src-10q_20200930.htm

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

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.

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).

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.

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

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

As of October 29, 2020, there were 108,779,254 shares of common stock, par value $0.05, of Spirit Realty Capital, Inc. outstanding.

This report combines the quarterly reports on Form 10-Q for the three and nine months ended September 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:

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.

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
2031 Senior Notes	$450.0 million aggregate principal amount of senior notes issued in August 2020
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 contingent 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 deemed not probable of collection.
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
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, which was effective from September 20, 2019 through September 4, 2020
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 and terminated effective September 20, 2019
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, 2030 Senior Notes, and 2031 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.

	September 30, 2020			December 31, 2019
Assets
Investments:
Real estate investments:
Land and improvements	$	1,995,780		$	1,910,287
Buildings and improvements		4,022,944			3,840,220
Total real estate investments		6,018,724			5,750,507
Less: accumulated depreciation		(810,215	)		(717,097	)
		5,208,509			5,033,410
Loans receivable, net		—			34,465
Intangible lease assets, net		349,347			385,079
Real estate assets under direct financing leases, net		7,444			14,465
Real estate assets held for sale, net		33,885			1,144
Net investments		5,599,185			5,468,563
Cash and cash equivalents		116,814			14,492
Deferred costs and other assets, net		149,820			124,006
Goodwill		225,600			225,600
Total assets	$	6,091,419		$	5,832,661

Liabilities and stockholders’ equity
Liabilities:
Revolving credit facilities	$	—		$	116,500
Term loans, net		177,170			—
Senior Unsecured Notes, net		1,926,752			1,484,066
Mortgages and notes payable, net		213,479			216,049
Convertible Notes, net		188,216			336,402
Total debt, net		2,505,617			2,153,017
Intangible lease liabilities, net		121,066			127,335
Accounts payable, accrued expenses and other liabilities		132,555			139,060
Total liabilities		2,759,238			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 September 30, 2020 and December 31, 2019		166,177			166,177
Common stock, $0.05 par value, 175,000,000 shares authorized: 105,884,703 and 102,476,152 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively		5,294			5,124
Capital in excess of common stock par value		5,813,128			5,686,247
Accumulated deficit		(2,643,063	)		(2,432,838	)
Accumulated other comprehensive loss		(9,355	)		(11,461	)
Total stockholders’ equity		3,332,181			3,413,249
Total liabilities and stockholders’ equity	$	6,091,419		$	5,832,661

	Three Months Ended September 30,						Nine Months Ended September 30,
	2020			2019			2020			2019
Revenues:
Rental income	$	112,916		$	109,511		$	351,469		$	320,084
Interest income on loans receivable		189			843			998			2,749
Earned income from direct financing leases		131			267			439			971
Related party fee income		178			54,795			678			68,971
Other income		327			1,531			1,401			2,510
Total revenues		113,741			166,947			354,985			395,285
Expenses:
General and administrative		10,931			12,727			36,396			39,741
Termination of interest rate swaps		—			12,461			—			12,461
Property costs (including reimbursable)		5,049			4,407			18,219			13,968
Deal pursuit costs		597			330			1,630			574
Interest		26,404			24,675			77,858			76,462
Depreciation and amortization		52,170			43,907			157,566			126,598
Impairments		8,106			5,932			69,929			13,231
Total expenses		103,257			104,439			361,598			283,035
Other income:
Loss on debt extinguishment		(7,252	)		(5,580	)		(7,252	)		(11,473	)
Gain on disposition of assets		10,763			32,254			11,809			70,760
Preferred dividend income from SMTA		—			3,302			—			10,802
Total other income		3,511			29,976			4,557			70,089
Income (loss) before income tax expense		13,995			92,484			(2,056	)		182,339
Income tax expense		(197	)		(11,190	)		(406	)		(11,730	)
Net income (loss)		13,798			81,294			(2,462	)		170,609
Dividends paid to preferred shareholders		(2,587	)		(2,587	)		(7,763	)		(7,763	)
Net income (loss) attributable to common stockholders	$	11,211		$	78,707		$	(10,225	)	$	162,846

Net income (loss) per share attributable to common stockholders:
Basic	$	0.11		$	0.87		$	(0.11	)	$	1.85
Diluted	$	0.11		$	0.87		$	(0.11	)	$	1.85

Weighted average shares of common stock outstanding:
Basic		102,750,120			90,040,353			102,553,798			87,529,786
Diluted		102,938,860			90,396,797			102,553,798			87,784,477

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

Nine Months Ended September 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		—		—		—			—


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)


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


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	58
	Item 4.	Controls and Procedures	59
PART II — OTHER INFORMATION			60
	Item 1.	Legal Proceedings	60
	Item 1A.	Risk Factors	60
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	62
	Item 3.	Defaults Upon Senior Securities	62
	Item 4.	Mine Safety Disclosures	62
	Item 5.	Other Information	62
	Item 6.	Exhibits	63
		Signatures	64


Spirit Realty Capital, Inc.		001-36004
Spirit Realty, L.P.	333-216815-01


Spirit Realty Capital, Inc. Yes ☒ No □	Spirit Realty, L.P. Yes ☒ No □


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


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


Spirit Realty Capital, Inc. Yes ☐ No ☒	Spirit Realty, L.P. Yes ☐ No ☒