beginning balance at Dec. 31, 2019 [2]       797,644  
Limited partners' common units, beginning balance at Dec. 31, 2019 [1]     101,678,508    
Increase (Decrease) in Stockholders' Equity [Roll Forward]          
Net (loss) income (16,260) (16,260)      
Net (loss) income attributable to common stockholders/after preferred distributions $ (21,436) (21,436)      
Tax withholdings related to net stock settlements (in shares) (117,500)        
Ending balance, value at Jun. 30, 2020   3,283,808 $ 3,096,395 [1] $ 21,236 [2] $ 166,177 [1]
Limited partners' preferred units, ending balance at Jun. 30, 2020 [1]         6,900,000
General partners' common units, ending balance at Jun. 30, 2020 [2]       797,644  
Limited partners' common units, ending balance at Jun. 30, 2020 [1]     102,245,626    
Beginning balance, value at Mar. 31, 2020   3,349,408 $ 3,161,479 [1] $ 21,752 [2] $ 166,177 [1]
Limited partners' preferred units, beginning balance at Mar. 31, 2020 [1]         6,900,000
General partners' common units, beginning balance at Mar. 31, 2020 [2]       797,644  
Limited partners' common units, beginning balance at Mar. 31, 2020 [1]     102,144,518    
Increase (Decrease) in Stockholders' Equity [Roll Forward]          
Net (loss) income $ (413) (413) $ (390) [1] $ (23) [2]  
Dividends declared on preferred stock (2,588) (2,588) (2,588) [1]    
Net (loss) income attributable to common stockholders/after preferred distributions (3,001) (3,001) (2,978) [1] (23) [2]  
Other comprehensive income (loss) 702 702 697 [1] 5 [2]  
Dividends declared on common stock (64,402) (64,402) (63,904) [1] (498) [2]  
Tax withholdings related to net stock settlements $ (2,031) (2,031) $ (2,031) [1]    
Tax withholdings related to net stock settlements (in shares) [1]     (73,055)    
Issuance of common units, net   (185) $ (185) [1]    
Stock-based compensation, net   3,317 $ 3,317 [1]    
Stock-based compensation, net (in shares) [1]     174,163    
Ending balance, value at Jun. 30, 2020   $ 3,283,808 $ 3,096,395 [1] $ 21,236 [2] $ 166,177 [1]
Limited partners' preferred units, ending balance at Jun. 30, 2020 [1]         6,900,000
General partners' common units, ending balance at Jun. 30, 2020 [2]       797,644  
Limited partners' common units, ending balance at Jun. 30, 2020 [1]     102,245,626    
[1] Consists of limited partnership interests held by the Corporation and Spirit Notes Partner, LLC.
[2] Consists of general partnership interests held by OP Holdings.
v3.20.2
Organization
6 Months Ended
Jun. 30, 2020
Organization Consolidation And Presentation Of Financial Statements [Abstract]  
Organization

NOTE 1. ORGANIZATION

Organization and Operations

Spirit Realty Capital, Inc. (the "Corporation" or "Spirit" or, with its consolidated subsidiaries, the "Company") operates as a self-administered and self-managed REIT that seeks to generate and deliver sustainable and attractive returns for stockholders by primarily investing in and managing a portfolio of single-tenant, operationally essential real estate throughout the U.S. that is generally leased on a long-term, triple-net basis to tenants operating within retail, industrial, office and other property types. Single tenant, operationally essential real estate generally refers to free-standing, commercial real estate facilities where tenants conduct activities that are essential to the generation of their sales and profits.

The Company’s operations are generally carried out through Spirit Realty, L.P. (the "Operating Partnership") and its subsidiaries. Spirit General OP Holdings, LLC, one of the Corporation’s wholly-owned subsidiaries, is the sole general partner and owns approximately 1% of the Operating Partnership. The Corporation and a wholly-owned subsidiary (Spirit Notes Partner, LLC) are the only limited partners and together own the remaining 99% of the Operating Partnership.

On May 31, 2018, the Company completed the spin-off (the "Spin-Off") of the assets that collateralized Master Trust 2014, properties leased to Shopko, and certain other assets into an independent, publicly traded REIT, Spirit MTA REIT ("SMTA"). The Company formed Spirit Realty AM Corporation (“SRAM”), a wholly-owned taxable REIT subsidiary. The rights and obligations of the Asset Management Agreement were transferred to SRAM on April 1, 2019, which was subsequently terminated and simultaneously replaced by the Interim Management Agreement between SRAM and SMTA, effective as of September 20, 2019. The Company allocates personnel and other general and administrative costs to SRAM for management services provided to SMTA.

v3.20.2
Summary of Significant Accounting Policies
6 Months Ended
Jun. 30, 2020
Accounting Policies [Abstract]  
Summary of Significant Accounting Policies

NOTE 2. SUMMARY OF SIGNIFICANT ACOUNTING POLICIES

Basis of Accounting and Principles of Consolidation

The accompanying consolidated financial statements of the Company and the Operating Partnership have been prepared pursuant to the rules and regulations of the SEC. In the opinion of management, the consolidated financial statements include the normal, recurring adjustments necessary for a fair statement of the information required to be set forth therein. The results for interim periods are not necessarily indicative of the results for the entire year. Certain information and note disclosures, normally included in financial statements prepared in accordance with GAAP, have been condensed or omitted from these statements pursuant to SEC rules and regulations and, accordingly, these financial statements should be read in conjunction with the Company’s audited consolidated financial statements as filed with the SEC in its Annual Report on Form 10-K for the year ended December 31, 2019.

The consolidated financial statements of the Company include the accounts of the Corporation and its wholly-owned subsidiaries. The consolidated financial statements of the Operating Partnership include the accounts of the Operating Partnership and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. All expenses incurred by the Company have been allocated to the Operating Partnership in accordance with the Operating Partnership's first amended and restated agreement of limited partnership, which management determined to be a reasonable method of allocation. Therefore, expenses incurred would not be materially different if the Operating Partnership had operated as an unaffiliated entity.

These consolidated financial statements include certain special purpose entities that were formed to acquire and hold real estate encumbered by indebtedness (see Note 4). Each special purpose entity is a separate legal entity and is the sole owner of its assets and responsible for its liabilities. The assets of these special purpose entities are not available to pay, or otherwise satisfy obligations to, the creditors of any affiliate or owner of another entity unless the special purpose entities have expressly agreed and are permitted to do so under their governing documents. As of June 30, 2020 and December 31, 2019, net assets totaling $0.35 billion and $0.38 billion, respectively, were held, and net liabilities totaling $0.22 billion and $0.23 billion, respectively, were owed by these encumbered special purpose entities and are included in the accompanying consolidated balance sheets.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Although management believes its estimates are reasonable, actual results could differ from those estimates.

Segment Reporting

The Company views its operations as one segment, which consists of net leasing operations. The Company has no other reportable segments.

Revenue Recognition

Rental Income: Cash and Straight-line Rent

The Company primarily leases real estate to its tenants under long-term, triple-net leases that are classified as operating leases. To evaluate lease classification, the Company assesses the terms and conditions of the lease to determine the appropriate lease term. The Company does not include options to extend, terminate or purchase in its evaluation for lease classification purposes or for recognizing rental income unless the Company is reasonably certain the tenant will exercise the option.       

Another component of lease classification that requires judgment is the residual value of the property at the end of the lease term. For acquisitions, the Company assumes a value that is equal to the tangible value of the property at the date of the assessment. For lease modifications, the Company generally uses sales comparables or a direct capitalization approach to determine fair value.

The Company’s leases generally provide for rent escalations throughout the term of the lease. For leases with fixed rent escalators, rental income is recognized on a straight-line basis to produce a constant periodic rent over the term of the lease. Accordingly, accrued rental revenue, calculated as the aggregate difference between the rental revenue recognized on a straight-line basis and scheduled rents, represents unbilled rent receivables that the Company will receive only if the tenants make all rent payments required through the expiration of the initial term of the leases.

For leases with contingent rent escalators, rental income typically increases at a multiple of any increase in the CPI over a specified period and may adjust over a one-year period or over multiple-year periods. Because of the volatility and uncertainty with respect to future changes in the CPI and the Company’s inability to determine the extent to which any specific future change in the CPI is probable at each rent adjustment date during the entire term of these leases, increases in rental revenue from leases with this type of escalator are recognized when the changes in the rental rates have occurred.

Some of the Company’s leases also provide for contingent rent based on a percentage of the tenant’s gross sales, which the Company recognizes as rental income when the change in the factor on which the contingent lease payment is based actually occurs.

Rental income is subject to an evaluation for collectability, which includes management’s estimates of amounts that will not be realized based on an assessment of the risks inherent in the portfolio, considering historical experience, as well as the tenant's payment history and financial condition. The Company records a provision for losses against rental income for amounts that are not probable of collection.

Rental Income: Tenant Reimbursement Revenue

Under a triple-net lease, the tenant is typically responsible for all improvements and is contractually obligated to pay all property operating expenses, such as real estate taxes, insurance premiums and repair and maintenance costs. Certain leases contain additional amounts recoverable from tenants for common area maintenance expenses and certain other recoverable expenses, which are non-lease components. The Company has elected to combine all its non-lease components, which were determined to have the same pattern of transfer as the related operating lease component, into a single combined lease component. Tenant reimbursement revenue is variable and is recognized as revenue in the period in which the related expenses are incurred, with the related expenses included in property costs (including reimbursable) on the Company’s consolidated statements of operations. Tenant reimbursements are recorded on a gross basis in instances when our tenants reimburse us for property costs which we incur. Tenant receivables are carried net of the allowances for amounts that are not probable of collection.

Rental Income: Intangible Amortization

Initial direct costs associated with the origination of a lease are deferred and amortized over the related lease term as an adjustment to rental revenue. In-place lease intangibles are amortized on a straight-line basis over the remaining term of the related lease and included in depreciation and amortization expense. Above-market lease intangibles are amortized over the remaining term of the respective leases as a decrease in rental revenue, and below-market lease intangibles are amortized as an increase to rental revenue over the remaining term of the respective leases. The remaining term includes the initial term of the lease but may also include the renewal periods if the Company believes it is reasonably certain the tenant will exercise the renewal option. If the Company subsequently determines it is reasonably certain that the tenant will

not exercise the renewal option, the unamortized portion of any related lease intangible is accelerated over the remaining initial term of the lease. If the Company believes the intangible balance is no longer recoverable, the unamortized portion of any related lease intangible is immediately recognized in impairments in the Company’s consolidated statements of operations.

Cash, Cash Equivalents and Restricted Cash

Cash and cash equivalents include cash and highly liquid investment securities with maturities at acquisition of three months or less. The Company invests cash primarily in money market funds of major financial institutions with fund investments consisting of highly-rated money market instruments and other short-term investments. Restricted cash is classified within deferred costs and other assets, net in the accompanying consolidated balance sheets. Cash, cash equivalents and restricted cash consisted of the following (in thousands):

 

 

June 30,

2020

 

 

December 31,

2019

 

 

June 30,

2019

 

Cash and cash equivalents

 

$

97,190

 

 

$

14,492

 

 

$

9,984

 

Restricted cash:

 

 

 

 

 

 

 

 

 

 

 

 

Collateral deposits (1)

 

 

426

 

 

 

347

 

 

 

440

 

Tenant improvements, repairs and leasing commissions (2)

 

 

11,769

 

 

 

10,877

 

 

 

9,985

 

Other (3)

 

 

 

 

 

307

 

 

 

580

 

Total cash, cash equivalents and restricted cash

 

$

109,385

 

 

$

26,023

 

 

$

20,989

 

(1) Funds held in lender-controlled accounts generally used to meet future debt service or certain property operating expenses.

(2)

Deposits held as additional collateral support by lenders to fund improvements, repairs and leasing commissions incurred to secure a new tenant.

(3)

Funds held in lender-controlled accounts released after scheduled debt service requirements are met.

Allowance for Doubtful Accounts

The Company reviews its rent and other tenant receivables for collectability on a regular basis, taking into consideration changes in factors such as the tenant’s payment history, the financial condition of the tenant, business conditions in the industry in which the tenant operates, and economic conditions in the area in which the tenant operates. If the collectability of a receivable with respect to any tenant is in doubt, a provision for uncollectible amounts will be established or a direct write-off of the specific receivable will be made. The Company provided for reserves for uncollectible amounts totaling $7.2 million and $3.8 million at June 30, 2020 and December 31, 2019, respectively, against accounts receivable balances of $39.3 million and $11.4 million, respectively. Receivables are recorded within deferred cost and other assets, net in the accompanying consolidated balance sheets. Receivables are written off against the reserves for uncollectible amounts when all possible means of collection have been exhausted.

For receivable balances related to the straight-line method of reporting rental revenue, the collectability is generally assessed in conjunction with the evaluation of rental income as described above. The Company has a reserve for losses of $6.7 million and $0.4 million at June 30, 2020 and December 31, 2019, respectively, against straight-line rent receivables of $95.8 million and $84.0 million, respectively. These receivables are recorded within deferred costs and other assets, net in the accompanying consolidated balance sheets.

Goodwill

Goodwill arises from business combinations and represents the excess of the cost of an acquired entity over the net fair value amounts that were assigned to the identifiable assets acquired and the liabilities assumed. In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment. ASU 2017-04 simplifies the accounting for goodwill impairment by eliminating the Step 2 requirement to calculate the implied fair value of goodwill. Instead, an entity should perform its annual or interim goodwill impairment test by comparing the fair value of each reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. The Company adopted ASU 2017-04 effective January 1, 2020. Goodwill is tested for impairment at the reporting unit level on an annual basis and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying value. No impairment was recorded for the periods presented.

Income Taxes

The Corporation has elected to be taxed as a REIT under the Code. As a REIT, the Corporation generally will not be subject to federal income tax provided it continues to satisfy certain tests concerning the Company’s sources of income, the nature of the Company’s assets, the amounts distributed to the Corporation’s stockholders and the ownership of Corporation stock. Management believes the Corporation has qualified and will continue to qualify as a REIT and, therefore, no provision has

been made for federal income taxes in the accompanying consolidated financial statements. Even if the Corporation qualifies for taxation as a REIT, it may be subject to state and local income and franchise taxes, and to federal income tax and excise tax on its undistributed income.

Taxable income earned by any of the Company's taxable REIT subsidiaries, including from non-REIT activities, is subject to federal, state and local taxes. The rights and obligations of the Asset Management Agreement were transferred to SRAM, a wholly-owned taxable REIT subsidiary of Spirit, on April 1, 2019, which was subsequently terminated and simultaneously replaced by the Interim Management Agreement between SRAM and SMTA, effective as of September 20, 2019. Accordingly, commencing from April 1, 2019, all asset management fees, including the termination fee income, were subject to income tax.  

The Operating Partnership is a partnership for federal income tax purposes. Partnerships are pass-through entities and are not subject to U.S. federal income taxes, therefore no provision has been made for federal income taxes in the accompanying financial statements. Although most states and cities where the Operating Partnership operates follow the U.S. federal income tax treatment, there are certain jurisdictions such as Texas, Tennessee and Ohio that impose income or franchise taxes on a partnership.

Franchise taxes are included in general and administrative expenses on the accompanying consolidated statements of operations.

New Accounting Pronouncements  

In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments, which requires more timely recognition of credit losses associated with financial assets. ASU 2016-13 requires financial assets (or a group of financial assets) measured at an amortized cost basis to be presented at the net amount expected to be collected. ASU 2016-13 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, and as such, the Company adopted ASU 2016-13 effective January 1, 2020. Per the subsequently issued ASU 2018-19, receivables arising from operating leases are not within the scope of ASU 2016-13. As such, the Company reviewed receivables within the scope of ASU 2016-13 totaling $40.3 million, which were comprised of loans receivable and real estate assets held under direct financing lease. The Company determined the key credit quality indicator was the credit rating of the borrower, coupled with remaining time to maturity. As a result, the adoption of the new guidance resulted in the recognition of a loss of $0.3 million on January 1, 2020, which is recorded in impairments on the accompanying consolidated statement of operations.

In April 2020, the FASB released a Staff Q&A regarding the accounting for lease concessions related to the effects of the COVID-19 pandemic. The FASB noted that the underlying premise in requiring a modified lease to be accounted for as if it were a new lease under ASC 842 is that the modified terms and conditions affect the economics of the lease for the remainder of the lease term. As such, the FASB staff clarified that it would be acceptable for entities to make an election to account for lease concessions related to the effects of the COVID-19 pandemic consistent with how those concessions would be accounted for under ASC 842 as though enforceable rights and obligations for those concessions existed (regardless of whether those enforceable rights and obligations for the concessions explicitly exist in the contract). The Company made this election and accounts for rent deferrals by increasing the rent receivables as receivables accrue and continuing to recognize income during the deferral period, resulting in $22.3 million of deferrals being recognized in rental income for the three and six months ended June 30, 2020. The deferral periods range generally from one to six months, with an average deferral period of three months and an average repayment period of 12 months. Lease concessions other than rent deferrals are evaluated to determine if a substantive change to the consideration in the original lease contract has occurred and should be accounted for as a lease modification. Management continues to evaluate any amounts recognized for collectability, regardless of whether accounted for as a lease modification or not, and records a provision for losses against rental income for amounts that are not probable of collection. For lease concessions granted in conjunction with the COVID-19 pandemic, management reviewed all amounts recognized on a tenant-by-tenant basis for collectability.

v3.20.2
Investments
6 Months Ended
Jun. 30, 2020
Real Estate [Abstract]  
Investments

NOTE 3. INVESTMENTS

Owned Properties

As of June 30, 2020, the Company's gross investment in owned real estate properties totaled approximately $6.3 billion. The gross investment is comprised of land, buildings, lease intangible assets and lease intangible liabilities, as adjusted for any impairment, and real estate assets held under direct financing leases and real estate assets held for sale. The portfolio is geographically dispersed throughout 48 states with Texas, at 11.6%, as the only state with a gross investment greater than 10.0% of the total gross investment of the Company's entire portfolio.

During the six months ended June 30, 2020, the Company had the following real estate activity, net of accumulated depreciation and amortization (dollars in thousands):

 

 

Number of Properties

 

 

Dollar Amount of Investments

 

 

 

Held in Use

 

 

Held for Sale

 

 

Total

 

 

Held in Use

 

 

Held for Sale

 

 

Total

 

Gross balance, December 31, 2019

 

 

1,750

 

 

 

2

 

 

 

1,752

 

 

$

6,140,775

 

 

$

1,223

 

 

$

6,141,998

 

Acquisitions/improvements (1)

 

 

29

 

 

 

 

 

 

29

 

 

 

228,812

 

 

 

 

 

 

228,812

 

Dispositions of real estate (2)

 

 

(7

)

 

 

(3

)

 

 

(10

)

 

 

(19,239

)

 

 

(1,842

)

 

 

(21,081

)

Transfers to Held for Sale

 

 

(8

)

 

 

8

 

 

 

 

 

 

(13,705

)

 

 

13,705

 

 

 

 

Transfers from Held for Sale

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Impairments (3)

 

 

 

 

 

 

 

 

 

 

 

(61,708

)

 

 

(32

)

 

 

(61,740

)

Reset of gross balances(4)

 

 

 

 

 

 

 

 

 

 

 

(33,918

)

 

 

(6

)

 

 

(33,924

)

Other

 

 

 

 

 

 

 

 

 

 

 

(1,337

)

 

 

 

 

 

(1,337

)

Gross balance, June 30, 2020

 

 

1,764

 

 

 

7

 

 

 

1,771

 

 

 

6,239,680

 

 

 

13,048

 

 

 

6,252,728

 

Accumulated depreciation and amortization

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(900,501

)

 

 

(340

)

 

 

(900,841

)

Net balance, June 30, 2020 (5)

 

 

 

 

 

 

 

 

 

 

 

 

 

$

5,339,179

 

 

$

12,708

 

 

$

5,351,887

 

 

(1)

Includes investments of $7.6 million in revenue producing capitalized expenditures, as well as $2.4 million of non-revenue producing capitalized expenditures during the six months ended June 30, 2020.

(2)

For the six months ended June 30, 2020, the total gain on disposal of assets for properties held in use and held for sale was $1.1 million and $0.1 million, respectively.

(3)

Impairments on owned real estate is comprised of $61.4 million of real estate and intangible asset impairment and $0.3 million of allowance for credit losses on direct financing leases.  

(4)

Represents write-off of gross investment balances against the related accumulated depreciation and amortization balances as a result of basis reset due to impairment or intangibles which have been fully amortized.

(5)

Reconciliation of total owned investments to the accompanying consolidated balance sheet at June 30, 2020 is as follows:

Operating lease held in use land and buildings, net

 

$

5,102,347

 

Intangible lease assets, net

 

 

 

 

350,466

 

Real estate assets under direct financing leases, net

 

 

 

 

7,300

 

Real estate assets held for sale, net

 

 

 

 

12,708

 

Intangible lease liabilities, net

 

 

 

 

(120,934

)

Net balance

 

 

 

$

5,351,887

 

Operating Leases

As of June 30, 2020 and December 31, 2019, the Company held 1,756 and 1,745 properties under operating leases, respectively. The following table summarizes the components of rental income recognized on these operating leases in the accompanying consolidated statements of operations (in thousands):

 

 

Three Months Ended

June 30,

 

 

Six Months Ended

June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Base Cash Rent(1)

 

$

110,166

 

 

$

98,418

 

 

$

226,712

 

 

$

195,217

 

Variable cash rent (including reimbursables)

 

 

2,404

 

 

 

2,942

 

 

 

5,793

 

 

 

6,580

 

Straight-line rent, net of uncollectible reserve(2)

 

 

4,392

 

 

 

4,485

 

 

 

5,486

 

 

 

7,392

 

Amortization of above- and below- market lease intangibles, net (3)

 

 

228

 

 

 

661

 

 

 

562

 

 

 

1,384

 

Total rental income

 

$

117,190

 

 

$

106,506

 

 

$

238,553

 

 

$

210,573

 

(1)

Includes rent reserved as uncollectible of $4.8 million and net recoveries of $0.8 million for the three months ended June 30, 2020 and 2019, respectively, and reserves of $5.6 million and net recoveries of $1.0 million for the six months ended June 30, 2020 and 2019, respectively.

(2)

Includes net uncollectible reserve/(recovery) of $2.4 million and $(0.6 million) for the three months ended June 30, 2020 and 2019, respectively, and $6.7 million and $0.3 million for the six months ended June 30, 2020 and 2019, respectively.

(3)

Excludes amortization of in-place leases of $8.7 million and $6.5 million for the three months ended June 30, 2020 and 2019, respectively, and $17.5 million and $13.2 million for the six months ended June 30, 2020 and 2019, respectively, which is included in depreciation and amortization expense in the accompanying consolidated statements of operations.

Scheduled minimum future rent to be received under the remaining non-cancellable term of these operating leases (including contractual fixed rent increases occurring on or after July 1, 2020) at June 30, 2020 are as follows (in thousands):

 

 

June 30, 2020

 

Remainder of 2020

 

$

237,029

 

2021

 

 

466,427

 

2022

 

 

449,638

 

2023

 

 

429,129

 

2024

 

 

405,130

 

Thereafter

 

 

3,066,883

 

Total future minimum rentals

 

$

5,054,236

 

Because lease renewal periods are exercisable at the lessees' options, the preceding table presents future minimum lease payments due during the initial lease term only. In addition, the future minimum rentals do not include any contingent rentals based on a percentage of the lessees' gross sales or lease escalations based on future changes in the CPI.

The following table details lease intangible assets and liabilities, net of accumulated amortization (in thousands):

 

 

June 30,

2020

 

 

December 31,

2019

 

In-place leases

 

$

441,072

 

 

$

457,616

 

Above-market leases

 

 

84,385

 

 

 

95,002

 

Less: accumulated amortization

 

 

(174,991

)

 

 

(167,539

)

Intangible lease assets, net

 

$

350,466

 

 

$

385,079

 

 

 

 

 

 

 

 

 

 

Below-market leases

 

$

173,362

 

 

$

176,816

 

Less: accumulated amortization

 

 

(52,428

)

 

 

(49,481

)

Intangible lease liabilities, net

 

$

120,934

 

 

$

127,335

 

Direct Financing Leases

As of June 30, 2020, the Company held one property under a direct financing lease, which was held in use. As of June 30, 2020, this property had $3.8 million in scheduled minimum future payments to be received under the remaining non-cancellable terms of its lease. The Company evaluated the collectability of the amounts receivable under the direct financing lease, and recorded a reserve for uncollectible amounts totaling $0.3 million against the net investment balance of $7.6 million as of June 30, 2020, primarily as a result of the borrower’s credit rating being non-investment grade and the initial term extending until 2027.     

Loans Receivable

As of June 30, 2020, the Company held two first-priority mortgage loans. The mortgage loans are secured by single-tenant commercial properties and have fixed interest rates over the term of the loans. As of June 30, 2020, these loans had an outstanding principal balance of $29.1 million and an unamortized premium balance of $0.2 million. The Company evaluated the collectability of the amounts receivable under the loans receivable and recorded an allowance for loan losses of $0.3 million on January 1, 2020, primarily driven by the borrowers’ having investment grade credit ratings and maturities in 2020. The Company reversed $0.2 million of the reserve in the second quarter of 2020 due to the shorter time to maturity and no change in the borrower’s credit ratings. As of June 30, 2020, there was a remaining allowance of $0.1 million against the carrying value of $29.3 million.   

Impairments and Allowance for Credit Losses

The following table summarizes total impairments and allowance for credit losses recognized in the accompanying consolidated statements of operations (in thousands):

 

 

Three Months Ended

June 30,

 

 

Six Months Ended

June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Real estate and intangible asset impairment

 

$

21,272

 

 

$

3,607

 

 

$

61,436

 

 

$

7,299

 

Allowance for credit losses on direct financing leases

 

 

 

 

 

 

 

 

304

 

 

 

 

(Reversal)/allowance for credit losses on loans receivable

 

 

(223

)

 

 

 

 

 

83

 

 

 

 

Total impairment loss

 

$

21,049

 

 

$

3,607

 

 

$

61,823

 

 

$

7,299

 

 

v3.20.2
Debt
6 Months Ended
Jun. 30, 2020
Debt Disclosure [Abstract]  
Debt

NOTE 4. DEBT

The debt of the Company and the Operating Partnership are the same, except for the presentation of the Convertible Notes which were issued by the Company. Subsequently, an intercompany note between the Company and the Operating Partnership was executed with terms identical to those of the Convertible Notes. Therefore, in the consolidated balance sheet of the Operating Partnership, the amounts related to the Convertible Notes are reflected as notes payable to Spirit Realty Capital, Inc., net. The Company's debt is summarized below (dollars in thousands):

 

 

Weighted Average Effective Interest Rates (1)

 

 

Weighted Average Stated Interest Rates (2)

 

 

Weighted Average Remaining Years to Maturity (3)

 

 

June 30,

2020

 

 

December 31,

2019

 

Revolving credit facilities

 

3.66%

 

 

 

 

 

 

2.8

 

 

$

 

 

$

116,500

 

Term loans

 

1.96%

 

 

1.69%

 

 

 

1.8

 

 

 

400,000

 

 

 

 

Senior Unsecured Notes

 

3.85%

 

 

3.73%

 

 

 

8.1

 

 

 

1,500,000

 

 

 

1,500,000

 

CMBS

 

5.81%

 

 

5.47%

 

 

 

3.3

 

 

 

216,316

 

 

 

218,338

 

Convertible Notes

 

5.64%

 

 

3.75%

 

 

 

0.9

 

 

 

345,000

 

 

 

345,000

 

Total debt

 

4.10%

 

 

3.55%

 

 

 

5.7

 

 

 

2,461,316

 

 

 

2,179,838

 

Debt discount, net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(6,804

)

 

 

(9,272

)

Deferred financing costs, net (4)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(18,004

)

 

 

(17,549

)

Total debt, net

 

 

 

 

 

 

 

 

 

 

 

 

 

$

2,436,508

 

 

$

2,153,017

 

(1)

The effective interest rates include amortization of debt discount/premium, amortization of deferred financing costs, facility fees, and non-utilization fees, where applicable, calculated for the six months ended June 30, 2020 and based on the average principal balance outstanding during the period.

(2)

Represents the weighted average stated interest rate based on the outstanding principal balance as of June 30, 2020.

(3)

Represents the weighted average remaining years to maturity based on the outstanding principal balance as of June 30, 2020.

(4)

The Company records deferred financing costs for its revolving credit facilities in deferred costs and other assets, net on its consolidated balance sheets.

Revolving Credit Facilities

On January 14, 2019, the Operating Partnership entered into the 2019 Revolving Credit and Term Loan Agreement, comprised of the 2019 Credit Facility and the A-1 Term Loans, which replaced the 2015 Credit Agreement and 2015 Term Loan Agreement, respectively. The 2019 Credit Facility is comprised of $800.0 million of aggregate revolving commitments and an accordion feature providing for an additional $400.0 million of revolving borrowing capacity, subject to satisfying certain requirements and obtaining additional lender commitments. The 2019 Credit Facility has an initial maturity date of March 31, 2023 and includes two six-month extensions that can be exercised at the Company’s option. Borrowings may be repaid, in whole or in part, at any time, without premium or penalty, but subject to applicable LIBOR breakage fees, if any.

As of June 30, 2020, the outstanding loans under the 2019 Credit Facility bore interest at LIBOR plus an applicable margin of 0.90% per annum and the aggregate revolving commitments incurred a facility fee of 0.20% per annum, in each case, based on the Operating Partnership's credit rating, which was upgraded to BBB by S&P in May 2019. Prior to the upgrade, the 2019 Credit Facility bore interest at LIBOR plus an applicable margin of 1.10% per annum and the aggregate revolving commitments incurred a facility fee of 0.25% per annum.

Deferred financing costs incurred in connection with entering into the 2019 Credit Facility are being amortized to interest expense over its remaining initial term. The unamortized deferred financing costs were $3.1 million as of June 30, 2020, compared to $3.7 million as of December 31, 2019, and are recorded in deferred costs and other assets, net on the accompanying consolidated balance sheets.

As of June 30, 2020, the full $800.0 million of borrowing capacity was available under the 2019 Credit Facility. No outstanding letters of credit existed under the agreement as of June 30, 2020. The Operating Partnership's ability to borrow under the 2019 Credit Facility is subject to ongoing compliance with a number of customary financial covenants and other customary affirmative and negative covenants. As of June 30, 2020, the Company and the Operating Partnership were in compliance with these financial covenants.

Term Loans

On April 2, 2020, the Operating Partnership entered into the 2020 Term Loan Agreement, which provided for $200 million of unsecured term loans and has a maturity date of April 2, 2022. The 2020 Term Loan Agreement also had an accordion feature to increase the available term loans up to an aggregate of $400 million, which the Operating Partnership fully exercised in the second quarter of 2020 to borrow an additional $200 million of term loans. As of June 30, 2020, the 2020 Term Loans bore interest at LIBOR plus an applicable margin of 1.5% per annum, based on the Operating Partnership’s credit rating. If any 2020 Term Loans are outstanding after April 2, 2021, the Operating Partnership will be required to pay a one-time fee in an amount equal to 0.20% of the outstanding principal amount of the loans.

In connection with entering into the 2020 Term Loan Agreement, the Company incurred $2.5 million in deferred financing costs, which are being amortized to interest expense over the 2020 Term Loans’ remaining initial term. As of June 30, 2020, the unamortized deferred financing costs were $2.2 million and are recorded net against the Term loan principal balance on the accompanying consolidated balance sheets.

In connection with the borrowings under the 2020 Term Loan Agreement, the Company and Operating Partnership are subject to ongoing compliance with a number of customary financial covenants and other customary affirmative and negative covenants. As of June 30, 2020, the Company and the Operating Partnership were in compliance with these financial covenants.

Senior Unsecured Notes       

The Senior Unsecured Notes were issued by the Operating Partnership and guaranteed by the Company. The following is a summary of the Senior Unsecured Notes outstanding (dollars in thousands):

 

 

Maturity Date

 

Stated Interest Rate

 

 

June 30,

2020

 

 

December 31,

2019

 

2026 Senior Notes

 

September 15, 2026

 

4.45%

 

 

$

300,000

 

 

$

300,000

 

2027 Senior Notes

 

January 15, 2027

 

3.20%

 

 

 

300,000

 

 

 

300,000

 

2029 Senior Notes

 

July 15, 2029

 

4.00%

 

 

 

400,000

 

 

 

400,000

 

2030 Senior Notes

 

January 15, 2030

 

3.40%

 

 

 

500,000

 

 

 

500,000

 

Total Senior Unsecured Notes

 

 

 

3.73%

 

 

$

1,500,000

 

 

$

1,500,000

 

The Senior Unsecured Notes are payable on January 15 and July 15 of each year, except for the 2026 Senior Notes, which are payable on March 15 and September 15 of each year. The Senior Unsecured Notes are redeemable in whole at any time or in part from time to time, at the Operating Partnership’s option, at a redemption price equal to the sum of: 100% of the principal amount of the respective Senior Unsecured Notes to be redeemed plus accrued and unpaid interest and liquidated damages, if any, up to, but not including, the redemption date; and a make-whole premium. If any of the Senior Unsecured Notes are redeemed three months or less (or two months or less in the case of the 2027 Senior Notes) prior to their respective maturity dates, the redemption price will not include a make-whole premium.  

Deferred financing costs and offering discounts incurred in connection with the issuance the Senior Unsecured Notes are being amortized to interest expense over the lives of the respective Senior Unsecured Notes. As of June 30, 2020 and December 31, 2019, the unamortized deferred financing costs were $12.3 million and $12.9 million, respectively, and the unamortized discount was $2.9 million and $3.0 million, respectively. Both the deferred financing costs and offering discount are recorded net against the Senior Unsecured Notes principal balance on the accompanying consolidated balance sheets.

In connection with the issuance of the Senior Unsecured Notes, the Company and Operating Partnership are subject to ongoing compliance with a number of customary financial covenants and other customary affirmative and negative covenants. As of June 30, 2020, the Company and the Operating Partnership were in compliance with these financial covenants.

CMBS

As of June 30, 2020, indirect wholly-owned special purpose entity subsidiaries of the Company were borrowers under five fixed-rate non-recourse loans, which have been securitized into CMBS and are secured by the borrowers' respective leased properties and related assets. The stated interest rates as of June 30, 2020 for the loans ranged from 5.23% to 6.00%, with a weighted average stated rate of 5.47%. As of June 30, 2020, the loans were secured by 88 properties. As of June 30, 2020 and December 31, 2019, the unamortized deferred financing costs associated with the CMBS loans were $2.2 million and $2.6 million, respectively, and the unamortized net offering premium was $0.3 million as of both periods. Both the deferred financing costs and offering premium were recorded net against the principal balance of the mortgages and notes payable on the accompanying consolidated balance sheets and are being amortized to interest expense over the term of the respective loans.

Convertible Notes

In May 2014, the Company issued $402.5 million aggregate principal amount of 2.875% convertible notes due in 2019 and $345.0 million aggregate principal amount of 3.75% convertible notes due in 2021. Proceeds from the issuance were contributed to the Operating Partnership and are recorded as a note payable to Spirit Realty Capital, Inc. on the consolidated balance sheets of the Operating Partnership. The 2019 Notes matured on May 15, 2019 and were settled in cash. The 2021 Notes will mature on May 15, 2021 and interest is payable semi-annually in arrears on May 15 and November 15 of each year.

The 2021 Notes are convertible only during certain periods and, subject to certain circumstances, into cash, shares of the Corporation’s common stock, or a combination thereof. The conversion rate is subject to adjustment for certain anti-dilution events, including special distributions and regular quarterly cash dividends exceeding a current threshold of $0.73026 per share. As of June 30, 2020, the conversion rate was 17.4458 per $1,000 principal note, which reflects the adjustment from the SMTA dividend distribution related to the Spin-Off, in addition to the other regular dividends declared during the life of the Convertible Notes. Earlier conversion may be triggered if shares of the Corporation’s common stock trade higher than the established thresholds, if the 2021 Notes trade below established thresholds, or certain corporate events occur.

Offering discount and deferred financing costs incurred in connection with the issuance of the Convertible Notes are being amortized to interest expense over the term of the respective Convertible Notes and, as such, the amounts related to the 2019 Notes were fully amortized in May 2019. As of June 30, 2020 and December 31, 2019, the unamortized discount was $4.2 million and $6.5 million, respectively. As of June 30, 2020 and December 31, 2019, the unamortized deferred financing costs were $1.3 million and $2.1 million, respectively. These amounts are shown net against the aggregate outstanding principal balance of the Convertible Notes on the accompanying consolidated balance sheets. The equity component of the conversion feature was $55.1 million as of both June 30, 2020 and December 31, 2019 and is recorded in capital in excess of par value in the accompanying consolidated balance sheets, net of financing transaction costs.

Debt Extinguishment

During the six months ended June 30, 2020, we did not extinguish any debt.

During the six months ended June 30, 2019, the Company retired the Master Trust 2013 notes, resulting in a loss on debt extinguishment of $14.7 million. The Company also extinguished a total of $10.4 million aggregate principal amount of CMBS indebtedness on one defaulted loan, which was secured by one property. The loan had a default interest rate of 9.85% and resulted in a gain on debt extinguishment of $9.5 million. Finally, as a result of the termination of the 2015 Credit Agreement and the 2015 Term Loan Agreement, the Company recognized a loss on debt extinguishment of $0.7 million.

Debt Maturities

As of June 30, 2020, scheduled debt maturities, including balloon payments, were as follows (in thousands):

 

 

Scheduled

Principal

 

 

Balloon

Payment

 

 

Total

 

Remainder of 2020

 

$

2,078

 

 

$

 

 

$

2,078

 

2021

 

 

4,365

 

 

 

345,000

 

 

 

349,365

 

2022

 

 

4,617

 

 

 

400,000

 

 

 

404,617

 

2023

 

 

3,074

 

 

 

197,912

 

 

 

200,986

 

2024

 

 

590

 

 

 

 

 

 

590

 

Thereafter

 

 

3,610

 

 

 

1,500,070

 

 

 

1,503,680

 

Total

 

$

18,334

 

 

$

2,442,982

 

 

$

2,461,316

 

Interest Expense

The following table is a summary of the components of interest expense related to the Company's borrowings (in thousands):

 

 

Three Months Ended

June 30,

 

 

Six Months Ended

June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Interest expense – revolving credit facilities (1)

 

$

804

 

 

$

1,798

 

 

$

2,860

 

 

$

3,976

 

Interest expense – term loans

 

 

1,671

 

 

 

5,691

 

 

 

1,671

 

 

 

9,669

 

Interest expense – Senior Unsecured Notes

 

 

13,987

 

 

 

3,515

 

 

 

27,975

 

 

 

6,853

 

Interest expense – mortgages and notes payable

 

 

2,998

 

 

 

5,829

 

 

 

6,011

 

 

 

12,082

 

Interest expense – Convertible Notes (2)

 

 

3,235

 

 

 

4,649

 

 

 

6,469

 

 

 

10,776

 

Non-cash interest expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of deferred financing costs

 

 

1,456

 

 

 

1,774

 

 

 

2,598

 

 

 

3,805

 

Amortization of debt discount, net

 

 

1,242

 

 

 

1,920

 

 

 

2,466

 

 

 

4,626

 

Amortization of net losses related to interest rate swaps

 

 

702

 

 

 

 

 

 

1,404

 

 

 

 

Total interest expense

 

$

26,095

 

 

$

25,176

 

 

$

51,454

 

 

$

51,787

 

 

(1)

Includes facility fees of approximately $0.4 million and $0.5 million for the three months ended June 30, 2020 and 2019, respectively, and $0.8 million and $1.2 million for the six months ended June 30, 2020 and 2019, respectively.

(2)

Included in interest expense on the Operating Partnership's consolidated statements of operations are amounts paid to the Company by the Operating Partnership related to the notes payable to Spirit Realty Capital, Inc.

v3.20.2
Stockholders' Equity and Partners' Capital
6 Months Ended
Jun. 30, 2020
Equity [Abstract]  
Stockholders' Equity and Partners' Capital

NOTE 5. STOCKHOLDERS’ EQUITY AND PARTNERS' CAPITAL

Common Stock

During the six months ended June 30, 2020, portions of awards of restricted common stock and market-based share awards granted to certain of the Company's officers and other employees vested. The vesting of these awards, granted pursuant to the Amended Incentive Award Plan, resulted in federal and state income tax liabilities for the recipients. As permitted by the terms of the Amended Incentive Award Plan and the award grants, certain executive officers and employees elected to surrender 117.5 thousand shares of common stock valued at $4.4 million, solely to pay the associated statutory tax withholdings during the six months ended June 30, 2020.               

In June 2020, the Company entered into forward sale agreements with certain financial institutions acting as forward purchasers in connection with an offering of 9.2 million shares of common stock at an initial public offering price of $37.35 per share, before underwriting discounts and offering expenses.The Company did not receive any proceeds from the sale of its shares of common stock by the forward purchasers at the time of the offering. The forward sale price that the Company will receive upon physical settlement of the agreements, which was initially $35.856 per share, will be subject to adjustment for (i) a floating interest rate factor equal to a specified daily rate less a spread, (ii) the forward purchasers' stock borrowing costs and (iii) scheduled dividends during the term of the forward sale agreements. As of June 30, 2020, none of these shares had been settled.

In November 2016, the Board of Directors approved a $500 million ATM Program. The agreement provides for the offer and sale of shares of the Corporation’s common stock having an aggregate gross sales price of up to $500.0 million through the agents, as its sales agents or, if applicable, as forward sellers for forward purchasers, or directly to the agents acting as principals. The Company may sell shares in amounts and at times to be determined by the Company but has no obligation to sell any shares in the ATM program. Since inception of the ATM Program through June 30, 2020, 5.6 million shares of the Corporation’s common stock have been sold, of which 0.4 million were sold during the six months ended June 30, 2020 at a weighted average price per share of $49.30, generating $17.9 million in gross proceeds. 3.8 million of these sales were through forward sales agreements, including all of the shares sold during the six months ended June 30, 2020. There were no open forward sales agreements under the ATM Program as of June 30, 2020. Aggregate gross proceeds capacity of $246.3 million remained available under the program as of June 30, 2020.

Preferred Stock

As of June 30, 2020, the Company had 6.9 million shares of 6.00% Series A Preferred Stock outstanding. The Series A Preferred Stock pays cumulative cash dividends at the rate of 6.00% per annum on the liquidation preference of $25.00 per share (equivalent to $0.375 per share on a quarterly basis and $1.50 per share on an annual basis).  

Dividends Declared

For the six months ended June 30, 2020, the Company's Board of Directors declared the following dividends:

Declaration Date

 

Dividend Per Share

 

 

Record Date

 

Total Amount

(in thousands)

 

 

Payment Date

Common Stock

 

 

 

 

 

 

 

 

 

 

 

 

February 27, 2020

 

$

0.625

 

 

March 31, 2020

 

$

64,338

 

 

April 15, 2020

May 22, 2020

 

$

0.625

 

 

June 30, 2020

 

$

64,402

 

 

July 15, 2020

Preferred Stock

 

 

 

 

 

 

 

 

 

 

 

 

February 27, 2020

 

$

0.375

 

 

March 13, 2020

 

$

2,588

 

 

March 31, 2020

May 22, 2020

 

$

0.375

 

 

June 15, 2020

 

$

2,588

 

 

June 30, 2020

The common stock dividend declared on May 22, 2020 is included in accounts payable, accrued expenses and other liabilities in the consolidated balance sheets as of June 30, 2020.

v3.20.2
Commitments and Contingencies
6 Months Ended
Jun. 30, 2020
Commitments And Contingencies Disclosure [Abstract]  
Commitments and Contingencies

NOTE 6. COMMITMENTS AND CONTINGENCIES

The Company is periodically subject to claims or litigation in the ordinary course of business, including claims generated from business conducted by tenants on real estate owned by the Company. In these instances, the Company is typically indemnified by the tenant against any losses that might be suffered, and the Company and/or the tenant are typically insured against such claims. The Company is contingently liable for $5.7 million of debt owed by one of its former tenants until the maturity of the debt on March 15, 2022. The Company has accrued the full $5.7 million liability in accounts payable, accrued expenses and other liabilities in the consolidated balance sheet as of both June 30, 2020 and December 31, 2019.

The Company estimates future costs for known environmental remediation requirements when it is probable that the Company has incurred a liability and the related costs can be reasonably estimated. The Company considers various factors when estimating its environmental liabilities, and adjustments are made when additional information becomes available that affects the estimated costs to study or remediate any environmental issues. When only a wide range of estimated amounts can be reasonably established and no other amount within the range is better than another, the low end of the range is recorded in the consolidated financial statements. As of June 30, 2020, no accruals have been made.

As of June 30, 2020, there were no outstanding claims against the Company that are expected to have a material adverse effect on the Company’s financial position, results of operations or cash flows.

Purchase and Capital Improvement Commitments

As of June 30, 2020, the Company had commitments totaling $13.0 million, all of which are to fund improvements on properties the Company currently owns. $11.8 million of these commitments are expected to be funded during fiscal year 2020, with the remainder to be funded by the end of 2021.

Lessee Contracts

The Company leases its current corporate office space and certain office equipment, which are classified as operating leases. The Company's lease of its corporate office space has an initial term that expires on January 31, 2027 and is renewable at the Company's option for two additional periods of five years each after the initial term. The corporate office lease contains a variable lease cost related to the lease of parking spaces and a non-lease component related to the reimbursement of certain common area maintenance expenses, both of which are recognized as incurred.

The Company is also a lessee under five long-term, non-cancellable ground leases under which it is obligated to pay monthly rent as of June 30, 2020. For all five of the ground leases, rental expenses are reimbursed by unrelated third parties, and the corresponding rental revenue is recorded in rental income on the accompanying consolidated statements of operations. All leases are classified as operating leases and have a weighted average remaining lease term of 7.2 years.

As of June 30, 2020, the Company had a right-of-use lease asset balance of $5.0 million and total operating lease liabilities of $6.9 million for these lessee contracts.

v3.20.2
Derivative and Hedging Activities
6 Months Ended
Jun. 30, 2020
Derivative Instruments And Hedging Activities Disclosure [Abstract]  
Derivative and Hedging Activities

NOTE 7. DERIVATIVE AND HEDGING ACTIVITIES

The Company uses interest rate derivative contracts to manage its exposure to changes in interest rates on its variable rate debt. These derivatives are considered cash flow hedges and are recorded on a gross basis at fair value. Assessments of hedge effectiveness are performed quarterly using either a qualitative or quantitative approach. The Company recognizes the entire change in the fair value in AOCL and the change is reflected as cash flow hedge changes in fair value in the supplemental disclosures of non-cash investing and financing activities in the consolidated statement of cash flows.

Amounts will subsequently be reclassified to earnings when the hedged item affects earnings. The Company does not enter into derivative contracts for speculative or trading purposes and does not have derivative netting arrangements.

The Company is exposed to credit risk in the event of non-performance by its derivative counterparties. The Company evaluates counterparty credit risk through monitoring the creditworthiness of counterparties, which includes review of debt ratings and financial performance. To mitigate credit risk, the Company enters into agreements with counterparties it considers credit-worthy, such as large financial institutions with favorable credit ratings.

In December 2018, the Company entered into interest rate swap agreements. In the third quarter of 2019, the Company terminated its interest rate swaps and accelerated the reclassification of a loss of $12.5 million from AOCL to termination of interest rate swaps as a result of a portion of the hedged forecasted transactions becoming probable not to occur. There were no events of default related to the interest rate swaps prior to their termination. Given that a proportion of the hedged transactions remained probable to occur, $12.3 million of the loss was deferred in other comprehensive loss and will be amortized over the remaining initial term of the interest rate swaps, which ends March 31, 2024. As of June 30, 2020, the unamortized portion of loss in AOCL related to terminated interest rate swaps was $10.1 million.

The following table provides information about the amounts recorded in AOCL, as well as the loss recorded in operations, when reclassified out of AOCL or recognized in earnings immediately (in thousands):

 

 

Three Months Ended

June 30,

 

 

Six Months Ended

June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Gross amount of loss recognized in AOCL on derivatives

 

$

 

 

$

(9,097

)

 

$

 

 

$

(14,326

)

Amount of loss reclassified from AOCL to termination of interest rate swaps

 

 

 

 

 

343

 

 

 

 

 

 

551

 

Amount of loss reclassified from AOCL to interest (1)

 

 

702

 

 

 

 

 

 

1,404

 

 

 

 

Net reclassification of amounts from (to) AOCL

 

$

702

 

 

$

(8,754

)

 

$

1,404

 

 

$

(13,775

)

(1)

Interest expense for the three and six months ended June 30, 2020 was $26.1 million and $51.5 million, respectively.

During the next 12 months, we estimate that approximately $2.8 million will be reclassified as an increase to interest expense related to terminated hedges of existing floating-rate debt.

v3.20.2
Fair Value Measurements
6 Months Ended
Jun. 30, 2020
Fair Value Disclosures [Abstract]  
Fair Value Measurements

NOTE 8. FAIR VALUE MEASUREMENTS

Nonrecurring Fair Value Measurements

Fair value measurement of an asset on a nonrecurring basis occurs when events or changes in circumstances related to an asset indicate that the carrying amount of the asset is no longer recoverable. Real estate assets and their related intangible assets are evaluated for impairment based on certain indicators including, but not limited to: the asset being held for sale, vacant or non-operating, tenant bankruptcy or delinquency, and leases expiring in 60 days or less. The fair values of impaired real estate and intangible assets were determined by using the following information, depending on availability, in order of preference: signed purchase and sale agreements (“PSA”) or letters of intent (“LOI”); broker opinions of value (“BOV”); recently quoted bid or ask prices, or market prices for comparable properties; estimates of discounted cash flows, which consider, among other things, contractual and forecasted rental revenues, leasing assumptions, expenses based upon market conditions and capitalization rates; and expectations for the use of the real estate. Based on these inputs, the Company determined that its valuation of the impaired real estate and intangible assets falls within Level 3 of the fair value hierarchy. The following table sets forth the Company’s assets that were accounted for at fair value on a nonrecurring basis as of their respective measurement dates (in thousands):

 

 

 

 

 

 

Fair Value Hierarchy Level

 

Description

 

Fair Value

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Assets held at June 30, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Impaired at March 31, 2020

 

$

52,131

 

 

$

 

 

$

 

 

$

52,131

 

Impaired at June 30, 2020

 

$

10,294

 

 

$

 

 

$

 

 

$

10,294

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets held at December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Impaired at June 30, 2019

 

$

1,893

 

 

$

 

 

$

 

 

$

1,893

 

Impaired at September 30, 2019

 

$

1,093

 

 

$

 

 

$

 

 

$

1,093

 

Impaired at December 31, 2019

 

$

11,594

 

 

$

 

 

$

 

 

$

11,594

 

As of June 30, 2020, the Company held 24 properties that were impaired during 2020. As of December 31, 2019, the Company held 16 properties that were impaired during 2019. For one of the properties held at June 30, 2020, the Company estimated fair value using a capitalization rate of 10.06% based on comparative capitalization rates from market

comparables. For one of the properties held at December 31, 2019, the Company estimated fair value using a capitalization rate of 9.62% based on comparative capitalization rates from market comparables. For the remaining properties, the Company estimated property fair value using price per square foot from unobservable inputs and, for the properties valued using comparable properties at June 30, 2020, the price per square foot includes a discount of 0-10% to account for the market impact of COVID-19. The unobservable inputs for the remaining properties are as follows:

 

Unobservable Input

 

Asset Type

 

Property Count

 

 

Price Per Square Foot Range

 

Weighted Average Price Per Square Foot

 

Square Footage

 

June 30, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comparable Properties

 

Retail

 

 

14

 

 

$4.35 - $320.89

 

$49.77

 

 

573,784

 

PSA, LOI or BOV

 

Retail

 

 

7

 

 

$30.66 - $349.62

 

$44.57

 

 

349,609

 

PSA, LOI or BOV

 

Industrial

 

 

1

 

 

$13.79

 

$13.79

 

 

35,551

 

PSA, LOI or BOV

 

Office

 

 

1

 

 

$96.39

 

$96.39

 

 

4,310

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comparable Properties

 

Retail

 

 

4

 

 

$34.45 - $740.74

 

$104.84

 

 

35,885

 

PSA, LOI or BOV

 

Retail

 

 

10

 

 

$24.78 - $323.00

 

$50.71

 

 

165,773

 

PSA, LOI or BOV

 

Office

 

 

1

 

 

$99.37

 

$99.37

 

 

4,310

 

Estimated Fair Value of Financial Instruments

Financial assets and liabilities for which the carrying values approximate their fair values include cash and cash equivalents, restricted cash and escrow deposits, and accounts receivable and payable. Generally, these assets and liabilities are short-term in duration and are recorded at cost, which approximates fair value, on the accompanying consolidated balance sheets.

In addition, companies are required to disclose the estimated fair values of all financial instruments, even if they are not carried at their fair values. The fair values of financial instruments are estimates based upon market conditions and perceived risks at June 30, 2020 and December 31, 2019. These estimates require management’s judgment and may not be indicative of the future fair values of the assets and liabilities. The estimated fair values of these financial instruments have been derived either based on (i) market quotes for identical or similar instruments in markets that are not active or (ii) discounted cash flow analyses using estimates of the amount and timing of future cash flows, market rates and credit spreads. These measurements are classified as Level 2 of the fair value hierarchy. The following table discloses fair value information for these financial instruments (in thousands):  

 

 

June 30, 2020

 

 

December 31, 2019

 

 

 

Carrying

Value

 

 

Estimated

Fair Value

 

 

Carrying

Value

 

 

Estimated

Fair Value

 

Loans receivable, net

 

$

29,163

 

 

$

29,823

 

 

$

34,465

 

 

$

35,279

 

2019 Credit Facility

 

 

 

 

 

 

 

 

116,500

 

 

 

119,802

 

2020 Term Loans

 

 

397,824

 

 

 

400,231

 

 

 

 

 

 

 

Senior Unsecured Notes, net (1)

 

 

1,484,884

 

 

 

1,455,070

 

 

 

1,484,066

 

 

 

1,543,919

 

Mortgages and notes payable, net (1)

 

 

214,338

 

 

 

228,768

 

 

 

216,049

 

 

 

235,253

 

Convertible Notes, net (1)

 

 

339,462

 

 

 

344,597

 

 

 

336,402

 

 

 

356,602

 

(1)

The carrying value of the debt instruments are net of unamortized deferred financing costs and certain debt discounts/premiums.

v3.20.2
Incentive Award Plan
6 Months Ended
Jun. 30, 2020
Compensation Related Costs [Abstract]  
Incentive Award Plan

NOTE 9. INCENTIVE AWARD PLAN

Restricted Shares of Common Stock

During the six months ended June 30, 2020, the Company granted 148 thousand restricted shares under the Amended Incentive Award Plan to certain executive officers, directors and employees. The Company recorded $6.9 million in deferred compensation associated with these grants. Deferred compensation for restricted shares will be recognized in expense over the requisite service period. As of June 30, 2020, there were approximately 296 thousand unvested restricted shares outstanding.

Market-Based Awards

During the six months ended June 30, 2020, the Board of Directors, or committee thereof, approved target grants of 88 thousand market-based awards to executive officers of the Company. The performance period of these grants runs primarily through December 31, 2022. Potential shares of the Corporation’s common stock that each participant is eligible to receive is based on the initial target number of shares granted, multiplied by a percentage range between 0% and 300%. Grant date fair value of the market-based share awards was calculated using the Monte Carlo simulation model, which incorporated stock price volatility of the Company and each of the Company’s peers and other variables over the time horizons matching the performance periods. Significant inputs for the calculation were expected volatility of the Company of 25.2% and expected volatility of the Company's peers, ranging from 18.1% to 27.3%, with an average volatility of 21.7% and a risk-free interest rate of 1.07%. The fair value of the market-based award per share was $67.30 as of the grant date. Stock-based compensation expense associated with unvested market-based share awards is recognized on a straight-line basis over the minimum required service period, which is generally three years.

Approximately $1.6 million and $2.7 million in dividend rights have been accrued as of June 30, 2020 and December 31, 2019, respectively. For outstanding non-vested awards at June 30, 2020, 0.4 million shares would have been released based on the Corporation’s TSR relative to the specified peer groups through that date.

Stock-based Compensation Expense

For the three months ended June 30, 2020 and 2019, the Company recognized $3.3 million and $3.9 million, respectively, in stock-based compensation expense, and for the six months ended June 30, 2020 and 2019, the Company recognized $6.8 million and $7.5 million, respectively. These amounts are included in general and administrative expenses in the accompanying consolidated statements of operations. As of June 30, 2020, the remaining unamortized stock-based compensation expense totaled $18.4 million, comprised of $9.7 million related to restricted stock awards and $8.7 million related to market-based awards. As of December 31, 2019, the unamortized stock-based compensation expense totaled $12.6 million, comprised of $6.6 million related to restricted stock awards and $6.0 million related to market-based awards. Amortization is recognized on a straight-line basis over the service period of each applicable award.

v3.20.2
Income Per Share and Partnership Unit
6 Months Ended
Jun. 30, 2020
Earnings Per Share [Abstract]  
Income Per Share and Partnership Unit

NOTE 10. INCOME PER SHARE AND PARTNERSHIP UNIT

Income per share and unit has been computed using the two-class method, which is computed by dividing the sum of distributed earnings to common stockholders and undistributed earnings allocated to common stockholders by the weighted average number of shares of common stock outstanding for the period. In applying the two-class method, undistributed earnings are allocated to both shares of common stock and participating securities based on the weighted average shares outstanding during the period. Classification of the Company's unvested restricted stock, which contain rights to receive nonforfeitable dividends, are deemed participating securities under the two-class method. Under the two-class method, earnings attributable to unvested restricted shares are deducted from income from continuing operations in the computation of net income attributable to common stockholders.

The table below is a reconciliation of the numerator and denominator used in the computation of basic and diluted net (loss) income per share and unit computed using the two-class method (dollars in thousands):

 

 

Three Months Ended

June 30,

 

 

Six Months Ended

June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Basic and diluted (loss) income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Loss) income from continuing operations

 

$

(413

)

 

$

45,737

 

 

$

(16,260

)

 

$

89,315

 

Less: dividends paid to preferred stockholders

 

 

(2,588

)

 

 

(2,588

)

 

 

(5,176

)

 

 

(5,176

)

Less: dividends attributable to unvested restricted stock

 

 

(185

)

 

 

(250

)

 

 

(392

)

 

 

(522

)

Net (loss) income attributable to common stockholders used in basic and diluted (loss) income per share

 

$

(3,186

)

 

$

42,899

 

 

$

(21,828

)

 

$

83,617

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic weighted average shares of common stock outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares of common stock outstanding

 

 

102,980,619

 

 

 

87,422,369

 

 

 

102,765,967

 

 

 

86,673,672

 

Less: unvested weighted average shares of restricted stock

 

 

(301,652

)

 

 

(420,382

)

 

 

(311,410

)

 

 

(419,974

)

Basic weighted average shares of common stock outstanding

 

 

102,678,967

 

 

 

87,001,987

 

 

 

102,454,557

 

 

 

86,253,698

 

Net (loss) income per share attributable to common stockholders - basic

 

$

(0.03

)

 

$

0.49

 

 

$

(0.21

)

 

$

0.97

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted weighted average shares of common stock outstanding: (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Plus: unsettled shares under open forward equity contracts

 

 

 

 

 

772,040

 

 

 

 

 

 

328,617

 

Plus: unvested market-based awards

 

 

 

 

 

116,672

 

 

 

 

 

 

196,982

 

Diluted weighted average shares of common stock outstanding

 

 

102,678,967

 

 

 

87,890,699

 

 

 

102,454,557

 

 

 

86,779,297

 

Net (loss) income per share attributable to common stockholders - diluted

 

$

(0.03

)

 

$

0.49

 

 

$

(0.21

)

 

$

0.96

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Potentially dilutive shares of common stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unvested shares of restricted stock, less shares assumed repurchased at market

 

 

 

 

 

160,606

 

 

 

66,920

 

 

 

191,215

 

Unsettled shares under open forward equity contracts

 

 

 

 

 

 

 

 

607,636

 

 

 

 

Unvested shares of market-based awards

 

 

83,625

 

 

 

 

 

 

230,537

 

 

 

 

 

(1)

Assumes the most dilutive issuance of potentially issuable shares between the two-class and treasury stock method unless the result would be anti-dilutive.

The Corporation intends to satisfy its exchange obligation for the principal amount of the 2021 Convertible Notes to the note holders entirely in cash; therefore, the "if-converted" method does not apply and the treasury stock method is being used. For the six months ended June 30, 2020 and 2019, the Corporation’s average stock price was below the conversion price, resulting in zero potentially dilutive shares related to the conversion spread of the 2021 Convertible Notes.

v3.20.2
Related Party Transactions and Arrangements
6 Months Ended
Jun. 30, 2020
Related Party Transactions [Abstract]  
Related Party Transactions and Arrangements

Note 11. Related Party Transactions and Arrangements

Continuing Involvement

Subsequent to the Spin-Off, the Company has had continuing involvement with SMTA through related party agreements. The Company had cash inflows from SMTA of $0.8 million and cash outflows to SMTA of $4 thousand for the six months ended June 30, 2020. The Company had cash inflows from SMTA of $22.7 million and cash outflows to SMTA of $22.7 million for the six months ended June 30, 2019.

Cost Sharing Arrangements

In conjunction with the Spin-Off, the Company and SMTA entered into certain agreements, including the Separation and Distribution Agreement, Tax Matters Agreement, Registration Rights Agreement and Insurance Sharing Agreement. These agreements provide a framework for the relationship between the Company and SMTA after the Spin-Off, by which Spirit may incur certain expenses on behalf of SMTA that must be reimbursed in a timely manner. These agreements, except for the Tax Matters Agreement, were terminated in conjunction with the termination of the Asset Management Agreement.   

Asset Management Agreement and Interim Management Agreement

In conjunction with the Spin-Off, the Company entered into the Asset Management Agreement pursuant to which the Operating Partnership provided various management services to SMTA. On June 2, 2019, concurrently with SMTA’s entry into an agreement to sell Master Trust 2014, the Company entered into a termination agreement of the Asset Management Agreement, which became effective on September 20, 2019. On June 2, 2019, the Company and SMTA also entered into an Interim Management Agreement, which became effective on September 20, 2019, and which provides that the Company is entitled to an annual management fee of $1 million for the initial one-year term thereof and $4 million per annum for any renewal term, in each case plus certain cost reimbursements. The Interim Management Agreement is terminable at any time by SMTA and may be terminated at any time upon 180 days’ prior written notice by the Company, in each case without payment of a termination fee. On March 18, 2020, the Company notified SMTA of its intention to terminate the Interim Asset Management Agreement effective as of September 14, 2020. Management fees of $0.2 million and $0.5 million were earned during the three and six months ended June 30, 2020, respectively, compared to $5.0 million and $10.0 million during the three and six months ended June 30, 2019, respectively, and are included in related party fee income in the consolidated statements of operations. As of both June 30, 2020 and December 31, 2019, the Company did not have material accrued receivable balances related to the Interim Management Agreement.

Property Management and Servicing Agreement

Prior to September 20, 2019, the Operating Partnership provided property management services and special services for Master Trust 2014. The property management fees accrued daily at 0.25% per annum of the collateral value of the Master Trust 2014 collateral pool less any specially serviced assets, and the special servicing fees accrued daily at 0.75% per annum of the collateral value of any assets deemed to be specially serviced per the terms of the Property Management and Servicing Agreement dated May 20, 2014. Property management fees of $1.4 million and $3.0 million were earned during the three and six months ended June 30, 2019, respectively, and special servicing fees of $0.4 million and $0.8 million were earned during the three and six months ended June 30, 2019, respectively. These fees are included in related party fee income in the consolidated statements of operations. In conjunction with SMTA’s sale of Master Trust 2014 on September 20, 2019, the notes were retired and the Property Management and Servicing Agreement was terminated.

v3.20.2
Summary of Significant Accounting Policies (Policies)
6 Months Ended
Jun. 30, 2020
Accounting Policies [Abstract]  
Basis of Accounting

The accompanying consolidated financial statements of the Company and the Operating Partnership have been prepared pursuant to the rules and regulations of the SEC. In the opinion of management, the consolidated financial statements include the normal, recurring adjustments necessary for a fair statement of the information required to be set forth therein. The results for interim periods are not necessarily indicative of the results for the entire year. Certain information and note disclosures, normally included in financial statements prepared in accordance with GAAP, have been condensed or omitted from these statements pursuant to SEC rules and regulations and, accordingly, these financial statements should be read in conjunction with the Company’s audited consolidated financial statements as filed with the SEC in its Annual Report on Form 10-K for the year ended December 31, 2019.

Consolidation

The consolidated financial statements of the Company include the accounts of the Corporation and its wholly-owned subsidiaries. The consolidated financial statements of the Operating Partnership include the accounts of the Operating Partnership and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. All expenses incurred by the Company have been allocated to the Operating Partnership in accordance with the Operating Partnership's first amended and restated agreement of limited partnership, which management determined to be a reasonable method of allocation. Therefore, expenses incurred would not be materially different if the Operating Partnership had operated as an unaffiliated entity.

These consolidated financial statements include certain special purpose entities that were formed to acquire and hold real estate encumbered by indebtedness (see Note 4). Each special purpose entity is a separate legal entity and is the sole owner of its assets and responsible for its liabilities. The assets of these special purpose entities are not available to pay, or otherwise satisfy obligations to, the creditors of any affiliate or owner of another entity unless the special purpose entities have expressly agreed and are permitted to do so under their governing documents. As of June 30, 2020 and December 31, 2019, net assets totaling $0.35 billion and $0.38 billion, respectively, were held, and net liabilities totaling $0.22 billion and $0.23 billion, respectively, were owed by these encumbered special purpose entities and are included in the accompanying consolidated balance sheets.

Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Although management believes its estimates are reasonable, actual results could differ from those estimates.

Segment Reporting

Segment Reporting

The Company views its operations as one segment, which consists of net leasing operations. The Company has no other reportable segments.

Revenue Recognition

Revenue Recognition

Rental Income: Cash and Straight-line Rent

The Company primarily leases real estate to its tenants under long-term, triple-net leases that are classified as operating leases. To evaluate lease classification, the Company assesses the terms and conditions of the lease to determine the appropriate lease term. The Company does not include options to extend, terminate or purchase in its evaluation for lease classification purposes or for recognizing rental income unless the Company is reasonably certain the tenant will exercise the option.       

Another component of lease classification that requires judgment is the residual value of the property at the end of the lease term. For acquisitions, the Company assumes a value that is equal to the tangible value of the property at the date of the assessment. For lease modifications, the Company generally uses sales comparables or a direct capitalization approach to determine fair value.

The Company’s leases generally provide for rent escalations throughout the term of the lease. For leases with fixed rent escalators, rental income is recognized on a straight-line basis to produce a constant periodic rent over the term of the lease. Accordingly, accrued rental revenue, calculated as the aggregate difference between the rental revenue recognized on a straight-line basis and scheduled rents, represents unbilled rent receivables that the Company will receive only if the tenants make all rent payments required through the expiration of the initial term of the leases.

For leases with contingent rent escalators, rental income typically increases at a multiple of any increase in the CPI over a specified period and may adjust over a one-year period or over multiple-year periods. Because of the volatility and uncertainty with respect to future changes in the CPI and the Company’s inability to determine the extent to which any specific future change in the CPI is probable at each rent adjustment date during the entire term of these leases, increases in rental revenue from leases with this type of escalator are recognized when the changes in the rental rates have occurred.

Some of the Company’s leases also provide for contingent rent based on a percentage of the tenant’s gross sales, which the Company recognizes as rental income when the change in the factor on which the contingent lease payment is based actually occurs.

Rental income is subject to an evaluation for collectability, which includes management’s estimates of amounts that will not be realized based on an assessment of the risks inherent in the portfolio, considering historical experience, as well as the tenant's payment history and financial condition. The Company records a provision for losses against rental income for amounts that are not probable of collection.

Rental Income: Tenant Reimbursement Revenue

Under a triple-net lease, the tenant is typically responsible for all improvements and is contractually obligated to pay all property operating expenses, such as real estate taxes, insurance premiums and repair and maintenance costs. Certain leases contain additional amounts recoverable from tenants for common area maintenance expenses and certain other recoverable expenses, which are non-lease components. The Company has elected to combine all its non-lease components, which were determined to have the same pattern of transfer as the related operating lease component, into a single combined lease component. Tenant reimbursement revenue is variable and is recognized as revenue in the period in which the related expenses are incurred, with the related expenses included in property costs (including reimbursable) on the Company’s consolidated statements of operations. Tenant reimbursements are recorded on a gross basis in instances when our tenants reimburse us for property costs which we incur. Tenant receivables are carried net of the allowances for amounts that are not probable of collection.

Rental Income: Intangible Amortization

Initial direct costs associated with the origination of a lease are deferred and amortized over the related lease term as an adjustment to rental revenue. In-place lease intangibles are amortized on a straight-line basis over the remaining term of the related lease and included in depreciation and amortization expense. Above-market lease intangibles are amortized over the remaining term of the respective leases as a decrease in rental revenue, and below-market lease intangibles are amortized as an increase to rental revenue over the remaining term of the respective leases. The remaining term includes the initial term of the lease but may also include the renewal periods if the Company believes it is reasonably certain the tenant will exercise the renewal option. If the Company subsequently determines it is reasonably certain that the tenant will

not exercise the renewal option, the unamortized portion of any related lease intangible is accelerated over the remaining initial term of the lease. If the Company believes the intangible balance is no longer recoverable, the unamortized portion of any related lease intangible is immediately recognized in impairments in the Company’s consolidated statements of operations.

Cash, Cash Equivalents and Restricted Cash

Cash, Cash Equivalents and Restricted Cash

Cash and cash equivalents include cash and highly liquid investment securities with maturities at acquisition of three months or less. The Company invests cash primarily in money market funds of major financial institutions with fund investments consisting of highly-rated money market instruments and other short-term investments. Restricted cash is classified within deferred costs and other assets, net in the accompanying consolidated balance sheets. Cash, cash equivalents and restricted cash consisted of the following (in thousands):

 

 

June 30,

2020

 

 

December 31,

2019

 

 

June 30,

2019

 

Cash and cash equivalents

 

$

97,190

 

 

$

14,492

 

 

$

9,984

 

Restricted cash:

 

 

 

 

 

 

 

 

 

 

 

 

Collateral deposits (1)

 

 

426

 

 

 

347

 

 

 

440

 

Tenant improvements, repairs and leasing commissions (2)

 

 

11,769

 

 

 

10,877

 

 

 

9,985

 

Other (3)

 

 

 

 

 

307

 

 

 

580

 

Total cash, cash equivalents and restricted cash

 

$

109,385

 

 

$

26,023

 

 

$

20,989

 

(1) Funds held in lender-controlled accounts generally used to meet future debt service or certain property operating expenses.

(2)

Deposits held as additional collateral support by lenders to fund improvements, repairs and leasing commissions incurred to secure a new tenant.

(3)

Funds held in lender-controlled accounts released after scheduled debt service requirements are met.

Allowance for Doubtful Accounts

Allowance for Doubtful Accounts

The Company reviews its rent and other tenant receivables for collectability on a regular basis, taking into consideration changes in factors such as the tenant’s payment history, the financial condition of the tenant, business conditions in the industry in which the tenant operates, and economic conditions in the area in which the tenant operates. If the collectability of a receivable with respect to any tenant is in doubt, a provision for uncollectible amounts will be established or a direct write-off of the specific receivable will be made. The Company provided for reserves for uncollectible amounts totaling $7.2 million and $3.8 million at June 30, 2020 and December 31, 2019, respectively, against accounts receivable balances of $39.3 million and $11.4 million, respectively. Receivables are recorded within deferred cost and other assets, net in the accompanying consolidated balance sheets. Receivables are written off against the reserves for uncollectible amounts when all possible means of collection have been exhausted.

For receivable balances related to the straight-line method of reporting rental revenue, the collectability is generally assessed in conjunction with the evaluation of rental income as described above. The Company has a reserve for losses of $6.7 million and $0.4 million at June 30, 2020 and December 31, 2019, respectively, against straight-line rent receivables of $95.8 million and $84.0 million, respectively. These receivables are recorded within deferred costs and other assets, net in the accompanying consolidated balance sheets.

Goodwill

Goodwill

Goodwill arises from business combinations and represents the excess of the cost of an acquired entity over the net fair value amounts that were assigned to the identifiable assets acquired and the liabilities assumed. In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment. ASU 2017-04 simplifies the accounting for goodwill impairment by eliminating the Step 2 requirement to calculate the implied fair value of goodwill. Instead, an entity should perform its annual or interim goodwill impairment test by comparing the fair value of each reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. The Company adopted ASU 2017-04 effective January 1, 2020. Goodwill is tested for impairment at the reporting unit level on an annual basis and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying value. No impairment was recorded for the periods presented.

Income Taxes

Income Taxes

The Corporation has elected to be taxed as a REIT under the Code. As a REIT, the Corporation generally will not be subject to federal income tax provided it continues to satisfy certain tests concerning the Company’s sources of income, the nature of the Company’s assets, the amounts distributed to the Corporation’s stockholders and the ownership of Corporation stock. Management believes the Corporation has qualified and will continue to qualify as a REIT and, therefore, no provision has

been made for federal income taxes in the accompanying consolidated financial statements. Even if the Corporation qualifies for taxation as a REIT, it may be subject to state and local income and franchise taxes, and to federal income tax and excise tax on its undistributed income.

Taxable income earned by any of the Company's taxable REIT subsidiaries, including from non-REIT activities, is subject to federal, state and local taxes. The rights and obligations of the Asset Management Agreement were transferred to SRAM, a wholly-owned taxable REIT subsidiary of Spirit, on April 1, 2019, which was subsequently terminated and simultaneously replaced by the Interim Management Agreement between SRAM and SMTA, effective as of September 20, 2019. Accordingly, commencing from April 1, 2019, all asset management fees, including the termination fee income, were subject to income tax.  

The Operating Partnership is a partnership for federal income tax purposes. Partnerships are pass-through entities and are not subject to U.S. federal income taxes, therefore no provision has been made for federal income taxes in the accompanying financial statements. Although most states and cities where the Operating Partnership operates follow the U.S. federal income tax treatment, there are certain jurisdictions such as Texas, Tennessee and Ohio that impose income or franchise taxes on a partnership.

Franchise taxes are included in general and administrative expenses on the accompanying consolidated statements of operations.

New Accounting Pronouncements

New Accounting Pronouncements  

In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments, which requires more timely recognition of credit losses associated with financial assets. ASU 2016-13 requires financial assets (or a group of financial assets) measured at an amortized cost basis to be presented at the net amount expected to be collected. ASU 2016-13 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, and as such, the Company adopted ASU 2016-13 effective January 1, 2020. Per the subsequently issued ASU 2018-19, receivables arising from operating leases are not within the scope of ASU 2016-13. As such, the Company reviewed receivables within the scope of ASU 2016-13 totaling $40.3 million, which were comprised of loans receivable and real estate assets held under direct financing lease. The Company determined the key credit quality indicator was the credit rating of the borrower, coupled with remaining time to maturity. As a result, the adoption of the new guidance resulted in the recognition of a loss of $0.3 million on January 1, 2020, which is recorded in impairments on the accompanying consolidated statement of operations.

In April 2020, the FASB released a Staff Q&A regarding the accounting for lease concessions related to the effects of the COVID-19 pandemic. The FASB noted that the underlying premise in requiring a modified lease to be accounted for as if it were a new lease under ASC 842 is that the modified terms and conditions affect the economics of the lease for the remainder of the lease term. As such, the FASB staff clarified that it would be acceptable for entities to make an election to account for lease concessions related to the effects of the COVID-19 pandemic consistent with how those concessions would be accounted for under ASC 842 as though enforceable rights and obligations for those concessions existed (regardless of whether those enforceable rights and obligations for the concessions explicitly exist in the contract). The Company made this election and accounts for rent deferrals by increasing the rent receivables as receivables accrue and continuing to recognize income during the deferral period, resulting in $22.3 million of deferrals being recognized in rental income for the three and six months ended June 30, 2020. The deferral periods range generally from one to six months, with an average deferral period of three months and an average repayment period of 12 months. Lease concessions other than rent deferrals are evaluated to determine if a substantive change to the consideration in the original lease contract has occurred and should be accounted for as a lease modification. Management continues to evaluate any amounts recognized for collectability, regardless of whether accounted for as a lease modification or not, and records a provision for losses against rental income for amounts that are not probable of collection. For lease concessions granted in conjunction with the COVID-19 pandemic, management reviewed all amounts recognized on a tenant-by-tenant basis for collectability.

v3.20.2
Summary of Significant Accounting Policies (Tables)
6 Months Ended
Jun. 30, 2020
Accounting Policies [Abstract]  
Schedule of Cash, Cash Equivalents and Restricted Cash Cash, cash equivalents and restricted cash consisted of the following (in thousands):

 

 

June 30,

2020

 

 

December 31,

2019

 

 

June 30,

2019

 

Cash and cash equivalents

 

$

97,190

 

 

$

14,492

 

 

$

9,984

 

Restricted cash:

 

 

 

 

 

 

 

 

 

 

 

 

Collateral deposits (1)

 

 

426

 

 

 

347

 

 

 

440

 

Tenant improvements, repairs and leasing commissions (2)

 

 

11,769

 

 

 

10,877

 

 

 

9,985

 

Other (3)

 

 

 

 

 

307

 

 

 

580

 

Total cash, cash equivalents and restricted cash

 

$

109,385

 

 

$

26,023

 

 

$

20,989

 

(1) Funds held in lender-controlled accounts generally used to meet future debt service or certain property operating expenses.

(2)

Deposits held as additional collateral support by lenders to fund improvements, repairs and leasing commissions incurred to secure a new tenant.

(3)

Funds held in lender-controlled accounts released after scheduled debt service requirements are met.

v3.20.2
Investments (Tables)
6 Months Ended
Jun. 30, 2020
Real Estate [Abstract]  
Summary of Real Estate Activity

During the six months ended June 30, 2020, the Company had the following real estate activity, net of accumulated depreciation and amortization (dollars in thousands):

 

 

Number of Properties

 

 

Dollar Amount of Investments

 

 

 

Held in Use

 

 

Held for Sale

 

 

Total

 

 

Held in Use

 

 

Held for Sale

 

 

Total

 

Gross balance, December 31, 2019

 

 

1,750

 

 

 

2

 

 

 

1,752

 

 

$

6,140,775

 

 

$

1,223

 

 

$

6,141,998

 

Acquisitions/improvements (1)

 

 

29

 

 

 

 

 

 

29

 

 

 

228,812

 

 

 

 

 

 

228,812

 

Dispositions of real estate (2)

 

 

(7

)

 

 

(3

)

 

 

(10

)

 

 

(19,239

)

 

 

(1,842

)

 

 

(21,081

)

Transfers to Held for Sale

 

 

(8

)

 

 

8

 

 

 

 

 

 

(13,705

)

 

 

13,705

 

 

 

 

Transfers from Held for Sale

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Impairments (3)

 

 

 

 

 

 

 

 

 

 

 

(61,708

)

 

 

(32

)

 

 

(61,740

)

Reset of gross balances(4)

 

 

 

 

 

 

 

 

 

 

 

(33,918

)

 

 

(6

)

 

 

(33,924

)

Other

 

 

 

 

 

 

 

 

 

 

 

(1,337

)

 

 

 

 

 

(1,337

)

Gross balance, June 30, 2020

 

 

1,764

 

 

 

7

 

 

 

1,771

 

 

 

6,239,680

 

 

 

13,048

 

 

 

6,252,728

 

Accumulated depreciation and amortization

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(900,501

)

 

 

(340

)

 

 

(900,841

)

Net balance, June 30, 2020 (5)

 

 

 

 

 

 

 

 

 

 

 

 

 

$

5,339,179

 

 

$

12,708

 

 

$

5,351,887

 

 

(1)

Includes investments of $7.6 million in revenue producing capitalized expenditures, as well as $2.4 million of non-revenue producing capitalized expenditures during the six months ended June 30, 2020.

(2)

For the six months ended June 30, 2020, the total gain on disposal of assets for properties held in use and held for sale was $1.1 million and $0.1 million, respectively.

(3)

Impairments on owned real estate is comprised of $61.4 million of real estate and intangible asset impairment and $0.3 million of allowance for credit losses on direct financing leases.  

(4)

Represents write-off of gross investment balances against the related accumulated depreciation and amortization balances as a result of basis reset due to impairment or intangibles which have been fully amortized.

(5)

Reconciliation of total owned investments to the accompanying consolidated balance sheet at June 30, 2020 is as follows:

Operating lease held in use land and buildings, net

 

$

5,102,347

 

Intangible lease assets, net

 

 

 

 

350,466

 

Real estate assets under direct financing leases, net

 

 

 

 

7,300

 

Real estate assets held for sale, net

 

 

 

 

12,708

 

Intangible lease liabilities, net

 

 

 

 

(120,934

)

Net balance

 

 

 

$

5,351,887

 

Schedule of Operating Lease Income The following table summarizes the components of rental income recognized on these operating leases in the accompanying consolidated statements of operations (in thousands):

 

 

Three Months Ended

June 30,

 

 

Six Months Ended

June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Base Cash Rent(1)

 

$

110,166

 

 

$

98,418

 

 

$

226,712

 

 

$

195,217

 

Variable cash rent (including reimbursables)

 

 

2,404

 

 

 

2,942

 

 

 

5,793

 

 

 

6,580

 

Straight-line rent, net of uncollectible reserve(2)

 

 

4,392

 

 

 

4,485

 

 

 

5,486

 

 

 

7,392

 

Amortization of above- and below- market lease intangibles, net (3)

 

 

228

 

 

 

661

 

 

 

562

 

 

 

1,384

 

Total rental income

 

$

117,190

 

 

$

106,506

 

 

$

238,553

 

 

$

210,573

 

(1)

Includes rent reserved as uncollectible of $4.8 million and net recoveries of $0.8 million for the three months ended June 30, 2020 and 2019, respectively, and reserves of $5.6 million and net recoveries of $1.0 million for the six months ended June 30, 2020 and 2019, respectively.

(2)

Includes net uncollectible reserve/(recovery) of $2.4 million and $(0.6 million) for the three months ended June 30, 2020 and 2019, respectively, and $6.7 million and $0.3 million for the six months ended June 30, 2020 and 2019, respectively.

(3)

Excludes amortization of in-place leases of $8.7 million and $6.5 million for the three months ended June 30, 2020 and 2019, respectively, and $17.5 million and $13.2 million for the six months ended June 30, 2020 and 2019, respectively, which is included in depreciation and amortization expense in the accompanying consolidated statements of operations.

Schedule of Minimum Future Rent to be Received from Operating Lease

Scheduled minimum future rent to be received under the remaining non-cancellable term of these operating leases (including contractual fixed rent increases occurring on or after July 1, 2020) at June 30, 2020 are as follows (in thousands):

 

 

June 30, 2020

 

Remainder of 2020

 

$

237,029

 

2021

 

 

466,427

 

2022

 

 

449,638

 

2023

 

 

429,129

 

2024

 

 

405,130

 

Thereafter

 

 

3,066,883

 

Total future minimum rentals

 

$

5,054,236

 

Schedule of Lease Intangible Assets and Liabilities, Net of Accumulated Amortization

The following table details lease intangible assets and liabilities, net of accumulated amortization (in thousands):

 

 

June 30,

2020

 

 

December 31,

2019

 

In-place leases

 

$

441,072

 

 

$

457,616

 

Above-market leases

 

 

84,385

 

 

 

95,002

 

Less: accumulated amortization

 

 

(174,991

)

 

 

(167,539

)

Intangible lease assets, net

 

$

350,466

 

 

$

385,079

 

 

 

 

 

 

 

 

 

 

Below-market leases

 

$

173,362

 

 

$

176,816

 

Less: accumulated amortization

 

 

(52,428

)

 

 

(49,481

)

Intangible lease liabilities, net

 

$

120,934

 

 

$

127,335

 

Summary of Impairment and Credit Losses Recognized

The following table summarizes total impairments and allowance for credit losses recognized in the accompanying consolidated statements of operations (in thousands):

 

 

Three Months Ended

June 30,

 

 

Six Months Ended

June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Real estate and intangible asset impairment

 

$

21,272

 

 

$

3,607

 

 

$

61,436

 

 

$

7,299

 

Allowance for credit losses on direct financing leases

 

 

 

 

 

 

 

 

304

 

 

 

 

(Reversal)/allowance for credit losses on loans receivable

 

 

(223

)

 

 

 

 

 

83

 

 

 

 

Total impairment loss

 

$

21,049

 

 

$

3,607

 

 

$

61,823

 

 

$

7,299

 

 

v3.20.2
Debt (Tables)
6 Months Ended
Jun. 30, 2020
Debt Disclosure [Abstract]  
Summary of Debt The Company's debt is summarized below (dollars in thousands):

 

 

Weighted Average Effective Interest Rates (1)

 

 

Weighted Average Stated Interest Rates (2)

 

 

Weighted Average Remaining Years to Maturity (3)

 

 

June 30,

2020

 

 

December 31,

2019

 

Revolving credit facilities

 

3.66%

 

 

 

 

 

 

2.8

 

 

$

 

 

$

116,500

 

Term loans

 

1.96%

 

 

1.69%

 

 

 

1.8

 

 

 

400,000

 

 

 

 

Senior Unsecured Notes

 

3.85%

 

 

3.73%

 

 

 

8.1

 

 

 

1,500,000

 

 

 

1,500,000

 

CMBS

 

5.81%

 

 

5.47%

 

 

 

3.3

 

 

 

216,316

 

 

 

218,338

 

Convertible Notes

 

5.64%

 

 

3.75%

 

 

 

0.9

 

 

 

345,000

 

 

 

345,000

 

Total debt

 

4.10%

 

 

3.55%

 

 

 

5.7

 

 

 

2,461,316

 

 

 

2,179,838

 

Debt discount, net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(6,804

)

 

 

(9,272

)

Deferred financing costs, net (4)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(18,004

)

 

 

(17,549

)

Total debt, net

 

 

 

 

 

 

 

 

 

 

 

 

 

$

2,436,508

 

 

$

2,153,017

 

(1)

The effective interest rates include amortization of debt discount/premium, amortization of deferred financing costs, facility fees, and non-utilization fees, where applicable, calculated for the six months ended June 30, 2020 and based on the average principal balance outstanding during the period.

(2)

Represents the weighted average stated interest rate based on the outstanding principal balance as of June 30, 2020.

(3)

Represents the weighted average remaining years to maturity based on the outstanding principal balance as of June 30, 2020.

(4)

The Company records deferred financing costs for its revolving credit facilities in deferred costs and other assets, net on its consolidated balance sheets.

Summary of Senior Unsecured Notes The following is a summary of the Senior Unsecured Notes outstanding (dollars in thousands):

 

 

Maturity Date

 

Stated Interest Rate

 

 

June 30,

2020

 

 

December 31,

2019

 

2026 Senior Notes

 

September 15, 2026

 

4.45%

 

 

$

300,000

 

 

$

300,000

 

2027 Senior Notes

 

January 15, 2027

 

3.20%

 

 

 

300,000

 

 

 

300,000

 

2029 Senior Notes

 

July 15, 2029

 

4.00%

 

 

 

400,000

 

 

 

400,000

 

2030 Senior Notes

 

January 15, 2030

 

3.40%

 

 

 

500,000

 

 

 

500,000

 

Total Senior Unsecured Notes

 

 

 

3.73%

 

 

$

1,500,000

 

 

$

1,500,000

 

Schedule of Debt Maturities

As of June 30, 2020, scheduled debt maturities, including balloon payments, were as follows (in thousands):

 

 

Scheduled

Principal

 

 

Balloon

Payment

 

 

Total

 

Remainder of 2020

 

$

2,078

 

 

$

 

 

$

2,078

 

2021

 

 

4,365

 

 

 

345,000

 

 

 

349,365

 

2022

 

 

4,617

 

 

 

400,000

 

 

 

404,617

 

2023

 

 

3,074

 

 

 

197,912

 

 

 

200,986

 

2024

 

 

590

 

 

 

 

 

 

590

 

Thereafter

 

 

3,610

 

 

 

1,500,070

 

 

 

1,503,680

 

Total

 

$

18,334

 

 

$

2,442,982

 

 

$

2,461,316

 

Summary of Components of Interest Expense Related to Borrowings

The following table is a summary of the components of interest expense related to the Company's borrowings (in thousands):

 

 

Three Months Ended

June 30,

 

 

Six Months Ended

June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Interest expense – revolving credit facilities (1)

 

$

804

 

 

$

1,798

 

 

$

2,860

 

 

$

3,976

 

Interest expense – term loans

 

 

1,671

 

 

 

5,691

 

 

 

1,671

 

 

 

9,669

 

Interest expense – Senior Unsecured Notes

 

 

13,987

 

 

 

3,515

 

 

 

27,975

 

 

 

6,853

 

Interest expense – mortgages and notes payable

 

 

2,998

 

 

 

5,829

 

 

 

6,011

 

 

 

12,082

 

Interest expense – Convertible Notes (2)

 

 

3,235

 

 

 

4,649

 

 

 

6,469

 

 

 

10,776

 

Non-cash interest expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of deferred financing costs

 

 

1,456

 

 

 

1,774

 

 

 

2,598

 

 

 

3,805

 

Amortization of debt discount, net

 

 

1,242

 

 

 

1,920

 

 

 

2,466

 

 

 

4,626

 

Amortization of net losses related to interest rate swaps

 

 

702

 

 

 

 

 

 

1,404

 

 

 

 

Total interest expense

 

$

26,095

 

 

$

25,176

 

 

$

51,454

 

 

$

51,787

 

 

(1)

Includes facility fees of approximately $0.4 million and $0.5 million for the three months ended June 30, 2020 and 2019, respectively, and $0.8 million and $1.2 million for the six months ended June 30, 2020 and 2019, respectively.

(2)

Included in interest expense on the Operating Partnership's consolidated statements of operations are amounts paid to the Company by the Operating Partnership related to the notes payable to Spirit Realty Capital, Inc.

v3.20.2
Stockholders' Equity and Partners' Capital (Tables)
6 Months Ended
Jun. 30, 2020
Equity [Abstract]  
Summary of Dividends Declared

For the six months ended June 30, 2020, the Company's Board of Directors declared the following dividends:

Declaration Date

 

Dividend Per Share

 

 

Record Date

 

Total Amount

(in thousands)

 

 

Payment Date

Common Stock

 

 

 

 

 

 

 

 

 

 

 

 

February 27, 2020

 

$

0.625

 

 

March 31, 2020

 

$

64,338

 

 

April 15, 2020

May 22, 2020

 

$

0.625

 

 

June 30, 2020

 

$

64,402

 

 

July 15, 2020

Preferred Stock

 

 

 

 

 

 

 

 

 

 

 

 

February 27, 2020

 

$

0.375

 

 

March 13, 2020

 

$

2,588

 

 

March 31, 2020

May 22, 2020

 

$

0.375

 

 

June 15, 2020

 

$

2,588

 

 

June 30, 2020

v3.20.2
Derivative and Hedging Activities (Tables)
6 Months Ended
Jun. 30, 2020
Derivative Instruments And Hedging Activities Disclosure [Abstract]  
Summary of Amounts Recorded in AOCL

The following table provides information about the amounts recorded in AOCL, as well as the loss recorded in operations, when reclassified out of AOCL or recognized in earnings immediately (in thousands):

 

 

Three Months Ended

June 30,

 

 

Six Months Ended

June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Gross amount of loss recognized in AOCL on derivatives

 

$

 

 

$

(9,097

)

 

$

 

 

$

(14,326

)

Amount of loss reclassified from AOCL to termination of interest rate swaps

 

 

 

 

 

343

 

 

 

 

 

 

551

 

Amount of loss reclassified from AOCL to interest (1)

 

 

702

 

 

 

 

 

 

1,404

 

 

 

 

Net reclassification of amounts from (to) AOCL

 

$

702

 

 

$

(8,754

)

 

$

1,404

 

 

$

(13,775

)

(1)

Interest expense for the three and six months ended June 30, 2020 was $26.1 million and $51.5 million, respectively.

v3.20.2
Fair Value Measurements (Tables)
6 Months Ended
Jun. 30, 2020
Fair Value Disclosures [Abstract]  
Fair Value Measurements, Nonrecurring The following table sets forth the Company’s assets that were accounted for at fair value on a nonrecurring basis as of their respective measurement dates (in thousands):

 

 

 

 

 

 

Fair Value Hierarchy Level

 

Description

 

Fair Value

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Assets held at June 30, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Impaired at March 31, 2020

 

$

52,131

 

 

$

 

 

$

 

 

$

52,131

 

Impaired at June 30, 2020

 

$

10,294

 

 

$

 

 

$

 

 

$

10,294

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets held at December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Impaired at June 30, 2019

 

$

1,893

 

 

$

 

 

$

 

 

$

1,893

 

Impaired at September 30, 2019

 

$

1,093

 

 

$

 

 

$

 

 

$

1,093

 

Impaired at December 31, 2019

 

$

11,594

 

 

$

 

 

$

 

 

$

11,594

 

Fair Value Inputs of Long-Lived Assets Held and Used and Held for Sale For the remaining properties, the Company estimated property fair value using price per square foot from unobservable inputs and, for the properties valued using comparable properties at June 30, 2020, the price per square foot includes a discount of 0-10% to account for the market impact of COVID-19. The unobservable inputs for the remaining properties are as follows:

 

Unobservable Input

 

Asset Type

 

Property Count

 

 

Price Per Square Foot Range

 

Weighted Average Price Per Square Foot

 

Square Footage

 

June 30, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comparable Properties

 

Retail

 

 

14

 

 

$4.35 - $320.89

 

$49.77

 

 

573,784

 

PSA, LOI or BOV

 

Retail

 

 

7

 

 

$30.66 - $349.62

 

$44.57

 

 

349,609

 

PSA, LOI or BOV

 

Industrial

 

 

1

 

 

$13.79

 

$13.79

 

 

35,551

 

PSA, LOI or BOV

 

Office

 

 

1

 

 

$96.39

 

$96.39

 

 

4,310

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comparable Properties

 

Retail

 

 

4

 

 

$34.45 - $740.74

 

$104.84

 

 

35,885

 

PSA, LOI or BOV

 

Retail

 

 

10

 

 

$24.78 - $323.00

 

$50.71

 

 

165,773

 

PSA, LOI or BOV

 

Office

 

 

1

 

 

$99.37

 

$99.37

 

 

4,310

 

Schedule of Carrying Amount and Estimated Fair Value of Financial Instruments The following table discloses fair value information for these financial instruments (in thousands):  

 

 

June 30, 2020

 

 

December 31, 2019

 

 

 

Carrying

Value

 

 

Estimated

Fair Value

 

 

Carrying

Value

 

 

Estimated

Fair Value

 

Loans receivable, net

 

$

29,163

 

 

$

29,823

 

 

$

34,465

 

 

$

35,279

 

2019 Credit Facility

 

 

 

 

 

 

 

 

116,500

 

 

 

119,802

 

2020 Term Loans

 

 

397,824

 

 

 

400,231

 

 

 

 

 

 

 

Senior Unsecured Notes, net (1)

 

 

1,484,884

 

 

 

1,455,070

 

 

 

1,484,066

 

 

 

1,543,919

 

Mortgages and notes payable, net (1)

 

 

214,338

 

 

 

228,768

 

 

 

216,049

 

 

 

235,253

 

Convertible Notes, net (1)

 

 

339,462

 

 

 

344,597

 

 

 

336,402

 

 

 

356,602

 

(1)

The carrying value of the debt instruments are net of unamortized deferred financing costs and certain debt discounts/premiums.

v3.20.2
Income Per Share and Partnership Unit (Tables)
6 Months Ended
Jun. 30, 2020
Earnings Per Share [Abstract]  
Reconciliation of the Numerator and Denominator Used in the Computation of Basic and Diluted (Loss) Income Per Share

The table below is a reconciliation of the numerator and denominator used in the computation of basic and diluted net (loss) income per share and unit computed using the two-class method (dollars in thousands):

 

 

Three Months Ended

June 30,

 

 

Six Months Ended

June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Basic and diluted (loss) income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Loss) income from continuing operations

 

$

(413

)

 

$

45,737

 

 

$

(16,260

)

 

$

89,315

 

Less: dividends paid to preferred stockholders

 

 

(2,588

)

 

 

(2,588

)

 

 

(5,176

)

 

 

(5,176

)

Less: dividends attributable to unvested restricted stock

 

 

(185

)

 

 

(250

)

 

 

(392

)

 

 

(522

)

Net (loss) income attributable to common stockholders used in basic and diluted (loss) income per share

 

$

(3,186

)

 

$

42,899

 

 

$

(21,828

)

 

$

83,617

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic weighted average shares of common stock outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares of common stock outstanding

 

 

102,980,619

 

 

 

87,422,369

 

 

 

102,765,967

 

 

 

86,673,672

 

Less: unvested weighted average shares of restricted stock

 

 

(301,652

)

 

 

(420,382

)

 

 

(311,410

)

 

 

(419,974

)

Basic weighted average shares of common stock outstanding

 

 

102,678,967

 

 

 

87,001,987

 

 

 

102,454,557

 

 

 

86,253,698

 

Net (loss) income per share attributable to common stockholders - basic

 

$

(0.03

)

 

$

0.49

 

 

$

(0.21

)

 

$

0.97

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted weighted average shares of common stock outstanding: (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Plus: unsettled shares under open forward equity contracts

 

 

 

 

 

772,040

 

 

 

 

 

 

328,617

 

Plus: unvested market-based awards

 

 

 

 

 

116,672

 

 

 

 

 

 

196,982

 

Diluted weighted average shares of common stock outstanding

 

 

102,678,967

 

 

 

87,890,699

 

 

 

102,454,557

 

 

 

86,779,297

 

Net (loss) income per share attributable to common stockholders - diluted

 

$

(0.03

)

 

$

0.49

 

 

$

(0.21

)

 

$

0.96

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Potentially dilutive shares of common stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unvested shares of restricted stock, less shares assumed repurchased at market

 

 

 

 

 

160,606

 

 

 

66,920

 

 

 

191,215

 

Unsettled shares under open forward equity contracts

 

 

 

 

 

 

 

 

607,636

 

 

 

 

Unvested shares of market-based awards

 

 

83,625

 

 

 

 

 

 

230,537

 

 

 

 

 

(1)

Assumes the most dilutive issuance of potentially issuable shares between the two-class and treasury stock method unless the result would be anti-dilutive.

v3.20.2
Organization - Narrative (Details) - Operating Partnership
6 Months Ended
Jun. 30, 2020
Subsidiary of Limited Liability Company or Limited Partnership [Line Items]  
General partner ownership of operating partnership 1.00%
Limited partner ownership of operating partnership 99.00%
v3.20.2
Summary of Significant Accounting Policies - Narrative (Details)
3 Months Ended 6 Months Ended
Jan. 01, 2020
USD ($)
Jun. 30, 2020
USD ($)
Jun. 30, 2020
USD ($)
segment
Dec. 31, 2019
USD ($)
Summary Of Significant Accounting Policies [Line Items]        
Net assets   $ 5,977,838,000 $ 5,977,838,000 $ 5,832,661,000
Net liabilities   2,694,030,000 $ 2,694,030,000 2,419,412,000
Number of segments | segment     1  
Rent escalators adjustment period     1 year  
Reserves for uncollectible amounts   7,200,000 $ 7,200,000 3,800,000
Accounts receivable   39,300,000 39,300,000 11,400,000
Reserve for losses   6,700,000 6,700,000 400,000
Deferred rental revenue receivables   95,800,000 95,800,000 84,000,000.0
Goodwill impairment     0  
Provision for income taxes     0  
Deferral rental income recognized CARES Act   22,300,000 $ 22,300,000  
Deferred rent average repayment period     12 months  
Minimum        
Summary Of Significant Accounting Policies [Line Items]        
Rent deferral period     1 month  
Maximum        
Summary Of Significant Accounting Policies [Line Items]        
Rent deferral period     6 months  
Average        
Summary Of Significant Accounting Policies [Line Items]        
Rent deferral period     3 months  
Accounting Standards Update 2016-13        
Summary Of Significant Accounting Policies [Line Items]        
Recognition of loss due to adoption of new guidance $ 300,000      
Loans receivable and real estate assets held under direct financing lease $ 40,300,000      
Special Purpose Entity        
Summary Of Significant Accounting Policies [Line Items]        
Net assets   350,000,000 $ 350,000,000 380,000,000
Net liabilities   $ 220,000,000 $ 220,000,000 $ 230,000,000
v3.20.2
Summary of Significant Accounting Policies - Schedule of Cash, Cash Equivalents and Restricted Cash (Details) - USD ($)
$ in Thousands
Jun. 30, 2020
Dec. 31, 2019
Jun. 30, 2019
Dec. 31, 2018
Restricted Cash and Cash Equivalents Items [Line Items]        
Cash and cash equivalents $ 97,190 $ 14,492 $ 9,984  
Total cash, cash equivalents and restricted cash 109,385 26,023 20,989 $ 77,421
Collateral deposits        
Restricted Cash and Cash Equivalents Items [Line Items]        
Restricted cash 426 347 440  
Tenant improvements, repairs and leasing commissions        
Restricted Cash and Cash Equivalents Items [Line Items]        
Restricted cash 11,769 10,877 9,985  
Other        
Restricted Cash and Cash Equivalents Items [Line Items]        
Restricted cash $ 0 $ 307 $ 580  
v3.20.2
Investments - Narrative (Details)
$ in Millions
3 Months Ended 6 Months Ended
Jun. 30, 2020
USD ($)
State
Property
Jun. 30, 2020
USD ($)
State
Property
loan
Jan. 01, 2020
USD ($)
Dec. 31, 2019
Property
Real Estate Properties [Line Items]        
Gross investment in owned real estate properties $ 6,300.0 $ 6,300.0    
Portfolio disbursement, number of states | State 48 48    
Minimum of investment in real estate properties 10.00% 10.00%    
Number of properties under operating leases | Property 1,756 1,756   1,745
Number of properties under direct financing lease | Property 1 1    
Sales-type and direct financing leases minimum future payments to be received $ 3.8 $ 3.8    
Direct financing leases, reserves for uncollectible amount 0.3 0.3    
Direct financing leases, net investment balance 7.6 7.6    
Mortgage Receivables        
Real Estate Properties [Line Items]        
Loans outstanding principal balance 29.1 29.1    
Unamortized premium balance 0.2 0.2    
Allowance for loan losses 0.1 0.1 $ 0.3  
Reversal of reserve 0.2      
Loans receivable carrying value $ 29.3 $ 29.3    
Single-Tenant Commercial Properties | First Mortgage | Mortgage Receivables        
Real Estate Properties [Line Items]        
Number of first-priority mortgage loans | loan   2    
Texas        
Real Estate Properties [Line Items]        
Investment in real estate properties 11.60% 11.60%    
v3.20.2
Investments - Summary of Owned Real Estate Activity (Details)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2020
USD ($)
Property
Jun. 30, 2019
USD ($)
Jun. 30, 2020
USD ($)
Property
Jun. 30, 2019
USD ($)
Dollar Amount of Investments        
Impairments $ (21,272) $ (3,607) $ (61,436) $ (7,299)
Ending balance 6,300,000   6,300,000  
Net balance $ 5,351,887   $ 5,351,887  
Held in Use        
Number of Properties        
Beginning balance (in properties) | Property     1,750  
Acquisitions/improvements (in properties) | Property     29  
Dispositions of real estate (in properties) | Property     (7)  
Transfers to Held for Sale (in properties) | Property     (8)  
Transfers from Held for Sale (in properties) | Property     0  
Impairments (in properties) | Property     0  
Reset of gross balances (in properties) | Property     0  
Other (in properties) | Property     0  
Ending balance (in properties) | Property 1,764   1,764  
Dollar Amount of Investments        
Beginning balance     $ 6,140,775  
Acquisitions     228,812  
Dispositions     (19,239)  
Transfers to Held for Sale     (13,705)  
Transfers from Held for Sale     0  
Impairments     (61,708)  
Reset of gross balances     (33,918)  
Other     (1,337)  
Ending balance $ 6,239,680   6,239,680  
Accumulated depreciation and amortization (900,501)   (900,501)  
Net balance $ 5,339,179   $ 5,339,179  
Held for Sale        
Number of Properties        
Beginning balance (in properties) | Property     2  
Acquisitions/improvements (in properties) | Property     0  
Dispositions of real estate (in properties) | Property     (3)  
Transfers to Held for Sale (in properties) | Property     8  
Transfers from Held for Sale (in properties) | Property     0  
Impairments (in properties) | Property     0  
Reset of gross balances (in properties) | Property     0  
Other (in properties) | Property     0  
Ending balance (in properties) | Property 7   7  
Dollar Amount of Investments        
Beginning balance     $ 1,223  
Acquisitions     0  
Dispositions     (1,842)  
Transfers to Held for Sale     13,705  
Transfers from Held for Sale     0  
Impairments     (32)  
Reset of gross balances     (6)  
Other     0  
Ending balance $ 13,048   13,048  
Accumulated depreciation and amortization (340)   (340)  
Net balance $ 12,708   $ 12,708  
Total        
Number of Properties        
Beginning balance (in properties) | Property     1,752  
Acquisitions/improvements (in properties) | Property     29  
Dispositions of real estate (in properties) | Property     (10)  
Transfers to Held for Sale (in properties) | Property     0  
Transfers from Held for Sale (in properties) | Property     0  
Impairments (in properties) | Property     0  
Reset of gross balances (in properties) | Property     0  
Other (in properties) | Property     0  
Ending balance (in properties) | Property 1,771   1,771  
Dollar Amount of Investments        
Beginning balance     $ 6,141,998  
Acquisitions     228,812  
Dispositions     (21,081)  
Transfers to Held for Sale     0  
Transfers from Held for Sale     0  
Impairments     (61,740)  
Reset of gross balances     (33,924)  
Other     (1,337)  
Ending balance $ 6,252,728   6,252,728  
Accumulated depreciation and amortization (900,841)   (900,841)  
Net balance $ 5,351,887   $ 5,351,887  
v3.20.2
Investments - Summary of Owned Real Estate Activity (Footnote) (Details) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Dec. 31, 2019
Real Estate [Line Items]          
Revenue producing capitalized expenditures     $ 7,600    
Capitalized maintenance expenditures     2,400    
Impairments on owned real estate $ 21,272 $ 3,607 61,436 $ 7,299  
Allowance for credit losses on direct financing leases 0 $ 0 304 $ 0  
Operating lease held in use land and buildings, net 5,102,347   5,102,347    
Intangible lease assets, net 350,466   350,466   $ 385,079
Real estate assets under direct financing leases, net 7,300   7,300   14,465
Real estate assets held for sale, net 12,708   12,708   1,144
Intangible lease liabilities, net (120,934)   (120,934)   $ (127,335)
Net balance $ 5,351,887   5,351,887    
Held-in-use          
Real Estate [Line Items]          
Gain on disposal of assets for properties     1,100    
Held-for-sale          
Real Estate [Line Items]          
Gain on disposal of assets for properties     $ 100    
v3.20.2
Investments - Operating Lease Income (Details) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Lessor, Lease, Description [Line Items]        
Base Cash Rent $ 110,166 $ 98,418 $ 226,712 $ 195,217
Variable cash rent (including reimbursables) 2,404 2,942 5,793 6,580
Straight-line rent, net of uncollectible reserve 4,392 4,485 5,486 7,392
Amortization of above- and below- market lease intangibles, net 228 661 562 1,384
Total rental income 117,190 106,506 238,553 210,573
Uncollectible rent (reserved)/recovered, net (4,800) 800 (5,600) 1,000
Straight-line rent, uncollectible reserve (recovery) 2,400 (600) 6,700 300
In-place leases        
Lessor, Lease, Description [Line Items]        
Leases amortization expenses $ 8,700 $ 6,500 $ 17,500 $ 13,200
v3.20.2
Investments - Schedule of Minimum Future Rent to be Received from Operating Leases (Details)
$ in Thousands
Jun. 30, 2020
USD ($)
Operating Leases, Future Contractual Rent Receivable  
Remainder of 2020 $ 237,029
2021 466,427
2022 449,638
2023 429,129
2024 405,130
Thereafter 3,066,883
Total future minimum rentals $ 5,054,236
v3.20.2
Investments - Schedule of Lease Intangible Assets and Liabilities, Net of Accumulated Amortization (Details) - USD ($)
$ in Thousands
Jun. 30, 2020
Dec. 31, 2019
Lessor, Lease, Description [Line Items]    
Less: accumulated amortization $ (174,991) $ (167,539)
Intangible lease assets, net 350,466 385,079
Below-market leases 173,362 176,816
Less: accumulated amortization (52,428) (49,481)
Intangible lease liabilities, net 120,934 127,335
In-place leases    
Lessor, Lease, Description [Line Items]    
Intangible lease assets, gross 441,072 457,616
Above-market leases    
Lessor, Lease, Description [Line Items]    
Intangible lease assets, gross $ 84,385 $ 95,002
v3.20.2
Investments - Summary of Impairment and Credit Losses Recognized (Details) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Real Estate [Abstract]        
Real estate and intangible asset impairment $ 21,272 $ 3,607 $ 61,436 $ 7,299
Allowance for credit losses on direct financing leases 0 0 304 0
(Reversal)/allowance for credit losses on loans receivable (223) 0 83 0
Total impairment loss $ 21,049 $ 3,607 $ 61,823 $ 7,299
v3.20.2
Debt - Summary of Debt (Details) - USD ($)
$ in Thousands
6 Months Ended
Jun. 30, 2020
Dec. 31, 2019
Debt Instrument [Line Items]    
Total debt, gross $ 2,461,316 $ 2,179,838
Debt discount, net (6,804) (9,272)
Deferred financing costs, net (18,004) (17,549)
Total debt, net $ 2,436,508 2,153,017
Weighted Average    
Debt Instrument [Line Items]    
Effective Interest Rates 4.10%  
Stated Interest Rate 3.55%  
Remaining Years to Maturity 5 years 8 months 12 days  
Revolving credit facilities    
Debt Instrument [Line Items]    
Total debt, gross   116,500
Revolving credit facilities | Weighted Average    
Debt Instrument [Line Items]    
Effective Interest Rates 3.66%  
Remaining Years to Maturity 2 years 9 months 18 days  
Term loans    
Debt Instrument [Line Items]    
Total debt, gross $ 400,000  
Deferred financing costs, net $ (2,200)  
Term loans | Weighted Average    
Debt Instrument [Line Items]    
Effective Interest Rates 1.96%  
Stated Interest Rate 1.69%  
Remaining Years to Maturity 1 year 9 months 18 days  
Senior Unsecured Notes    
Debt Instrument [Line Items]    
Total debt, gross $ 1,500,000 1,500,000
Deferred financing costs, net $ (12,300) (12,900)
Senior Unsecured Notes | Weighted Average    
Debt Instrument [Line Items]    
Effective Interest Rates 3.85%  
Stated Interest Rate 3.73%  
Remaining Years to Maturity 8 years 1 month 6 days  
CMBS    
Debt Instrument [Line Items]    
Total debt, gross $ 216,316 218,338
Deferred financing costs, net $ (2,200) (2,600)
CMBS | Weighted Average    
Debt Instrument [Line Items]    
Effective Interest Rates 5.81%  
Stated Interest Rate 5.47%  
Remaining Years to Maturity 3 years 3 months 18 days  
CMBS | Minimum    
Debt Instrument [Line Items]    
Stated Interest Rate 5.23%  
CMBS | Maximum    
Debt Instrument [Line Items]    
Stated Interest Rate 6.00%  
Convertible Notes    
Debt Instrument [Line Items]    
Effective Interest Rates 5.64%  
Stated Interest Rate 3.75%  
Remaining Years to Maturity 10 months 24 days  
Total debt, gross $ 345,000 345,000
Deferred financing costs, net $ (1,300) $ (2,100)
v3.20.2
Debt - Revolving Credit Facilities - Narrative (Details) - Credit Facility 2019 - Revolving credit facilities - Unsecured Debt
$ in Thousands
4 Months Ended 14 Months Ended
Jan. 14, 2019
USD ($)
ExtensionOption
Apr. 30, 2019
Jun. 30, 2020
USD ($)
Dec. 31, 2019
USD ($)
Line of Credit Facility [Line Items]        
Maximum borrowing capacity $ 800,000      
Number of extension options | ExtensionOption 2      
Term of extension option 6 months      
Increased borrowing capacity under accordion feature $ 400,000      
Credit facility maturity date Mar. 31, 2023      
Facility fee percentage   0.25% 0.20%  
Line of credit facility remaining borrowing capacity     $ 800,000  
Letters of credit outstanding     0  
Deferred Costs and Other Assets        
Line of Credit Facility [Line Items]        
Unamortized deferred financing costs     $ 3,100 $ 3,700
LIBOR        
Line of Credit Facility [Line Items]        
Basis spread on variable rate   1.10% 0.90%  
v3.20.2
Debt - Term Loans - Narrative (Details) - USD ($)
3 Months Ended
Apr. 02, 2020
Jun. 30, 2020
Apr. 02, 2021
Dec. 31, 2019
Line of Credit Facility [Line Items]        
Unamortized deferred financing costs   $ 18,004,000   $ 17,549,000
Term loans        
Line of Credit Facility [Line Items]        
Maximum borrowing capacity $ 200,000,000      
Credit facility maturity date Apr. 02, 2022      
Accordion feature fully exercised   200,000,000    
Deferred financing costs $ 2,500,000      
Unamortized deferred financing costs   $ 2,200,000    
Term loans | Maximum        
Line of Credit Facility [Line Items]        
Increased borrowing capacity under accordion feature $ 400,000,000      
Term loans | Scenario Forecast        
Line of Credit Facility [Line Items]        
One-time fee payable on outstanding principal amount of loans     0.20%  
Term loans | LIBOR        
Line of Credit Facility [Line Items]        
Basis spread on variable rate 1.50%      
v3.20.2
Debt - Summary of Senior Unsecured Notes (Details) - USD ($)
$ in Thousands
6 Months Ended
Jun. 30, 2020
Dec. 31, 2019
Debt Instrument [Line Items]    
Total Debt $ 2,461,316 $ 2,179,838
Weighted Average    
Debt Instrument [Line Items]    
Stated Interest Rate 3.55%  
Senior Notes    
Debt Instrument [Line Items]    
Total Debt $ 1,500,000 1,500,000
Senior Notes | Weighted Average    
Debt Instrument [Line Items]    
Stated Interest Rate 3.73%  
2026 Senior Notes | Senior Notes    
Debt Instrument [Line Items]    
Maturity Date Sep. 15, 2026  
Stated Interest Rate 4.45%  
Total Debt $ 300,000 300,000
2027 Senior Notes | Senior Notes    
Debt Instrument [Line Items]    
Maturity Date Jan. 15, 2027  
Stated Interest Rate 3.20%  
Total Debt $ 300,000 300,000
2029 Senior Notes | Senior Notes    
Debt Instrument [Line Items]    
Maturity Date Jul. 15, 2029  
Stated Interest Rate 4.00%  
Total Debt $ 400,000 400,000
2030 Senior Notes | Senior Notes    
Debt Instrument [Line Items]    
Maturity Date Jan. 15, 2030  
Stated Interest Rate 3.40%  
Total Debt $ 500,000 $ 500,000
v3.20.2
Debt - Senior Unsecured Notes - Narrative (Details) - USD ($)
$ in Thousands
6 Months Ended
Jun. 30, 2020
Dec. 31, 2019
Debt Instrument [Line Items]    
Unamortized deferred financing costs $ 18,004 $ 17,549
Senior Notes    
Debt Instrument [Line Items]    
Redemption price, percent of principal amount 100.00%  
Unamortized discount $ 2,900 3,000
Unamortized deferred financing costs $ 12,300 $ 12,900
v3.20.2
Debt - CMBS - Narrative (Details)
$ in Thousands
Jun. 30, 2020
USD ($)
Property
loan
Dec. 31, 2019
USD ($)
Debt Instrument [Line Items]    
Unamortized deferred financing costs $ 18,004 $ 17,549
Weighted Average    
Debt Instrument [Line Items]    
Stated interest rate 3.55%  
CMBS    
Debt Instrument [Line Items]    
Number of loans secured by mortgage on leased properties and related assets | loan 5  
Number of properties securing borrowings | Property 88  
Unamortized deferred financing costs $ 2,200 2,600
Unamortized net offering premium $ 300 $ 300
CMBS | Weighted Average    
Debt Instrument [Line Items]    
Stated interest rate 5.47%  
CMBS | Minimum    
Debt Instrument [Line Items]    
Stated interest rate 5.23%  
CMBS | Maximum    
Debt Instrument [Line Items]    
Stated interest rate 6.00%  
v3.20.2
Debt - Convertible Notes (Details)
1 Months Ended 6 Months Ended
May 31, 2014
USD ($)
Jun. 30, 2020
USD ($)
$ / shares
Dec. 31, 2019
USD ($)
Debt Instrument [Line Items]      
Unamortized deferred financing costs   $ 18,004,000 $ 17,549,000
Convertible Senior Notes      
Debt Instrument [Line Items]      
Stated interest rate   3.75%  
Unamortized discount   $ 4,200,000 6,500,000
Unamortized deferred financing costs   1,300,000 2,100,000
Equity component of the conversion feature   $ 55,100,000 $ 55,100,000
Convertible Senior Notes | Convertible Senior Notes Due 2019      
Debt Instrument [Line Items]      
Aggregate principal amount of debt $ 402,500,000    
Stated interest rate 2.875%    
Debt instrument, maturity date May 15, 2019    
Convertible Senior Notes | Convertible Senior Notes Due 2021      
Debt Instrument [Line Items]      
Aggregate principal amount of debt $ 345,000,000.0    
Stated interest rate 3.75%    
Debt instrument, maturity date May 15, 2021    
Debt conversion ratio   17.4458  
Anti-dilutive cash dividends, exceeding (in USD per share) | $ / shares   $ 0.73026  
v3.20.2
Debt - Debt Extinguishment - Narrative (Details)
3 Months Ended 6 Months Ended
Jun. 30, 2019
USD ($)
Property
loan
Jun. 30, 2020
USD ($)
Jun. 30, 2019
USD ($)
Property
loan
Debt Instrument [Line Items]      
Debt extinguished   $ 0  
Gain (Loss) on extinguishment of debt $ (14,676,000)   $ (5,893,000)
Two Thousand Fifteen Credit Agreement      
Debt Instrument [Line Items]      
Gain (Loss) on extinguishment of debt     (700,000)
Mortgages | CMBS      
Debt Instrument [Line Items]      
Debt extinguished     10,400,000
Gain (Loss) on extinguishment of debt     $ 9,500,000
Number of loans paid off | loan 1   1
Number of real estate properties, securing debt | Property 1   1
Weighted average contractual interest rate 9.85%   9.85%
Master Trust 2013 Notes | Secured Debt      
Debt Instrument [Line Items]      
Gain (Loss) on extinguishment of debt     $ (14,700,000)
v3.20.2
Debt - Schedule of Debt Maturities (Details) - USD ($)
$ in Thousands
Jun. 30, 2020
Dec. 31, 2019
Scheduled Debt Maturities    
Remainder of 2020 $ 2,078  
2021 349,365  
2022 404,617  
2023 200,986  
2024 590  
Thereafter 1,503,680  
Total debt, net 2,461,316 $ 2,179,838
Scheduled Principal    
Scheduled Debt Maturities    
Remainder of 2020 2,078  
2021 4,365  
2022 4,617  
2023 3,074  
2024 590  
Thereafter 3,610  
Total debt, net 18,334  
Balloon Payment    
Scheduled Debt Maturities    
2021 345,000  
2022 400,000  
2023 197,912  
Thereafter 1,500,070  
Total debt, net $ 2,442,982  
v3.20.2
Debt - Summary of Components of Interest Expense Related to Borrowings (Details) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Non-cash interest expense:        
Amortization of deferred financing costs $ 1,456 $ 1,774 $ 2,598 $ 3,805
Amortization of debt discount, net 1,242 1,920 2,466 4,626
Amortization of net losses related to interest rate swaps 702   1,404  
Total interest expense 26,095 25,176 51,454 51,787
Revolving credit facilities        
Schedule Of Interest Expenses [Line Items]        
Facility fees 400 500 800 1,200
Interest expense 804 1,798 2,860 3,976
Term loans        
Schedule Of Interest Expenses [Line Items]        
Interest expense 1,671 5,691 1,671 9,669
Senior Unsecured Notes        
Schedule Of Interest Expenses [Line Items]        
Interest expense 13,987 3,515 27,975 6,853
Mortgages and Notes Payable        
Schedule Of Interest Expenses [Line Items]        
Interest expense 2,998 5,829 6,011 12,082
Convertible Notes        
Schedule Of Interest Expenses [Line Items]        
Interest expense $ 3,235 $ 4,649 $ 6,469 $ 10,776
v3.20.2
Stockholders' Equity and Partners' Capital - Narrative (Details) - USD ($)
1 Months Ended 6 Months Ended 44 Months Ended
Jun. 30, 2020
Jun. 30, 2020
Jun. 30, 2020
Dec. 31, 2019
Class Of Stock [Line Items]        
Shares withheld for taxes   117,500    
Shares withheld for taxes, value   $ 4,400,000    
Forward sale agreements, shares of common stock 9,200,000      
Forward sale agreements, price per share $ 37.35      
Open forward sales agreements to be receive upon physical settlement, per share $ 35.856 $ 35.856 $ 35.856  
Preferred stock, shares outstanding 6,900,000 6,900,000 6,900,000 6,900,000
Dividend rate   6.00%    
Liquidation value (in USD per share) $ 25.00 $ 25.00 $ 25.00  
Dividend rate, quarterly basis (in USD per share)   0.375    
Dividend rate, annual basis (in USD per share)   $ 1.50    
Forward Sale Agreements        
Class Of Stock [Line Items]        
Issuance of common shares 0      
ATM Program November2016        
Class Of Stock [Line Items]        
Issuance of common shares   400,000 5,600,000  
Common stock authorized   $ 500,000,000.0    
Gross proceeds from issuance of common stock   17,900,000    
Gross proceeds capacity remaining $ 246,300,000 $ 246,300,000 $ 246,300,000  
ATM Program November2016 | Weighted Average        
Class Of Stock [Line Items]        
Share issued during the period (in dollars per share)   $ 49.30    
ATM Program, Forward Sales        
Class Of Stock [Line Items]        
Issuance of common shares     3,800,000  
Number of open forward sales agreements 0 0 0  
v3.20.2
Stockholders' Equity and Partners' Capital - Summary of Dividends Declared (Details) - USD ($)
$ / shares in Units, $ in Thousands
3 Months Ended 6 Months Ended
May 22, 2020
Feb. 27, 2020
Jun. 30, 2020
Mar. 31, 2020
Jun. 30, 2019
Mar. 31, 2019
Jun. 30, 2020
Jun. 30, 2019
Equity [Abstract]                
Common stock, dividend per share (in USD per share) $ 0.625 $ 0.625 $ 0.6250   $ 0.6250   $ 1.2500 $ 1.2500
Common stock, total amount $ 64,402 $ 64,338 $ 64,402 $ 64,338 $ 56,318 $ 54,254    
Preferred stock, dividend per share (in USD per share) $ 0.375 $ 0.375            
Preferred stock, total amount $ 2,588 $ 2,588 $ 2,588 $ 2,588 $ 2,588 $ 2,588    
v3.20.2
Commitments and Contingencies - Narrative (Details)
6 Months Ended
Jun. 30, 2020
USD ($)
tenant
claim
ground_lease
Dec. 31, 2019
USD ($)
Commitments And Contingencies Disclosure [Abstract]    
Contingently liable amount of debt owed by tenant $ 5,700,000 $ 5,700,000
Number of tenants indemnified by | tenant 1  
Accruals made for environmental remediation $ 0  
Outstanding claims | claim 0  
Total commitments $ 13,000,000.0  
Commitments to purchase capital assets within one year expected to be funded in remainder of year $ 11,800,000  
Operating lease renewal option two  
Operating lease renewal term 5 years  
Number of long-term non-cancelable ground leases | ground_lease 5  
Operating lease, weighted average remaining lease term 7 years 2 months 12 days  
Operating lease, right-of-use assets $ 5,000,000.0  
Operating lease liabilities $ 6,900,000  
v3.20.2
Derivative and Hedging Activities - Narrative (Details) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Sep. 30, 2019
Jun. 30, 2020
Dec. 31, 2019
Derivative [Line Items]      
Accumulated other comprehensive loss   $ (10,057) $ (11,461)
Amount reclassified as an increase to interest expense related to terminated hedges of existing floating-rate debt within the next 12 months   2,800  
Interest Rate Swap      
Derivative [Line Items]      
Accumulated other comprehensive loss   $ 10,100  
Designated as Hedging Instrument | Interest Rate Swap      
Derivative [Line Items]      
Termination of interest rate swaps $ 12,500    
Deferred loss on termination of interest rate swaps $ 12,300    
v3.20.2
Derivative and Hedging Activities - Summary of Amounts Recorded in AOCL and Gain (Loss) Recorded in Operations when Reclassified out of AOCL or Recognized in Earnings (Details) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Derivative Instruments, Gain (Loss) [Line Items]        
Net reclassification of amounts from (to) AOCL $ 702 $ (8,754) $ 1,404 $ (13,775)
Interest expense 26,095 25,176 51,454 51,787
Interest Rate Swap        
Derivative Instruments, Gain (Loss) [Line Items]        
Gross amount of loss recognized in AOCL on derivatives   (9,097)   (14,326)
Amount of loss reclassified from AOCL to termination of interest rate swaps   $ 343   $ 551
Interest Expense | Interest Rate Swap        
Derivative Instruments, Gain (Loss) [Line Items]        
Amount of loss reclassified from AOCL to interest [1] $ 702   $ 1,404  
[1] Interest expense for the three and six months ended June 30, 2020 was $26.1 million and $51.5 million, respectively.
v3.20.2
Fair Value Measurements - Narrative (Details) - Property
6 Months Ended 12 Months Ended
Jun. 30, 2020
Dec. 31, 2019
Measurement Input, Price Per Square Foot | Minimum | Impact of COVID-19    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Price per square foot, discount rate 0.00%  
Measurement Input, Price Per Square Foot | Maximum | Impact of COVID-19    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Price per square foot, discount rate 10.00%  
Fair Value, Measurements, Nonrecurring    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Impairment of lease, expiration period (or less) 60 days  
Number Of Properties Accounted For At Fair Value 24 16
Fair Value, Measurements, Nonrecurring | Fair Value Estimated Using Capitalization Rate | Measurement Input Capitalization Rate    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Number Of Properties Accounted For At Fair Value 1 1
Long Lived Assets Estimated Capitalization Rate Fair Value Disclosure 10.06% 9.62%
v3.20.2
Fair Value Measurements - Schedule of Assets at Fair Value on Nonrecurring Basis (Details) - Fair Value, Measurements, Nonrecurring - USD ($)
$ in Thousands
Jun. 30, 2020
Mar. 31, 2020
Dec. 31, 2019
Sep. 30, 2019
Jun. 30, 2019
Assets Held Impaired At March 31, 2020          
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]          
Assets Impaired Fair Value Disclosure   $ 52,131      
Assets Held Impaired At June 30, 2020          
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]          
Assets Impaired Fair Value Disclosure $ 10,294        
Assets Held Impaired At June 30 2019          
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]          
Assets Impaired Fair Value Disclosure         $ 1,893
Assets Held Impaired At September 30 2019          
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]          
Assets Impaired Fair Value Disclosure       $ 1,093  
Assets Held Impaired At December 31 2019          
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]          
Assets Impaired Fair Value Disclosure     $ 11,594    
Level 1 | Assets Held Impaired At March 31, 2020          
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]          
Assets Impaired Fair Value Disclosure   0      
Level 1 | Assets Held Impaired At June 30, 2020          
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]          
Assets Impaired Fair Value Disclosure 0        
Level 1 | Assets Held Impaired At June 30 2019          
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]          
Assets Impaired Fair Value Disclosure         0
Level 1 | Assets Held Impaired At September 30 2019          
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]          
Assets Impaired Fair Value Disclosure       0  
Level 1 | Assets Held Impaired At December 31 2019          
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]          
Assets Impaired Fair Value Disclosure     0    
Level 2 | Assets Held Impaired At March 31, 2020          
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]          
Assets Impaired Fair Value Disclosure   0      
Level 2 | Assets Held Impaired At June 30, 2020          
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]          
Assets Impaired Fair Value Disclosure 0        
Level 2 | Assets Held Impaired At June 30 2019          
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]          
Assets Impaired Fair Value Disclosure         0
Level 2 | Assets Held Impaired At September 30 2019          
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]          
Assets Impaired Fair Value Disclosure       0  
Level 2 | Assets Held Impaired At December 31 2019          
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]          
Assets Impaired Fair Value Disclosure     0    
Level 3 | Assets Held Impaired At March 31, 2020          
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]          
Assets Impaired Fair Value Disclosure   $ 52,131      
Level 3 | Assets Held Impaired At June 30, 2020          
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]          
Assets Impaired Fair Value Disclosure $ 10,294        
Level 3 | Assets Held Impaired At June 30 2019          
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]          
Assets Impaired Fair Value Disclosure         $ 1,893
Level 3 | Assets Held Impaired At September 30 2019          
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]          
Assets Impaired Fair Value Disclosure       $ 1,093  
Level 3 | Assets Held Impaired At December 31 2019          
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]          
Assets Impaired Fair Value Disclosure     $ 11,594    
v3.20.2
Fair Value Measurements - Fair Value Inputs of Long-Lived Assets Held and Used (Details)
6 Months Ended 12 Months Ended
Jun. 30, 2020
ft²
Property
$ / ft²
Dec. 31, 2019
ft²
Property
$ / ft²
Fair Value Estimated Using Comparable Properties | Retail    
Impaired Long Lived Assets Held Used And Held For Sale Properties [Line Items]    
Number Of Properties Accounted For At Fair Value | Property 14 4
Fair Value Estimated Using Comparable Properties | Retail | Weighted Average    
Impaired Long Lived Assets Held Used And Held For Sale Properties [Line Items]    
Weighted Average Price (in dollars per sq ft) 49.77 104.84
Fair Value Estimated Using Comparable Properties | Retail | Measurement Input, Price Per Square Foot | Minimum    
Impaired Long Lived Assets Held Used And Held For Sale Properties [Line Items]    
Price per square foot range 4.35 34.45
Fair Value Estimated Using Comparable Properties | Retail | Measurement Input, Price Per Square Foot | Maximum    
Impaired Long Lived Assets Held Used And Held For Sale Properties [Line Items]    
Price per square foot range 320.89 740.74
Fair Value Estimated Using Comparable Properties | Retail | Measurement Input Square Footage    
Impaired Long Lived Assets Held Used And Held For Sale Properties [Line Items]    
Square Footage | ft² 573,784 35,885
Fair Value Estimated Using Listing Price or Broker Opinion of Value | Retail    
Impaired Long Lived Assets Held Used And Held For Sale Properties [Line Items]    
Number Of Properties Accounted For At Fair Value | Property 7 10
Fair Value Estimated Using Listing Price or Broker Opinion of Value | Retail | Weighted Average    
Impaired Long Lived Assets Held Used And Held For Sale Properties [Line Items]    
Weighted Average Price (in dollars per sq ft) 44.57 50.71
Fair Value Estimated Using Listing Price or Broker Opinion of Value | Retail | Measurement Input, Price Per Square Foot | Minimum    
Impaired Long Lived Assets Held Used And Held For Sale Properties [Line Items]    
Price per square foot range 30.66 24.78
Fair Value Estimated Using Listing Price or Broker Opinion of Value | Retail | Measurement Input, Price Per Square Foot | Maximum    
Impaired Long Lived Assets Held Used And Held For Sale Properties [Line Items]    
Price per square foot range 349.62 323.00
Fair Value Estimated Using Listing Price or Broker Opinion of Value | Retail | Measurement Input Square Footage    
Impaired Long Lived Assets Held Used And Held For Sale Properties [Line Items]    
Square Footage | ft² 349,609 165,773
Fair Value Estimated Using Listing Price or Broker Opinion of Value | Industrial    
Impaired Long Lived Assets Held Used And Held For Sale Properties [Line Items]    
Number Of Properties Accounted For At Fair Value | Property 1  
Fair Value Estimated Using Listing Price or Broker Opinion of Value | Industrial | Weighted Average    
Impaired Long Lived Assets Held Used And Held For Sale Properties [Line Items]    
Weighted Average Price (in dollars per sq ft) 13.79  
Fair Value Estimated Using Listing Price or Broker Opinion of Value | Industrial | Measurement Input, Price Per Square Foot    
Impaired Long Lived Assets Held Used And Held For Sale Properties [Line Items]    
Price per square foot range 13.79  
Fair Value Estimated Using Listing Price or Broker Opinion of Value | Industrial | Measurement Input Square Footage    
Impaired Long Lived Assets Held Used And Held For Sale Properties [Line Items]    
Square Footage | ft² 35,551  
Fair Value Estimated Using Listing Price or Broker Opinion of Value | Office    
Impaired Long Lived Assets Held Used And Held For Sale Properties [Line Items]    
Number Of Properties Accounted For At Fair Value | Property 1 1
Fair Value Estimated Using Listing Price or Broker Opinion of Value | Office | Weighted Average    
Impaired Long Lived Assets Held Used And Held For Sale Properties [Line Items]    
Weighted Average Price (in dollars per sq ft) 96.39 99.37
Fair Value Estimated Using Listing Price or Broker Opinion of Value | Office | Measurement Input, Price Per Square Foot    
Impaired Long Lived Assets Held Used And Held For Sale Properties [Line Items]    
Price per square foot range 96.39 99.37
Fair Value Estimated Using Listing Price or Broker Opinion of Value | Office | Measurement Input Square Footage    
Impaired Long Lived Assets Held Used And Held For Sale Properties [Line Items]    
Square Footage | ft² 4,310 4,310
v3.20.2
Fair Value Measurements - Schedule of Carrying Amount and Estimated Fair Value Of Financial Instruments (Details) - USD ($)
$ in Thousands
Jun. 30, 2020
Dec. 31, 2019
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]    
Loans receivable, net $ 29,163 $ 34,465
Revolving credit facilities   116,500
2020 Term Loans 397,824  
Senior Unsecured Notes, net 1,484,884 1,484,066
Mortgages and notes payable, net 214,338 216,049
Convertible Notes, net 339,462 336,402
Estimated Fair Value    
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]    
Loans receivable, net 29,823 35,279
2019 Credit Facility   119,802
2020 Term Loans 400,231  
Senior Unsecured Notes, net 1,455,070 1,543,919
Mortgages and notes payable, net 228,768 235,253
Convertible Notes, net $ 344,597 $ 356,602
v3.20.2
Incentive Award Plan - Narrative (Details) - USD ($)
$ / shares in Units, shares in Thousands, $ in Millions
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Dec. 31, 2019
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]          
Unamortized stock-based compensation expense $ 18.4   $ 18.4   $ 12.6
General and Administrative Expense          
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]          
Stock-based compensation expense $ 3.3 $ 3.9 $ 6.8 $ 7.5  
Non-vested Shares of Restricted Stock          
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]          
Grants in period (in shares)     148    
Deferred compensation expense     $ 6.9    
Outstanding unvested shares 296   296    
Unamortized stock-based compensation expense $ 9.7   $ 9.7   6.6
Market-Based Awards          
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]          
Number of shares available for grant 88   88    
Expected volatility     25.20%    
Minimum required service period     3 years    
Average volatility rate     21.70%    
Risk free interest rate     1.07%    
Market-based award, grant date fair value     $ 67.30    
Accrued dividend rights $ 1.6   $ 1.6   2.7
Shares released for awards     400    
Unamortized stock-based compensation expense $ 8.7   $ 8.7   $ 6.0
Market-Based Awards | Minimum          
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]          
Percent multiplier for shares granted     0.00%    
Market-Based Awards | Maximum          
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]          
Percent multiplier for shares granted     300.00%    
Market-Based Awards | Group of Industry Peers          
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]          
Volatility rate, minimum     18.10%    
Volatility rate, maximum     27.30%    
v3.20.2
Income Per Share and Partnership Unit - Schedule of Reconciliation of the Numerator and Denominator Used in the Computation of Basic and Diluted (Loss) Income Per Share (Details) - USD ($)
$ / shares in Units, $ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Basic and diluted (loss) income:        
(Loss) income from continuing operations $ (413) $ 45,737 $ (16,260) $ 89,315
Less: dividends paid to preferred stockholders (2,588) (2,588) (5,176) (5,176)
Less: dividends attributable to unvested restricted stock (185) (250) (392) (522)
Net (loss) income attributable to common stockholders used in basic and diluted (loss) income per share $ (3,186) $ 42,899 $ (21,828) $ 83,617
Basic weighted average shares of common stock outstanding:        
Weighted average shares of common stock outstanding 102,980,619 87,422,369 102,765,967 86,673,672
Less: unvested weighted average shares of restricted stock (301,652) (420,382) (311,410) (419,974)
Basic weighted average shares of common stock outstanding 102,678,967 87,001,987 102,454,557 86,253,698
Basic (in USD per share) $ (0.03) $ 0.49 $ (0.21) $ 0.97
Diluted weighted average shares of common stock outstanding        
Plus: unsettled shares under open forward equity contracts   772,040   328,617
Plus: unvested market-based awards   116,672   196,982
Diluted weighted average shares of common stock outstanding 102,678,967 87,890,699 102,454,557 86,779,297
Diluted (in USD per share) $ (0.03) $ 0.49 $ (0.21) $ 0.96
Unvested shares of restricted stock, less shares assumed repurchased at market        
Potentially dilutive shares of common stock        
Dilutive shares   160,606 66,920 191,215
Unsettled shares under open forward equity contracts        
Potentially dilutive shares of common stock        
Dilutive shares     607,636  
Market-Based Awards        
Potentially dilutive shares of common stock        
Dilutive shares 83,625   230,537  
v3.20.2
Income Per Share and Partnership Unit - Narrative (Details) - shares
6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Earnings Per Share [Abstract]    
Potentially dilutive shares, convertible debt 0 0
v3.20.2
Related Party Transactions and Arrangements - Continuing Involvement (Details) - Spirit MTA REIT - USD ($)
$ in Thousands
6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Related Party Transaction [Line Items]    
Cash inflow from SMTA subsequent to spin-off $ 800 $ 22,700
Cash outflow to SMTA subsequent to spin-off $ 4 $ 22,700
v3.20.2
Related Party Transactions and Arrangements - Asset Management Agreement and Interim Management Agreement (Details) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Sep. 20, 2019
Related Party Transaction [Line Items]          
Related party fee income $ 250 $ 7,249 $ 500 $ 14,176  
Asset Management Fees | Spirit MTA REIT          
Related Party Transaction [Line Items]          
Related party fee income $ 200 $ 5,000 $ 500 $ 10,000  
Asset Management Agreement | Spirit MTA REIT          
Related Party Transaction [Line Items]          
Agreement termination date     Sep. 20, 2019    
Initial one-year term | Interim Management Agreement | Spirit MTA REIT          
Related Party Transaction [Line Items]          
Due from related parties         $ 1,000
Renewal Term | Interim Management Agreement | Spirit MTA REIT          
Related Party Transaction [Line Items]          
Due from related parties         $ 4,000
v3.20.2
Related Party Transactions - Property Management and Servicing Agreement (Details) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
May 20, 2014
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Related Party Transaction [Line Items]          
Related party fee income   $ 250 $ 7,249 $ 500 $ 14,176
Affiliated Entity | Property Management          
Related Party Transaction [Line Items]          
Annual management fees rate 0.25%        
Related party fee income     1,400   3,000
Affiliated Entity | Special Servicing Fees          
Related Party Transaction [Line Items]          
Annual management fees rate 0.75%        
Related party fee income     $ 400   $ 800