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8-K - 8-K - SPIRIT REALTY CAPITAL, INC. | investdeck8-k.htm |
Citi Global Property CEO Conference
March 2018
Forward-Looking Statements and Risk Factors
This document 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 and equity financing 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, assets that collateralize Master Trust 2014 and certain
other assets 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.
This presentation shall not constitute an offer to sell or the solicitation of an offer to buy securities nor shall there be any sale of any securities in any state in which such
solicitation or sale would be unlawful prior to registration or qualification of these securities under the laws of any such state.
The information contained herein is preliminary and subject to change and may be superseded in its entirety by further updated materials. The future performance of Spirit
and its subsidiaries and their respective assets may differ significantly from the past performance of Spirit and its subsidiaries and their prior securitizations. Neither Spirit
nor any of its subsidiaries make any representation as to the accuracy or completeness of the information contained herein. The information provided may not reflect all
information known to professionals in every business area of Spirit or its subsidiaries.
Certain data set forth herein has been obtained from third parties. Neither Spirit and its subsidiaries, nor any of their respective affiliates have independently verified the
accuracy of such data. This information is not intended to provide and should not be relied upon for accounting, legal or tax advice or investment recommendations. You
should consult your own counsel, tax, accountant, regulatory and other advisors as to such matters.
Pg. 3
Executive Summary
Please see Appendix at the back of this presentation for Reporting Definitions, Explanations and Non-GAAP Reconciliations. All data as 12/31/17.
Diversified portfolio, improved operations and capital to grow
Spirit portfolio and evolution
Financial profile and comparison
Benefits to SRC and SMTA
Strategy and investments
Operational enhancements
Post Spin-Off SRC
What are we solving for
Portfolio and the fortress REIT
Strategy and rankings
SMTA
Mission statement
Portfolio and overview of Master
Trust A
Rankings
Spirit Portfolio and Evolution
Pg. 5
Moving Forward
Please see Appendix at the back of this presentation for Reporting Definitions, Explanations and Non-GAAP Reconciliations. All data as 12/31/17.
2018 Focus on Growth
In 2018, SRC will prudently acquire utilizing
the systems put in place in 2017
Heat Map and Property Ranking
System
Enhanced research department
analyzing long term industry trends
and geographies
Asset management and credit/
underwriting utilizing vast SRC data
on existing tenants and properties
to evaluate new deals
Sale-leaseback effort with a focus
on partnering with customers for
growth
Spirit is on track with spin-off and is geared to grow
Pg. 6
Pg. 6
Pg. 6
Transformation of Spirit
• Post Spin-Off Spirit will have: Over $1bn in liquidity, approximately 4.5x Adj. Debt / Ann.
Adj. EBITDA and secured debt reduced by 77%
SRC: Balance sheet positioned for growth, liquidity to execute plan forward, optimize industry / portfolio mix
Please see Appendix at the back of this presentation for Reporting Definitions, Explanations and Non-GAAP Reconciliations and the first slide of this presentations for
a disclosure regarding Forward-Looking Statements and Risk Factors.
1: As of December 31, 2017. Please note that figures are preliminary and are subject to change. Top tenant is Shopko for Spirit and Walgreens for Post Spin-Off Spirit.
2: A securities rating is not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal at any time, For SMTA the ratings represent the secured
debt rating for MTA.
IPO Il lustrative Post
Sep-12 F Y 2013 F Y 2014 F Y 2015 F Y 2016 F Y 2017 Spin-Off Spirit1
Por tfo l i o
Number of Properties 1,190 2,186 2,509 2,629 2,615 2,392 1,474
W.A.L.T. 11.2yrs 10.1yrs 10.8yrs 10.7yrs 10.7yrs 10.0yrs 9.7yrs
Occupied SQF (mm) 32.2 54.3 55.0 52.4 50.9 46.5 26.4
Contractual Rent / Occupied SF $ 8.66 $ 9.70 $ 10.89 $ 12.22 $ 12.70 $ 12.95 $ 13.84
Top 10 Concentration 51.7% 36.0 % 32.7 % 26.5 % 25.8 % 24.9 % 24.9 %
Top 5 Concentration 43.8 % 27.6 % 25.1 % 19.4 % 17.5 % 16.7 % 15.7 %
Top Tenant Concentration 29.9 % 14.8 % 14.0 % 9.1 % 8.2 % 7.7 % 3.6 %
Bal ance Sheet
Secured Debt / Gross Assets 51.8 % 48.0 % 41.6 % 35.2 % 25.1 % 30.1 % 10.9 %
Adj. Debt / Annualized Adj. EBITDA 7.3 x 7.3 x 7.6 x 6.9 x 6.2 x 6.3 x 4.5 x
Unencumbered Assets / Gross Assets 0.2 % 8.0 % 23.1 % 36.1 % 56.3 % 55.8 % 71.7 %
Rating (Moody's/S&P/Fitch)2 Caa1/B/NA NA/BB-/NA NA/BB-/NA NA/BB+/NA Baa3 / BBB- Baa3/BBB-/BBB-
Pg. 7
Pg. 7
Pg. 7
Spirit Peer Comparison
Balance sheet capacity for growth
Source: Company filings for SRC. For other companies, most recent company filings, unless otherwise noted as SNL. Financial data is as of
12/31/2017 . Note: Other companies may calculate Unit Coverage, W.A.L.T., Occupied SQF, Base Rental Revenue / SQF, Adjusted EBITDA,
Unencumbered Assets / Gross Assets, AFFO as well as the components of such figures, differently. Such figures may not therefore be
comparable.
1: NNN Peers reflect average of EPR, GPT, GTY, LXP, NNN, O, SIR, STOR, VER and WPC.
2: A securities rating is not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal at any time.
3: Dividend Payout represents the annualized last quarter dividend divided by SNL consensus 2018 AFFO as of 3/1/2018.
4: Dividend Yield is calculated by annualizing the last dividend paid, divided by the stock price as of 3/1/2018.
5: Calculated by taking price as of 3/1/2018 divided by the SNL consensus estimate for 2018 AFFO per share as of the same date. SMTA payout is based on FAD.
• Over the last year, Spirit raised over $900 million of incremental capital through MTA,
CMBS and preferred equity with a weighted average cost of capital below 5%
Pg. 8
Pg. 8
Pg. 8
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1
Spirit utilizes proprietary rankings across twelve characteristics
Steady Eddie
1,811 Properties
Bottom 10%
241 Properties
Top 15%
362 Properties
Current Spirit
Property Ranking Score
N
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f
P
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Spirit
Criteria
Pre-OH Unit FCC
Pre-OH Master Lease FCC
Corporate FCC
Lease Term
Lease Type
Demographic Income
Demographic Population
Dark Rent
Rent Bumps
Real Estate
Geography Size
Industry
Note:
1: Property Rankings are for single tenant occupied properties.
2: Includes 2,414 single tenant occupied properties ranked as of December 31, 2017.
Please see Appendix at the back of this presentation for Reporting Definitions, Explanations and Non-GAAP Reconciliations. All data as 12/31/17.
Spirit Portfolio Ranking1,2
Pg. 9
Spirit Heat Map
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General Merchandise
(ShopKo)
Casual Dining
QSR
Movie Theaters
C-Stores
Auto Service
Drug Stores Medical Office
Health and Fitness
Entertainment
Home Furnishings
Education
Building Materials
Apparel
Specialty Retail
Home Improvement
Industrial
Car Washes
Manufacturing
Auto Parts
Consumer Electronics
Pet Supplies
Wholesale Clubs
Office Supplies
Professional Services
Data Centers
Technological Disruption
100
100
50
50
0
0
Sporting Goods Auto Dealers
Dollar Stores
Grocery
Focus on industries that are less vulnerable to competitive forces and technological disruption
Porter’s 5 Forces includes competition, substitution, barriers to entry, supplier dynamic and buyer dynamic. Please refer to Michael E. Porter, “Competitive
Strategy: Techniques for Analyzing Industries and Competitors”
Worse Better
B
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W
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r
s
e
Travel Plaza
Pg. 10
Spirit’s
Real Estate
Investment
(Spirit’s $
Investment
within each
category)
Risk Adjusted Return Based On Spirit’s Heat Map
Spirit Industry Investments1
General Merchandise
QSR
Movie Theaters
Casual Dining
Grocery
Automotive Service
Drug Stores
Medical Office
Education
Health and
Fitness
Entertainment
Home Furnishings
Apparel
Specialty Retail
Auto Dealers
Home Improvement
Industrial
Dollar StoresAuto Parts
Wholesale Clubs
Office Supplies Professional Services
Data Centers
Industries
below the
best fit line
are areas in
which Spirit
intends to
increase its
investment
Spirit has several industries for future growth
Best Fit
Line
Please see Appendix at the back of this presentation for Reporting Definitions, Explanations and Non-GAAP Reconciliations and the first slide of this presentations for
a disclosure regarding Forward-Looking Statements and Risk Factors.
C-Stores
Car Washes
Sporting Goods
$660MM
$440MM
$220MM
Building MaterialTravel Plaza
1: Excludes multi-tenants. Industries are for retail and office assets only. Industrial and data centers are shown at the asset level.
Discount Retailers
Pg. 11
Risk Adjusted Return Based On Spirit’s Heat Map
Spirit 2017 Acquisitions1
General
QSR
Drug
Medical Office
Education
Home Furnishings
Industrial
Spirit acquired $323 million of diversified assets at a 7.66% Initial Cash Yield
Note: Please see Appendix at the back of this presentation for Reporting Definitions, Explanations and Non-GAAP Reconciliations and the first slide of this
presentations for a disclosure regarding Forward-Looking Statements and Risk Factors.
$660MM
$440MM
$220MM
2017 ACQUISITIONS INCLUDE:
Home Improvement: 3 Home Depots
Data Centers: 2 IBM
Industrial: 1 FedEx
Entertainment: 1 CircusTrix,
1 Main Event, 2 Dave and Busters
Grocery: 1 Cermak Fresh Market
Movie Theaters: 1 Studio Movie Grill,
1 Cinemark.
Wholesale Club: 1 BJ’s Wholesale Club
C-Store: 2 Petromark, 1 JAKG Petro,
3 White Oak
Auto Service: 1 Caliber Collision,
5 Maaco Collision Repair
Car Washes: 5 Zips Car Washes
Restaurants—Quick Service:
4 Dairy Queen
Specialty Retail: 1 Camping World
Education: 1 Children’s Network,
1 Children’s Courtyard
Restaurants - Casual Dining:
1 Sonny’s BBQ.
S
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Represents $10
million investment
Home
Improvement
Entertainment
Auto Service
C-Store
Industrial
Movie Theaters
Casual Dining
Specialty Retail
Wholesale Clubs
Car Washes
1: Excludes multi-tenants. Industries are for retail and office assets only. Industrial and data centers are shown at the asset level.
Data CentersDiscount
Grocery
Pg. 12
Risk Adjusted Return Based On Spirit’s Heat Map
Spirit 2017 Dispositions1
Education
Office Supplies
Gross sales proceeds of $551 million, including $398 million Occupied Properties at a 7.11% Capitalization Rate
Please see Appendix at the back of this presentation for Reporting Definitions, Explanations and Non-GAAP Reconciliations and the first slide of this presentations for
a disclosure regarding Forward-Looking Statements and Risk Factors.
Car Washes
$660MM
$220MM
S
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2017 DISPOSITIONS INCLUDE:
General Merchandise: $71.4 MM
Drug Stores/Pharmacies: $57.3 M
Grocery: $57.7 MM
Industrial: $42.1 MM
Specialty Retail: $35.4 MM
Building Materials: $29.8 MM
Restaurants – Quick Service: $18.9 MM
Restaurants – Casual Dining: $19.2 MM
Dollar Stores: $12.4 MM
Other: $14.3 MM
Health & Fitness: $7.8 MM
Home Improvement: $8.1 MM
Automotive Service: $7.1 MM
Home Furnishings: $6.1 MM
Education: $4.6 MM
Office Supplies: $2.6 MM
Convenience Stores: $2.0 MM
Car Washes: $0.7 MM
Vacant:$153.7 MM (105 total)
General Merchandise
C-Stores
Grocery
Drug Stores
Industrial
$440MM
Specialty Retail
Home Furnishings
Automotive Service
Building Materials
QSR
Casual Dining
Dollar Stores
Health and
Fitness
Home Improvement
1: Excludes multi-tenants. Industries are for retail and office assets only. Industrial and data centers are shown at the asset level.
Represents $10
million sale price
Pg. 13
Process Improvements
Operations
• Midland Servicing Transferred In-
House
• Asset Management Realignment
• Credit Monitoring Process
Reengineered
• Enhanced Tax & Insurance
Surveillance
• Enhanced Customer Onboarding
• Implementation of Tenant Portal
Finance & Accounting
• Implemented Flash Report
• Lease Administration Transitioned
to Property Accounting
• Collaborative Tenant Review
• Enhanced Rent Monitoring
• Cash Automation Project
Underway
Legal
• Strengthened
Agreements & Forms
(Risk Mitigation)
• Enhanced Insurance
Risk & Surveillance
• EDMS Implementation
Underway
Technology Acquisitions
• IT Optimization Project
Underway
• MRI Data Validation
Underway
• Growing Direct Sale-
Leaseback with a Focus
on Existing Tenants
• Streamlined Pipeline
Process
• Enhanced Marketing
• Team Realignment
Illustrative Post Spin-Off SRC
Pg. 15
What Defines Success for SRC
Competitive cost of capital
Better balance sheet to grow into
Liquidity to execute plan forward
Optimize industry and portfolio mix
Moving Forward
Execute on Operation Processes,
Implement Investment / Disposition
Strategy and Be Reliable
Remove / “Firewall” Structural
Impediments
• ShopKo
• Master Trust A
Pg. 16
Pg. 16
.
Creating The Fortress REIT
Solid balance sheet with a strong tenant roster
Please see Appendix at the back of this presentation for Reporting Definitions, Explanations and Non-GAAP Reconciliations and the first slide of this presentations for
a disclosure regarding Forward-Looking Statements and Risk Factors.
Note: 4-Wall coverage numbers exclude all manufacturing tenants.
Pg. 17
Risk Adjusted Return Based On Spirit’s Heat Map
Illustrative Post Spin-Off Industry Investments1
QSR
Movie Theaters
Casual Dining
Grocery
Automotive Service
Drug Stores
Medical Office
Education
Health and Fitness
Entertainment
Home Furnishings
Specialty Retail
Auto Dealers
Home Improvement
Industrial
Dollar Stores
Auto Parts
Wholesale Clubs
Office Supplies
Data Centers
Spirit is targeting several industries for future growth
Best Fit
Line
Note: Pro Forma for Proposed spin-off as of 12/31/17.
Please see Appendix at the back of this presentation for Reporting Definitions, Explanations and Non-GAAP Reconciliations and the first slide of this presentations for
a disclosure regarding Forward-Looking Statements and Risk Factors.
C-Stores
Car Washes
Sporting Goods
$540MM
$360MM
$180MM
Building MaterialTravel Plaza
Discount Retailers
1: Excludes multi-tenants. Industries are for retail and office assets only. Industrial and data centers are shown at the asset level.
Spirit’s
Real Estate
Investment
(Spirit’s $
Investment
within each
category)
Industries
below the
best fit line
are areas in
which Spirit
intends to
increase its
investment
Pg. 18
Pg. 18
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Post Spin-Off Spirit has a similar distribution in real estate quality
Post Spin-Off SRC
Property Ranking Score
N
u
m
b
e
r
o
f
P
r
o
p
e
r
t
i
e
s
Criteria
Pre-OH Unit FCC
Pre-OH Master Lease FCC
Corporate FCC
Lease Term
Lease Type
Demographic Income
Demographic Population
Dark Rent
Rent Bumps
Real Estate
Geography Size
Industry
1: Property Rankings are only for single tenant occupied properties.
2: Includes 1,500 single tenant occupied properties ranked as of December 31, 2017.
Please see Appendix at the back of this presentation for Reporting Definitions, Explanations and Non-GAAP Reconciliations. All data as 12/31/17.
Post Spin-Off SRC 150 Properties 1,125 Properties 225 Properties
Illustrative Post Spin-Off SRC Portfolio Ranking1,2
Pg. 19
Illustrative Post Spin-Off SRC 5-Mile Demographic Area
Please see Appendix at the back of this presentation for Reporting Definitions, Explanations and Non-GAAP Reconciliations and the first slide of this presentations for
a disclosure regarding Forward-Looking Statements and Risk Factors.
Entertainment
Education
Auto DealersHealth & Fitness
Building/Home Improvement
Movie Theaters
Home FurnishingsGrocery
Sporting Goods
Car WashesOther
Auto Service
Casual Dining
Medical/OfficeDrug Stores
Auto Parts
C-Stores
QSRGeneral Merchandise
Dollar Store
40,000
50,000
60,000
70,000
80,000
0 50,000 100,000 150,000 200,000 250,000 300,000
M
e
d
i
a
n
H
H
I
n
c
o
m
e
(
$
)
Population
Target demographics supporting the underlying tenants
Pg. 20
Same Store Performance — Illustrative Post Spin-Off SRC
Please see Appendix at the back of this presentation for Reporting Definitions, Explanations and Non-GAAP Reconciliations and the first slide of this presentations for
a disclosure regarding Forward-Looking Statements and Risk Factors.
1: Contractual Cash Rent excludes accrued percentage rents.
2: Same store performance represents the period-to-period change in contractual rent and percentage rents received, net of reserves for properties included within
the defined pool.
% of Total % Change
Quarter Ended % Change Industry from
Industry 12/31/2017 12/31/2016 Net ChangeBy Industry Contribution Prior Year
Movie Theatres $ 4,689 $ 4,027 $ 662 16.4 % 6.3 % 0.9 %
Consumer Electronics 754 589 165 28.0 % 1.0 % 0.2 %
General Merchandise 838 945 (107) (11.3)% 1.1 % (0.1)%
Medical / Other Office 3,380 3,276 104 3.2 % 4.5 % 0.1 %
Restaurants - Quick Service 6,731 6,652 79 1.2 % 9.0 % 0.1 %
Restaurants - Casual Dining 4,755 4,677 78 1.7 % 6.4 % 0.1 %
Convenience Stores 9,697 9,632 65 0.7 % 13.0 % 0.1 %
Drug Stores / Pharmacies 6,400 6,338 62 1.0 % 8.5 % 0.1 %
Remainder 37,535 37,177 358 1.0 % 50.2 % 0.5 %
TOTAL $ 74,779 $ 73,313 $ 1,466 2.0 % 100.0 % 2.0 %
Same Store Results
# of Props 1,339
SQ FT 20,212
Contractual Cash Rent
Q4 2017 $ 74,779
Q4 2016 $ 73,313
Increase (in dollars) $ 1,466
Increase (percent) 2.0 %
Pg. 21
Occupancy
Please see Appendix at the back of this presentation for Reporting Definitions, Explanations and Non-GAAP Reconciliations and the first slide of this presentations for
a disclosure regarding Forward-Looking Statements and Risk Factors.
98.9 % 98.7 % 98.2 % 98.4 % 98.3 % 98.7 % 98.5 % 98.6 % 98.7 % 98.3 % 98.4 % 98.2 % 97.7 % 97.9 % 99.1 % 99.2 % 99.3 %
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Q1‐14 Q2‐14 Q3‐14 Q4‐14 Q1‐15 Q2‐15 Q3‐15 Q4‐15 Q1‐16 Q2‐16 Q3‐16 Q4‐16 Q1‐17 Q2‐17 Q3‐17 Q4‐17 Post Spin‐
Off Spirit
Historical Occupancy Rates
By Property—Current SRC By Property—Illustrative Post Spin‐Off SRC
Occupied 2,373 Occupied 1,463
Vacant 19 Vacant 11
Total Owned Properties 2,392 Total Owned Properties 1,474
Occupancy Rate 99.2 % Occupancy Rate 99.3 %
Pg. 22
Pg. 22
.
Illustrative Post Spin-Off Spirit Portfolio¹
Service focus with larger concentration in investment grade tenants
$4.9 Billion
Real Estate
Investment
$365 million
Contractual Rents
65% Contractual Fixed
20% CPI-Related
15% Flat2
Please see Appendix at the back of this presentation for Reporting Definitions, Explanations and Non-GAAP Reconciliations and the first slide of this presentations for
a disclosure regarding Forward-Looking Statements and Risk Factors.
1: Pro forma for proposed spin-off as of 12/31/17. Industry categorization excludes multi-tenant properties.
2: By % of Contractual Rent. Includes Contractual Fixed Increase and CPI Related Increase.
3: Actual investment grade of 23%.
1,474 Owned
Properties, 75%
NNN Leases²
45% Investment
Grade Equivalent,
253 Tenants3
Pg. 23
Properties by industry (17% of single site Contractual Rent)
W.A. Real Estate Score
2.3
W.A. 5-Mile HH Income
$62,898
W.A. 5-Mile Population
217,429
W.A. Lease Term
12.5 yrs
Properties characterized by: stronger demographics, lease structure, longer lease duration, real estate
and lower rents
Includes 225 Single Tenant Properties; Median Score: 657
En tertainment,
15 %
Grocery,
12 %
In dustrial,
9 %
Restaurants -
Qu ick Service,
8 %
Health and
Fi tness, 7 %
Home
Improvement,
7 %
Wholesale
Clubs, 6 %
Home Furnishings,
5 % Data
Center, 5 %
Movie
Theatres, 4 %
Restaurants -
Casual
Dining, 4 %
Con venience
Stores, 3 %
Medical
O f fice, 3 %
Au tomotive
dealers, 2 %
Education, 2 %
Au tomotive
Service, 2 %
Car Washes, 2 %
Other,
5 %
Top 10 Tenants
Main Event Entertainment
BJ's Wholesale Club, Inc.
Smart & Final, LLC
At Home Holding II I Inc.
FedEx Ground Package System, Inc.
Home Depot U.S.A., Inc.
International Business Machine Corp
CircusTrix Holdings, LLC.
Cajun Global LLC
Def ined Fitness, Inc.
Please see Appendix at the back of this presentation for Reporting Definitions, Explanations and Non-GAAP Reconciliations. All data as 12/31/17.
Illustrative Post Spin-Off SRC Top 15%1
1: Spirit Property Ranking. Data as of 12/31/17, excludes vacant and multi-tenant properties.
Pg. 24
Properties by industry (76% of single site Contractual Rent)
W.A. Real Estate Score
2.9
W.A. 5-Mile HH Income
$57,389
W.A. 5-Mile Population
129,067
W.A. Lease Term
9.7 yrs
Assets characterized by: good demographics, mix with or without lease structure, shorter lease duration,
good real estate and generally inline market rents
Includes 1,125 Single Tenant Properties; Median Score: 453
Con venience Stores,
13 %
Restaurants -
Qu ick Service,
9 %
Restaurants -
Casual Dining,
9 %
Drug Stores /
Pharmacies,
9 %
Industrial,
8 %
Movie
Theatres,
7 %
Health and
Fi tness, 5 %
Grocery,
4 %
Medical
O f fice, 4 %
Au tomotive
Service, 3 %
Home
Improvement,
3 %
Car
Washes,
3 %
Specialty
Retail, 3 %
Home
Fu rnishings,
2 %
Sporting Goods,
2 %
Education,
2 %Au tomotive
parts, 2 %
Wholesale
Clubs, 2 %Au tomotive
dealers, 1 %
Other,
8 %
Top 10 Tenants
Cajun Global LLC
Alimentation Couche-Tard, Inc.
Walgreen Co.
CVS Caremark Corporation
Ferguson Enterprises, Inc.
Apple New Mexico, LLC
Fitness International, LLC
PetSmart, Inc.
Sportsman's Warehouse Holdings, Inc.
Car Wash Partners, Inc.
Please see Appendix at the back of this presentation for Reporting Definitions, Explanations and Non-GAAP Reconciliations. All data as 12/31/17.
Illustrative Post Spin-Off SRC Steady Eddy1
1: Spirit Property Ranking. Data as of 12/31/17, excludes vacant and multi-tenant properties.
Pg. 25
Properties by industry (7% of single site Contractual Rent)
W.A. Real Estate Score
3.7
W.A. 5-Mile HH Income
$45,413
W.A. 5-Mile Population
45,581
W.A. Lease Term
6.2 yrs
Assets ranking predominantly due to lease duration, however, we expect this to improve as leases are
renegotiated
Includes 150 Single Tenant Properties; Median Score: 221
Specialty
Retail, 15 %
Con venience
Stores, 14 %
Drug Stores /
Pharmacies,
14 %
Dol lar Stores,
11 %
Office Supplies,
9 %
Restaurants
- Casual
Dining, 9 % Au tomotive
parts, 7 % Restaurants
- Quick
Service, 6 %
Grocery,
5 %
Medical
O f fice, 4 %
Professional
Services, 3 %
Home Furnishings,
2 %
Other,
1 %
Top 10 Tenants
Tractor Supply Company
Dollar General Corporation
Walgreen Co.
Advance Auto Parts, Inc
Off ice Depot, Inc
Cracker Barrel Old Country Store, Inc.
Irving Oil Marketing, Inc.
Bell Indiana, LLC
Staples, Inc.
Convergys Corporation
Please see Appendix at the back of this presentation for Reporting Definitions, Explanations and Non-GAAP Reconciliations. All data as 12/31/17.
Bottom 10% Illustrative Post Spin-Off SRC1
1: Spirit Property Ranking. Data as of 12/31/17, excludes vacant and multi-tenant properties.
SMTA
Maximizing Collateral of MTA
Pg. 27
SMTA Mission Statement
Increasing the asset base and quality of the collateral in Master Trust A
by: (a) monetization and capital recycling of Shopko leased stores, (b)
select Shopko redevelopments, and (c) select Shopko outparcel QSRs
and casual dining development in the first 24 months post spin-off
Master Trust A will provide long term financing by redeploying proceeds
from Shopko dispositions consistent with our Heat Map and Property
Rankings
− Provide stability for Spirit Master Trust to execute its mission statement in first
24 months post transaction
− Strong operational results and continued sponsorship of ABS program
−Optimal execution of Shopko disposition strategy and reinvestment
strategy
− Provide Spirit Master Trust optionality to consider alternatives
What are we solving for?
Pg. 28
Pg. 28
.
Overview of Master Trust A
Master Trust A represents approximately 30% of the total net lease ABS debt outstanding
Please see Appendix at the back of this presentation for Reporting Definitions, Explanations and Non-GAAP Reconciliations and the first slide of this presentations for
a disclosure regarding Forward-Looking Statements and Risk Factors.
1, MTA $1.9BN, STOR has $1.7BN; CARS has $2.2BN; SCMT has $0.5BN.
MTA was established in 2005 and has approximately $2 billion
in outstanding non-recourse debt and collateral of $2.6 billion
MTA has a long and established track record since its inception
in 2005
MTA has proven ability to raise notes having raised $510 million
in November of 2014 and $674 million in December of 2017
Spirit 2017-1 issuance was the largest ever net lease ABS
transaction and was extremely well received by ABS investors
(weighted average cost of debt at 4.58%)
Efficient leverage with 75% LTV capacity through BBB rating
MTA is highly diversified with over 800 properties with a focus
on service retail (75%) with strong coverage
Pg. 29
Significant unencumbered equity providing fuel for future growth utilizing leverage
Illustrative SMTA Sum of the Parts
• The value is in Master Trust A
and making Master Trust A
bigger
• SMTA benefits from ability to
raise secured debt at attractive
rates
• Maximize value of Shopko and
Workout Assets to provide fuel
for future Master Trust A
issuances
2: As of December 31, 2017 the estimated Net Book Value of unencumbered assets include: a) Shopko assets at $336 million (pro forma for anticipated dispositions), b) Workout
Assets at $106 million and c) $35 million Shopko note. No assurance can be given that estimated net book value will be achieved in any eventual disposition of these assets.
Please see Appendix at the back of this presentation for Reporting Definitions, Explanations and Non-GAAP Reconciliations.
1: Shopko contractual rents are adjusted to reflect sales completed in the fourth quarter of 2017 and anticipated to be completed in the first quarter of 2018.
Pg. 30
Pg. 30
.
Illustrative Master Trust A Portfolio¹
Highly diversified portfolio with master leases, coverage and service focused
$2.6 Billion in
Collateral Value
$175 million
Contractual Rents
53% Under Master
Leases or Master
Mortgages
Please see Appendix at the back of this presentation for Reporting Definitions, Explanations and Non-GAAP Reconciliations and the first slide of this presentations for
a disclosure regarding Forward-Looking Statements and Risk Factors.
827 Owned
Properties, 95%
NNN Leases²
6.75% Appraised
Value with 75% LTV
at 4.58% Interest
1: Pro forma for proposed spin-off as of 12/31/17. Industry categorization excludes multi-tenant properties.
2: By % of Contractual Rent. Includes Contractual Fixed Increase and CPI Related Increase.
Pg. 31
Pg. 31
.
Shopko Resolution Go To Market Strategy
Efficient disposition of Shopko stores is paramount for growing Master Trust A
Please see Appendix at the back of this presentation for Reporting Definitions, Explanations and Non-GAAP Reconciliations and the first slide of this presentations for
a disclosure regarding Forward-Looking Statements and Risk Factors.
Enhanced marketing through brokerage network
Increase number of listing brokers from current four to ten, approximately 40 assets leased to
Shopko on the market
Reduce number of properties with each broker to ~2-4 (better ability to focus marketing efforts)
Enhanced commission; additional 50 bps for co-broke payout
Seller financing
Staple financing
60% LTV, 5-7 year term; floating rate based on LIBOR
No prepayment penalty
True sale treatment
Structured for ability to liquidate
Borrower(s) could reduce rent by more than 50% before falling below 1.0X coverage
Portfolio opportunities
Concerted outreach to targeted principals
Selecting properties to sell; meets at least one of the following
Low Property Rank and/or Real Estate Score (>3)
Less defined development opportunity
Improves the master lease coverage of the portfolio
Pg. 32
Risk Adjusted Return Based On Spirit’s Heat Map
Illustrative SMTA Industry Investment1
General Merchandise
(Shopko) $560MM
QSR
Movie Theaters
Casual Dining
Grocery
Automotive Service
Drug Stores
Medical Office
Education
Health and
Fitness
Entertainment
Specialty Retail
Auto Dealers
Industrial
Professional Services
Spirit is targeting several industries for future growth
Best Fit
Line
Note: Pro Forma for Proposed Spin-Off as of 12/31/17.
Please see Appendix at the back of this presentation for Reporting Definitions, Explanations and Non-GAAP Reconciliations and the first slide of this presentations for
a disclosure regarding Forward-Looking Statements and Risk Factors.
Car Washes
Sporting Goods
$360MM
$240MM
$120MM
1: Excludes multi-tenants. Industries are for retail and office assets only. Industrial and data centers are shown at the asset level. Industrial
for SMTA includes the $123 million in Real Estate investment for the Academy Sports distribution center in Katy, Texas.
Home Furnishings
Spirit’s
Real Estate
Investment
(Spirit’s $
Investment
within each
category)
Industries
below the
best fit line
are areas in
which Spirit
intends to
increase its
investment
Pg. 33
Properties by industry (10% of single site Contractual Rent)
W.A. Real Estate Score
2.2
W.A. 5-Mile HH Income
$61,652
W.A. 5-Mile Population
268,391
W.A. Lease Term
13.2 yrs
Properties characterized by: stronger demographics, lease structure, longer lease duration, real estate
and lower rents
Includes 137 Single Tenant Properties; Median Score: 653
Top 10 Tenants
Norms Restaurant, LLC
Big Al's Holding Company
Specialty Retail Shops Holding Corp.
Uncle Ed's Oil Shoppes, Inc.
Heart land Dental Holdings, Inc.
HHI Formtech, LLC
Martin's Restaurant Systems Inc
Carmax, Inc
Aurora Fresh Market, Inc.
HR Group Holdings, LLC
Restaurants -
Casual Dining,
27 %
Restaurants -
Quick Service,
15 %
Entertainment,
14 %
Automotive
Service, 9 % Industrial,
8 %
General
Merchandise,
8 %
Medical
Office, 6 %
Automotive
dealers, 5 %
Health and Fitness,
4 %
Grocery, 3 %
Professional
Services, 1 %
Please see Appendix at the back of this presentation for Reporting Definitions, Explanations and Non-GAAP Reconciliations. All data as 12/31/17.
Illustrative SMTA Top 15%1
1: Spirit Property Ranking. Data as of 12/31/17, excludes vacant and multi-tenant properties.
Pg. 34
Properties by industry (84% of single site Contractual Rent)
W.A. Real Estate Score
3.1
W.A. 5-Mile HH Income
$60,529
W.A. 5-Mile Population
133,425
W.A. Lease Term
10.2 yrs
Assets characterized by: good demographics, mix with or without lease structure, shorter lease duration,
good real estate and generally inline market rents
Includes 686 Single Tenant Properties; Median Score: 437
Top 10 Tenants
Specialty Retail Shops Holding Corp.
Academy, LTD.
Carmike Cinemas, Inc
Universal Pool Co., Inc.
Creme De La Creme, Inc.
Goodrich Quality Theatres
Casual Male Retail Group Inc
E&H Family Group, Inc.
Carmax, Inc
Regal Entertainment Group
General
Merchandise
19%
Movie Theatres
12%
Restaurants - Casual
Dining
11%
Industrial
10%
Res taurants - Quick
Service
8% Medical
O f fice
6%
Specialty
Retail
5%
Education
5%
Home Furnishings
4%
Grocery
4%
Automotive dealers
3%
Health and Fitness
3%
Au tomotive Service
3%
Entertainment
2%Travel Plaza
2%
Car Washes
1%Other
2%
Please see Appendix at the back of this presentation for Reporting Definitions, Explanations and Non-GAAP Reconciliations. All data as 12/31/17.
Illustrative SMTA Steady Eddy1
1: Spirit Property Ranking. Data as of 12/31/17, excludes vacant and multi-tenant properties.
Pg. 35
Properties by industry (6% of single site Contractual Rent)
W.A. Real Estate Score
4.2
W.A. 5-Mile HH Income
$47,578
W.A. 5-Mile Population
42,129
W.A. Lease Term
8.1 yrs
Includes 91 Single Tenant Properties; Median Score: 207
Gen eral
Merchandise
48%
Restaurants -
Casual Dining
15%
Restaurants -
Qu ick Service
8% Home
Furnishings
7%
Drug Stores /
Pharmacies
7%
Education
6%
Movie Theatres
4%
Au tomotive dealers
2%
Dol lar Stores
1%
Specialty Retail
1%
Other
1%
Top 10 Tenants
Specialty Retail Shops Holding Corp.
Raymours Furniture Company, Inc.
Columbus Preparatory Academy, Inc.
Regal Entertainment Group
Rite Aid Corp
Unique Ventures Group LLC
NPC Restaurant Holdings, LLC
Baby Jack II Automotive
Walgreen Co.
Famous Dave's Of America
Please see Appendix at the back of this presentation for Reporting Definitions, Explanations and Non-GAAP Reconciliations. All data as 12/31/17.
Illustrative SMTA Bottom 10%1
1: Spirit Property Ranking. Data as of 12/31/17, excludes vacant and multi-tenant properties.
Assets ranking predominantly due to lease duration, however, we expect this to improve as leases are
renegotiated
Pg. 36
Appendix
Reporting Definitions, Explanations and
Non-GAAP Reconciliations
Pg. 37
Reporting Definitions and Explanations
Funds from Operations (FFO) and Adjusted Funds from
Operations (AFFO) We calculate FFO in accordance with the
standards established by the National Association of Real
Estate Investment Trusts (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. FFO is a
supplemental non-GAAP financial measure. 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, gains and losses from property dispositions
and impairment charges, 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. In
addition, other equity REITs may not calculate FFO as we
do, and, accordingly, our FFO may not be comparable to
such other equity REITs’ FFO. Accordingly, FFO should be
considered only as a supplement to net income (loss)
attributable to common stockholders as a measure of our
performance.
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, including restructuring and divestiture costs,
other G&A costs associated with relocation of the
Company's headquarters, transactions costs associated
with our proposed spin-off, default interest and fees on
non-recourse mortgage indebtedness, debt extinguishment
gains (losses), transaction costs incurred in connection
with the acquisition of real estate investments subject to
existing leases and certain non-cash items. These certain
non-cash items include non-cash revenues (comprised of
straight-line rents, amortization of above and below market
rent on our leases, amortization of lease incentives,
amortization of net premium (discount) on loans
receivable, provision for bad debts and amortization of
capitalized lease transaction costs), non-cash interest
expense (comprised of amortization of deferred financing
costs and amortization of net debt discount/premium) and
non-cash compensation expense (stock-based
compensation expense). In addition, other equity REITs
may not calculate AFFO as we do, and, accordingly, our
AFFO may not be comparable to such other equity REITs’
AFFO. AFFO does not represent cash generated from
operating activities determined in accordance with GAAP, is
not necessarily indicative of cash available to fund cash
needs and should not be considered as an alternative to
net income (determined in accordance with GAAP) as a
performance measure.
Adjusted EBITDA represents EBITDA, or earnings before
interest, taxes, depreciation and amortization, modified to
include other adjustments to GAAP net income (loss)
attributable to common stockholders for real estate
acquisition costs, impairment losses, gains/losses from the
sale of real estate and debt transactions and other items
that we do not consider to be indicative of our on-going
operating performance. We focus our business plans to
enable us to sustain increasing shareholder value.
Accordingly, 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 not be considered alternatives to net income
(loss) or as an indicator of financial performance. A
reconciliation of net income (loss) attributable to common
stockholders (computed in accordance with GAAP) to
EBITDA and Adjusted EBITDA is included in the Appendix
found at the end of this presentation.
Adjusted Debt represents interest bearing debt (reported in
accordance with GAAP) adjusted to exclude unamortized
debt discount/premium, deferred financing costs, cash and
cash equivalents and cash reserves on deposit with lenders
as additional security. By excluding these amounts, 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. A
reconciliation of interest bearing debt (reported in
accordance with GAAP) to Adjusted Debt is included in the
Appendix found at the end of this presentation.
Annualized Adjusted EBITDA is calculated by multiplying
Adjusted EBITDA of a quarter by four. Our computation of
Adjusted EBITDA and Annualized Adjusted EBITDA may
differ from the methodology used by other equity REITs to
calculate these measures and, therefore, may not be
comparable to such other REITs. A reconciliation of
Annualized Adjusted EBITDA is included in the Appendix
found at the end of this presentation.
Adjusted Debt to Annualized Adjusted EBITDA 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 this 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.
Pg. 38
Reporting Definitions and Explanations
Capitalization Rate represents the Annualized Cash Rents
on the date of a property disposition divided by the gross
sales price. For Multi-Tenant properties, non-reimbursable
property costs are deducted from the Annualized Cash
Rents prior to computing the disposition Capitalization
Rate.
Collateral Value equal to the most recent third party
appraised value unless it is a mortgage where it is equal to
the remaining principal balance and treats cash as 1:1
collateral. MTA collateral was appraised on August 1, 2017
and CMBS asset was appraised on November 30, 2017.
Contractual Rent represents monthly contractual cash rent
and earned income from direct financing leases, excluding
percentage rents, from our Owned Properties recognized
during the final month of the reporting period, adjusted to
exclude amounts received from properties sold during that
period and adjusted to include a full month of contractual
rent for properties acquired during that period. We use
Contractual Rent when calculating certain metrics that are
useful to evaluate portfolio credit, asset type, industry and
geographic diversity and to manage risk.
GAAP Generally Accepted Accounting Principles in the
United States.
Gross Assets is defined as Total Assets plus Accumulated
Depreciation and Amortization.
Gross Investment represents the gross acquisition cost
including the contracted purchase price and related
capitalized transaction costs.
Initial Cash Yield from properties is calculated by dividing
the first twelve months of contractual cash rent (excluding
any future rent escalations provided subsequently in the
lease and percentage rent) by the Gross Investment in the
related properties. Initial Cash Yield is a measure
(expressed as a percentage) of the contractual cash rent
expected to be earned on an acquired property in the first
year. Because it excludes any future rent increases or
additional rent that may be contractually provided for in the
lease, as well as any other income or fees that may be
earned from lease modifications or asset dispositions,
Initial Cash Yield does not represent the annualized
investment rate of return of our acquired properties.
Additionally, actual contractual cash rent earned from the
properties acquired may differ from the Initial Cash Yield
based on other factors, including difficulties collecting
anticipated rental revenues and unanticipated expenses at
these properties that we cannot pass on to tenants, as well
as the risk factors set forth in our Annual Report on Form
10-K for the year ended December 31, 2017.
Occupancy is calculated by dividing the number of
economically yielding Owned Properties in the portfolio as
of the measurement date by the number of total Owned
Properties on said date.
Spirit Heat Map is an analysis of potential tenant industries
across Porter’s Five Forces and technological disruption to
identify tenant industries which have good fundamentals
for future performance.
MTA refers to the net-lease mortgage notes issued under
the Spirit Master Funding Program and the securitization
trusts established thereunder. Indirect special purpose
entity subsidiaries of the Company are the borrowers.
These liabilities are discussed in greater detail in our
financial statements and the notes thereto included in our
periodic reports filed with the SEC.
Net Book Value represents the Real Estate Investment
value net of accumulated depreciation.
Real Estate Investment represents the Gross Investment
plus improvements less impairment charges.
.