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Section 1: 8-K (8-K Q4 2018 EARNINGS)

Document


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d)
of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): March 21, 2019

SPIRIT MTA REIT
(Exact name of registrant as specified in its charter)

 
 
 
 
 
Maryland
 
001-38414
 
82-6712510
(State or other Jurisdiction of Incorporation)
 
(Commission File Number)
 
(IRS Employer Identification No.)
2727 North Harwood Street, Suite 300
Dallas, Texas 75201
(Address of principal executive offices)
(972) 476-1900
(Registrant’s telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
 
o
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
o
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
o
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
o
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934
Emerging growth company x        
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o    





ITEM 2.02
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
On March 21, 2019, Spirit MTA REIT (the "Company"), issued a press release reporting its results of operations for the fourth fiscal quarter and year ended December 31, 2018, a copy of which is attached hereto as Exhibit 99.1.
The information set forth in Item 2.02 and in the attached Exhibit 99.1 is being "furnished" and shall not be deemed “filed” for any purpose, including for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not incorporated by reference into any of the Company’s filings, whether made before or after the date hereof, regardless of any general incorporation language in any such filing.
ITEM 9.01
FINANCIAL STATEMENTS AND EXHIBITS
(d) Exhibits.
 
 
99.1









SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
 
 
SPIRIT MTA REIT
 
 
By:
 
/s/ Ricardo Rodriguez
 
 
Ricardo Rodriguez
Chief Executive Officer, President, Chief Financial Officer and Treasurer
 
 
 
Date: March 21, 2019




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Section 2: EX-99.1 (EXHIBIT 99.1 PRESS RELEASE)

Exhibit


397202747_smtatwocolorrgblogohoriza3q1.jpg
Press Release
Spirit MTA REIT Announces
Fourth Quarter 2018 Financial and Operating Results
- Liquidity of $202.1 million as of December 31, 2018 -
- Eight disposed properties with gross proceeds of $15.2 million -
Dallas, TX - March 21, 2019 - Spirit MTA REIT (NYSE: SMTA) ("SMTA" or the "Company"), a net-lease real estate investment trust ("REIT") headquartered in Dallas, Texas, today reported its financial and operating results for the fourth quarter ended December 31, 2018.
Unless otherwise specified, financial and operating information prior to May 31, 2018 reflects the financial and operating information of SMTA's legal predecessor entities.
FOURTH QUARTER HIGHLIGHTS
Liquidity of $202.1 million as of December 31, 2018, is comprised of cash, cash equivalents and available borrowing capacity under our variable funding notes.
Closed on $165.0 million in non-recourse financing loans on November 1, 2018 with net proceeds of $141.9 million, secured by 87 Shopko assets (85 owned properties and two seller-financed notes on properties) in our Other Properties portfolio.
Closed on $50.0 million of variable funding notes within Master Trust 2014 on November 1, 2018. No funds were drawn on the variable funding notes as of December 31, 2018.
Disposed of eight properties for $15.2 million in gross proceeds. Included in these sales were two properties leased to Shopko sold for gross proceeds of $8.1 million.
CEO COMMENTS
"As a result of its bankruptcy filing, Shopko stopped making rental payments to us and therefore we defaulted on the $165 million CMBS financing related to those properties. Shortly thereafter, our lender foreclosed on the Shopko properties and has taken ownership of them. Given the impact on our ongoing cash available for distribution, we have accelerated efforts in exploring strategic alternatives for the Company. Nevertheless, we declared a first quarter 2019 special dividend of $0.33 per share and now have returned a total of $1.99 of cash per share to our shareholders since our inception. We will continue to keep shareholders updated on further developments related to our ongoing assessment of strategic alternatives,” stated SMTA Chief Executive Officer, President, Chief Financial Officer and Treasurer Ricardo Rodriguez.
FULL YEAR 2018 HIGHLIGHTS
On May 31, 2018, the Spin-Off from Spirit Realty Capital, Inc. ("Spirit") was completed with the distribution of one share of SMTA common stock for every ten shares of Spirit common stock held by each of Spirit's shareholders as of May 18, 2018, with 42,851,010 total shares of SMTA common stock issued in conjunction with the Spin-Off.
Invested $112.6 million in the acquisition of nine properties, with a weighted average lease term of 15.5 years, a weighted-average initial cash yield of 6.52% and an economic yield of 7.44%.
Disposed of 47 properties for $91.0 million in gross proceeds. Included in these sales were ten properties leased to Shopko sold for gross proceeds of $46.7 million.

1



FINANCIAL RESULTS
Total revenues for the Master Trust 2014 and Other Properties segments were $46.4 million and $16.5 million, respectively, for the three months ended December 31, 2018, compared to $43.4 million and $14.2 million for the same period last year. Total revenues for the Master Trust 2014 and Other Properties segments were $182.5 million and $63.8 million, respectively, for the year ended December 31, 2018, compared to $169.6 million and $62.2 million, respectively, for the same period last year.
Net loss attributable to common shareholders was $214.0 million, or $5.00 per share, for the three months ended December 31, 2018, compared to net income of $1.5 million, or $0.03 per share, for the same period last year. Net loss attributable to common shareholders was $229.5 million, or $5.36 per share, for the year ended December 31, 2018, compared to net income of $18.3 million, or $0.43 per share, for the same period last year. The impact of the Shopko bankruptcy filing resulted in our recording of impairment charges related to tangible and intangible assets of $168.5 million and an allowance for loan loss of $33.8 million relating to our Shopko B-1 Term Loan for the quarter and year ended December 31, 2018. The impact of these items is included in net loss attributable to common shareholders.
FFO per diluted share was $(0.72) and $0.54 for the three months ended December 31, 2018 and 2017, respectively. FFO per diluted share was $0.58 and $2.56 for the years ended December 31, 2018 and 2017, respectively.
AFFO for the three months ended December 31, 2018 was $14.5 million, compared to $29.0 million for the same period last year. AFFO per diluted share was $0.33 and $0.68 for the three months ended December 31, 2018 and 2017, respectively. AFFO for the year ended December 31, 2018 was $89.8 million, compared to $126.8 million for the same period last year. AFFO per diluted share was $2.09 and $2.96 for the years ended December 31, 2018 and 2017, respectively.
On December 5, 2018, the Board of Trustees declared a total cash dividend of $1.33 per common share, comprised of $0.33 for the quarter ended December 31, 2018 and a special cash dividend of $1.00, that was paid on January 15, 2019 to holders of record as of December 31, 2018. The Board of Trustees also declared a cash dividend of $0.625 per share of SMTA Preferred Stock that was paid on December 31, 2018 to holders of record as of December 17, 2018.
The amount and timing of dividends for 2019 and beyond will be at the discretion of the Board of Trustees. The Board of Trustees' decisions regarding the payment of dividends will depend on many factors, including, but not limited to, maintaining the Company's REIT tax status, timing and magnitude of disposition activities, execution of strategic alternatives and working capital needs.
PORTFOLIO HIGHLIGHTS
As of December 31, 2018, SMTA's diversified real estate portfolio, comprised of 876 owned properties, with 778 and 98 in the Master Trust 2014 and Other Properties segments, respectively, was 97.1% occupied with a weighted average remaining lease term of 9.7 years.
During the year ended December 31, 2018, SMTA invested $115.2 million for the acquisition of nine properties and revenue producing capital expenditures on 18 properties, all related to the Master Trust 2014 portfolio. The newly acquired properties have a weighted average lease term of 15.5 years, a weighted-average initial cash yield of approximately 6.52% and an economic yield of 7.44%.
During the year ended December 31, 2018, SMTA disposed of 47 properties for $91.0 million in gross proceeds, including the sale of 35 income producing properties for $74.8 million. These disposals comprised:
35 properties within Master Trust 2014 for gross proceeds of $38.9 million,
ten properties leased to Shopko for gross proceeds of $46.7 million, and
two other properties for gross proceeds of $5.4 million.

2



BALANCE SHEET, LIQUIDITY & CAPITAL MARKETS
As of December 31, 2018, net investments for the Master Trust 2014 and Other Properties segments were $1.7 billion and $0.34 billion, respectively.
As of December 31, 2018, total cash was $161.0 million and restricted cash for the Master Trust 2014 and Other Properties segments was $25.7 million and $18.4 million, respectively.
As of December 31, 2018, debt for the Master Trust 2014 and Other Properties segments was $1.91 billion and $0.23 billion, respectively.
Adjusted Debt to Annualized Adjusted EBITDAre was 12.6x as of December 31, 2018, based on the three months ended December 31, 2018 (during 2018, the definition of Adjusted EBITDAre was revised to reflect adjustments made for income producing acquisitions and dispositions made during the quarter, and Annualized Adjusted EBITDAre was revised to reflect adjustments for items where annualization is not appropriate).
SUBSEQUENT EVENTS
On January 16, 2019, Shopko, the Company's largest tenant, filed for relief under Chapter 11 of the Bankruptcy Code.
On January 16, 2019, SMTA announced that its Board of Trustees had elected to accelerate its strategic plan by initiating a process to explore strategic alternatives focused on maximizing shareholder value. Strategic alternatives to be considered may include, but are not limited to, a sale of the Company or Master Trust 2014, a merger, the sale of other assets, and the maximizing of recoveries in connection with the Shopko bankruptcy filing.
On March 1, 2019, the lender for the Shopko CMBS financing, with remaining outstanding principal of $157.4 million, foreclosed on and took ownership of the legal entities that own the remaining 85 Shopko assets (83 owned properties and two seller-financed notes on properties) collateralizing the loan.
On March 5, 2019, the Board of Trustees declared a special cash dividend of $0.33 per common share for the first quarter ended March 31, 2019. The dividend will be paid on April 15, 2019 to holders of record as of March 29, 2019.
As of March 19, 2019, SMTA had approximately $155.8 million in liquidity, comprised of $110.0 million in cash and cash equivalents and $45.8 million in available borrowing capacity under our variable funding notes.
As of March 19, 2019, SMTA had additional liquidity available for acquisitions of approximately $16.5 million in its Master Trust 2014 Release Account.
As of March 19, 2019, our outstanding common share count is 43,085,751.
EARNINGS WEBCAST
The Company has provided pre-recorded comments from management. Interested parties can listen to the presentation via the following:
Internet:
The webcast link can be located on the investor relations page of the Company's website at www.spiritmastertrust.com
Telephone:
(844) 512-2921 (Domestic) / (412) 317-6671 (International)
Access code 1133124

3



ABOUT SPIRIT MTA REIT
Spirit MTA REIT (NYSE: SMTA) is a net-lease REIT headquartered in Dallas, Texas. SMTA owns one of the largest, most diversified and seasoned commercial real estate backed master funding vehicles. SMTA is managed by Spirit Realty, L.P., a wholly-owned subsidiary of Spirit (NYSE: SRC), one of the largest publicly traded triple net-lease REITs. 
As of December 31, 2018, our diversified portfolio was comprised of 876 properties, including properties securing mortgage loans made by the Company. Our properties, with an aggregate gross leasable area of approximately 19.8 million square feet, are leased to approximately 203 tenants across 45 states and 23 industries. More information about Spirit MTA REIT can be found on the investor relations page of the Company's website at www.spiritmastertrust.com.
INVESTOR CONTACT
Investor Relations
(972) 476-1409
[email protected]
FORWARD-LOOKING AND CAUTIONARY STATEMENTS
This press release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. These forward-looking statements can be identified by the use of words such as "expect," "plan," "will," "estimate," "project," "intend," "believe," "guidance," “approximately,” “anticipate,” “may,” “should,” “seek” or the negative of these words and phrases or similar words or phrases that are predictions of or indicate future events or trends and that do not relate to historical matters. You can also identify forward-looking statements by discussions of strategy, plans or intentions of management. These forward-looking statements are subject to known and unknown risks and uncertainties that you should not rely on as predictions of future events. Forward-looking statements depend on assumptions, data and/or methods which may be incorrect or imprecise and we may not be able to realize them. The following risks and uncertainties, among others, could cause actual results to differ materially from those currently anticipated due to a number of factors, which include, but are not limited to: industry and economic conditions; SMTA’s ability to succeed in its strategic plan; SMTA's ability to realize its asset disposition plan; SMTA’s significant leverage which may expose it to the risk of default under its debt obligations; risks associated with using debt to fund SMTA’s business activities (including its ability to use Master Trust 2014, an asset-backed securitization trust, as its main financing vehicle, changes in interest rates and conditions of the debt capital markets, generally); SMTA’s dependence on its external manager, Spirit Realty, L.P., to conduct its business and achieve its investment objectives; SMTA’s continued ability to source new investments; unknown liabilities acquired in connection with acquired properties or interests in real-estate related entities; general risks affecting the real estate industry and local real estate markets (including, without limitation, the market value of SMTA’s properties, the inability to enter into or renew leases at favorable rates, portfolio occupancy varying from SMTA’s expectations, dependence on tenants’ financial condition and operating performance, competition from other developers, owners and operators of real estate tenant defaults, potential liability relating to environmental matters, potential illiquidity of real estate investments, condemnations, and potential damage from natural disasters); the financial performance of SMTA’s tenants and the demand for traditional retail and restaurant space particularly with respect to challenges being experienced by general merchandise retailers; SMTA’s ability to pay down, refinance, restructure and/or extend its indebtedness as it becomes due; SMTA’s or its manager’s ability to identify, underwrite, finance, consummate, integrate and manage diversifying acquisitions or investments; SMTA’s ability to diversify its tenant base; the impact of any financial, accounting, legal or regulatory issues or litigation that may affect SMTA or its major tenants; volatility and uncertainty in the financial markets, including potential fluctuations in the consumer price index; risks associated with its failure or unwillingness to maintain SMTA’s status as a REIT under the Internal Revenue Code of 1986, as amended, and other additional risks discussed in its most recent filings with the SEC, including its registration statement on Form 10, as amended and subsequent Quarterly Reports on Form 10-Q and our annual report on Form 10-K. SMTA expressly disclaims any responsibility to update or revise forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

4



NOTICE REGARDING NON-GAAP FINANCIAL MEASURES
In addition to U.S. GAAP financial measures, this press release may refer to certain non-GAAP financial measures. These non-GAAP financial measures are in addition to, not a substitute for or superior to, measures of financial performance prepared in accordance with GAAP. These non-GAAP financial measures should not be considered replacements for, and should be read together with, the most comparable GAAP financial measures. Definitions of non-GAAP financial measures, reconciliations to the most directly comparable GAAP financial measures and statements of why management believes these measures are useful to investors are included below.
REPORTING DEFINITIONS AND EXPLANATIONS
Adjusted Funds from Operations (AFFO) AFFO is a non-GAAP financial measure of operating performance used by many companies in the REIT industry. We adjust FFO to eliminate the impact of certain items that we believe are not indicative of our core operating performance, including restructuring and divestiture costs, other general and administrative costs associated with relocation of the Company's headquarters, transactions costs associated with our Spin-Off, default interest and fees on non-recourse mortgage indebtedness, debt extinguishment gains (losses), transaction costs incurred in connection with the acquisition of real estate investments subject to existing leases, amortization of the promote fee and certain non-cash items. These certain non-cash items include non-cash revenues (comprised of straight-line rents, amortization of above- and below-market rent on our leases, amortization of lease incentives, amortization of net premium/discount on loans receivable, bad debt expense and amortization of capitalized lease transaction costs), non-cash interest expense (comprised of amortization of deferred financing costs and amortization of net debt discount/premium) and non-cash compensation expense (stock-based compensation expense). In addition, other equity REITs may not calculate AFFO as we do, and, accordingly, our AFFO may not be comparable to such other equity REITs’ AFFO. AFFO does not represent cash generated from operating activities determined in accordance with GAAP, is not necessarily indicative of cash available to fund cash needs and should only be considered a supplement, and not an alternative, to net income (loss) attributable to common shareholders (computed in accordance with GAAP) as a performance measure.
Adjusted EBITDAre represents EBITDAre adjusted for transaction costs, real estate acquisition costs, dispositions for the quarter as if such acquisitions and dispositions had occurred as of the beginning of the quarter, revenue producing acquisitions, impairments and loan losses related to the Shopko loan, debt extinguishment gains (losses), and amortization (recovery) of the promote fee. We focus our business plans to enable us to sustain increasing shareholder value. Accordingly, we believe that excluding these items, which are not key drivers of our investment decisions and may cause short-term fluctuations in net income (loss), provides a useful supplemental measure to investors and analysts in assessing the net earnings contribution of our real estate portfolio. Because these measures do not represent net income (loss) that is computed in accordance with GAAP, they should only be considered a supplement, and not an alternative, to net income (loss) attributable to common shareholders (computed in accordance with GAAP) as a performance measure. A reconciliation of net income (loss) attributable to common shareholders (computed in accordance with GAAP) to EBITDAre and Adjusted EBITDAre is included in this release.
Annualized Adjusted EBITDAre is calculated as Adjusted EBITDAre for the quarter, adjusted for items where annualization would not be appropriate, multiplied by four. Our computation of Adjusted EBITDAre and Annualized Adjusted EBITDAre may differ from the methodology used by other equity REITs to calculate these measures and, therefore, may not be comparable to such other REITs. A reconciliation of Annualized Adjusted EBITDAre is included in this release.
Adjusted Debt represents interest bearing debt (reported in accordance with GAAP) adjusted to exclude unamortized debt discount/premium, deferred financing costs, and reduced by cash and cash equivalents and cash reserves on deposit with lenders as additional security. By excluding these amounts, the result provides an estimate of the contractual amount of borrowed capital to be repaid, net of cash available to repay it. We believe this calculation constitutes a beneficial supplemental non-GAAP financial disclosure to investors in understanding our financial condition. A reconciliation of interest bearing debt (reported in accordance with GAAP) to Adjusted Debt is included in this release.
Adjusted Debt to Annualized Adjusted EBITDAre is a supplemental non-GAAP financial measure we use to evaluate the level of borrowed capital being used to increase the potential return of our real estate investments and a proxy for a measure we believe is used by many lenders and ratings agencies to evaluate our ability to repay and service our debt obligations over time. We believe this ratio is a beneficial disclosure to investors as a supplemental means of evaluating our ability to meet obligations senior to those of our equity holders. Our computation of this ratio may differ from the methodology used by other equity REITs and, therefore, may not be comparable to such other REITs.
Cash Available for Distribution (CAD) is defined as AFFO less capital expenditures and any other scheduled principal payments or receipts.

5



Contractual Rent represents monthly contractual cash rent, excluding percentage rents, from properties owned fee-simple or ground leased, recognized during the final month of the reporting period, adjusted to exclude amounts received from properties sold during that period and adjusted to include a full month of contractual rent for properties acquired during that period. We use Contractual Rent when calculating certain metrics that are useful to evaluate portfolio credit, asset type, industry and geographic diversity and to manage risk.
EBITDAre is a non-GAAP financial measure and is computed in accordance with standards established by the National Association of Real Estate Investment Trusts (NAREIT). EBITDAre is defined as net income (loss) (computed in accordance with GAAP), plus interest expense, plus income tax expense (if any), plus depreciation and amortization, plus (minus) losses and gains on the disposition of depreciated property, plus impairment write-downs of depreciated property and investments in unconsolidated real estate ventures, plus adjustments to reflect the Company's share of EBITDAre of unconsolidated real estate ventures.
Economic Yield is calculated by dividing the contractual cash rent, including fixed rent escalations and/or cash increases determined by CPI (increases calculated using a month to month historical CPI index) by the initial lease term, expressed as a percentage of the Gross Investment.
Funds from Operations (FFO) We calculate FFO in accordance with the standards established by the National Association of Real Estate Investment Trusts (NAREIT). FFO represents net income (loss) attributable to common shareholders (computed in accordance with GAAP) excluding real estate-related depreciation and amortization, impairment charges and net (gains) losses from property dispositions. FFO is a supplemental non-GAAP financial measure. We use FFO as a supplemental performance measure because we believe that FFO is beneficial to investors as a starting point in measuring our operational performance. Specifically, in excluding real estate-related depreciation and amortization, gains and losses from property dispositions and impairment charges, which do not relate to or are not indicative of operating performance, FFO provides a performance measure that, when compared year over year, captures trends in occupancy rates, rental rates and operating costs. We also believe that, as a widely recognized measure of the performance of equity REITs, FFO will be used by investors as a basis to compare our operating performance with that of other equity REITs. However, because FFO excludes depreciation and amortization and does not capture the changes in the value of our properties that result from use or market conditions, all of which have real economic effects and could materially impact our results from operations, the utility of FFO as a measure of our performance is limited. In addition, other equity REITs may not calculate FFO as we do, and, accordingly, our FFO may not be comparable to such other equity REITs’ FFO. Accordingly, FFO should be considered only as a supplement to net income (loss) attributable to common shareholders (computed in accordance with GAAP) as a measure of our performance.
Gross Investment represents the gross acquisition cost including the contracted purchase price and related capitalized transaction costs.
Initial Cash Yield from properties is calculated by dividing the first twelve months of contractual cash rent (excluding any future rent escalations provided subsequently in the lease and percentage rent) by the Gross Investment in the related properties. Initial Cash Yield is a measure (expressed as a percentage) of the contractual cash rent expected to be earned on an acquired property in the first year. Because it excludes any future rent increases or additional rent that may be contractually provided for in the lease, as well as any other income or fees that may be earned from lease modifications or asset dispositions, Initial Cash Yield does not represent the annualized investment rate of return of our acquired properties. Additionally, actual contractual cash rent earned from the properties acquired may differ from the Initial Cash Yield based on other factors, including difficulties collecting anticipated rental revenues and unanticipated expenses at these properties that we cannot pass on to tenants.
Liquidity Reserve represents cash held on deposit until there is a cashflow shortfall as defined in the Master Trust 2014 agreements or a liquidation of Master Trust 2014 occurs.
Master Trust 2014 is an asset-backed securitization trust established in 2005, and amended and restated in 2014, which issues non-recourse notes collateralized by commercial real estate, net-leases and mortgage loans from time to time. Indirect special purpose entity subsidiaries of the Company are the borrowers. This liability is discussed in greater detail in our financial statements and the notes thereto included in our periodic reports filed with the SEC.
Occupancy is calculated by dividing the number of economically yielding Owned Properties in the portfolio as of the measurement date by the number of total Owned Properties on said date.
Other Properties are all properties not included in the Master Trust 2014.
Owned Properties refers to properties owned fee-simple or ground leased by Company subsidiaries as lessee.
Real Estate Investment represents the Gross Investment plus improvements less impairment charges.
SMTA Preferred Stock refers to the 10% Series A Cumulative Redeemable Preferred Stock.
Weighted Average Remaining Lease Term is calculated by dividing the sum product of (a) a stated revenue or sales price component and (b) the lease term for each lease by (c) the sum of the total revenue or sales price components for all leases within the sample.
Workout Assets include tenants or properties that are targeted for potential future dispositions or other lease restructurings.

6



Spirit MTA REIT
Consolidated Balance Sheets
(In Thousands, Except Share and Per Share Data)
 
 
December 31, 2018
 
December 31, 2017
Assets
 
 
 
Investments:
 
 
 
Real estate investments:
 
 
 
Land and improvements
$
870,549

 
$
973,231

Buildings and improvements
1,526,933

 
1,658,023

Total real estate investments
2,397,482

 
2,631,254

Less: accumulated depreciation
(459,615
)
 
(557,948
)
 
1,937,867

 
2,073,306

Loans receivable, net
30,093

 
32,307

Intangible lease assets, net
79,314

 
102,262

Real estate assets held for sale, net
7,263

 
28,460

Net investments
2,054,537

 
2,236,335

Cash and cash equivalents
161,013

 
6

Deferred costs and other assets, net
83,087

 
107,770

Goodwill
7,012

 
13,549

Total assets
$
2,305,649

 
$
2,357,660

Liabilities and (deficit) equity
 
 
 
Liabilities:
 
 
 
Mortgages and notes payable, net
$
2,138,804

 
$
1,926,835

Intangible lease liabilities, net
17,676

 
23,847

Accounts payable, accrued expenses and other liabilities
83,629

 
16,060

Total liabilities
2,240,109

 
1,966,742

Redeemable preferred equity:
 
 
 
SMTA Preferred Shares, $0.01 par value, $25 per share liquidation preference, 20,000,000 shares authorized: 6,000,000 and 0 shares issued and outstanding at December 31, 2018 and 2017, respectively
150,000

 

SubREIT Preferred Shares, $0.01 par value, $1,000 per share liquidation preference, 50,000,000 shares authorized: 5,125 and 0 shares issued and outstanding at December 31, 2018 and 2017, respectively
5,125

 

Total redeemable preferred equity
155,125

 

Shareholders' and parent company (deficit) equity:
 
 
 
Net parent investment

 
390,918

Common shares, $0.01 par value, 750,000,000 shares authorized; 43,000,862 and 10,000 shares issued and outstanding at December 31, 2018 and December 31, 2017, respectively
430

 

Capital in excess of common share par value
201,056

 

Accumulated deficit
(291,071
)
 

Total shareholders' and parent company (deficit) equity
(89,585
)
 
390,918

Total liabilities and (deficit) equity
$
2,305,649

 
$
2,357,660


7



Spirit MTA REIT
Consolidated Statements of Operations and Comprehensive Income (Loss)
(In Thousands, Except Share and Per Share Data)
 
 
Three Months Ended
December 31,
 
Year Ended December 31,
 
2018
 
2017
 
2018
 
2017
Revenues:
 
 
 
 
 
 
 
Rental income
$
60,871

 
$
57,100

 
$
240,410

 
$
226,586

Interest income on loans receivable
1,116

 
146

 
3,080

 
768

Other income
883

 
304

 
2,817

 
4,448

Total revenues
62,870

 
57,550

 
246,307

 
231,802

Expenses:
 
 
 
 
 
 
 
General and administrative
2,408

 
4,042

 
13,425

 
20,491

Related party fees
6,083

 
1,350

 
19,533

 
5,500

Transaction costs
56

 
2,254

 
8,676

 
4,354

Property costs (including reimbursable)
7,185

 
4,142

 
12,758

 
12,496

Interest
31,570

 
20,409

 
114,997

 
76,733

Depreciation and amortization
21,607

 
19,610

 
84,678

 
80,386

Impairment and allowance for loan losses
205,934

 
6,200

 
221,349

 
33,548

Total expenses
274,843

 
58,007

 
475,416

 
233,508

Other income:
 
 
 
 
 
 
 
Loss on debt extinguishment
(3
)
 
(2,224
)
 
(366
)
 
(2,223
)
Gain on disposition of assets
1,994

 
4,197

 
9,458

 
22,393

Total other income
1,991

 
1,973

 
9,092

 
20,170

(Loss) income before income tax expense
(209,982
)
 
1,516

 
(220,017
)
 
18,464

Income tax expense
(82
)
 
(44
)
 
(221
)
 
(179
)
Net (loss) income and total comprehensive (loss) income
(210,064
)
 
1,472

 
(220,238
)
 
18,285

Preferred dividends
(3,975
)
 

 
(9,275
)
 

Net (loss) income attributable to common shareholders
$
(214,039
)
 
$
1,472

 
$
(229,513
)
 
$
18,285

 
 
 
 
 
 
 
 
Net (loss) income per share attributable to common shareholders
 
 
 
 
 
 
 
Basic
$
(5.00
)
 
$
0.03

 
$
(5.36
)
 
$
0.43

Diluted
$
(5.00
)
 
$
0.03

 
$
(5.36
)
 
$
0.43

 
 
 
 
 
 
 
 
Weighted average common shares outstanding:
 
 
 
 
 
 
 
Basic
42,851,010

 
42,851,010

 
42,851,010

 
42,851,010

Diluted
42,851,010

 
42,851,010

 
42,851,010

 
42,851,010




8



Spirit MTA REIT
Reconciliation of Non-GAAP Financial Measures
(In Thousands, Except Share and Per Share Data)
(Unaudited)
FFO and AFFO
 
 
Three Months Ended December 31,
 
Year Ended December 31,
 
 
2018
 
2017 (1)
 
2018 (2)
 
2017 (1)
Net (loss) income attributable to common shareholders
 
$
(214,039
)
 
$
1,472

 
$
(229,513
)
 
$
18,285

Add/(less):
 
 
 
 
 
 
 
 
Portfolio depreciation and amortization
 
21,607

 
19,610

 
84,678

 
80,386

Portfolio impairments
 
163,926

 
6,200

 
179,341

 
33,548

Gain on disposition of real estate assets
 
(1,994
)
 
(4,197
)
 
(9,458
)
 
(22,393
)
FFO
 
$
(30,500
)
 
$
23,085

 
$
25,048

 
$
109,826

Add/(less):
 
 
 
 
 
 
 
 
Loss on debt extinguishment
 
3

 
2,224

 
366

 
2,223

Transaction costs
 
56

 
2,254

 
8,676

 
4,354

Real Estate acquisition costs
 
138

 

 
411

 

Non-cash interest expense
 
3,751

 
1,878

 
11,623

 
6,069

Straight-line rent, net of related bad debt expense
 
(722
)
 
(1,512
)
 
(3,000
)
 
(2,406
)
Other amortization and non-cash charges
 
136

 
59

 
507

 
568

Non-cash compensation expense
 
451

 
1,030

 
3,326

 
6,131

(Recovery) amortization of the promote fee
 
(786
)
 

 
833

 

Other impairment and allowance for loan losses
 
42,008

 

 
42,008

 

AFFO
 
$
14,535

 
$
29,018

 
$
89,798

 
$
126,765

 
 
 
 
 
 
 
 
 
Dividends declared to common shareholders
 
$
57,191

 
N/A

 
$
71,381

 
N/A

 
 
 
 
 
 
 
 
 
Net (loss) income per share of common stock
 
 
 
 
 
 
 
 
Diluted (3)
 
$
(5.00
)
 
$
0.03

 
$
(5.36
)
 
$
0.43

FFO per share of common stock
 
 
 
 
 
 
 
 
Diluted (3)
 
$
(0.72
)
 
$
0.54

 
$
0.58

 
$
2.56

AFFO per share of common stock
 
 
 
 
 
 
 
 
Diluted (3)
 
$
0.33

 
$
0.68

 
$
2.09

 
$
2.96

 
 
 
 
 
 
 
 
 
Weighted average shares of common stock outstanding:
 
 
 
 
 
 
 
 
Basic
 
42,851,010

 
42,851,010

 
42,851,010

 
42,851,010

Diluted
 
42,851,010

 
42,851,010

 
42,851,010

 
42,851,010

(1) Amounts for the year ended December 31, 2017 are based entirely on results of SMTA's legal predecessor entities.
(2) Amounts for the year ended December 31, 2018 include five months of income and expense items based on SMTA's legal predecessor entities and seven months of actual results from SMTA operations as a stand-alone company.
(3) For the three months and year ended December 31, 2018, there were dividends declared to unvested restricted shareholders of $199 thousand and $249 thousand, respectively.

9



Spirit MTA REIT
Reconciliation of Non-GAAP Financial Measures
(In Thousands, Except Share and Per Share Data)
(Unaudited)
Adjusted Debt, Adjusted EBITDAre, Annualized Adjusted EBITDAre
 
 
December 31,
 
 
2018
 
2017
Master Trust 2014, net
 
$
1,905,321

 
$
1,926,835

CMBS, net
 
233,483

 

Total debt, net
 
2,138,804

 
1,926,835

Add/(less):
 
 
 
 
Unamortized debt discount
 
21,155

 
36,342

Unamortized deferred financing costs
 
21,885

 
17,989

Cash and cash equivalents
 
(161,013
)
 
(6
)
Cash reserves on deposit with lenders as additional security classified as other assets
 
(44,087
)
 
(66,504
)
Adjusted Debt
 
$
1,976,744

 
$
1,914,656

Preferred Stock at liquidation value
 
155,125

 

Adjusted Debt + Preferred Stock
 
$
2,131,869

 
$
1,914,656

 
 
 
 
 
 
 
Three Months Ended December 31,
 
 
2018
 
2017 (1)
Net (loss) income
 
$
(210,064
)
 
$
1,472

Add/(less):
 
 
 
 
Interest
 
31,570

 
20,409

Depreciation and amortization
 
21,607

 
19,610

Income tax expense
 
82

 
44

Gain on disposition of real estate assets
 
(1,994
)
 
(4,197
)
Portfolio impairments
 
163,926

 
6,200

EBITDAre
 
$
5,127

 
$
43,538

Add/(less):
 
 
 
 
Adjustments to revenue producing acquisitions and dispositions (2)
 
(294
)
 

Transaction costs
 
56

 
2,254

Real estate acquisition costs
 
138

 

Loss on debt extinguishment
 
3

 
2,224

(Recovery) amortization of the promote fee
 
(786
)
 

Other impairment and allowance for loan losses
 
42,008

 

Adjusted EBITDAre
 
$
46,252

 
$
48,016

Other adjustments for Annualized Adjusted EBITDAre
 

 

Impact of Shopko bankruptcy (3)
 
(6,991
)
 
 
Annualized Adjusted EBITDAre
 
$
157,044

 
$
192,064

Adjusted Debt / Annualized Adjusted EBITDAre (3)
 
12.6x

 
10.0x

Adjusted Debt + Preferred / Adjusted EBITDAre (3)
 
13.6x

 
N/A

(1) 
Amounts for 2017 are based on the SMTA's allocated portion of Spirit’s expense.
(2) 
Revenue producing acquisitions and dispositions were adjusted as if such acquisitions and dispositions had occurred at the beginning of the quarter.
(3)
Adjustments to exclude contractual rent and interest income received from Shopko, as SMTA does not expect to receive any additional cash flow going forward from Shopko, and property operating costs on assets leased to Shopko, as SMTA does not expect to pay due to the bankruptcy of Shopko and subsequent foreclosure on the loans secured by such properties. Excluding the outstanding principal of the Shopko CMBS financing of $157.4 million, the Adjusted Debt/Annualized Adjusted EBITDAre ratio would be 11.6x and the Adjusted Debt + Preferred/Annualized Adjusted EBITDAre ratio would be 12.6x for the 2018 period presented.

10



Spirit MTA REIT
Components of Non-GAAP Financial Measures
(In Millions, Unaudited)
Components of NAV
Master Trust 2014
December 31, 2018
Master Trust 2014 Contractual Rent
$
179.2

Less: Contractual Rent of Shopko properties in Master Trust 2014
(1.5
)
Master Trust 2014 Contractual Rent excluding Shopko
$
177.7

 
 
Real Estate Investment of vacant properties in Master Trust 2014
$
18.0

Mortgage loans in Master Trust 2014
$
27.9

Master Trust 2014 restricted cash (1)
$
21.7

Master Trust 2014 debt outstanding
$
(1,941.4
)
 
 
Academy Distribution Center
December 31, 2018
Academy Contractual Rent
$
9.3

Academy CMBS debt outstanding
$
(83.0
)
 
 
Workout Assets
December 31, 2018
Workout Assets Contractual Rent (2)
$
6.4

Real Estate Investment of vacant Workout Assets
$
15.0

 
 
Other Assets
December 31, 2018
Unrestricted cash (3)
$
105.8

Shopko B-1 Term Loan (4)
$
34.4

 
 
Other Liabilities
December 31, 2018
Termination fee (5)
$
48.1

Redeemable preferred equity
$
155.1

(1)
Restricted cash as of December 31, 2018 includes $5.6 million in the Liquidity Reserve.
(2)
Property cost leakage for occupied Workout Assets for fourth quarter of 2018 annualized was $3.4 million.
(3)
Unrestricted cash balance as of March 14, 2019.
(4)
As of December 31, 2018, the Company had an allowance for loan loss related to the Shopko B-1 Term Loan of $33.8 million.
(5)
Termination fee is 1.75x the sum of the annualized asset management fee under the Asset Management Agreement of $20.0 million and the annualized property management fee under the Property Management Agreement of approximately $7.5 million. Does not take into account transition services fees, which require eight months of service fees upon a termination notice.
Illustrative Impact of Shopko Exposure
 
Three Months Ended December 31, 2018 Annualized
 
Shopko (1)
 
Three Months Ended December 31, 2018 Annualized excluding Shopko
AFFO
$
58.1

 
$
(17.0
)
 
$
41.1

Collections of principal on loans receivable
5.3

 
(2.4
)
 
2.9

Repayments under mortgages and notes payable (2)
(41.2
)
 
4.0

 
(37.2
)
Capital expenditures
(0.9
)
 

 
(0.9
)
CAD
$
21.3

 
$
(15.4
)
 
$
5.9

(1)
Shopko adjustments include Contractual Rent from Shopko, interest and principal payments on the Shopko B-1 Term Loan, interest and principal payments on the two seller-financed notes on Shopko properties, and real estate taxes on properties leased to Shopko.
(2)
There was no use of the variable funding notes during the three months ended December 31, 2018.

11



Spirit MTA REIT
Portfolio Overview
(Square Feet In Thousands)
 
Properties
Annualized Contractual Rent
Occupied Square Feet
Vacant Properties
Vacant Square Feet
 
 
 
 
 
 
 
Master Trust 2014
778


$179.2
M
 
11,794

19

152

Other Properties
98


$56.4
M
 
7,647

6

204

SMTA
876


$235.6
M
 
19,441

25

356


Top Ten Tenants at December 31, 2018:
Master Trust 2014
 
Other Properties
Tenant (1) 
 
Properties
 
Total Square
Feet
  
 
Percent of MTA
Contractual Rent
 
Tenant (1) 
 
Properties
 
Total Square
Feet
  
 
Percent of Other Properties
Contractual Rent
AMC Entertainment, Inc.
 
14

 
696

 
6.1
%
 
Shopko (2)
 
83

 
5,803

 
72.1
%
Universal Pool Co., Inc.
 
14

 
543

 
4.0
%
 
Academy, LTD.
 
1

 
1,501

 
16.6
%
Crème De La Crème, Inc.
 
9

 
190

 
3.1
%
 
PricewaterhouseCoopers LLP
 
1

 
135

 
3.8
%
Goodrich Quality Theaters, Inc.
 
4

 
245

 
3.0
%
 
Children's Learning Adventure USA, LLC
 
3

 
71

 
3.7
%
Life Time Fitness, Inc.
 
3

 
420

 
2.9
%
 
Crown Distributing LLC
 
1

 
94

 
2.1
%
Destination XL Group, Inc.
 
1

 
756

 
2.9
%
 
Neighbors Health System, Inc.
 
2

 
15

 
1.1
%
Buehler Food Markets Inc.
 
5

 
503

 
2.9
%
 
Pleasanton Fitness, LLC
 
1

 
28

 
0.6
%
Carmax, Inc.
 
4

 
201

 
2.7
%
 

 
 
 


 


Professional Resource Development, Inc.
 
59

 
234

 
2.4
%
 

 
 
 


 


Regal Entertainment Group
 
6

 
267

 
2.0
%
 

 
 
 


 


 
 
119

 
4,055

 
32.0
%
 
 
 
92

 
7,647

 
100.0
%
(1) 
Tenants represent legal entities ultimately responsible for obligations under the lease agreements or affiliated entities. Other tenants may operate the same or similar business concepts or brands as those set forth above.
(2)
SMTA had 88 owned properties leased to Shopko as of December 31, 2018, 83 were encumbered by Shopko CMBS debt and were within the Other Properties segment and the remaining five were collateral within Master Trust 2014.



12





Industry Diversification at December 31, 2018:
Master Trust 2014
 
Other Properties
Industry
 
Properties
 
Total Square
Feet
  
 
Percent of MTA
Contractual Rent
 
Industry
 
Properties
 
Total Square
Feet
  
 
Percent of Other Properties
Contractual Rent
Restaurants - Quick Service
 
305

 
792

 
14.3
%
 
General Merchandise (1)
 
83

 
5,804

 
72.1
%
Movie Theaters
 
29

 
1,519

 
13.4
%
 
Sporting Goods
 
1

 
1,501

 
16.6
%
Restaurants - Casual Dining
 
89

 
640

 
11.4
%
 
Multi-Tenant
 
1

 
135

 
3.8
%
Health and Fitness
 
18

 
1,021

 
7.7
%
 
Education
 
3

 
71

 
3.7
%
Medical / Other Office
 
77

 
503

 
6.9
%
 
Distribution
 
1

 
94

 
2.1
%
Specialty Retail
 
22

 
857

 
5.9
%
 
Medical / Other Office
 
2

 
14

 
1.1
%
Home Furnishings
 
17

 
907

 
5.0
%
 
Health and Fitness
 
1

 
28

 
0.6
%
Automotive Parts and Service
 
79

 
362

 
4.9
%
 
Vacant
 
6

 
204

 
%
Grocery
 
19

 
1,020

 
4.8
%
 

 


 


 


Education
 
15

 
358

 
4.7
%
 

 


 


 


Automotive Dealers
 
12

 
323

 
4.5
%
 

 


 


 


Apparel
 
3

 
1,019

 
3.4
%
 

 


 


 


Other
 
3

 
183

 
2.7
%
 

 


 


 


Entertainment
 
4

 
200

 
2.2
%
 

 


 


 


Sporting Goods
 
3

 
331

 
1.9
%
 

 


 


 


Manufacturing
 
7

 
763

 
1.3
%
 

 


 


 


Car Washes
 
6

 
49

 
1.3
%
 

 


 


 


Building Materials
 
28

 
458

 
1.2
%
 

 


 


 


General Merchandise
 
8

 
317

 
1.1
%
 

 


 


 


Drug Stores / Pharmacies
 
8

 
83

 
0.9
%
 

 


 


 


Multi-Tenant
 
2

 
34

 
0.3
%
 

 


 


 


Dollar Stores
 
5

 
55

 
0.2
%
 

 


 


 


Vacant
 
19

 
152

 
%
 

 


 


 


 
 
778

 
11,946

 
100.0
%
 
 
 
98

 
7,851

 
100.0
%
(1) SMTA had 88 owned properties leased to Shopko as of December 31, 2018, 83 were encumbered by Shopko CMBS debt and were within the Other Properties segment and the remaining five were collateral within Master Trust 2014.

13



Asset Type Diversification at December 31, 2018:
Master Trust 2014
 
Other Properties
Asset Type
 
Properties
 
Total Square
Feet
  
 
Percent of MTA
Contractual Rent
 

 
Properties
 
Total Square
Feet
  
 
Percent of Other Properties
Contractual Rent
Retail
 
660

 
9,245

 
84.7
%
 
Retail
 
95

 
6,093

 
77.6
%
Industrial
 
38

 
2,022

 
6.2
%
 
Industrial
 
2

 
1,594

 
18.6
%
Office
 
80

 
679

 
9.1
%
 
Office
 
1

 
164

 
3.8
%

 
778

 
11,946

 
100.0
%
 

 
98

 
7,851

 
100.0
%


14
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