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| 8-K - FORM 8-K - SPIRIT REALTY CAPITAL, INC. | d598558d8k.htm |
 September 2013
Investor Presentation
The
New
Spirit
Exhibit 99.1 |
 FORWARD LOOKING STATEMENT:
Statements contained in these slides and any accompanying oral presentation by Spirit Realty Capital,
Inc. (the “Company”) that are not strictly historical are forward-looking
statements under Federal securities laws, which should be regarded solely as reflections of our
current operating plans and estimates and not guarantees of future performance. These forward-looking statements are subject to
known and unknown risks and uncertainties that can cause actual results to differ materially from
those currently anticipated, due to a number of factors which include, but are not limited to,
our continued ability to source new investments, risks associated with using debt to fund the
company’s business activities (including refinancing and interest rate risks, changes in interest rates and/or credit
spreads, changes in the real estate markets), risks related to the Spirit-CCPT II merger and our
ability to integrate the portfolios, disruption from the merger making it more difficult to
maintain business and operational relationships, unknown liabilities acquired in connection
with the acquired properties, portfolios of properties, or interests in real-estate related entities, effects of liquidity for former
CCPT II shareholders and Spirit shareholders previously holding unregistered shares, and those
discussed in the Company’s filings with the Securities and Exchange Commission from time
to time, including the pre-merger companies’ Annual Reports on Form 10-K, as well
as the Company’s press releases, which can be found on the Company’s website www.spiritrealty.com. The Company
expressly disclaims any responsibility to update or revise forward-looking statements, whether as
a result of new information, future events or otherwise, except as required by law. NOTICE REGARDING NON-GAAP
FINANCIAL MEASURES: This presentation contains and may refer to certain non-GAAP financial
measures. These non-GAAP financial measures should not be considered replacements for, and
should be read together with, the most comparable GAAP financial measures. Explanations of
these non-GAAP financial measures and reconciliations to the most directly comparable GAAP
financial measures can be found in the Appendix at the end of this presentation. |
 Spirit Overview and Investment Highlights
Section 1 |
 SRC
Overview
(1)
NYSE Ticker
SRC
Enterprise Value
$6.9 billion
Market Capitalization
$3.3 billion
Current Annual Dividend
$0.65625
Dividend Yield
7.3%
Current Share Price
$8.99
IPO Share Price
$7.87
(2)
Total Return Since IPO
+20%
3
Spirit Overview and Investment Highlights
Spirit, a single tenant, triple net REIT focused on
operationally essential real estate, owns a real estate
portfolio consisting of 2,046 properties (99% occupied with
an average remaining lease term of 11 years)
The portfolio is well-diversified by industry (19), tenants
(231), and geography (49 states) and has 49% investment
grade tenancy
(3)
In September 2012, Spirit was recapitalized through a
$500 million IPO with an enterprise value of $3.2 billion
and a market cap of $1.3 billion
In July 2013, Spirit merged with Cole Credit Property Trust
II, a $3.7 billion non-traded, public REIT and created a
$7.1 billion enterprise value company
Despite approximately 368 million shares becoming freely tradable over the past 12
months,
Spirit
shares
have
out
performed
its
competitors
and
the
market
(4)
Spirit is focused on generating and delivering sustainable and attractive returns
for our shareholders
Notes:
(1)
As of September 13, 2013
(2)
$15.00 initial share price divided by the 1.9048 conversion ratio associated with
Cole II merger (3)
Based
on
annualized
rental
revenue
from
tenants
with
actual
or
implied
credit
ratings
of
BBB-
or
higher.
Implied
credit
ratings
determined
using
Moody’s
KMV
licensed
software
(4)
Including
ARCP,
NNN,
O,
the
S&P
500,
and
the
RMS;
based
on
total
return
since
IPO,
per
Capital
IQ |
 1
st
Year’s Progress
Management Has Made Material Progress Since the IPO
4
Criteria
Sept. 2012
Jun.
2013
(1)
Portfolio
# of Properties
1,183
2,046
(5)
% of
Revenue
from
Investment
Grade
(2)
28%
49%
% of Revenue from Top Tenant
30%
16%
% of Revenue from Top 10 Tenants
52%
37%
Avg. Remaining Lease Term
11 years
11 years
Financial
Enterprise
Value
(3)
$3.2Bn
$7.1Bn
Market
Capitalization
(3)
$1.3Bn
$3.6Bn
G&A (% of Revenue)
8.8%
7.3%
Free Float
39%
99%
EBITDA
(3)
$253MM
$484MM
Total Debt
(4)
$1.9Bn
$3.6Bn
Total
Debt
/
EBITDA
(3)(4)
7.6x
7.5x
Notes:
(1)
Pro forma for Cole II merger which closed on July 17, 2013
(2)
Based
on
annualized
rental
revenue
from
tenants
with
actual
or
implied
credit
ratings
of
BBB-
or
higher.
Implied
credit
ratings
determined
using
Moody’s
KMV
licensed
software
(3)
Definition/ reconciliation in appendix
(4)
Represents debt principal balance outstanding
(5)
As of September 13, 2013
+863
+21%
(14%)
+$3.9Bn
(1.5%) |
 SRC prices IPO at $7.87
(2)
/ share
Spirit announces plans to merge with
Cole II
TLC lockup expires
Spirit announces 1
quarter results
Spirit added to the RMZ Index
Sponsor equity lockups expire
Spirit completes $7.1Bn merger
with Cole II
Strong Performance Since IPO
Demonstrated Public Company Track Record, Minimal Equity Overhang
Total Return (%)
Volume (MM)
5
Notes:
(1)
Implied cap rate calculation in appendix; FFO multiple is share price divided by
consensus estimate (2)
$15.00 initial share price divided by the 1.9048 conversion ratio associated with
Cole II merger (3)
Excludes first day of trading post-IPO
Ample opportunity for legacy
SRC equity and Cole retail to exit
–
Highly liquid stock
Equity overhang is behind us
with only execs and directors
locked up
Possible additional index
demand
–
S&P Real Estate Indices and
Dow Jones Real Estate
Indices
Observations
Annotations
Free Float: 40%
Shares: 65.2mm
ADTV:
0.5mm
(3)
Free Float: 69%
Shares: 111.4mm
ADTV: 1.2mm
Free Float: 98%
Shares: 159.0mm
ADTV: 1.9mm
Free Float: 99%
Shares: 367.5mm
ADTV: 5.7mm
Source: SNL Financial, Capital IQ
$2.0Bn of NTR equity becomes freely
tradable
0
5
10
15
20
25
0
20
40
60
80
100
120
140
160
180
Sep-12
Oct-12
Nov-12
Dec-12
Jan-13
Feb-13
Mar-13
Apr-13
May-13
Jun-13
Jul-13
Sep-13
A
B
C
D
E
F
G
Current Valuation of
7.8% cap rate and
12.2x
2014E
FFO
(1)
IPO Valuation of 8.8%
cap rate and 10.2x NTM
FFO
(1)
Total Return Since SRC
IPO
SRC
+20%
S&P 500
+18%
ARCP
+11%
NNN
+5%
RMS
+4%
O
+0%
G
B
A
C
D
E
F
st |
 Operational Overview
Section 2 |
 Notes:
(1)
Excludes mortgage notes receivables and vacant properties
(2)
Represents unit-level coverage ratio of EBITDAR to cash interest paid and rent
expense; weighted by rent (3)
Based
on
annualized
rental
revenue
from
tenants
with
actual
or
implied
credit
ratings
of
BBB-
or
higher.
Implied
credit
ratings
determined
using
Moody’s
KMV
licensed
software
7
Operational Highlights
Focus on retail real estate that is operationally essential to tenant
profits –
Including non-rated tenants with strong credits, but otherwise overlooked by
traditional lenders Market segment allows for favorable lease
structuring –
96% of portfolio has rent escalations
–
Approximately half of the portfolio under master lease
Historical credit loss of only 3.6% in total across 10 years
Portfolio occupancy rate has never been below 95% and 10 year average is greater
than 99% –
80% historical lease renewal rate
Market segment allows for favorable lease structuring
–
Weighted
average
EBITDAR
coverage
ratio
of
2.58x
(2)
–
49%
of
tenants
are
investment
grade
(3)
Differentiated Business Strategy
Seasoned, Cycle-Tested Portfolio
$412
$803
$1,375
$750
$133
$37
$164
$91
$81
$349
$1,243
$1,103
$124
$143
$121
$8
0
500
1,000
1,500
2,000
2004
2005
2006
2007
2008
2009
2010
2011
2012
1H13
Acquisition Vintage
Amounts in Millions
(1)
Over 90% of the portfolio
was acquired before 2009
SRC
Cole |
 Large Diverse Portfolio
Notes:
(1)
By rental revenue
(2)
Does not include investments of mortgage notes receivable and vacant
properties Credit Diversity
8
Industry Diversity
Investment
Grade / Implied
Investment
Grade
(2)
Non-Investment
Grade / Implied
Non-Investment
Grade
Not Rated
Specialty Retail
Restaurants
Department / Discount
Drug Stores
Other
Top Tenants
# of Prop.
% of Portfolio
(1)
(S&P/Moody’s)
181
15.6%
BB
70
4.3%
A-
109
3.5%
BB+
201
2.4%
BBB-
9
2.3%
B+
83
2.0%
BBB
36
1.7%
BBB
12
1.5%
BB+
8
1.5%
A-
4
1.3%
A-
14
1.2%
BB
8
1.2%
BBB+
8
1.2%
A
21
1.1%
BB-
9
1.1%
BBB
Total Top 15
773
41.9%
Spirit's Top Tenants Represent an Attractive Mix of Industries and Credits
(1)(2) |
 Large Diverse
Portfolio Spirit’s
Portfolio
is
Geographically
Well-Diversified
Retail
Real
Estate
9
Number of Properties
Retail
Industrial
Office, 3%
Distribution, 2%
Service, 1%
70%+ Less Than
$4.0MM
Notes:
(1) By rental revenue
(2) Does not include investments of mortgage note portfolios and vacant properties Property Type
Diversification Property Value Diversification
(1)(2) |
 Lease Profile with
Predictable Revenue Source:
Company filings
Occupancy
Lease Expiration
Lease Escalation
(3)
0.8
2.3
2.8
4.1
4.3
4.5
3.7
6.9
7.8
3.9
58.8
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023 and
thereafter
(%)
10
Lease Structure
(2)
Notes:
(1) By rental revenue
(2) Does not include investments of mortgage notes receivable and vacant properties
(3) Does not include investments in multi-tenant properties
% Contractual Fixed
% With Contractual CPI-Related
% Flat
% Other
% NNN
% NN
(10.0%)
(5.0%)
0.0%
5.0%
10.0%
80.0%
90.0%
100.0%
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
GDP Growth
Spirit Occupancy Rate |
 Financial Overview
Section 3 |
 Balance Sheet Data
SRC Has Long-Term Leases and Well-Laddered Debt Maturities
Balance Sheet
(1)
$7.1 billion in total assets
–
Almost entirely owned real estate
–
Long-term leases
$3.6 billion in debt principal balance
outstanding
–
Only $141 million in short-term,
variable facility
–
$925 million in Master Trust bonds;
this facility (or similar structure) can
be used to issue investment
grade bonds
–
Remainder in laddered, property-
level CMBS debt
–
Weighted average rate on debt
outstanding is approximately 5.66%
–
No significant maturities until 2016
–
Leverage is 7.5x
(3)
Scheduled
Principal
Amortization
(2)
Balloon Payments at Maturity
(2)
Notes:
(1)
Post-merger, pro forma as of June 30, 2013
(2)
Post-merger, contractual debt maturities (July 1, 2013)
(3)
Debt / EBITDA, see appendix for EBITDA calculation / reconciliation
(4)
CMBS interest rate, contractual weighted average interest rate including revolver is
6.0% $MM
Primarily
CMBS
Debt
Revolver
Debt
Contractual Weighted Avg.
Interest Rate
12
72
266
775
945
96
964
115
0
200
400
600
800
1,000
2H13
2014
2015
2016
2017
2018
Thereafter
4.3%
5.3%
6.3%
5.8%
5.7%
5.5%
$225MM by
2017
(4)
Annual Amortization
Cumulative
Amortization
$MM
24
55
55
49
42
40
106
0
100
200
300
400
2H13
2014
2015
2016
2017
2018
Thereafter |
 Income Statement Data
Note:
(1)
Continuing operations, excluding merger costs and impairments; calculation /
reconciliation in appendix Income Statement
Post-merger Pro Forma
$546 million in annualized revenue
$525 million in annualized NOI
G&A is 7.3% of revenue
A significant amount of property costs
relate to remaining multi-tenant
portfolio
1H13 pro forma annualized FFO was
approximately $0.75 per share
AFFO per share is estimated to be
between $0.77 and $0.82 per share
in 2014
13
Post-Merger Pro Forma
($000s)
2012
Annualized
Revenues
$ 530,227
$ 545,904
Property costs
24,441
21,234
Net operating income (“NOI”)
(1)
505,786
524,670
General and administrative
32,762
39,868
Acquisition costs
1,054
436
EBITDA
(1)
471,970
484,366
Interest
211,569
206,086
Income taxes
504
284
Funds from Operations (“FFO”)
(1)
$ 259,897
$ 277,996
1H13 |
 Market Overview
Section 4 |
 Benchmarking to Our Closest Comparables
Operational Statistics
(1)
Number of Properties
2,046
3,681
1,838
1,014
2,574
Square Feet (MM)
54.3
58.3
20.2
44.0
43.4
Occupancy Rate
99%
98%
98%
99%
100%
Average Remaining Lease
Term
11 yrs
11 yrs
12 yrs
12 yrs
10 yrs
% of Investment Grade
Tenants
49%
(2)
38%
(3)
Not Reported
55%
(3)
53%
(3)
% Retail
77%
78%
100%
66%
58%
Top 5 Tenants % Rent
28%
21%
23%
20%
21%
Top 10 Tenants % Rent
37%
34%
39%
33%
30%
Size, Occupancy, and Tenant Mix Similar to Sector-Leading Peers
15
Notes:
(1)
Sources: Company Filings; SRC statistics as of September 13, 2013; ARCP pro froma
for ARCT IV and CapLease mergers (2)
Based
on
annualized
rental
revenue
from
tenants
with
actual
or
implied
credit
ratings
of
BBB-
or
higher.
Implied
credit
ratings
determined
using
Moody’s
KMV
licensed
software
(3)
Company reported |
 Benchmarking to Our Closest Comparables
Notes:
(1)
Calculation / reconciliation in appendix
(2)
Per SNL
(3)
Principal value of debt + liquidation value of preferred equity / most recent
quarter EBITDA annualized (COLE is “annualized normalized EBITDA”, ARCP prior to acquisition of CapLease and ARCT IV
(4)
Calculated by applying comps average multiple / yield to the respective SRC
metric 16
Spirit Remains a Good Relative Valuation Opportunity
Comps
Average
Implied SRC
Share Price
(4)
Implied Cap Rate
(1)
7.8%
5.9%
6.3%
NA
NA
6.1%
$13.99
2014 AFFOx
(2)
11.5x
15.8x
14.6x
12.2x
11.5x
13.5x
$10.58
Dividend Yield
(2)
7.3%
5.6%
5.3%
5.9%
7.1%
6.0%
$11.00
AFFO Payout Ratio
(2)
82%
93%
82%
88%
103%
92%
NA
Leverage (Debt +
Preferred / EBITDA)
(3)
7.5x
6.9x
7.1x
5.7x
6.3x
6.5x
NA
Sources: SNL, SEC filings |
 What's Next for SRC?
Significantly reduced equity overhang
Q4
2013
-
our
first
full
reporting
period
as
a
merged
company
Continued portfolio management and asset recycling
Possible additional index inclusion
–
S&P Real Estate Indices and Dow Jones Real Estate Indices
2014 guidance
–
$0.77 to $0.82 of AFFO
–
Implied
dividend
coverage
of
117%
-
125%
(1)
Closing the valuation gap to peers through execution and investor education
Continue to identify and close on accretive acquisitions as the market
allows 17
Note:
(1)
Based on current annualized dividend of $0.65625 |
 Appendix & Financial Definitions
Appendix |
 Financial Definitions
19
NOI from Continuing Operations
–
expenses, merger costs, real estate acquisition costs, interest expense, depreciation and
amortization, impairments, Cole II portfolio gains on sale of real estate assets and property
condemnations, and income tax expense (benefit).
EBITDA from Continuing Operations, as Adjusted
–
discontinued operations, interest expense, depreciation and
amortization, and income tax expense (benefit); as further adjusted to eliminate the impact of
merger costs, impairments, and Cole II portfolio gains on sale of real estate assets and property condemnations.
EBITDAR
–
depreciation and amortization, income tax expense (benefit), and rent. FFO from Continuing Operations, as Adjusted
–
real estate related depreciation and amortization, impairment charges, merger costs, and Cole II
portfolio gains on sale of real estate assets and property condemnations. Enterprise Value
–
Adjusted Funds from Operations (AFFO)
–
REIT industry. It adjusts FFO (defined below) to eliminate the impact of non-recurring
items that are not reflective of ongoing operations and certain non-cash items that reduce
or increase net income in accordance with GAAP. Our computation of AFFO may differ from the methodology
for calculating AFFO used by other equity REITs, and, therefore, many not be comparable to such other
REITs. AFFO should not be considered as a substitute for net income determined in accordance
with U.S. GAAP as measures of financial performance. Reconciliations from U.S. GAAP net
income available to common stockholders to AFFO are included in financial statements filed by the Company with the Securities and
Exchange Commission.
Funds from Operations
–
estate-related depreciation and amortization, impairment charges and net losses (gains) on the
disposition of real estate assets. Its calculation conforms to the standards established
by the National Association of Real Estate Investment Trusts, or NAREIT.
Market Capitalization
–
as of the date indicated.
Represents
net
income
(loss)
(computed
in
accordance
with
GAAP),
excluding
general
and
administrative
Represents net income (loss) before the cumulative effect of income (loss) from
Represents net income (loss) before the cumulative effect of income (loss)
from discontinued operations, interest expense, Represents net income
(loss) from continuing operations, adjusted to eliminate the impact of
Represents market capitalization plus the sum of long-term and short-term
debt on the company's balance sheet less cash. AFFO is a non-GAAP
financial measure of operating performance used by many companies in the
Funds from Operations ("FFO") represents net income (loss) computed in
accordance with GAAP, excluding real Calculated by multiplying the number
of shares outstanding by the closing share price of the company's common stock |
 NOI Reconciliations
20
Net Operating Income from Continuing Operations Reconciliations
Post-Merger Pro Forma
2012
1H13
Annualized
(1)
Income (Loss) from Continuing Operations
$51,163
$70,970
Adjustments:
General and Administrative Expense
32,762
39,868
Real Estate Acquisition Costs
1,054
436
Interest Expense
211,569
206,086
Depreciation and Amortization Expense
193,557
202,166
Impairments
15,816
5,506
Other Expense (Income)
(2)
(639)
(646)
Income Tax Expense (Benefit)
504
284
Net Operating Income from Continuing Operations
$505,786
$524,670
Notes:
(1)
First half 2013 post-merger, pro forma results multiplied by 2
(2)
Cole II portfolio gains on sale of real estate assets and property
condemnations |
 EBITDA Reconciliations
21
EBITDA from Continuing Operations Excluding Merger Costs and Impairments
Reconciliations Post-Merger Pro Forma
2012
1H13
Annualized
(1)
Income (Loss) from Continuing Operations
$51,163
$70,970
Adjustments:
Interest expense
211,569
206,086
Depreciation and amortization expense
193,557
202,166
Impairments
15,816
5,506
Other
expense
(income)
(2)
(639)
(646)
Income tax expense (benefit)
504
284
EBITDA, from Continuing Operations Excluding Merger Costs and
Impairments
$471,970
$484,366
Notes:
(1)
First half 2013 post-merger, pro forma results multiplied by 2
(2)
Cole II portfolio gains on sale of real estate assets and property
condemnations |
 FFO Reconciliations
22
FFO from Continuing Operations, as Adjusted Reconciliations
Post-Merger Pro Forma
2012
1H13
Annualized
(1)
Income (Loss) from Continuing Operations
$51,163
$70,970
Adjustments:
Depreciation and amortization expense
193,557
202,166
Impairments
15,816
5,506
Other
expense
(income)
(2)
(639)
(646)
Funds from Operations, Continuing Operations Excluding Merger Costs and
Impairments
$259,897
$277,996
Weighted average common shares outstanding (diluted)
371,172
FFO from continuing operations, as Adjusted per share
$0.75
Notes:
(1)
First half 2013 post-merger, pro forma results multiplied by 2
(2)
Cole II portfolio gains on sale of real estate assets and property
condemnations |
 Implied Cap Rate Reconciliation
23
$MM, unless otherwise noted
Aggregate Value
(1)
12,355
5,857
less:
Loans
Receivable,
net
(2)
--
(40)
less: Accounts Receivable, net
(28)
(3)
less: Assets Held for Sale
(17)
(47)
less: Other Assets
(147)
(101)
plus: Accounts Payable & Accrued Expenses
77
17
plus: Distributions Payable
39
--
plus: Other Liabilities
29
88
plus: Minority Interest
–
–
Implied Real Estate Value
12,309
5,770
Q2 2013 Real Estate NOI Annualized
721
363
Implied Cap Rate
(3)
5.9%
6.3%
Notes:
(1) As of September 13, 2013
(2) For National Retail Properties, includes mortgages, notes, and commercial
mortgage interests (3) Equals 2Q2013 real estate NOI annualized divided by
implied real estate value Source: Most recent SEC filings
|
 Implied Cap Rate Reconciliation
24
$MM, unless otherwise noted
At IPO
Current
Aggregate Value
(1)
3,180
6,905
less: Loans Receivable, net
(61)
(123)
less: Accounts Receivable, net
–
–
less: Assets Held for Sale
(6)
(43)
less: Other Assets, net
(35)
(73)
plus: Accounts Payable & Accrued Expenses
25
84
plus: Distributions Payable
–
–
plus: Other Liabilities
–
–
plus: Minority Interest
–
–
Implied Real Estate Value
3,059
6,750
Real
Estate
NOI
Annualized
(2)
270
525
Implied Cap Rate
(3)
8.8%
7.7%
Source: SEC filings
Notes:
(1) “At IPO” as of pricing on September 19, 2012 (split
adjusted share price of $7.87); “Current” as of September 13, 2013 (split adjusted share price of $8.99)
(2) Annualized NOI; “At IPO” NOI research estimated
forward NTM, “Current” as of 2Q 2013 (3) Equals real estate NOI annualized divided by
implied real estate value |