Spirit Realty Capital, Inc. Announces First Quarter 2013 Operating Results

  Spirit Realty Capital, Inc. Announces First Quarter 2013 Operating Results

Business Wire

SCOTTSDALE, Ariz. -- May 08, 2013

Spirit Realty Capital, Inc. (NYSE: SRC), a real estate investment trust that
invests in single-tenant, operationally essential real estate, today announced
results for the first quarter ended March 31, 2013.

Highlights for the first quarter ended March 31, 2013:

  *Generated total revenues of $72.8 million, a 4.8% increase over first
    quarter 2012
  *Produced FFO of $0.26 per share, which was impacted by $0.12 per share
    related to transaction costs incurred in connection with the process of
    closing the Cole Credit Property Trust II merger, and AFFO of $0.43 per
    share
  *Declared a $0.3125 per share first quarter cash dividend
  *Invested $56.5 million in 31 properties with tenants in place
  *Increased portfolio occupancy rate to 98.9%; up from 98.0% and 98.8% at
    March 31, 2012 and December 31, 2012, respectively

CEO Comments

Mr. Thomas H. Nolan, Jr., Chairman and Chief Executive Officer of Spirit
Realty Capital, stated, “We are pleased with our first quarter results, which
affirm the stable earnings quality of our portfolio and our continuing
investment in selective real estate opportunities that meet our underwriting
standards and enhance the diversity of our tenant base. We remain on track to
complete the merger with Cole Credit Property Trust II in the third quarter
and look forward to operating as a new combined corporation with an enhanced
ability to generate attractive, sustainable returns for investors.”

Financial Results

Total Revenues

First quarter 2013 total revenues increased 4.8% to $72.8 million, compared to
$69.5 million in the first quarter of 2012. The 5.9% growth in rental income
was partially offset by lease termination fees recognized in the first quarter
of 2012. Lease termination fees periodically result from negotiations with
tenants where we may agree to lower lease payments by removing properties from
a lease. This generates higher revenue in the period in which the fee is
received but may result in lower revenues in future periods.

Net Loss Attributable to Common Stockholders

Net loss attributable to common stockholders for the first quarter of 2013 was
$(8.3) million, or $(0.10) per share (based on 83.7 million weighted average
shares of common stock outstanding), compared to the net loss attributable to
common stockholders for the first quarter of 2012 of $(12.4) million, or
$(0.48) per share (based on 25.9 million weighted average shares of common
stock outstanding).

The results for the first quarter 2013 included the following items associated
with the proposed merger with Cole Credit Property Trust II (“CCPT II”):

i. $6.1 million in merger-related transaction costs charged to general and
administrative expenses;

ii. $3.6 million in amortization charges included in interest expense arising
from financing commitments related to the proposed merger; and

iii. $0.4 million in third-party expenses incurred to secure lenders’ consents
to the proposed merger.

Absent these charges, results from operations would have provided $1.8 million
in net income attributable to common stockholders for the first quarter of
2013, or $0.02 per share.

FFO and AFFO Attributable to Common Stockholders

Funds from operations (FFO) for the first quarter of 2013 were $21.9 million,
or $0.26 per share. The items related to the proposed CCPT II merger and
associated financing, noted above, reduced FFO for the quarter by a total of
$0.12 per share. FFO for the first quarter of 2012 were $24.0 million, or
$0.52 per share.

Adjusted funds from operations (AFFO) for the first quarter of 2013 totaled
$36.5 million, or $0.43 per share, compared to $27.6 million, or $0.61 per
share, for the first quarter of 2012.

The definitions of FFO and AFFO are included on pages 4 and 5 and a
reconciliation of these measures to net loss attributable to common
stockholders is provided on page 8.

Portfolio Highlights

Real Estate Transactions

Spirit Realty Capital invested $56.5 million in 31 real estate properties
during the first quarter of 2013, compared to $33.0 million in 25 real estate
properties in the first quarter of 2012. During the first quarter of 2013,
Spirit Realty Capital sold six properties generating gross sales proceeds of
$4.0 million.

Portfolio

As of March 31, 2013, Spirit Realty Capital’s gross investment in real estate
and mortgage and equipment loans totaled $3.7 billion, substantially all of
which was invested in 1,232 properties that were 98.9% occupied. Spirit Realty
Capital’s properties are generally leased under long-term, triple net leases,
with a weighted average remaining maturity of approximately 10.9 years.
Approximately 65% of Spirit Realty Capital’s annual rent (defined as
annualized first quarter 2013 rent) is contributed from properties under
master leases and 96% of all leases provide for rental increases.

Spirit Realty Capital’s real estate portfolio is diversified geographically
across 47 states and among various property types. One state accounted for 11%
of the annual rent contribution of the real estate portfolio; and no other
state contributed more than 10%. Spirit Realty Capital’s three largest
property types (based on annual rent) as of March 31, 2013 were general and
discount retail (29%), restaurants (19%) and specialty retail (9%).

Cole Credit Property Trust II Proposed Merger

As previously announced on January 22, 2013, the respective boards of
directors of Spirit Realty Capital and CCPT II unanimously approved a
definitive agreement to merge the companies to create one of the largest
publicly traded triple-net-lease real estate investment trusts in the United
States. In connection with the proposed merger, proxy materials have been
mailed for Spirit Realty Capital’s special meeting of stockholders to be held
on June 12, 2013.

The transaction is expected to close in the third quarter of 2013 contingent
on the receipt of the approval of the majority of shares outstanding of Spirit
Realty Capital and CCPT II and other customary regulatory approvals and the
satisfaction of other contractual closing conditions.

2013 Estimates

As previously noted, Spirit Realty Capital withdrew its forward-looking
estimates in light of the pending merger with CCPT II. The combined company
will evaluate its estimates upon consummation of the transaction.

Conference Call

Spirit Realty Capital will hold a conference call and webcast to discuss the
its first quarter 2013 results on May 8, 2013 at 5:00 p.m. (Eastern Time). The
call can be accessed live over the phone by dialing 866-825-3209 (toll-free
domestic) or 617-213-8061 (international); passcode: 95939695. A live webcast
of the conference call will be available on the Investor Relations section of
Spirit Realty Capital’s website at www.spiritrealty.com. A replay of the call
will be available for one week via telephone starting approximately one hour
after the call ends. The replay can be accessed at 888-286-8010 (toll-free
domestic) or 617-801-6888 (international); passcode: 44834111. The webcast
will be archived on Spirit Realty Capital’s website for 30 days after the
call.

About Spirit Realty Capital

Spirit Realty Capital was formed in 2003 to invest in single-tenant
operationally essential real estate, which refers to properties that are
generally free-standing, commercial real estate facilities where tenants
conduct retail, service or distribution activities that are essential to the
generation of their sales and profits. Since that time, Spirit Realty Capital
has invested over $4.3 billion to create a diverse portfolio of more than
1,200 properties in 18 industries located across 47 states. Spirit Realty
Capital completed its initial public offering in September 2012 and trades
under the symbol “SRC” on the NYSE. More information about Spirit Realty
Capital can be found at www.spiritrealty.com.

Forward-Looking and Cautionary Statements

Statements contained in this press release that are not historical facts are
forward-looking statements. These forward-looking statements can be identified
by the use of words such as “expects,” “plans,” “estimates,” “projects,”
“intends,” “believes,” “guidance,” and similar expressions that do not relate
to historical matters. These forward-looking statements are subject to 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, continued ability to source new investments, changes in
interest rates and/or credit spreads, changes in the real estate markets, and
other risk factors discussed in Spirit Realty Capital’s Annual Report on Form
10-K for the year ended December 31, 2012 and other documents as filed by
Spirit Realty Capital with the SEC from time to time. All forward-looking
statements in this press release are made as of today, based upon information
known to management as of the date hereof, and Spirit Realty Capital assumes
no obligations to update or revise any of its forward-looking statements that
may be made to reflect events or circumstances after the date these statements
were made, except as required by law.

Non-GAAP Financial Measures

We calculate FFO in accordance with the standards established by the National
Association of Real Estate Investment Trusts, or NAREIT. FFO represents net
income (loss) (computed in accordance with GAAP), excluding real
estate-related depreciation and amortization, impairment charges and net
losses (gains) on the disposition of assets. 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) as a measure of our
performance. FFO should not be used as a measure of our liquidity, nor is it
indicative of funds available to fund our cash needs, including our ability to
make distributions or service indebtedness. FFO also should not be used as a
supplement to or substitute for cash flow from operating activities computed
in accordance with GAAP. A reconciliation of net loss (computed in accordance
with GAAP) to FFO is included in the financial information accompanying this
release.

Adjusted FFO (“AFFO”) is a non-GAAP financial measure of operating performance
used by many companies in the REIT industry. It adjusts FFO 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, may not be
comparable to such other REITs. A reconciliation of net loss (computed in
accordance with GAAP) to AFFO is included in the financial information
accompanying this release.

                                                         
                                                                             
SPIRIT REALTY CAPITAL, INC.



Consolidated Statements of Operations

Unaudited

(In Thousands, Except Share and Per Share Data)
                                                                             
                                               Quarter Ended March 31,
                                               2013             2012
Revenues:                                      
Rentals                                        $ 71,614         $ 67,628
Interest income on loans receivable            1,113              1,436
Interest income and other                      78               438        
Total revenues                                 72,805             69,502
                                                                             
Expenses:
General and administrative                     13,577             6,248
Property costs                                 963                1,190
Interest                                       36,439             38,939
Depreciation and amortization                  28,174             27,271
Impairments                                    —                8,135      
Total expenses                                 79,153           81,783     
                                                                             
Loss from continuing operations before         (6,348     )       (12,281    )
income tax expense
Income tax expense                             74               64         
Loss from continuing operations                (6,422     )       (12,345    )
                                                                             
Discontinued operations:
Loss from discontinued operations              (2,090     )       (1,507     )
Gain on dispositions of assets                 180              1,450      
Loss from discontinued operations              (1,910     )      (57        )
                                                                             
                                                                             
Net loss attributable to common                $ (8,332   )     $ (12,402    )
stockholders
                                                                             
                                                                             
Net loss per share of common                   
stock—basic and diluted
Continuing operations                          $ (0.08    )     $ (0.48      )
Discontinued operations                        (0.02      )      —          
Net loss                                       $ (0.10    )     $ (0.48      )
                                                                             
                                                                             
Weighted average shares of common
stock outstanding:
Basic and diluted                              83,694,549         25,863,976
                                                                             
                                                                             

                                                          
                                                                             
SPIRIT REALTY CAPITAL, INC.



Consolidated Balance Sheets

(In Thousands, Except Share and Per Share Data)
                                                                             
                                               March 31,
                                               2013              December 31,
                                                                 2012
                                               (unaudited)
Assets
Investments:
Real estate investments:
Land and improvements                          $ 1,344,924       $ 1,328,437
Buildings and improvements                      2,063,137       2,036,987 
Total real estate investments                    3,408,061         3,365,424
Less: accumulated depreciation                  (512,870  )      (490,938  )
                                                 2,895,191         2,874,486
Loans receivable, net                            50,960            51,862
Intangible lease assets, net                     183,224           187,362
Real estate assets held for sale, net           11,637          5,898     
Net investments                                  3,141,012         3,119,608
Cash and cash equivalents                        55,355            73,568
Deferred costs and other assets, net            50,473          54,501    
                                                                             
Total assets                                   $ 3,246,840      $ 3,247,677 
                                                                             
Liabilities and stockholders’ equity
Liabilities:
Revolving credit facilities, net               $ 11,400          $ —
Mortgages and notes payable, net                 1,910,952         1,894,878
Intangible lease liabilities, net                45,161            45,603
Accounts payable, accrued expenses and          58,863          53,753    
other liabilities
Total liabilities                                2,026,376         1,994,234
                                                                             
Stockholders’ equity:
Common stock, $0.01 par value per
share, 100 million shares authorized,            849               849
84,833,181 and 84,851,515 shares
issued and outstanding, respectively
Capital in excess of par value                   1,830,171         1,828,399
Accumulated deficit                              (609,868  )       (575,034  )
Accumulated other comprehensive loss            (688      )      (771      )
Total stockholders’ equity                      1,220,464       1,253,443 
                                                                             
Total liabilities and stockholders’            $ 3,246,840      $ 3,247,677 
equity
                                                                             
                                                                             

                                                        
                                                                             
SPIRIT REALTY CAPITAL, INC.



Reconciliation of Non-GAAP Financial Measures

Unaudited

(In Thousands, Except Share and Per Share Data)
                                                                             
                                           Quarter Ended

                                           March 31,
                                           2013                 2012
Net loss attributable to common            $ (8,332     )       $ (12,402    )
stockholders
Add (less):
Portfolio depreciation and
amortization
Continuing operations                        28,147               27,260
Discontinued operations                      142                  627
Portfolio impairments
Continuing operations                        —                    8,135
Discontinued operations                      2,103                1,802
Realized (gains) on sales of real           (180       )        (1,450     )
estate
                                                                             
Total adjustments                           30,212             36,374     
                                                                             
Funds from operations (FFO)
attributable to common                     $ 21,880             $ 23,972
stockholders
Add (less):
                                                                             
Loss on derivative instruments
related to Term Note                         —                    653
extinguishment
Expenses incurred to secure                  397                  1,026
lenders’ consents (a)
CCPT II merger-related transaction           6,140                —
costs
CCPT II merger-related financing             3,614                —
costs
Non-cash interest expense                    3,248                2,425
Non-cash revenues                            (521       )         (505       )
Non-cash compensation expense               1,772              -          
                                                                             
Total adjustments to FFO                    14,650             3,599      
                                                                             
Adjusted funds from operations
(AFFO) attributable to common              $ 36,530            $ 27,571     
stockholders
                                                                             
Net loss per share of common stock
Basic and Diluted (b)                      $ (0.10      )       $ (0.48      )
                                                                             
FFO per share of common stock
Diluted (b)                                $ 0.26               $ 0.52
                                                                             
AFFO per share of common stock
Diluted (b)                                $ 0.43               $ 0.61
                                                                             
Weighted average shares of common
stock outstanding:
Basic                                        83,694,549           25,863,976
Diluted (b)                                  84,075,297           50,109,254
                                                                             

(a)  These third-party expenses were incurred to secure lenders’ consents to
      the IPO and the proposed CCPT II merger in 2012 and 2013, respectively.
(b)   Assumes the issuance of potentially issuable shares unless
      the result would be anti-dilutive.
                                                                    
                                                                    

                         SPIRIT REALTY CAPITAL, INC.

                            Real Estate Portfolio
                                  Unaudited

Industry Diversification

The following table sets forth information regarding the diversification of
our owned real estate properties among different industries (based on annual
rent) as of March 31, 2013:

                                                     
                                                              Percent of Total
Industry                                   Number of
                                           Properties         Annual
                                                              Rent^(1)
General and discount retail                181                29.0%
properties
Restaurants—quick service                  395                11.0
Specialty retail properties                48                 9.1
Restaurants—casual dining                  129                7.8
Movie theatres                             23                 7.6
Building material suppliers                110                6.6
Industrial properties                      26                 5.0
Educational properties                     22                 4.6
Automotive dealers, parts and              78                 4.2
service properties
Recreational properties                    8                  3.6
Convenience stores / car washes            40                 2.9
Medical/other office properties            12                 2.3
Supermarkets                               21                 2.1
Distribution properties                    36                 1.4
Health clubs/gyms                          5                  1.1
Interstate travel plazas                   3                  1.0
Drugstores                                 9                  *
Call centers                               1                  *
Total                                      1,147              100%
                                                              

                                                                      
*    Less than 1%
      
(1)   We define annual rent as rental revenue for the quarter ended March
      31, 2013 multiplied by four.
                                                                             
                                                                             

Tenant Diversification

The following table lists the top 10 tenants of our owned real estate
properties (based on annual rent) as of March 31, 2013:

                                                            
                                                                             Percent
                                   Number             Annual Rent            of
            Tenant                 of                 (in                    Total
                                   Properties         thousands)^(1)         Annual
                                                                             Rent
            Shopko
1.          Stores/Pamida          181                $ 83,459               29.0 %
            Operating Co.,
            LLC
2.          84 Properties,         109                18,647                 6.5
            LLC
3.          Carmike                12                 8,028                  2.8
            Cinemas, Inc.
4.          Universal Pool         14                 6,679                  2.3
            Co., Inc.
            CBH20, LP
5.          (Camelback Ski         1                  5,779                  2.0
            Resort)
            United
6.          Supermarkets,          15                 5,155                  1.8
            LLC
            Destination XL
7.          Group, Inc.            1                  4,814                  1.7
            ^(2)
8.          Carmax, Inc.           5                  4,726                  1.6
            Main Event
9.          Entertainment,         6                  4,477                  1.6
            LP
10.         NE Opco, Inc.          6                  4,458                  1.5
            Other                  797                141,842                49.2
            Total                  1,147              $ 288,064              100 %
                                                                             

                            
(1)  We define annual rent as rental revenue for the quarter ended March 31,
      2013 multiplied by four.
      
(2)   Effective February 25, 2013, Casual Male Retail Group, Inc. formally
      changed its name to Destination XL Group, Inc.
      
                                                       

                         SPIRIT REALTY CAPITAL, INC.

                      Real Estate Portfolio (continued)
                                  Unaudited

Geographic Diversification

The following table sets forth information regarding the geographic
diversification of our owned real estate properties as of March 31, 2013:

                                         
                                                  
Location                       Number of          Percent of Total
                               Properties         Annual Rent^(1)
Wisconsin                      57                 11.0%
Texas                          84                 8.7
Illinois                       91                 6.8
Pennsylvania                   50                 5.2
Florida                        69                 4.5
Minnesota                      36                 4.4
Arizona                        26                 4.4
Georgia                        67                 3.4
Indiana                        40                 3.2
Michigan                       34                 3.1
Nebraska                       17                 3.1
Ohio                           50                 3.0
Massachusetts                  6                  2.8
California                     9                  2.5
North Carolina                 29                 2.2
Utah                           13                 2.2
Tennessee                      60                 2.2
Iowa                           34                 2.1
Idaho                          9                  2.0
Kentucky                       37                 1.9
Alabama                        51                 1.7
Washington                     9                  1.6
Missouri                       29                 1.5
Montana                        7                  1.4
South Dakota                   9                  1.4
New York                       28                 1.3
West Virginia                  26                 1.3
Virginia                       29                 1.3
Oregon                         6                  1.2
Oklahoma                       11                 1.2
Colorado                       8                  1.0
Kansas                         6                  1.0
South Carolina                 18                 *
Maryland                       18                 *
Louisiana                      13                 *
Arkansas                       7                  *
Maine                          18                 *
New Jersey                     3                  *
Wyoming                        8                  *
New Mexico                     4                  *
Nevada                         1                  *
Delaware                       2                  *
Vermont                        2                  *
Mississippi                    7                  *
North Dakota                   2                  *
New Hampshire                  6                  *
Rhode Island                   1                  *
Total properties owned         1,147              100 %
                                                  

                             
*    Less than 1%
      
(1)   We define annual rent as rental revenue for the quarter ended March 31,
      2013 multiplied by four.
      
                                                        

                         SPIRIT REALTY CAPITAL, INC.

                      Real Estate Portfolio (continued)
                                  Unaudited

Lease Expirations

The following table sets forth a summary schedule of lease expirations for
leases in place as of March 31, 2013. As of March 31, 2013, the weighted
average non-cancelable remaining initial term of our leases (based on annual
rent) was 10.9years. The information set forth in the table assumes that
tenants exercise no renewal options and all early termination rights:

                                                          
                                               Expiring Annual         Percent
                            Number             Rent                    of
Leases expiring in         of                 (in                     Total
                            Properties         thousands)^(1)          Annual
                                                                       Rent
Remainder of 2013           11                 $ 2,246                 0.8%
2014                        53                 7,643                   2.7
2015                        19                 4,734                   1.6
2016                        21                 2,578                   0.9
2017                        35                 7,216                   2.5
2018                        38                 12,372                  4.3
2019                        61                 12,630                  4.4
2020                        84                 27,959                  9.7
2021                        123                21,725                  7.5
2022                        63                 6,065                   2.1
2023 and thereafter         626                182,669                 63.5
Vacant                      13                 —                       —
                                                                       
Total owned                 1,147              $ 287,837               100 %
properties
                                                                       

                            
(1)  We define annual rent as rental revenue for the quarter ended March 31,
      2013 multiplied by four.
      
                                                       

Contact:

Spirit Realty Capital, Inc.
Michael A. Bender, 480-315-6634
SVP, Chief Financial Officer
InvestorRelations@spiritrealty.com
 
Press spacebar to pause and continue. Press esc to stop.