Spirit MTA REIT Announces First Quarter 2019 Financial and Operating Results

– Continued execution of strategic alternatives –

– Declared special cash dividend of $0.33 per common share payable July
15, 2019 –

DALLAS–(BUSINESS WIRE)–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 first quarter ended
March 31, 2019.

Unless otherwise specified, financial and operating information prior to
May 31, 2018 reflects the financial and operating information of SMTA’s
legal predecessor entities.

FIRST QUARTER HIGHLIGHTS

  • Continued to advance the process with the Board and the Company’s
    financial advisor to execute strategic alternatives.
  • On March 5, 2019, the Board of Trustees declared a special cash
    dividend of $0.33 per common share, which was paid on April 15, 2019
    to holders of record as of March 29, 2019.
  • Held $108.9 million in cash and cash equivalents as of March 31, 2019.
  • Had $28.9 million of restricted cash, comprised of the Master Trust
    2014 Reserve Account, Master Trust Liquidity Reserve and other
    lender-controlled cash.
  • Eliminated $157.4 million of CMBS debt by foreclosure of the remaining
    85 Shopko assets (83 owned properties and two seller-financed notes on
    properties) collateralizing the loan.
  • Disposed of three properties for $5.4 million in gross proceeds, two
    of which were in the Master Trust 2014 segment and one was in the
    Other Properties segment.

CEO COMMENTS

In keeping with our announcement at the beginning of the quarter, we
have been working closely with our Board and our advisors as we run our
process to explore strategic alternatives for our Company. Our focus
remains on maximizing shareholder value and returning that value to
shareholders. In the meantime, we maintain approximately $145 million in
liquidity as of May 8, 2019 and we are committed to keeping shareholders
updated as and when we have developments we are able to share,” stated
SMTA Chief Executive Officer, President, Chief Financial Officer and
Treasurer Ricardo Rodriguez.

FINANCIAL RESULTS

Total revenues for the Master Trust 2014 and Other Properties segments
were $45.5 million and $10.0 million, respectively, for the three months
ended March 31, 2019, compared to $45.2 million and $14.9 million for
the same period in 2018.

Net loss attributable to common shareholders was $42.2 million, or $0.99
per share, for the three months ended March 31, 2019, compared to net
loss of $7.6 million, or $0.18 per share, for the same period in 2018.
The foreclosure of the Shopko assets securing the CMBS debt resulted in
a loss on debt extinguishment of $21.3 million, which is included in net
loss attributable to common shareholders.

FFO for the three months ended March 31, 2019 was $(17.3) million, or
$(0.41) per diluted share, compared to $19.9 million, or $0.47 per
diluted share for the same period in 2018.

AFFO for the three months ended March 31, 2019 was $8.4 million, or
$0.19 per diluted share, compared to $26.9 million, or $0.63 per diluted
share, for the same period in 2018.

On March 5, 2019, the Board of Trustees declared a special cash dividend
of $0.33 per common share that was paid on April 15, 2019 to holders of
record as of March 29, 2019. The Board of Trustees also declared a cash
dividend of $0.63 per SMTA Preferred Share and a cash dividend of $45.00
per SubREIT Preferred Share, both of which were paid on March 29, 2019
to holders of record as of March 15, 2019. The amount and timing of any
future dividends will be at the discretion of the Board of Trustees and
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 March 31, 2019, SMTA’s diversified real estate portfolio,
comprised of 790 owned properties, with 776 and 14 in the Master Trust
2014 and Other Properties segments, respectively, was 97.1% occupied
with a weighted average remaining lease term of 8.7 years.

During the three months ended March 31, 2019, SMTA disposed of three
properties for $5.4 million in gross proceeds. Two of the properties
were within Master Trust 2014 and the other property was within the
Other Properties segment.

BALANCE SHEET, LIQUIDITY & CAPITAL MARKETS

  • As of March 31, 2019, net investments for the Master Trust 2014 and
    Other Properties segments were $1.70 billion and $0.16 billion,
    respectively.
  • As of March 31, 2019, total cash was $108.9 million and restricted
    cash for the Master Trust 2014 and Other Properties segments was $27.8
    million and $1.1 million, respectively.
  • As of March 31, 2019, debt for the Master Trust 2014 and Other
    Properties segments was $1.90 billion and $81.7 million, respectively.
  • Adjusted Debt to Annualized Adjusted EBITDAre was 13.2x as of
    March 31, 2019, based on the three months ended March 31, 2019.
  • On May 1, 2019, the Board of Trustees declared a special cash dividend
    of $0.33 per common share, which will be paid on July 15, 2019 to
    holders of record as of June 28, 2019.
  • As of May 8, 2019, total cash was $96.7 million and borrowing capacity
    under the Master Trust 2014 variable funding notes was $48.4 million,
    providing total liquidity of $145.1 million.
  • As of May 8, 2019, the Company held $40.2 million in restricted cash,
    comprised of the Master Trust 2014 Reserve Account, Master Trust
    Liquidity Reserve and other lender-controlled cash.

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)
Available through May 23, 2019 with access code 1134003

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 March 31, 2019, our diversified portfolio was comprised of 796
properties, including properties securing mortgage loans made by the
Company. Our owned properties, with an aggregate gross leasable area of
approximately 13.9 million square feet, are leased to approximately 203
tenants across 43 states and 24 industries. More information about
Spirit MTA REIT can be found on the investor relations page of the
Company’s website at www.spiritmastertrust.com.

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 Annual
Report on Form 10-K for the fiscal year ended December 31, 2018. 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.

NOTICE REGARDING NON-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 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.
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.
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, 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.
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.
Annualized Cash Rent represents Annualized Contractual Rent,
less any rent reserved for.
Annualized Contractual Rent represents the monthly
Contractual Rent multiplied by twelve.
Cash Available for Distribution (CAD) is defined as AFFO less
non-revenue producing capital expenditures and any other scheduled
principal payments or receipts.
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.
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.
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.
       

Spirit MTA REIT

Consolidated Balance Sheets

(In Thousands, Except Share and Per Share Data)

(Unaudited)

 
March 31, 2019 December 31, 2018
Assets
Investments:
Real estate investments:
Land and improvements $ 774,527 $ 870,549
Buildings and improvements 1,432,458   1,526,933  
Total real estate investments 2,206,985 2,397,482
Less: accumulated depreciation (463,528 ) (459,615 )
1,743,457 1,937,867
Loans receivable, net 27,148 30,093
Intangible lease assets, net 75,722 79,314
Real estate assets held for sale, net 15,603   7,263  
Net investments 1,861,930 2,054,537
Cash and cash equivalents 108,883 161,013
Deferred costs and other assets, net 66,710 83,087
Goodwill 7,012   7,012  
Total assets $ 2,044,535   $ 2,305,649  
Liabilities and deficit
Liabilities:
Mortgages and notes payable, net $ 1,980,939 $ 2,138,804
Intangible lease liabilities, net 16,428 17,676
Accounts payable, accrued expenses and other liabilities 37,367   83,629  
Total liabilities 2,034,734 2,240,109
Redeemable preferred equity:

SMTA Preferred Shares, $0.01 par value, $25 per share liquidation
preference,
20,000,000 shares authorized: 6,000,000 shares issued
and
outstanding at both March 31, 2019 and December 31, 2018

150,000 150,000

SubREIT Preferred Shares, $0.01 par value, $1,000 per share
liquidation
preference, 50,000,000 shares authorized: 5,125 shares
issued
and outstanding at both March 31, 2019 and December 31,
2018

5,125   5,125  
Total redeemable preferred equity 155,125 155,125
Shareholders’ deficit:

Common shares, $0.01 par value, 750,000,000 shares authorized;
43,085,751
and 43,000,862 shares issued and outstanding at March
31,
2019 and December 31, 2018, respectively

431 430
Capital in excess of common share par value 201,824 201,056
Accumulated deficit (347,579 ) (291,071 )
Total shareholders’ deficit (145,324 ) (89,585 )
Total liabilities and deficit $ 2,044,535   $ 2,305,649  
 
   

Spirit MTA REIT

Consolidated Statements of Operations and Comprehensive Income
(Loss)

(In Thousands, Except Share and Per Share Data)

(Unaudited)

 
Three Months Ended March 31,
2019     2018
Revenues:
Rental income $ 53,052 $ 59,608
Interest income on loans receivable 1,236 81
Other income 1,193   379  
Total revenues 55,481 60,068
 
Expenses:
General and administrative 6,052 5,651
Related party fees 6,950 1,730
Transaction costs 606 3,017
Property costs (including reimbursable) 1,573 1,413
Interest 32,335 28,012
Depreciation and amortization 19,375 20,993
Impairment and allowance for loan losses 6,037   4,825  
Total expenses 72,928 65,641
Other loss:
Loss on debt extinguishment (21,267 ) (255 )
Gain (loss) on disposition of real estate assets 478   (1,694 )
Total other loss (20,789 ) (1,949 )
Loss before income tax expense (38,236 ) (7,522 )
Income tax expense (34 ) (57 )
Net loss and total comprehensive loss (38,270 ) (7,579 )
Preferred dividends (3,975 )  
Net loss attributable to common shareholders $ (42,245 ) $ (7,579 )
 
Net loss per share attributable to common shareholders
Basic $ (0.99 ) $ (0.18 )
Diluted $ (0.99 ) $ (0.18 )
 
Weighted average common shares outstanding:
Basic 42,860,427 42,851,010
Diluted 42,860,427 42,851,010
 

Contacts

INVESTORS
Investor Relations
(972) 476-1409
SMTAInvestorRelations@SpiritRealty.com

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Author: dmnnewswire