Spirit Realty Capital – On A Mission To Improve Metrics

logoWhen analyzing Spirit Realty Capital’s (NYSE: SRC) financial reports, one has a sense that this net lease REIT is on a mission to improve their performance. Management has identified the company’s areas of weakness and is demonstrating efforts to address them. Spirit Realty is a company that one can feel confident about its future.

Spirit Realty is a single-tenant, net lease REIT with a focus on small and mid-sized retail customers with a minimum credit rating of B-. In July 2013, the company doubled in size through a merger with Cole Credit Property Trust. Spirit Realty has an approximate market capitalization of $5.0 billion, 2,547 properties spread across 49 states, and trades as a one hundred percent free float company.


The following details Spirit Realty’s highlights:

  • The company wisely reduced the concentration of Shopko, its largest tenant, from 14 to 12.8 percent of its portfolio. Prior to the merger, the concentration of Shopko was even higher at 30 percent.
  • Spirit Realty’s credit rating has been upgraded to BB by Standard&Poor’s.
  • Management has worked to reduce the net debt-to-enterprise value ratio.
  • The debt profile has also improved with a lowering of the average cost of debt and extending the average debt maturity.

Spirit Realty went public in 2012 but was originally founded in 2003 providing plenty of history to analyze. The company has consistently renewed 80 percent of expiring leases and occupancy has always remained high (as high as National Retail Properties (NYSE: NNN), even through the Great Recession.

The company’s financial results for Q1 2015 were strong. In a quick comparison* with NNN and Lexington Realty Trust (NYSE: LXP), Spirit Realty performed better than LXP but not quite as good as NNN. SRC did lead in Q1 revenue growth but lagged in FFO, dividend per share growth, and AFFO dividend payout ratio. In ranking these three net lease REITs by performance, NNN led the group with Spirit Realty second and LXP placing last.

*Using same parameters as the table below

With price-to-FFO below its peers and a good dividend yield at 6 percent, Spirit Realty is worth considering for your portfolio.

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Percent change 2015 vs. 2014
Revenues – Q1, in percent 13
NOI – Q1, in percent 9
FFO per share – Q1, in percent
AFFO per share – Q1, in percent 5
FFO per share, in percent (Projected) 31
AFFO per share, in percent (Projected) 4
Other Metrics – 2015
Dividend per share, Q1, percent 2
Dividend payout ratio – Q1, in percent 81
Occupancy (Same Store) – Q1, in percent 98
Total debt to total capitalization value – Q1 47

Written by Heli Brecailo

Disclaimer: This newsletter is not engaged in rendering tax, accounting, or other professional advice through this publication. No statement in this issue is to be construed as a recommendation to buy or sell any security or other investment. Please do your own due diligence before making any investment decision. Some information presented in this publication has been obtained from third-party sources considered to be reliable. Sources are not required to make representations as to the accuracy of the information, however, and consequently the publisher cannot guarantee accuracy.

Disclosure: The author has no positions in any shares mentioned, and no plans to initiate any positions within the next 72 hours.​