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

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

   And Reports Pro Forma Financial Information for the Post-Merger Combined
                                   Company

Business Wire

SCOTTSDALE, Ariz. -- August 8, 2013

Spirit Realty Capital, Inc. (NYSE: SRC), a real estate investment trust that
invests in single-tenant, operationally essential real estate, today announced
operating results for the second quarter ended June 30, 2013 and reported pro
forma highlights of its merger with Cole Credit Property Trust II (“Cole II”),
which was completed on July 17, 2013.

Highlights:

Pre-merger activity for the second quarter ended June 30, 2013:

  *Received stockholder approval for the merger agreement with Cole II and
    the transactions contemplated therein (the “Merger”) on June 12, 2013
  *Generated revenues of $72.8 million, a 7.2% increase over second quarter
    2012
  *Produced FFO of $0.25 per share, AFFO of $0.45 per share, and a net loss
    of $(0.14) per share
  *Declared a $0.3125 per share second quarter cash dividend (equates to
    $0.16406 per share on a post-merger basis)
  *Invested $38.2 million in nine properties with tenants in place
  *Maintained portfolio occupancy above 98%

Pre-merger activity for the six months ended June 30, 2013:

  *Generated revenues of $144.2 million, a 6.0% increase over the first six
    months of 2012
  *Invested $94.7 million in 40 properties, with a weighted average initial
    yield of 8.25%
  *Produced FFO of $0.51 per share, AFFO of $0.89 per share and a net loss of
    $(0.24) per share

Subsequent to June 30, Spirit Realty Capital:

  *Completed the Merger with Cole II, which diversified the company’s tenant
    base, enhanced its credit quality, improved its operating efficiency,
    reduced its leverage and provides additional financial strength and
    flexibility, in part by almost doubling the size of the company
  *Completed the sale of two non-core multi-tenant properties acquired in the
    Cole II Merger on July 19, 2013 in a transaction valued at approximately
    $259 million, including the assumption by the purchaser of approximately
    $139 million of debt

CEO Comments

Mr. Thomas H. Nolan, Jr., Chairman and Chief Executive Officer of Spirit
Realty Capital, stated “Our second quarter results were consistent with our
expectations and affirm the stable earnings quality of our seasoned,
cycle-tested pre-merger portfolio. In regards to the Merger, this transaction
has allowed us to achieve significant progress toward the broad strategic
objectives established at the time of our IPO less than one year ago, which
were to diversify our tenant base, reduce our leverage, increase our financial
flexibility and scale our operations. The new combined company has an
enterprise value in excess of $7.1 billion and an equity market capitalization
of approximately $3.5 billion and is now well-positioned within an exciting
and dynamic industry.”

“We will maintain a disciplined and consistent investment strategy focused on
delivering stable and growing dividends to our shareholders.” Mr. Nolan
concluded, “The recent sale of the non-core, multi-tenant properties acquired
in the Cole II Merger is consistent with our strategy of maintaining a
portfolio of operationally essential single-tenant, triple-net real estate
that enables us to deliver a steady and attractive total return to our
shareholders.”

Pre-Merger Financial Results

Revenues

Second quarter 2013 pre-merger total revenues increased 7.2% to $72.8 million,
compared to $68.0 million in the second quarter of 2012. The growth in total
revenues was primarily driven by rental income, which was higher by $4.2
million, or 6.3%. New investments and contractual rent growth, which is
embedded in approximately 96% of our leases, accounted for the growth in
rental income. Also, interest income and other was $1.1 million higher than
the second quarter of 2012 due to lease termination fees recognized during the
second quarter of 2013. Lease termination fees periodically result from
negotiations with tenants, which results in higher revenue in the period in
which the fee is received but may lower revenues in future periods.

Total revenues for the first six months in 2013 were $144.2 million, 6.0% or
$8.2 million higher than total revenues for the first six months in 2012. The
growth in total revenues was principally the result of an increase in rental
income. The favorable impact of lease termination fees earned in the first six
months ended 2013 were offset by reductions in interest income on loans
receivable due to scheduled and early pay-offs.

Net Loss Attributable to Common Stockholders

Net loss attributable to common stockholders for the second quarter of 2013
was $(11.7) million, or $(0.14) 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 second quarter of 2012 of $(8.8)
million, or $(0.34) per share based on 25.9 million weighted average shares of
common stock outstanding.

Net loss attributable to common stockholders for the first six months in 2013
was $(20.0) million, or $(0.24) 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 six months in 2012 of
$(21.2) million, or $(0.82) per share based on 25.9 million weighted average
shares of common stock outstanding.

The results for the second quarter 2013 and the first six months in 2013
included $11.5 million and $21.6 million, respectively, of Merger-related
costs described below:

                                          Quarter ended   Six months ended
Dollars in millions                         June 30, 2013     June 30, 2013
Amortization charges included in
interest expense arising from financing     $ 6.5             $10.0
commitments
Transaction costs charged to Merger         2.7               8.8
related costs
Third party expenses incurred to
solicit and obtain lenders’ consents to     2.3               2.8
the Merger charged to Merger related
costs
Total                                       $11.5             $21.6
                                                              

The results for the second quarter 2012 and the first six months ended June
30, 2012 included charges associated with the IPO and the associated Term Loan
extinguishment of $2.8 million and $4.5 million, respectively.

Absent these (a) Merger and (b) IPO and associated Term Loan extinguishment
charges, results from operations would have provided the following net income
(loss) attributable to common stockholders for each of the respective periods
noted below:

                            Quarter ended             Six months ended
                              June 30,                    June 30,
Amounts in millions,           2013      2012        2013    2012  
except per share data
Net (loss) income
attributable to common        $ (0.2  )   $ (6.0  )     $ 1.6    $ (16.7 )
stockholders, as adjusted
Net (loss) income per
share attributable to         $ (0.00 )     $ (0.23 )     $ 0.02     $ (0.65 )
common stockholders, as
adjusted
                                                                             

FFO and AFFO Attributable to Common Stockholders

Funds from operations (FFO) for the second quarter of 2013 were $21.4 million,
or $0.25 per share. FFO for the second quarter of 2012 were $19.4 million, or
$0.49 per share. For the first six months of 2013, FFO were $43.3 million, or
$0.51 per share. For the first six months of 2012, FFO were $43.4 million or
$1.01 per share.

Adjusted funds from operations (AFFO) for the second quarter of 2013 totaled
$37.9 million, or $0.45 per share, compared to $27.0 million, or $0.60 per
share, for the second quarter of 2012. For the first six months of 2013, AFFO
were $74.5 million or $0.89 per share. AFFO in the first six months of 2012
were $54.6 million, or $1.21 per share.

The definitions of FFO and AFFO are included on page 8, and a reconciliation
of these measures to net loss attributable to common stockholders is provided
on page 12.

Pre-Merger Portfolio Highlights

Real Estate Transactions

Spirit Realty Capital invested $38.2 million and added nine real estate
properties during the second quarter of 2013. These investments had a weighted
average initial yield of 8.14% and were with one existing and two new tenants.
This compared to $24.3 million and 25 real estate properties in the second
quarter of 2012. During the second quarter of 2013, Spirit Realty Capital sold
three properties generating gross sales proceeds of $2.0 million.

Investments in real estate during the first six months of 2013 were $94.7
million and comprised 40 new properties with a weighted average initial yield
of 8.25%. This compares to the $57.3 million invested in 50 real estate
properties during the first six months of 2012.

Portfolio

As of June 30, 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 1,234 single tenant properties that were 98.4% 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 65.9% of Spirit Realty Capital’s annual rent
(defined as annualized second quarter 2013 rent) is contributed from
properties under master leases and approximately 96% of all leases provide for
rental increases.

Spirit Realty Capital’s real estate portfolio as of June 30, 2013, was
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 June 30,
2013, were general and discount retail (29%), restaurants (19%) and specialty
retail (9%).

Cole II Merger

Summary

Subsequent to the end of the second quarter, on July 17, 2013, Spirit Realty
Capital completed the Merger that was approved by the stockholders at a
special meeting held on June 12, 2013. The combined company (“Combined
Company”) has an enterprise value in excess of $7.1 billion and an equity
market capitalization of approximately $3.5 billion as of July 18, 2013.

Under the terms of the Merger agreement, the Combined Company is managed by
the Spirit Realty Capital (“Spirit”) management team and retains the name
Spirit Realty Capital, Inc. The Combined Company listed its shares on the New
York Stock Exchange (NYSE) under Spirit’s existing ticker symbol, “SRC,” and
began trading on July 18, 2013. Spirit stockholders received 1.9048 shares of
newly issued shares of the Combined Company in exchange for each share of
Spirit common stock they owned immediately before the effective date of the
Merger (the “Exchange Ratio”). Each share of Cole II common stock issued and
outstanding remains outstanding as common stock of the Combined Company. This
transaction has resulted in the Combined Company having approximately 370.4
million shares of common stock outstanding as of the effective date of the
Merger.

The Merger is being accounted for as a reverse acquisition with Spirit treated
as the acquiring entity. Beginning with the third quarter 2013, publicly filed
financial statements of the Combined Company will include the historical
results of Spirit as the predecessor company through July 16, 2013 and the
consolidated results of the Combined Company prospectively. Cole II was
externally managed; accordingly, no Cole II employees were part of the merger
transaction.

The accounting consideration for the net assets acquired through the Merger
(“Merger Consideration”) is estimated at $2.0 billion, based on the number of
shares of Cole II common stock outstanding immediately prior to the Merger and
the closing price of Spirit’s common stock on July 17, 2013.

Concurrent with the Merger, financing commitments obtained at the time the
Merger agreement was executed were replaced with a new three-year $400 million
revolving credit facility and $203 million in 10 year, fixed rate commercial
mortgage-backed securities (“CMBS”) financing. Cole II’s outstanding
borrowings under its existing line of credit (approximately $324 million) were
repaid concurrently with the closing of the Merger. In connection with the
Merger, the Combined Company assumed approximately $1.5 billion of Cole II’s
outstanding mortgage indebtedness.

Merger Costs and Expenses

In connection with the Merger, transaction costs and expenses of approximately
$86 million were incurred through July 17, 2013 and include the following
items and approximate amounts (dollars in millions):

  i.    Advisory fees                                               $ 33.6
    ii.    Costs incurred for financing commitments                       20.8
    iii.   Costs incurred to solicit and obtain lenders’ consents to      16.1
           the Merger
    iv.    Legal, accounting and other professional services             15.5
                                                                        $ 86.0
                                                                          

Net Assets Acquired in the Merger

The Merger Consideration will be allocated to all of Cole II’s assets acquired
and liabilities assumed that existed on July 17, 2013 at their respective fair
values. The following is a preliminary estimate of the allocation of the
Merger Consideration to the net assets acquired (dollars in millions):

  Real estate investments (includes intangible lease assets     $ 3,501
    and liabilities)
    Mortgages and other notes receivable                              79
    Goodwill                                                          279
    Less: Other net liabilities assumed                               (5     )
    Less: Assumed mortgages and other notes payable                  (1,828 )
    Estimated fair value of net assets acquired                     $ 2,026  
                                                                             

Post-Merger Pro Forma Portfolio Highlights

                                                         Post Merger
                                                Spirit       Pro-Forma
(Dollars in millions)                         6/30/13    7/17/13
Real estate investments (a)                   $3,376.2   $6,489.1
Debt (a) (b)                                  $1,932.2   $3,613.4
Market capitalization (as of July 17, 2013)   $1,503.2   $3,452.4
Leverage (c)                                  62%        52%
% Investment grade                            1%         19%
% Top ten tenants (revenue)                   50%        37%
Occupancy                                     98%        99%
# Tenants                                     165        383
# States                                      47         48
Annualized rents (d)                          $288.5     $545.7
                                                             

    
(a)   Post-merger real estate investments and debt for the combined company
      reflect pro forma financial positions at June 30, 2013
(b)   Includes Revolving credit facilities, net and Mortgages and notes
      payable, net.
      Percentage that the principal balance outstanding under revolving credit
(c)   facilities and mortgages and notes payable for pre-merger Spirit and
      pro-forma combined company at June 30, 2013 represents of total assets.
      Represents rents for the last full quarter of the period presented
(d)   multiplied by 4. Pro forma Combined Company excludes rent from multi
      tenant properties sold on July 19, 2013 (discussed below).
      

Unaudited Pro Forma Condensed Consolidated Financial Statements for the
Combined Company are included as an exhibit that begins after page 15.

Multi-Tenant Properties Sale

On July 19, 2013, Spirit completed the sale of two non-core multi-tenant
properties acquired in the Cole II Merger in a transaction valued at
approximately $259 million, including the assumption by the purchaser of
approximately $139 million of debt. The properties are a 760,414-square-foot
power center in Winter Garden, FL, and a 311,396-square-foot power center in
Cummings Town Center in Atlanta, GA. The sale of these non-core assets
acquired in the Merger is consistent with Spirit’s focus on operationally
essential single-tenant investment opportunities.

2013 and 2014 Guidance

On January 22, 2013, Spirit Realty Capital withdrew its forward-looking
financial guidance in conjunction with the Cole II Merger announcement. The
three months ended September 30, 2013 will be the first quarter reported by
the new combined company. Management intends to reinstate guidance by that
time.

Conference Call

Spirit Realty Capital will hold a conference call and webcast to discuss its
second quarter 2013 results on August 8, 2013 at 5:00 p.m. (Eastern Time). The
call can be accessed live over the phone by dialing 800-299-9086 (toll-free
domestic) or 617-786-2903 (international); passcode: 82292083. 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: 62573982. 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 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. Spirit Realty Capital completed its merger with Cole Credit
Property Trust II (Cole II) on July 17, 2013. As a result, Spirit Realty
Capital has an estimated enterprise value of $7.1 billion comprising a diverse
portfolio of approximately 1,900 properties across 48 states. Spirit Realty
Capital completed its initial public offering in September 2012 and trades
under the symbol “SRC” on the New York Stock Exchange. The CUSIP number for
shares of the post-merger Spirit Realty Capital common stock is 84860W102.
There are approximately 370.4 million shares of Spirit Realty Capital common
stock outstanding as of July 18, 2013. 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 strictly historical
are forward-looking statements, which should be regarded solely as reflections
of our current operating plans and estimates. 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 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, continued ability to source new
investments, risks associated with using debt to fund the company’s business
activities, including refinancing and interest rate risks, changes in interest
rates and/or credit spreads, changes in the real estate markets, risks related
to the merger and our ability to integrate the portfolios, disruption from the
merger making it more difficult to maintain business and operational
relationships, unknown liabilities acquired in connection with the acquired
properties, portfolios of properties, or interests in real-estate related
entities, effects of liquidity for CCPTII shareholders and Spirit shareholders
previously holding unregistered shares, 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.
Condensed Consolidated Balance Sheets
(In Thousands, Except Share and Per Share Data)
                                                                 
                                               June
                                               30,               December
                                               2013              31,
                                               (unaudited)       2012
Assets
Investments:
Real estate investments:
Land and improvements                          $ 1,345,041       $ 1,328,437
Buildings and improvements                      2,031,174       2,036,987 
Total real estate investments                    3,376,215         3,365,424
Less: accumulated depreciation                  (510,983  )      (490,938  )
                                                                             
Total real estate investments, net               2,865,232         2,874,486
                                                                 
Loans receivable, net                            44,027            51,862
Intangible lease assets, net                     178,782           187,362
Real estate assets held for sale, net           42,949          5,898     
Net investments                                  3,130,990         3,119,608
Cash and cash equivalents                        38,031            73,568
Deferred costs and other assets, net            54,482          54,501    
                                                                             
Total assets                                   $ 3,223,503      $ 3,247,677 
                                                                 
Liabilities and stockholders' equity:
Liabilities:
Revolving credit facilities, net               $ 26,492          $ -
Mortgages and notes payable, net                 1,905,706         1,894,878
Intangible lease liabilities, net                43,859            45,603
Accounts payable, accrued expenses and          62,238          53,753    
other liabilities
                                                                             
Total liabilities                                2,038,295         1,994,234
                                                                 
Stockholders' equity:
Common stock, $0.01 par value per share,
100 million shares authorized, 84,857,769
and 84,851,515 shares issued and                 849               849
outstanding at June 30, 2013 and December
31, 2012, respectively
Capital in excess of par value                   1,832,501         1,828,399
Accumulated deficit                              (648,051  )       (575,034  )
Accumulated other comprehensive loss            (91       )      (771      )
                                                                             
Total stockholders' equity                      1,185,208       1,253,443 
                                                                             
Total liabilities and stockholders' equity     $ 3,223,503      $ 3,247,677 
                                                                             

                                                                   
SPIRIT REALTY CAPITAL, INC.
Condensed Consolidated Statements of Operations
Unaudited
(In Thousands, Except Share and Per Share Data)
                                                                            
                   Quarter Ended June 30,                Six Months Ended June 30,
                    2013             2012             2013             2012       
                                                                            
Revenues:
Rentals            $ 70,479           $ 66,279           $ 140,647          $ 132,483
Interest
income on            1,128              1,576              2,240              3,012
loans
receivable
Interest
income and          1,242            102              1,322            540        
other
                                                                                         
Total revenues       72,849             67,957             144,209            136,035
                                                                            
Expenses:
General and          9,154              7,030              16,125             12,727
administrative
Merger related       5,020              -                  11,558             -
costs
Property costs       522                1,055              1,465              2,234
Real estate
acquisition          129                709                218                1,259
costs
Interest             39,552             42,024             75,990             80,962
Depreciation
and                  29,894             26,258             57,031             52,492
amortization
Impairments         1,601            (180       )      1,601            7,955      
                                                                                         
Total expenses      85,872           76,896           163,988          157,629    
                                                                            
Loss from
continuing
operations           (13,023    )       (8,939     )       (19,779    )       (21,594    )
before income
tax expense
Income tax          68               255              142              319        
expense
Loss from
continuing          (13,091    )      (9,194     )      (19,921    )      (21,913    )
operations
                                                                            
Discontinued
operations:
Income (loss)
from                 1,613              493                (69        )       (640       )
discontinued
operations
Net (loss)
gain on             (191       )      (81        )      (11        )      1,369      
dispositions
of assets
                                                                                         
Income (loss)
from                1,422            412              (80        )      729        
discontinued
operations
Net loss             (11,669    )       (8,782     )       (20,001    )       (21,184    )
Less:
preferred           -                (8         )      -                (8         )
dividends
Net loss
attributable       $ (11,669    )     $ (8,790     )     $ (20,001    )     $ (21,192    )
to common
stockholders
                                                                            
Net (loss)
income per
share of
common stock-
basic and
diluted
Continuing         $ (0.16      )     $ (0.36      )     $ (0.24      )     $ (0.85      )
operations
Discontinued        0.02             0.02             (0.00      )      0.03       
operations
Net loss per       $ (0.14      )     $ (0.34      )     $ (0.24      )     $ (0.82      )
share
                                                                            
Weighted
average shares
of common
stock
outstanding:
Basic and            83,699,142         25,863,976         83,696,858         25,863,976
diluted
                                                                                         

                                                                  
SPIRIT REALTY CAPITAL, INC.
Reconciliation of Non-GAAP Financial Measures
Unaudited
(In Thousands, Except Share and Per Share Data)
                                                                            
                   Quarter Ended June 30,                Six Months Ended June 30,
                    2013             2012             2013             2012       
Net loss
attributable       $ (11,669    )     $ (8,790     )     $ (20,001    )     $ (21,192    )
to common
stockholders
Add/(less):
Portfolio
depreciation
and
amortization
Continuing           29,865             26,246             56,974             52,470
operations
Discontinued         1,019              1,573              2,198              3,238
operations
Portfolio
impairments
Continuing           1,968              -                  1,968              8,135
operations
Discontinued         -                  320                2,103              2,122
operations
Realized loss
(gain) on           191              81               11               (1,369     )
sales of real
estate
Total               33,043           28,220           63,254           64,596     
adjustments
                                                                            
Funds from
operations
(FFO)              $ 21,374           $ 19,430           $ 43,253         # $ 43,404
attributable
to common
stockholders
Add/(less):
Loss on
derivative
instruments          -                  43                 -                  696
related to
Term Note
extinguishment
Expenses
incurred to
secure               -                  2,780              -                  3,807
lenders’
consents to
the IPO
CCPT II merger       11,462             -                  21,614             -
related costs
Non-cash
interest             3,799              5,379              7,047              7,805
expense
Non-cash             (539       )       (645       )       (1,060     )       (1,150     )
revenues
Non-cash
compensation        1,842            -                3,614            -          
expense
Total
adjustments to      16,564           7,557            31,215           11,158     
FFO
                                                                            
Adjusted funds
from
operations
(AFFO)             $ 37,938          $ 26,987          $ 74,468          $ 54,562     
attributable
to common
stockholders
                                                                            
Net loss per
share of
common stock
Basic and          $ (0.14      )     $ (0.34      )     $ (0.24      )     $ (0.82      )
Diluted (b)
FFO per share
of common
stock
Diluted (b)        $ 0.25             $ 0.49             $ 0.51             $ 1.01
AFFO per share
of common
stock
Diluted (b)        $ 0.45             $ 0.60             $ 0.89             $ 1.21
                                                                            
Weighted
average shares
of common
stock
outstanding:
Basic                83,699,142         25,863,976         83,696,858         25,863,976
Diluted (b)          84,197,933         50,109,254         84,136,954         50,109,254
                                                                                         

(a)  Reclassifications have been made to prior period balances to conform to
      current period presentation.
(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 June 30, 2013:

                                             Number of    Percent of Total
Industry                                       Properties     Annual Rent((1))
General and discount retail properties         181            28.9       %
Restaurants - quick service                    395            11.2
Specialty retail properties                    50             9.2
Movie theaters                                 23             7.5
Restaurants - casual dining                    129            7.5
Building material suppliers                    110            6.5
Auto dealers, parts and service properties     77             5.4
Educational properties                         22             4.6
Industrial Properties                          26             4.6
Recreational properties                        8              3.6
Medical/other office properties                12             2.6
Convenience stores/car washes                  44             2.3
Supermarkets                                   21             2.0
Distribution properties                        36             1.4
Health clubs/gyms                              6              1.1
Interstate travel plazas                       3              1.0
Drugstores                                     9              *
Total                                          1,152          100.0      %
                                                                         

___________________________
  *     Less than 1%
   (1)    We define annual rent as rental revenue for the quarter ended June
          30, 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 June 30, 2013:

                              Number of    Annual Rent (in   Percent of
                                                                    Total
Tenant                           Properties     thousands)((1))     Annual
                                                                    Rent((1))
Shopko Stores/Pamida             181            $ 83,488            28.9   %
Operating Co., LLC
84 Properties, LLC               109            18,554              6.4
Carmike Cinemas, Inc.            12             8,026               2.8
Universal Pool Co., Inc.         14             6,679               2.3
CBH20, LP (Camelback Ski         1              5,779               2.0
Resort)
United Supermarkets, LLC         15             4,883               1.7
Destination XL Group, Inc.       1              4,814               1.7
Carmax, Inc.                     5              4,726               1.6
Main Event Entertainment, LP     6              4,477               1.6
Goodrich Quality Theatres        3              3,928               1.4
Other                            805            143,184             49.6
Total                            1,152          $ 288,538           100    %
                                                                           

(1) We define annual rent as rental revenue for the quarter ended June 30,
2013 multiplied by four.

                         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 portfolio as of June 30, 2013:

                         Number of    Percent of Total
Location                   Properties     Annual Rent((1))
Wisconsin                  57             10.7      %
Texas                      84             8.6
Illinois                   91             6.4
Pennsylvania               49             4.9
Florida                    69             4.7
Minnesota                  36             4.3
Arizona                    29             4.3
Georgia                    68             3.4
Indiana                    40             3.2
Michigan                   34             3.1
Nebraska                   17             3.0
Ohio                       50             3.0
California                 9              2.5
Massachusetts              5              2.3
Tennessee                  60             2.2
Idaho                      13             2.2
North Carolina             28             2.2
Utah                       13             2.1
Iowa                       34             2.1
Alabama                    52             2.0
Kentucky                   37             1.8
South Carolina             19             1.6
Washington                 9              1.5
Missouri                   29             1.4
Montana                    7              1.4
South Dakota               9              1.4
New York                   28             1.3
Virginia                   29             1.3
West Virginia              26             1.3
Oregon                     6              1.2
Oklahoma                   11             1.2
Colorado                   8              1.0
Kansas                     6              1.0
Maryland                   18             *
Louisiana                  13             *
Arkansas                   7              *
New Jersey                 3              *
Maine                      18             *
Wyoming                    8              *
New Mexico                 4              *
Vermont                    2              *
Delaware                   2              *
Mississippi                5              *
North Dakota               2              *
New Hampshire              6              *
Rhode Island               1              *
Nevada                     1              *
Total properties owned     1,152          100       %
                                                    

_________________________
  *     Less than 1%
   (1)    We define annual rent as rental revenue for the quarter ended June
          30, 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 June 30, 2013. As of June 30, 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 do not
exercise renewal options and/or all early termination rights:

                                     Expiring Annual   Percent of Total
                           Number of      Rent (in            Expiring Annual
Leases expiring in         Properties     thousands)((1))     Rent
Remainder of 2013          9              $ 1,116             0.4       %
2014                     53             7,636               2.7
2015                     18             3,789               1.3
2016                     21             2,591               0.9
2017                     35             6,292               2.2
2018                     38             12,248              4.2
2019                     59             12,944              4.5
2020                     84             26,387              9.2
2021                     123            21,855              7.6
2022                     63             6,176               2.1
2023 and thereafter      631            187,017             64.9
Vacant                   18             -                   -
Total owned              1,152          $ 288,051           100       %
properties
                                                                        

______________________________

(1) We define annual rent as rental revenue for the quarter ended June 30,
2013 multiplied by four.

                                  EXHIBIT A
   Index of Unaudited Pro Forma Condensed Consolidated Financial Statements

Introduction                                                             F-2
Unaudited Pro Forma Condensed Consolidated Balance Sheet as of June        F-4
30, 2013
Unaudited Pro Forma Condensed Consolidated Statement of Operations for     F-5
the Six Months Ended June 30, 2013
Unaudited Pro Forma Condensed Consolidated Statement of Operations for     F-6
the Year Ended December 31, 2012
Notes and Management’s Assumptions to Pro Forma Condensed Consolidated     F-7
Financial Statements
                                                                           

                 SPIRIT REALTY CAPITAL, INC. AND SUBSIDIARIES
       UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION

On July 17, 2013, Spirit Realty Capital, Inc., a Maryland corporation
(“Spirit”), a publicly-listed REIT, and Cole Credit Property Trust II, Inc., a
Maryland corporation (“Cole II”), completed the transactions contemplated in
the definitive agreement to merge the companies (the “Merger Agreement”) which
was approved by stockholders of the respective companies at their stockholder
meetings held on June 12, 2013. Under the terms of the Merger Agreement, the
combined company (the “Combined Corporation” or “Spirit Realty Capital, Inc.”)
is managed by the former Spirit management team and retains the name of Spirit
Realty Capital, Inc. The Combined Corporation listed its shares on the New
York Stock Exchange under Spirit’s existing ticker SRC, and began trading on
July 18, 2013. Spirit stockholders received 1.9048 of newly issued shares of
the Combined Corporation for each share of Spirit common stock they owned
(which equates to an inverse exchange ratio of 0.525 shares of Spirit Realty
Capital, Inc. common stock for each share of Cole II common stock) (the
“Exchange Ratio”). Each share of Cole II common stock, issued and outstanding
remains outstanding as common stock of the Combined Corporation.

The following unaudited pro forma condensed consolidated financial statements
present the financial condition and results of operations of the Combined
Corporation, after giving effect to the Merger, and have been prepared by
applying the acquisition method of accounting rules under Accounting Standards
Codification 805, Business Combinations (“ASC 805”), with Spirit treated as
the acquiring entity. The unaudited pro forma condensed consolidated financial
statements are prepared for informational purposes only and are based on
assumptions and estimates considered appropriate by management; however, they
are not necessarily indicative of what the Combined Corporation’s financial
condition or results of operations actually would have been if the Merger had
been consummated as of the dates indicated, nor do they purport to represent
the consolidated financial position or results of operations for future
periods. Additionally, the unaudited pro forma condensed consolidated
financial statements do not include the impact of all the potential synergies
that may be achieved in the Merger or any strategies that the Combined
Corporation’s management may consider in order to continue to efficiently
manage the on-going operations of the Combined Corporation.

The unaudited pro forma condensed consolidated statements of operations for
the six months ended June 30, 2013 and for the year ended December31, 2012,
give effect to the Merger as if the Merger had been consummated on January1,
2012. The unaudited pro forma condensed consolidated balance sheet gives
effect to the Merger as if it had occurred on June 30, 2013.

On July 19, 2013, the sale of two multi-tenant properties valued at
approximately $259 million, including the assumption of approximately $139
million of debt, was completed. The net proceeds from the sale (approximately
$116 million) were used to repay borrowings under the new revolving credit
facility. Management considers this transaction to have a discrete and
significant impact to the continuing operations of the Combined Corporation.
Accordingly, the unaudited pro forma condensed consolidated statement of
operations for the six months ended June 30, 2013 and for the year ended
December 31, 2012, give effect to this sale as if it had been consummated on
January 1, 2012. The unaudited pro forma condensed consolidated balance sheet
gives effect to the sale as if it had occurred on June 30, 2013.

The unaudited pro forma condensed consolidated financial statements do not
include any adjustments associated with: (1)Spirit or Cole II acquisitions
closed after June 30, 2013 or the related financing of those acquisitions,
(2)Spirit or Cole II acquisitions currently under contract or the related
financing of those proposed acquisitions, (3)Spirit or Cole II dispositions
closed after June 30, 2013 or the repayment of the related financing of such
dispositions other than for the sale of the multi-tenant properties noted
earlier, and (4) Spirit or Cole II dispositions currently under contract or
the repayment of the related financing of those dispositions.

These unaudited pro forma condensed consolidated financial statements, and the
related notes thereto, should be read in conjunction with (1)Cole II’s
audited consolidated financial statements, and the related notes thereto, as
of and for the year ended December31, 2012, included in Cole II’s Annual
Report on Form 10-K as filed with the Securities and Exchange Commission (the
“SEC”) on March 6, 2013, and (2)Spirit’s audited consolidated financial
statements, and the related notes thereto, as of and for the year ended
December31, 2012, included in Spirit’s Annual Report on Form 10-K as filed
with the SEC on March 5, 2013.

Merger Consideration

The pro forma financial information reflects the accounting consideration of
approximately $2.0 billion for the Merger, as calculated below treating Spirit
as the accounting acquirer (in millions, except price per share):

Cole II shares of common stock outstanding at June 30, 2013         208.6
Multiplied by inverse Exchange Ratio                                  0.525
Cole II shares of common stock in the combined company (for           109.5
accounting purposes)
Multiplied by closing price of Spirit common share on July 17,        $ 18.50
2013
Accounting consideration for the Merger (“Merger Consideration”)      $2,025.9
                                                                      

As Spirit is treated as the acquiring entity, the calculation of the purchase
price for accounting purposes is based on Spirit’s shares. However, under the
terms of the Merger Agreement, Spirit’s stockholders received 1.9048 newly
issued shares of the Combined Corporation’s common stock for each Spirit share
of common stock that they held immediately before the effective date of the
Merger. This transaction has resulted in the Combined Corporation having
approximately 370.4 million shares of common stock outstanding as of the date
of the Merger.

The Merger Consideration will be allocated to all Cole II’s assets acquired
and liabilities assumed based on their respective fair values. The allocation
has not been finalized and is based upon preliminary estimates of fair values.
The allocation of the Merger Consideration and the determination of the fair
values of the Cole II’s assets and liabilities will be based on the actual
tangible and intangible assets and liabilities that exist as of July 17, 2013,
the date the Merger was consummated. The completion of the final valuations,
the allocation of the Merger consideration, and the impact of ongoing
integration activities could cause material differences in these unaudited pro
forma condensed consolidated financial statements.

                                                                                                  
SPIRIT REALTY CAPITAL, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 2013
(in thousands)
                                                   
                                                      Pro Forma                          Pro Forma           Spirit Realty
                  Spirit            CCPT II           Fair Value         CCPT II         Merger              Capital, Inc.
Assets            Historical       Historical       Adjustments A     Pro Forma       Adjustments  B     Pro Forma
Investments:
Real estate
investments:
Land and          $ 1,345,041       $ 851,774         $ 78,583    C      $ 930,357       $ (39,150  ) H      $ 2,236,248
improvements
Buildings and       2,031,174         2,200,917         196,078   C        2,396,995       (216,412 ) H        4,211,757
improvements
Real estate
assets under
direct             -               34,438          6,647    C       41,085         -                 41,085    
financing
leases
Total real
estate              3,376,215         3,087,129         281,308            3,368,437       (255,562 )          6,489,090
investments
Less:
accumulated        (510,983  )      (326,676  )      326,676  D       -              -                 (510,983  )
depreciation
                    2,865,232         2,760,453         607,984            3,368,437       (255,562 )          5,978,107
Loans
receivable,         44,027            71,499            7,020     E        78,519          -                   122,546
net
Intangible
lease assets,       178,782           275,735           47,286    F        323,021         -                   501,803
net
Real estate
assets held        42,949          -               -                -              -                 42,949    
for sale, net
Net                 3,130,990         3,107,687         662,290            3,769,977       (255,562 )          6,645,405
investments
Cash and cash       38,031            16,187            -                  16,187          44,222     G        98,440
equivalents
Deferred
costs and           54,482            88,853            (73,121 ) I        15,732          3,175      G,       73,389
other assets,                                                                                         H
net
Goodwill           -               -               278,538  J       278,538        -                 278,538   
Total assets      $ 3,223,503      $ 3,212,727      $ 867,707         $ 4,080,434     $ (208,165 )        $ 7,095,772 
                                                                                                             
Liabilities
and
Stockholders’
Equity
Liabilities:
Revolving
credit            $ 26,492          $ 319,111         $ -                $ 319,111       $ (204,764 ) G,     $ 140,839
facilities,                                                                                           H
net
Mortgages and                                                                                         G,
notes               1,905,706         1,436,721         71,906    K        1,508,627       58,226     H        3,472,559
payable, net
Intangible
lease               43,859            108,991           81,008    L        189,999         -                   233,858
liabilities,
net
Accounts
payable,
accrued            62,238          36,819          -                36,819         (14,886  ) G       84,171    
expenses and
other
liabilities
Total               2,038,295         1,901,642         152,914            2,054,556       (161,424 )          3,931,427
liabilities
                                                                                                             
Stockholders’
equity:
Common stock        849               2,086             769       M        2,855           -                   3,704
Capital in
excess of par       1,832,501         1,883,113         139,910   M        2,023,023       -                   3,855,524
value
Accumulated         (648,051  )       (573,397  )       573,397   M        -               (46,741  ) G,       (694,792  )
deficit                                                                                               H
Accumulated
other              (91       )      (717      )      717      M       -              -                 (91       )
comprehensive
loss
Total
stockholders’      1,185,208       1,311,085       714,793          2,025,878      (46,741  )         3,164,345 
equity
Total
liabilities
and               $ 3,223,503      $ 3,212,727      $ 867,707         $ 4,080,434     $ (208,165 )        $ 7,095,772 
stockholders’
equity
                                                                                                                         

                                                                                                                                            
SPIRIT REALTY CAPITAL, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2013
(in thousands, except per share data)
                                                                                                                                                             
                                                                                                                                     Pro Forma               Spirit Realty
                   Spirit             IPO Related         Spirit             CCPT II           Pro Forma           CCPT II           Merger                  Capital, Inc.
                   Historical         Adjustments AA     Pro Forma          Historical        Adjustments BB     Pro Forma         Adjustments     CC     Pro Forma
Revenues:
Rentals            $ 140,647          $  -                $ 140,647          $ 130,531         $  (1,794 ) DD      $ 128,737         $ (9,166      ) EE      $ 260,218
Tenant
reimbursement        -                   -                  -                  8,471              -                  8,471             (2,887      ) EE        5,584
income
Earned income
from direct          -                   -                  -                  947                753      FF        1,700             -                       1,700
financing
leases
Interest
income on            2,240               -                  2,240              2,937              (1,048 ) GG        1,889             -                       4,129
loans
receivable
Interest
income and          1,322             -                1,322            -                 -                -                (1          ) EE       1,321
other
Total revenues       144,209             -                  144,209            142,886            (2,089 )           140,797           (12,054     )           272,952
Expenses:
General and          16,125              (854  )  HH        15,271             4,720              -                  4,720             (57         ) EE        19,934
administrative
Merger related       11,558              -                  11,558             14,159             -                  14,159            (25,717     ) II        -
costs
Property costs       1,465               -                  1,465              20,113             (7,652 ) JJ        12,461            (3,309      ) EE        10,617
Real estate
acquisition          218                 -                  218                -                  -                  -                 -                       218
costs
Interest             75,990              -                  75,990             52,133             5,627    LL        57,760            (10,989     ) EE,       122,761
                                                                                                                                                     MM
Depreciation
and                  57,031              -                  57,031             43,961             3,485    NN        47,446            (3,394      ) EE        101,083
amortization
Impairments         1,601             -                1,601            1,152             -                1,152            -                     2,753
Total expenses      163,988           (854  )           163,134          136,238           1,460            137,698          (43,466     )          257,366
Income (loss)
from
continuing
operations
before other         (19,779    )        854                (18,925    )       6,648              (3,549 )           3,099             31,412                  15,586
income
(expense) and
income tax
expense
Other income
(expense):
Loss on debt         -                   -                  -                  -                  -                  -                 -                       -
extinguishment
Gain on sale
of real estate
assets and          -                 -                -                323               -                323              -                     323
property
condemnation
Total other
income              -                 -                -                323               -                323              -                     323
(expense)
Income (loss)
from
continuing           (19,779    )        854                (18,925    )       6,971              (3,549 )           3,422             31,412                  15,909
operations
before income
tax expense
Income tax          142               -                142              -                 -                -                -                     142
expense
Income (loss)
from               $ (19,921    )     $  854             $ (19,067    )     $ 6,971           $  (3,549 )         $ 3,422           $ 31,412               $ 15,767
continuing
operations
                                                                                                                                                             
Income (loss)
per share of
common stock
from
continuing
operations
Basic and          $ (0.24      )       N/A             $ (0.23      )     $ 0.03              N/A             $ 0.02             N/A                  $ 0.04
diluted
                                                                                                                                                             
Weighted
average common
shares
outstanding:
Basic               83,696,858        N/A     OO       83,696,858       208,587,290       N/A              208,587,290      160,054,507           368,641,797
Diluted             83,696,858        N/A     OO       83,696,858       208,588,851       N/A              208,588,851      163,154,580           371,743,431
                                                                                                                                                               
See accompanying Notes to the Unaudited Pro Forma Condensed Consolidated Financial Statements.
                                                                                                                                                               


SPIRIT REALTY CAPITAL, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2012
(in thousands, except per share data)
                                                                                                                            
                                                                                                                                             
                                                                                                                                             Spirit
                                                                                                                         Pro                 Realty
                                  IPO                 Spirit                         Pro                                 Forma               Capital,
                   Spirit         Related             Pro            CCPT II         Forma               CCPT II         Merger              Inc.
                   Historical     Adjustments AA     Forma          Historical      Adjustments BB     Pro Forma       Adjustments CC     Pro Forma
Revenues:
Rentals            $ 268,696      $ -                 $ 268,696      $ 259,567       $ (5,278)   DD      $ 254,289       $ (18,738)  EE      $ 504,247
Tenant
reimbursement      -              -                   -              15,249          -                   15,249          (4,340)     EE      10,909
income
Earned income
from direct        -              -                   -              1,888           1,512       FF      3,400           -                   3,400
financing
leases
Interest
income on          5,696          -                   5,696          6,148           (2,221)     GG      3,927           -                   9,623
loans
receivable
Interest
income and         852            -                   852            1,197           -                   1,197           (1)         EE      2,048
other
Total revenues     275,244        -                   275,244        284,049         (5,987)             278,062         (23,079)            530,227
Expenses:
General and        36,263         (11,479)    HH      24,784         7,984           -                   7,984           (6)         EE      32,762
administrative
Merger related     -              -                   -              5,847           -                   5,847           (5,847)     II      -
costs
Property costs     5,176          -                   5,176          41,361          (15,232)    JJ      26,129          (6,864)     EE      24,441
Real estate
acquisition        1,054          -                   1,054          -               -                   -               -                   1,054
costs
Interest           156,220        (24,167)    KK      132,053        107,963         7,410       LL      115,373         401         MM,     247,827
                                                                                                                                     EE
Depreciation
and                105,776        -                   105,776        89,238          5,652       NN      94,890          (7,109)     EE      193,557
amortization
Impairments        8,918          -                   8,918          6,898           -                   6,898           -                   15,816
Total expenses     313,407        (35,646)            277,761        259,291         (2,170)             257,121         (19,425)            515,457
Income (loss)
from
continuing
operations
before other       (38,163)       35,646              (2,517)        24,758          (3,817)             20,941          (3,654)             14,770
income
(expense) and
income tax
expense
Other income
(expense):
Loss on debt       (32,522)       32,522      KK      -              -               -                   -               -                   -
extinguishment
Gain on sale
of real estate
assets and         -              -                   -              639             -                   639             -                   639
property
condemnation
Total other
income             (32,522)       32,522              -              639             -                   639             -                   639
(expense)
Income (loss)
from
continuing         (70,685)       68,168              (2,517)        25,397          (3,817)             21,580          (3,654)             15,409
operations
before income
tax expense
Income tax         504            -                   504            -               -                   -               -                   504
expense
Income (loss)
from               $ (71,189)     $ 68,168            $ (3,021)      $ 25,397        $ (3,817)           $ 21,580        $ (3,654)           $ 14,905
continuing
operations
                                                                                                                                             
Income (loss)
per share of
common stock
from
continuing
operations
Basic and          $ (1.72)       N/A                 $ (0.04)       $ 0.12          N/A                 $ 0.10          N/A                 $ 0.04
diluted
                                                                                                                                             
Weighted
average common
shares
outstanding:
Basic              41,277,353     N/A         OO      83,694,549     210,075,980     N/A                 210,075,980     159,677,152         369,753,132
Diluted            41,277,353     N/A         OO      83,694,549     210,077,076     N/A                 210,077,076     161,094,726         371,171,802
                                                                                                                                             
See accompanying Notes to the Unaudited Pro Forma Condensed Consolidated Financial Statements.
                                                                                                                                             

                         SPIRIT REALTY CAPITAL, INC.
               NOTES AND MANAGEMENT’S ASSUMPTIONS TO PRO FORMA
                 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 (UNAUDITED)

General

The Spirit and Cole II historical amounts include the reclassification of
certain historical balances to conform to the post-Merger Spirit Realty
Capital, Inc.’s presentation of these unaudited pro forma condensed
consolidated financial statements, as described below:

Balance Sheet:

  *Cole II’s balances for Rents and tenant receivables, less allowance for
    doubtful accounts, Restricted cash, Prepaid and other assets, and Deferred
    financing costs, less accumulated amortization previously disclosed as
    separate components have been reclassified to Deferred costs and other
    assets, net.
  *Cole II’s balances for Line of credit previously included in Notes payable
    and line of credit has been reclassified to Line of credit as a separate
    component.
  *Cole II’s balances for Notes payable previously included in Notes payable
    and line of credit have been reclassified to Mortgage and Notes payable,
    net.
  *Cole II’s balances for Due to affiliates, Distributions payable, Deferred
    rental income, and Derivative and other liabilities previously disclosed
    as separate components have been reclassified to Accounts payable, accrued
    expenses and other liabilities.

Statement of Operations:

  *Cole II’s balances for Property operating expenses and Property and asset
    management expenses previously disclosed as separate components of Cole
    II’s total operating expenses have been combined and reclassified to
    Property costs.
  *Cole II’s balances for Depreciation and Amortization previously disclosed
    as separate components of Cole II’s total operating expense have been
    combined and reclassified to Depreciation and amortization.
  *Cole II’s balances for Equity in income of unconsolidated joint ventures
    and other income previously disclosed as a separate component of Other
    income (expense) has been reclassified into Interest income and other as a
    component of Total revenues.
  *Cole II’s balance for Impairment of investment in unconsolidated joint
    venture and Interest expense previously disclosed as a separate components
    of Other income (expense) have been reclassified into Impairments and
    Interest which are separate components of Total expenses.
  *Spirit’s and Cole II’s balances for Real estate acquisition costs and
    Merger related costs, previously included in General and administrative
    are being disclosed as separate components of Total expenses.
  *Spirit’s balances for IPO related costs previously included in General and
    administrative are being disclosed as a separate component of Total
    expenses.

Balance Sheet

General

A. The allocation of the Merger Consideration presented in the unaudited pro
forma condensed consolidated balance sheet incorporates reasonable fair value
estimates for buildings and improvements, land, in-place and above and
below-market intangible lease assets and liabilities, mortgage notes
receivable, real estate assets under direct financing leases and related
mortgage debt acquired and assumed in the Merger. These fair value estimates
are being prepared by independent valuation firms and take into consideration
various factors, including (1) market conditions, (2) the industry in which
the tenants operate, (3) the characteristics of the real estate (i.e.
location, size, demographics, value and comparative rental rates), (4) the
tenant credit profile, (5) store profitability metrics and the importance of
the real estate to the operations of the tenant’s business.

The allocation of the Merger Consideration, and the determination of the fair
values of Cole II’s assets and liabilities, will be based on the actual
valuations of tangible and intangible assets and liabilities that exist as of
July 17, 2013, the date of the consummation of the Merger, and have not yet
been finalized. The final allocation may be significantly different from the
preliminary estimates used in the unaudited pro forma condensed consolidated
financial statements.

B. In connection with the Merger, the Combined Corporation incurred legal,
accounting and finance advisory services, debt financing related costs and
other third-party expenses. The pro forma condensed consolidated balance sheet
has been adjusted accordingly. However, the pro forma condensed consolidated
financial statements exclude adjustment for certain debt refinancing costs and
expenses which may be incurred subsequent to the Merger. Such effects involve
estimates that could vary based on assumptions made as to the timing and
expected outcomes resulting from decisions made after the Merger was
consummated.

Concurrent with the Merger, financing commitments obtained at the time the
Merger agreement was executed were replaced with a three-year $400 million new
revolving credit facility and $203 million in 10 year, fixed rate CMBS
financing. Cole II’s outstanding borrowings under an existing line of credit
were repaid concurrently with the closing of the Merger.

Assets

C. Cole II’s real estate assets have been adjusted to their estimated fair
values. The estimated fair values were based on appraisals provided by an
independent valuation firm. The valuation methodologies employed by the
independent valuation firm followed customary methods, including an assessment
of comparable market statistics and the use of discounted cash flow analyses.

In estimating the fair value of the real estate assets under direct financing
leases, the independent valuation firm took into account the aggregate of the
remaining minimum lease payments and the residual values of the assets upon
expiration of the respective leases.

D. Cole II’s historical accumulated depreciation balances have been
eliminated.

E. The fair value of loans receivable was estimated by discounting the
expected future cash flows of the notes at interest rates which management
believes would be earned for similar loans.

F. Adjustments to Cole II’s Intangible lease assets were as follows (dollars
in thousands):

    Elimination of Cole II’s historical Lease in place, net   $ (232,873)
        balances
        Elimination of Cole II’s historical balances assigned to     (39,253)
        the value of leases that had above market rents
        Elimination of Cole II’s unamortized leasing commissions     (3,609)
        Recognition of the value of acquired in place leases         247,262
        Recognition of the value of leases with above market         75,759
        rents at the close of the Merger
                                                                   $ 47,286
                                                                     

G. The adjustment to Cash and cash equivalents includes unpaid costs at June
30, 2013, incurred to secure (a) financing commitments, (b) permanent term and
revolving credit facilities, and (c) lenders’ consents. The adjustment also
includes proceeds from the financing facilities closed concurrently with the
Merger (see Note B) to pay for Merger related transaction costs, as well as
the repayment in full of Cole II’s amounts due under its revolving line of
credit. Components of the adjustment are summarized below:

              Deferred                    Accounts                   
                                                payable,
                costs and                       accrued
                                                expenses
(Dollars in     other                           and other       Accumulated
thousands)      assets          Debt            liabilities     deficit         Cash
Transaction     $ ─           $ ─             $ (5,103)         $  (43,221)     $ (48,324)
costs
Financing         (959)         ─               (9,783)            (1,852)        (12,594)
costs
Costs and
deposits to
secure            (2,356)       (5,374)         ─                  (1,019)        (8,749)
lenders’
consents
(a)
Proceeds
from new                     203,000        ─                 ─             203,000
CMBS
                $ (3,315)     $ 197,626       $ (14,886)        $  (46,092)     $ 133,333
Proceeds
from new
revolving         ─             230,000         ─                  ─              230,000
credit
facility
Repayment
of Cole II
revolving        ─            (319,111)      ─                 ─             (319,111)
credit
facility
                $ (3,315)     $ 108,515       $ (14,886)        $  (46,092)     $ 44,222
                                                                                  

(a) Fees paid to Spirit lenders to obtain consents are expected to be
capitalized and amortized over the remaining term of the respective mortgage
and notes payable. Third-party expenses incurred to solicit and secure
lenders’ consents are reflected as non-recurring and are expensed as incurred.

H. On July 19, 2013, two multi-tenant properties were sold. This transaction
was valued at approximately $259 million, including the assumption of
approximately $139 million in debt. The net proceeds from the sale
(approximately $116 million) were used to repay borrowings under the new
revolving credit facility. Management considers this transaction to have a
discrete and significant impact to the continuing operations of the combined
corporation. The adjustment gives effect to the sale and related financing
transaction as if it had occurred on June 30, 2013.

I. Cole II’s historical deferred financing costs and straight-line receivables
balances of $15.7 million and $57.4 million, respectively, are eliminated.

J. Reflects an estimate of goodwill calculated as the excess between the total
Merger consideration and the estimated fair values of the assets acquired and
liabilities assumed. The Combined Corporation considers this to represent the
future economic benefits arising from other assets acquired in the Merger that
are not individually identified and separately recognized.

Liabilities

K. The fair value of the Mortgage and notes payable assumed as part of the
Merger was determined by a leading independent risk management advisory firm.
Their determination of fair value was derived by discounting the expected
future cash flows using an interest rate considered appropriate for financing
arrangements with similar terms, collateral and remaining maturities.

L. The adjustment reflects the elimination of Cole II’s historical Intangible
lease liabilities, net, and recognition of leases assumed in connection with
the Merger that were considered to have below market rents. The independent
valuation firm’s appraisal of the real estate assets, identified these leases
and an adjustment was made to value them at current market. Their
determination of the estimated fair value considered current market rental
rates and remaining lease terms.

Equity

M. The adjustment represents the elimination of Cole II’s historical balances
and the issuance of the Combined Corporation’s stock in the Merger.

Statements of Operations

General

AA. On September 25, 2012, Spirit completed an IPO. The IPO and the
transactions related to it, which are presented and discussed in Spirit’s
prospectus filed on Form S-11 with the SEC on September 19, 2012, have had and
are expected to have a discrete material impact on the company. Accordingly,
Spirit’s historical unaudited condensed consolidated statements of operations
have been adjusted to give effect to:

  *the completion of the IPO;
  *full extinguishment of the Term Loan discussed in Note HH below;
  *the amortization of non-cash stock-based compensation expense incurred as
    a result of restricted stock awards granted in connection with the IPO;
  *the payment of consent fees and other expenses associated with securing
    lenders’ consents to the IPO; and
  *the payment and amortization of financing costs related to a secured
    revolving credit facility which was put in place upon the completion of
    the IPO.

These IPO related adjustments were prepared to reflect the impact on
operations as if the IPO and the transactions related to it had occurred on
January 1, 2012.

Spirit’s historical results of operations for the year ended December 31, 2012
include costs associated with being a public company since the completion of
the IPO. Spirit expects that the full year incremental costs would be
approximately $2.1 million, which have not been reflected as an increase in
general and administrative expenses because such amounts are not contractually
obligated.

BB. The pro forma adjustments reflect the effect on Cole II’s historical
consolidated statements of operations and shares used in computing earnings
per common share as if the Merger occurred on January1, 2012.

CC. In connection with the Merger, Spirit incurred legal, accounting and
finance advisory services, debt financing related costs and other third-party
expenses. The pro forma condensed consolidated financial statements have been
adjusted accordingly. However, such financial statements exclude adjustments
for certain debt refinancing costs and expenses which may be incurred
subsequent to the Merger. Such effects involve estimates that could vary based
on assumptions made regarding the timing and expected amounts resulting from
decisions made by management after the consummation of the Merger.

Revenues

DD. The adjustment reflects the difference in pre-merger and post-merger
rental revenue generated on a straight-line basis, as well as adjustments for
amortization for pre-merger and post-merger above and below market lease
intangible assets and liabilities, as follows:

                                  Six months       Year ended
                                         ended
                                         June 30, 2013       December 31, 2012
        Pro forma adjustments to
        rental revenue
        Straight-line rent             $ 1,208               $    1,189
        Above market lease               1,883               3,847
        amortization
        Below market lease              (4,885)             (10,314       )
        amortization
        Total                          $ (1,794)             $    (5,278   )
                                                                           

EE. On July 19, 2013, two multi-tenant properties were sold (see Note H). The
adjustment eliminates the impact on net operating results that these
properties and related financing contributed in each of the respective periods
as follows:

                                      Six months ended   Year ended
                                       June 30, 2013        December 31, 2012
Rentals                               $ 9,166                    $   18,738
Tenant reimbursement income             2,887                         4,340
Interest income and other              1                           1
Total revenues                          12,054                        23,079
General and administrative              57                            6
Property costs                          3,309                         6,864
Interest                                4,456                     8,911
Depreciation and amortization          3,394                    7,109
Total expenses                         11,216                    22,890
Net reduction in income from          $ 838                       $   189
continuing operations
                                                                      

FF. The adjustment reflects the difference between (a) historical interest
income earned and (b) estimated earned income based on the fair value assigned
to the direct financing leases, including expected residual values of the
underlying properties and market discount rates.

GG. The adjustment reflects the amortization of additional premium resulting
from a difference in the face value of the notes and their estimated fair
value amortized over the weighted average remaining term for the respective
notes receivable.

Expenses

HH. Certain members of Spirit’s management were granted restricted common
stock awards of which $4.0 million vested as a direct result of the IPO (“IPO
Stock Awards”). The remainder of the IPO Stock Awards are earned over a
three-year vesting period and are reflected in general and administrative
expense in the pro forma condensed consolidated statements of operations for
Spirit. Additionally, the adjustment reflects the amortization of non-cash
stock-based compensation expense incurred as a result of restricted stock
awards (“Restricted Stock Awards”) that were been granted to Spirit’s
directors, management and other employees with an aggregate value of $14.1
million. The Restricted Stock Awards vest over a three-year period for
management and other employees and over a one-year period for directors. The
amortization of the IPO Stock Awards and the Restricted Stock Awards are
accounted for as stock-based compensation.

Separately, Spirit had $729 million in principal debt outstanding under a term
loan (“Term Loan”), which as a result of the IPO, was fully extinguished
through repayment ($399 million) and conversion ($330 million) into Spirit
common stock. In connection with the IPO, Spirit also expensed $4.7 million in
third party charges associated with obtaining lenders’ consents to the IPO.

Adjustments to general and administrative expenses reflect the effect of the
stock awards, removal of expenses associated with the extinguishment of the
Term Loan and the removal of the one-time expenses associated with securing
lenders’ consents to the IPO, are summarized below:

                                                          
                                          Six Months End     Year Ended
                                          June 30, 2013      December 31, 2012
Reductions to general and
administrative expenses
Elimination of IPO Stock Awards         $ ─                  $   (4,000    )
Amortization of stock-based
compensation of restricted common stock   (854)              5,301
awards
Amortization (non-interest portion) of
interest rate swap and other associated   ─                  (8,037        )
losses
Third party expenses incurred to secure  ─                  (4,743        )
lenders’ consents to IPO
Total                                   $ (854)              $   (11,479   )
                                                                           

II. The adjustment eliminates Merger related transaction costs.

JJ. The adjustment eliminates advisory related fees for asset management and
property management, excluding any expense reimbursements, that have
historically been paid to Cole II’s advisor. The Combined Corporation will be
a self-managed REIT and, accordingly, these charges will not be a part of its
continuing operations.

KK. Spirit had $729 million in principal debt outstanding under a term loan
(“Term Loan”), which as a result of the IPO, was partially repaid ($399
million),with the balance ($330 million) converted into Spirit common stock.
Spirit recognized a loss on debt extinguishment of $32.5 million. The
adjustment to reduce interest expense is associated with the removal of
charges associated with the Term Loan which will not be a part of the
continuing operations of the Combined Corporation as detailed below:

                                                         December 31, 2012
        Reductions to interest expense                       
        Interest expense (cash)                                 $  (19,925  )
        Amortization of net losses related to related hedge     (3,414      )
        agreements
        Amortization of related deferred financing costs        (2,389      )
        Amortization of related debt discounts                  1,561
        Total                                                   $  (24,167  )
                                                                            

LL. The adjustment eliminates amortization of deferred financing costs and
reflects the estimated interest to be paid on the mortgage and notes payable
assumed. Interest expense was determined by amortizing the difference between
the notes payable face amount and the estimated fair value over Cole II’s
weighted average remaining term for its notes payable, excluding its line of
credit.

MM. The Combined Corporation incurred costs to (a) obtain financing
commitments at the time the Merger agreement was executed, (b) establish its
new three-year revolving credit facility, (c) raise CMBS debt financing, as
well as (d) obtain Spirit’s lenders’ consents to the Merger. These costs will
be capitalized and will be an adjustment to interest expense over the
remaining term of the respective notes.

The financing commitments obtained at the time the Merger agreement was
executed were replaced with the new revolving credit facility and CMBS debt
financing. Proceeds from these new facilities were used to repay outstanding
borrowings under pre-existing revolving credit facilities concurrent with the
Merger closing.

In addition to the amortization of the capitalized financing costs discussed
earlier, the pro forma adjustment reflects the estimated interest charges to
be incurred under these new credit facilities.

The table below summarizes the components of the pro-forma adjustment to
interest expense:

                                    Adjustment to interest expense
                                      Six months ended     Year ended
(Dollars in thousands)                June 30, 2013         December 31, 2012
New $400 million revolving          $ 3,893                $ 7,786
credit facility
$203 million fixed rate CMBS          5,860                  11,738
financing
Lender consent fees                   1,160                 2,387        
                                      10,913                 21,911
Less: Bridge financing
commitment costs (one -time           (10,087     )          -
Merger)

Less: Remove costs associated
with pre-merger revolving
credit facilities which were          (7,359      )          (12,599      )
terminated concurrent with the
Merger and replaced with the
new credit facilities
                                      (6,533      )          9,312

Less: Interest expense on
financing related to                  (4,456      )          (8,911       )
multi-tenant properties that
were sold - see Note EE
                                    $ (10,989     )        $ 401          
                                                                          

NN. The adjustment (a) eliminates previously recognized depreciation and
amortization and reflects the estimated depreciation and amortization for real
estate and intangible lease assets and liabilities, net; and (b) recognizes
depreciation and amortization for these same items over the estimated useful
lives as determined by the independent valuation firm. Remaining useful lives
as determined by the independent valuation firm for buildings was 33 years and
11 years for land improvements. Amortization of in-place leases is over the
weighted average remaining lease term of approximately 17 years which takes
into account the exercise of below market renewal options

OO. Spirit’s weighted average number of shares of common stock outstanding
(basic and diluted) excludes unvested restricted stock awards, and pro forma
amounts assume the IPO and the portion of the Term Loan which was converted
into common stock occurred on January 1, 2012. No potentially dilutive
securities were included as their effect would be anti-dilutive.

Contact:

Spirit Realty Capital, Inc.
Michael A. Bender, 480-315-6634
SVP, Chief Financial Officer
InvestorRelations@spiritrealty.com
 
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