Spirit Realty Capital, Inc. Announces Second Quarter 2017 Financial and Operating Results

DALLAS, Aug. 3, 2017 /PRNewswire/ -- Spirit Realty Capital, Inc. (NYSE: SRC) ("Spirit" or the "Company"), a premier net lease real estate investment trust (REIT) that primarily invests in single-tenant, operationally essential real estate, today released its financial and operating results for the three and six months ended June 30, 2017.

SECOND QUARTER 2017 HIGHLIGHTS

• Generated Net Income of $0.05 per share and AFFO of $0.21 per share, including $4.2 million in cash severance charges.
• Acquired nine properties for $92.8 million.
• Disposed of 48 properties for $109.6 million, including 15 vacant and non-income producing properties for $11.7 million and five properties leased to Shopko for $25.5 million.
• Completed authorized $200 million share repurchase program at a weighted average price of $7.59 per share and reduced pre-buy back share count by 5.4%.
• Engaged financial advisers Morgan Stanley, Moelis and Company and legal adviser Latham & Watkins LLP to advise on capital structure, asset optimization and validation of Path Forward plan.

CEO COMMENTS

"We are pleased with the results of the second quarter, which demonstrate the continued strength of our diverse net-lease portfolio of  assets, and the many operational improvements put into place earlier this year," stated Jackson Hsieh, President and Chief Executive Officer of Spirit. "Additionally, we enhanced our financial and portfolio disclosure, repurchased shares, continued to optimize our portfolio and maintained balance sheet strength."

FINANCIAL RESULTS

Total revenues were $168.6 million for the three months ended June 30, 2017, compared to $171.7 million for the same period a year ago. Total revenues were $334.1 million for the six months ended June 30, 2017, compared to $340.1 million for the same period a year ago.

Net income attributable to common stockholders was $23.2 million, or $0.05 per diluted share, for the three months ended June 30, 2017, compared to $46.0 million, or $0.10 per diluted share, for the same period a year ago. Net income attributable to common stockholders was $36.0 million, or $0.07 per diluted share, for the six months ended June 30, 2017, compared to $69.1 million, or $0.15 per diluted share, for the same period a year ago.

FFO per diluted share was $0.18 and $0.24 for the three months ended June 30, 2017 and 2016, respectively. FFO per diluted share was $0.38 and $0.44 for the six months ended June 30, 2017 and 2016, respectively.

AFFO was $99.1 million, including $4.2 million in cash severance charges, for the three months ended June 30, 2017, compared to $104.4 million for the same period a year ago. AFFO per diluted share was $0.21 for the three months ended June 30, 2017, compared to $0.22 for the same period a year ago. AFFO was $197.2 million for the six months ended June 30, 2017, compared to $202.2 million for the same period a year ago. AFFO per diluted share was $0.41 for the six months ended June 30, 2017, compared to $0.44 for the same period a year ago.

Declared a quarterly cash dividend of $0.18 per share, which equates to an annualized cash dividend of $0.72 per share. The quarterly dividend was paid on July 14, 2017 to stockholders of record as of June 30, 2017.

SECOND QUARTER PORTFOLIO HIGHLIGHTS

During the three months ended June 30, 2017, Spirit invested $92.8 million in nine properties, including revenue producing capital expenditures. These investments comprise seven transactions, earn an initial weighted average cash yield of approximately 6.98% and have an average lease term of 12.9 years. Of the $92.8 million invested, 96.5% represent transactions with existing customers and are leased to seven different tenants in five different industries.

During the three months ended June 30, 2017, the Company sold 48 properties for $109.6 million in gross proceeds, including the sale of 33 income producing properties for $97.9 million, with a weighted average capitalization rate of 7.14%. The remaining 15 properties were vacant and non-income producing properties and were sold for $11.7 million.

During the three months ended June 30, 2017, Spirit continued to reduce the concentration of its largest tenant, Shopko. As of June 30, 2017, Spirit had reduced its Shopko concentration to 7.9% of Contractual Rent. During the three months ended June 30, 2017, the Company sold five revenue-producing Shopko properties for $25.5 million in gross proceeds.

As of June 30, 2017, Spirit's diversified real estate portfolio remained essentially fully occupied at 97.9% and was comprised of 2,475 owned properties, which had a weighted average remaining lease term of 10.3 years, of which 53 were vacant. During the second quarter, Spirit renewed six of eight expiring leases, recapturing 94.7% of the expiring rent.

FIRST HALF PORTFOLIO HIGHLIGHTS

During the six months ended June 30, 2017, Spirit invested $240.8 million in 35 properties, including revenue producing capital expenditures. These investments include 22 transactions, earn an initial weighted average cash yield of approximately 7.08% and have an average lease term of 13.7 years. Of the $240.8 million invested, 79.9% represent transactions with existing customers and are leased to 17 different tenants in 13 different industries.

During the six months ended June 30, 2017, the Company sold 105 properties for $282.2 million in gross proceeds, including the sale of 51 income producing properties for $190.6 million, with a weighted average capitalization rate of 7.50%. The remaining 54 properties were vacant and non-income producing properties and were sold for $91.6 million.

During the six months ended June 30, 2017, Spirit continued to reduce the concentration of its largest tenant, Shopko. As of June 30, 2017, Spirit had reduced its Shopko concentration to 7.9% of Contractual Rent. During the six months ended June 30, 2017, the Company sold eight revenue-producing Shopko properties for $46.5 million in gross proceeds.

During the six months ended June 30, 2017, Spirit renewed 21 of 25 expiring leases, recapturing 98.7% of the expiring rent.

BALANCE SHEET, LIQUIDITY & CAPITAL MARKETS

• Adjusted Debt to Annualized Adjusted EBITDA was 7.1x as of June 30, 2017, compared to 6.0x at June 30, 2016. Adjusted Debt to Annualized Adjusted EBITDA, excluding severance costs, was 6.6x as of June 30, 2017.
• Unencumbered assets totaled $4.9 billion at June 30, 2017, compared to $4.2 billion at June 30, 2016, representing approximately 60% and 50% of Spirit's total real estate investments, respectively.
• As of August 3, 2017, Spirit had approximately $10 million in cash and cash equivalents on its balance sheet and had drawn $420 million under its $800 million unsecured line of credit.
• As of August 3, 2017, Spirit had additional funds available for acquisitions of approximately $52 million in its 1031 Exchange and Spirit Master Trust Program release accounts.

Definitions for FFO and AFFO (as well as a reconciliation of these measures to net income attributable to common stockholders) and certain other defined terms can be found in the supplemental financial and operating report posted on Spirit's website along with this release.

SHARE REPURCHASE PROGRAM

In February 2016, Spirit's Board of Directors authorized a share repurchase program, under which the Company was authorized to repurchase up to $200 million of its outstanding common stock. As of August 3, 2017, the Company has repurchased 26.3 million shares of its outstanding common stock, at a weighted average price of $7.59 per share, equivalent to the $200 million authorized.

2017 GUIDANCE

The Company maintains its 2017 AFFO guidance range, from $0.80 to $0.84 per share, as updated in the first quarter of 2017.

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

EARNINGS WEBCAST AND CONFERENCE CALL TIME

The Company's second quarter 2017 earnings conference call is scheduled for Thursday, August 3, 2017 at 5:00 p.m. Eastern Time. Interested parties can listen to the call via the following:

SUPPLEMENTAL PACKAGES

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

ABOUT SPIRIT REALTY

Spirit Realty Capital, Inc. (NYSE: SRC) is a premier net-lease real estate investment trust (REIT) that primarily invests in high-quality, operationally essential real estate, subject to long-term, net leases.  Over the past decade, Spirit has become an industry leader and owner of income-producing, strategically located retail, industrial and office properties providing superior risk adjusted returns and steady dividend growth for our shareholders.

As of June 30, 2017, our diversified portfolio was comprised of 2,549 properties, including properties securing mortgage loans made by the Company.  Our properties, with an aggregate gross leasable area of approximately 51 million square feet, are leased to approximately 432 tenants across 49 states and 30 industries. More information about Spirit Realty Capital can be found on the investor relations page of the Company's website at www.spiritrealty.com.

FORWARD-LOOKING AND CAUTIONARY STATEMENTS

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. These forward-looking statements can be identified by the use of words such as "expect," "plan," "will," "estimate," "project," "intend," "believe," "guidance," and other similar expressions that do not relate to historical matters. 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, Spirit's continued ability to source new investments, risks associated with using debt to fund Spirit's business activities (including refinancing and interest rate risks, changes in interest rates and/or credit spreads, changes in the price of our common stock, and conditions of the equity and debt capital markets, generally), unknown liabilities acquired in connection with acquired properties or interests in real-estate related entities, general risks affecting the real estate industry and local real estate markets (including, without limitation, the market value of our properties, the inability to enter into or renew leases at favorable rates, portfolio occupancy varying from our expectations, dependence on tenants' financial condition and operating performance, and competition from other developers, owners and operators of real estate), the financial performance of our retail tenants and the demand for retail space, particularly with respect to challenges being experienced by general merchandise retailers, potential fluctuations in the consumer price index, risks associated with our failure to maintain our status as a REIT under the Internal Revenue Code of 1986, as amended, risks and uncertainties related to the completion and timing of Spirit's proposed spin-off of properties leased to Shopko and assets that collateralize Master Trust 2014 and the impact of the spin-off on Spirit's business, and other additional risks discussed in Spirit's most recent filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K. Spirit 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

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

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SOURCE Spirit Realty Capital, Inc.