Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Special Note Regarding Forward-looking Statements
This quarterly report contains forward-looking statements within the meaning of Section 27A of the Securities Act, Section 21E of the Exchange Act, the Private Securities Litigation Reform Act of 1995 and other federal securities laws. When used in this quarterly report, the words “estimate,” “anticipate,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “seek,” “approximately” or “plan,” or the negative of these words or similar words or phrases that are predictions of or indicate future events or trends and which do not relate solely to historical matters are intended to identify forward-looking statements. You can also identify forward-looking statements by discussions of strategy, plans or intentions of management.
Forward-looking statements involve numerous risks and uncertainties and you should not rely on them as predictions of future events. Forward-looking statements depend on assumptions, data or methods which may be incorrect or imprecise and we may not be able to realize them. We do not guarantee that the transactions and events described will happen as described (or that they will happen at all).
The following risks and uncertainties, among others, could cause actual results and future events to differ materially from those set forth or contemplated in the forward-looking statements:
•industry and economic conditions;
•volatility and uncertainty in the financial markets, including potential fluctuations in the CPI;
•our success in implementing our business strategy and our ability to identify, underwrite, finance, consummate, integrate and manage diversifying acquisitions or investments;
•the financial performance of our retail tenants and the demand for retail space;
•our ability to diversify our tenant base;
•the nature and extent of future competition;
•increases in our costs of borrowing as a result of changes in interest rates and other factors;
•our ability to access debt and equity capital markets;
•our ability to pay down, refinance, restructure and/or extend our indebtedness as it becomes due;
•our ability and willingness to renew our leases upon expiration and to reposition our properties on the same or better terms upon expiration in the event such properties are not renewed by tenants or we exercise our rights to replace existing tenants upon default;
•the impact of any financial, accounting, legal or regulatory issues or litigation that may affect us or our major tenants;
•our ability to manage our expanded operations;
•our ability and willingness to maintain our qualification as a REIT;
•the impact on our business and those of our tenants from epidemics, pandemics or other outbreaks of illness, disease or virus; and
•other risks inherent in the real estate business, including tenant defaults, potential liability relating to environmental matters, illiquidity of real estate investments and potential damages from natural disasters.
The factors included in this quarterly report, including the documents incorporated by reference, and documents we subsequently file with the SEC and incorporate by reference, are not exhaustive and additional factors could adversely affect our business and financial performance. Additional factors that may cause risks and uncertainties include those discussed in the sections entitled "Business", "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2022 and this report and subsequent filings with the SEC. All forward-looking statements are based on information that was available, and speak only, to the date on which they were made. We disclaim any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, new information, data or methods, future events or other changes, except as required by law.
25
Overview
Spirit Realty Capital, Inc. is an internally-managed net-lease REIT with in-house functions including acquisitions, credit research, asset management, portfolio management, real estate research, legal, finance and accounting. We invest primarily in single-tenant, operationally essential real estate assets throughout the United States, which are subsequently leased on a long-term, triple-net basis to high quality tenants with operations in retail, industrial and certain other industries. As a REIT, we are required to, among other things, annually distribute at least 90% of our taxable income (excluding net capital gains) to our stockholders. We aim to achieve this objective through consistent quarterly dividends supported by the cash flows generated by our leasing operations, which we look to continue to grow over time.
As of March 31, 2023, we owned a highly diversified portfolio of 2,083 properties operated by 347 tenants and with in-place Annualized Base Rent of $689.1 million. See "Property Portfolio Information" for further information on our portfolio diversification.
Our operations are carried out through the Operating Partnership. OP Holdings, one of our wholly-owned subsidiaries, is the sole general partner and owns approximately 1% of the Operating Partnership. We and one of our wholly-owned subsidiaries are the only limited partners, and together own the remaining 99% of the Operating Partnership. As of March 31, 2023, our assets, liabilities, and results of operations are materially the same as those of the Operating Partnership.
We have elected to be taxed as a REIT for federal income tax purposes and believe we have been organized and have operated in a manner that allows us to qualify as a REIT for federal income tax purposes.
Shares of our common stock are traded on the NYSE under the symbol “SRC.”
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with GAAP requires management to use judgment in the application of accounting policies, including making estimates and assumptions. We base estimates on the best information available to us at the time, our experience and various other assumptions deemed reasonable under the circumstances. From time to time, we re-evaluate our estimates and assumptions. In the event estimates or assumptions prove to be different from actual results, adjustments are made in subsequent periods to reflect more current estimates and assumptions about matters that are inherently uncertain. A summary of our critical accounting policies is included in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2022. We have not made any material changes to these policies during the periods covered by this quarterly report.
Supplemental Guarantor Disclosures
Subsidiary issuers of obligations guaranteed by the parent are not required to provide separate financial statements, provided that the parent guarantee is “full and unconditional,” the subsidiary obligor is consolidated into the parent company’s consolidated financial statements and, subject to certain exceptions as set forth below, the alternative disclosure required by Rule 13-01 is provided, which includes narrative disclosure and summarized financial information.
The Company and the Operating Partnership have filed a registration statement on Form S-3 with the SEC registering, among other securities, debt securities of the Operating Partnership, which will be fully and unconditionally guaranteed by the Company. As of March 31, 2023, the Senior Unsecured Notes were outstanding. The obligations of the Operating Partnership to pay principal, premiums, if any, and interest on the Senior Unsecured Notes are guaranteed on a senior, full and unconditional basis by the Company. The Operating Partnership is consolidated into the Company’s financial statements. Accordingly, separate consolidated financial statements of the Operating Partnership are not presented.
In accordance with SEC rules, the Company has excluded summarized financial information for the Company and the Operating Partnership because the assets, liabilities and results of operations of the Company and the Operating Partnership (other than unencumbered assets held in subsidiaries of the Operating Partnership and the related results of operations thereof) are not materially different than the corresponding amounts in the Company’s consolidated financial statements, and management believes such summarized financial information would be repetitive and would not provide incremental value to investors.
26
Liquidity and Capital Resources
ATM PROGRAM
In November 2021, the Board of Directors approved a new $500.0 million 2021 ATM Program, and we terminated the 2020 ATM Program. Sales of shares of our common stock under the 2021 ATM Program may be made in sales deemed to be “at the market offerings” as defined in Rule 415 under the Securities Act. The 2021 ATM Program contemplates that, in addition to the issuance and sale by us of shares of our common stock to or through agents, we may enter into separate forward sale agreements with an agent or one of their respective affiliates (in such capacity, each, a “forward purchaser”). When we enter into a forward sale agreement, we expect that the forward purchaser will attempt to borrow from third parties and sell, through a forward seller, shares of our common stock to hedge the forward purchaser's exposure under the forward sale agreement. We will not initially receive any proceeds from any sale of shares of our common stock borrowed by a forward purchaser and sold through a forward seller.
We generally expect to fully physically settle any forward sale agreement with the respective forward purchaser on one or more dates specified by us on or prior to the maturity date of such forward sale agreement, in which case we expect to receive aggregate net cash proceeds at settlement equal to the number of shares specified in such forward sale agreement multiplied by the relevant forward price per share. The forward sale price that we receive upon physical settlement of the agreements is subject to adjustment for (i) a floating interest rate factor equal to a specified daily rate less a spread, (ii) the forward purchasers’ stock borrowing costs and (iii) scheduled dividends during the term of the forward sale agreements. However, subject to certain exceptions, we may also elect, in our sole discretion, to cash settle or net share settle all or any portion of our obligations under any forward sale agreement, in which case we may not receive any proceeds (in the case of cash settlement) or will not receive any proceeds (in the case of net share settlement), and we may owe cash (in the case of cash settlement) or shares of our common stock (in the case of net share settlement) to the relevant forward purchaser.
As of March 31, 2023, 6.7 million shares of our common stock have been sold under the 2021 ATM Program, of which 4.7 million of these shares were sold through forward sale agreements. None of these shares were sold during the three months ended March 31, 2023. There were no open forward contracts and approximately $208.7 million of capacity remained available under the 2021 ATM Program as of March 31, 2023.
SHORT-TERM LIQUIDITY AND CAPITAL RESOURCES
On a short-term basis, our principal demands for funds will be for operating expenses, acquisitions, distributions to stockholders and payment of interest and principal on current and any future debt financings. We expect to fund these demands primarily through cash provided by operating activities, borrowings under the 2019 Credit Facility and 2023 Term Loans and, if market conditions warrant, issuances of equity securities, including shares of our common stock under our 2021 ATM program. As of March 31, 2023, available liquidity was comprised of $4.9 million in cash and cash equivalents, $13.0 million in 1031 Exchange proceeds, $1.1 billion of borrowing capacity under the 2019 Credit Facility and $500.0 million of availability under the delayed-draw 2023 Term Loans.
LONG-TERM LIQUIDITY AND CAPITAL RESOURCES
We plan to meet our long-term capital needs, including long-term financing of property acquisitions, by issuing registered debt or equity securities, by obtaining asset level financing and by issuing fixed-rate secured or unsecured notes and bonds. In the future, some of our property acquisitions could be made by issuing partnership interests of our Operating Partnership in exchange for property owned by third parties. These partnership interests would be exchangeable for cash or, at our election, shares of our common stock. We continually evaluate financing alternatives and believe that we can obtain financing on reasonable terms. However, we cannot be sure that we will have access to the capital markets at times and on terms that are acceptable to us, particularly as uncertainty related to rising interest rates, rising inflation rates, economic outlook, geopolitical events (including the military conflict between Russia and Ukraine) and other factors have contributed and may continue to contribute to significant volatility and negative pressure in financial markets. We expect that our primary uses of capital will be for property and other asset acquisitions, the payment of tenant improvements, operating expenses, debt service payments and distributions to our stockholders.
27
DESCRIPTION OF CERTAIN DEBT
The following descriptions of debt should be read in conjunction with Note 4 to the consolidated financial statements herein.
2019 Credit Facility
On March 30, 2022, we amended and restated the 2019 Revolving Credit and Term Loan Agreement. As of March 31, 2023, the aggregate gross commitment under the 2019 Credit Facility was $1.2 billion, which may be increased up to $1.7 billion by exercising an accordion feature, subject to satisfying certain requirements. The 2019 Credit Facility has a maturity of March 31, 2026 and includes two six-month extensions that can be exercised at our option.
We may voluntarily prepay the 2019 Credit Facility, in whole or in part, at any time without premium or penalty. Payment of the 2019 Credit Facility is unconditionally guaranteed by the Company and material subsidiaries that meet certain conditions. As of March 31, 2023, there were no subsidiaries that met this requirement.
As of March 31, 2023, the 2019 Credit Facility bore interest at a 1-month adjusted SOFR rate plus 0.775% and incurred a facility fee of 0.150% per annum, in each case, based on the Operating Partnership’s credit rating and leverage ratio (as defined in the agreement). As of March 31, 2023, there were $98.0 million in borrowings outstanding and no letters of credit outstanding.
Term Loans
On August 22, 2022, we entered into the 2022 Term Loan Agreement which provides for borrowings in an aggregate amount of $800.0 million comprised of a $300.0 million tranche with a maturity date of August 22, 2025 and a $500.0 million tranche with a maturity date of August 20, 2027. Borrowings may be increased up to $1.0 billion by exercising an accordion feature, subject to satisfying certain requirements. The full borrowing capacity of $800.0 million under the term loans was fully drawn as of March 31, 2023.
Borrowings may be repaid without premium or penalty. As of March 31, 2023, the 2022 Term Loans bore interest at a 1-month adjusted SOFR rate plus 0.850% per annum, based on the Operating Partnership’s credit rating. In conjunction with entering into the 2022 Term Loans, we entered into interest rate swaps to swap 1-month SOFR for a weighted average fixed rate of 2.55%.
On November 17, 2022, we entered into the 2023 Term Loan Agreement, which provides for $500.0 million of unsecured term loans with a maturity date of June 16, 2025 and allows funds to be drawn up to July 2, 2023. Borrowings may be increased up to $600.0 million by exercising an accordion feature, subject to satisfying certain requirements. The 2023 Term Loans will bear interest at a 1-month adjusted SOFR rate plus an applicable margin of 0.950% per annum, based on the Operating Partnership’s credit rating. Borrowings may be repaid without premium or penalty. As we expect to draw the 2023 Term Loans, we entered into interest rate swaps to swap 1-month SOFR for a weighted average fixed rate of 3.70% with a maturity date of June 15, 2025. One swap is for a notional amount of $300.0 million with an effective date of June 15, 2023 and one swap is for a notional amount of $200.0 million with an effective date of December 15, 2023. As of March 31, 2023, the full $500.0 million of borrowing capacity was available under the 2023 Term Loan Agreement.
Senior Unsecured Notes
As of March 31, 2023, we had the following Senior Unsecured Notes outstanding (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
Maturity Date |
|
Interest Payment Dates |
|
Stated Interest Rate |
|
March 31,
2023 |
|
2026 Senior Notes |
|
September 15, 2026 |
|
March 15 and September 15 |
|
4.45% |
|
$ |
300,000 |
|
2027 Senior Notes |
|
January 15, 2027 |
|
January 15 and July 15 |
|
3.20% |
|
|
300,000 |
|
2028 Senior Notes |
|
March 15, 2028 |
|
March 15 and September 15 |
|
2.10% |
|
|
450,000 |
|
2029 Senior Notes |
|
July 15, 2029 |
|
January 15 and July 15 |
|
4.00% |
|
|
400,000 |
|
2030 Senior Notes |
|
January 15, 2030 |
|
January 15 and July 15 |
|
3.40% |
|
|
500,000 |
|
2031 Senior Notes |
|
February 15, 2031 |
|
February 15 and August 15 |
|
3.20% |
|
|
450,000 |
|
2032 Senior Notes |
|
February 15, 2032 |
|
February 15 and August 15 |
|
2.70% |
|
|
350,000 |
|
Total Senior Unsecured Notes |
|
|
|
3.25% |
|
$ |
2,750,000 |
|
28
The Senior Unsecured Notes are redeemable in whole at any time or in part from time to time, at the Operating Partnership’s option, at a redemption price equal to the sum of: an amount equal to 100% of the principal amount of the respective Senior Unsecured Notes to be redeemed plus accrued and unpaid interest and liquidated damages, if any, up to, but not including, the redemption date; and a make-whole premium calculated in accordance with the respective indenture. Notwithstanding the foregoing, if any of the Senior Unsecured Notes are redeemed three months or less (or two months or less in the case of the 2027 Senior Notes and 2028 Senior Notes) prior to their respective maturity dates, the redemption price will not include a make-whole premium.
Mortgages payable
The obligors of our property level debt are special purpose entities that hold the real estate and other collateral securing the indebtedness. Each special purpose entity is a bankruptcy remote separate legal entity and is the sole owner of its assets and solely responsible for its liabilities other than typical non-recurring covenants. As of March 31, 2023, we had two fixed-rate CMBS loans with $4.7 million of aggregate outstanding principal. One of the CMBS loans, with principal outstanding of $4.2 million, matures in August 2031 and has a stated interest rate of 5.80%. The other CMBS loan, with principal outstanding of $0.5 million, matures in December 2025 and has a stated interest rate of 6.00%. Both CMBS loans are partially amortizing and require a balloon payment at maturity.
DEBT MATURITIES
Future principal payments due on our various types of debt outstanding as of March 31, 2023 are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
Remainder of 2023 |
|
|
2024 |
|
|
2025 |
|
|
2026 |
|
|
2027 |
|
|
Thereafter |
|
2019 Credit Facility |
|
$ |
98,000 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
98,000 |
|
|
$ |
— |
|
|
$ |
— |
|
Term loans |
|
|
800,000 |
|
|
|
— |
|
|
|
— |
|
|
|
300,000 |
|
|
|
— |
|
|
|
500,000 |
|
|
|
— |
|
Senior Unsecured Notes |
|
|
2,750,000 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
300,000 |
|
|
|
300,000 |
|
|
|
2,150,000 |
|
Mortgages payable |
|
|
4,689 |
|
|
|
420 |
|
|
|
590 |
|
|
|
626 |
|
|
|
469 |
|
|
|
497 |
|
|
|
2,087 |
|
|
|
$ |
3,652,689 |
|
|
$ |
420 |
|
|
$ |
590 |
|
|
$ |
300,626 |
|
|
$ |
398,469 |
|
|
$ |
800,497 |
|
|
$ |
2,152,087 |
|
CONTRACTUAL OBLIGATIONS
There were no material changes during the three months ended March 31, 2023 outside the ordinary course of business to the information regarding specified contractual obligations contained in our Annual Report on Form 10-K for the year ended December 31, 2022, as filed with the SEC.
We may enter into commitments to purchase goods and services in connection with the operations of our properties. Those commitments generally have terms of one-year or less and reflect expenditure levels comparable to our historical expenditures.
CASH FLOWS
The following table presents a summary of our cash flows for the three months ended March 31, 2023 and 2022 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
|
|
|
2023 |
|
|
2022 |
|
|
Change |
|
Net cash provided by operating activities |
|
$ |
101,691 |
|
|
$ |
78,271 |
|
|
$ |
23,420 |
|
Net cash used in investing activities |
|
|
(89,974 |
) |
|
|
(499,550 |
) |
|
|
409,576 |
|
Net cash (used) provided by financing activities |
|
|
(55,172 |
) |
|
|
430,056 |
|
|
|
(485,228 |
) |
Net (decrease) increase in cash, cash equivalents and restricted cash |
|
$ |
(43,455 |
) |
|
$ |
8,777 |
|
|
$ |
(52,232 |
) |
Substantially all of our operating cash flows are generated by our investment portfolio and are primarily dependent upon the rental rates specified in our leases, the collectability of rent and the level of our property and general and administrative costs. The increase in net cash provided by operating activities was driven by a $20.2 million net increase in cash rental revenue, largely as a result of our net acquisitions over the trailing twelve month period. The primary offset to this increase was an increase in cash interest paid of $9.8 million driven by the increased interest rates and changes within our debt
29
structure. See Management’s Discussion and Analysis of Financial Condition: Results of Operations for further discussion on our rental income and interest expenses.
We acquired seven properties during the three months ended March 31, 2023 compared to 41 during the three months ended March 31, 2022, driving the decrease in investing cash outflows of $306.1 million. Our investment activity is funded through cash provided by operations, proceeds from dispositions, proceeds from stock issuances, and proceeds from long-term debt issuances. In addition to the increase in operating cash flows as described above, changes related to our sources of funding were as follows:
•We sold 39 and 5 properties during the three months ended March 31, 2023 and 2022, respectively, which resulted in an increase in investing cash inflows of $103.5 million.
•We issued 6.6 million shares in 2022 compared to none in 2023, resulting in a decrease in proceeds of $300.0 million.
•We had a net decrease in cash provided by financing debt activity of $180.1 million, which was driven by less borrowings under the 2019 Credit Facility in 2023 than 2022.
Finally, there was an increase in dividends paid to equity owners of $10.4 million year-over-year, driven by an increase in shares outstanding and an increase in our quarterly dividend rate starting in the third quarter of 2022.
DISTRIBUTION POLICY
Distributions from our current or accumulated earnings are generally classified as ordinary income, whereas distributions in excess of our current and accumulated earnings, to the extent of a stockholder’s federal income tax basis in our common stock, are generally characterized as a return of capital. U.S. stockholders that are individuals, trusts and estates generally may deduct up to 20% of the ordinary dividends (e.g., dividends not designated as capital gain dividends or qualified dividend income) received from a REIT for taxable years beginning after December 31, 2017 and before January 1, 2026. Distributions in excess of a stockholder’s federal income tax basis in our common stock are generally characterized as capital gain.
We are required to distribute 90% of our taxable income (subject to certain adjustments and excluding net capital gains) on an annual basis to maintain qualification as a REIT for federal income tax purposes and are required to pay federal income tax at regular corporate rates to the extent we distribute less than 100% of our taxable income (including capital gains).
We intend to make distributions that will enable us to meet the distribution requirements applicable to REITs and to eliminate or minimize our obligation to pay corporate-level federal income and excise taxes.
Any distributions will be at the sole discretion of our Board of Directors, and their form, timing and amount, if any, will depend upon a number of factors, including our actual and projected results of operations, FFO, liquidity, cash flows and financial condition, the revenue we actually receive from our properties, our operating expenses, our debt service requirements, our capital expenditures, prohibitions and other limitations under our financing arrangements, our REIT taxable income, the annual REIT distribution requirements, applicable laws and such other factors as our Board of Directors deems relevant.
30
Results of Operations
Comparison of the three months ended March 31, 2023 to the three months ended March 31, 2022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31, |
|
|
Increase / (Decrease) |
|
(In Thousands) |
|
2023 |
|
|
2022 |
|
|
|
|
Revenues: |
|
|
|
|
|
|
|
|
|
Rental income |
|
$ |
187,294 |
|
|
$ |
167,075 |
|
|
$ |
20,219 |
|
Interest income on loans receivable |
|
|
817 |
|
|
|
319 |
|
|
|
498 |
|
Earned income from direct financing leases |
|
|
131 |
|
|
|
131 |
|
|
|
— |
|
Other operating income |
|
|
47 |
|
|
|
871 |
|
|
|
(824 |
) |
Total revenues |
|
|
188,289 |
|
|
|
168,396 |
|
|
|
19,893 |
|
Expenses: |
|
|
|
|
|
|
|
|
|
General and administrative |
|
|
15,879 |
|
|
|
14,674 |
|
|
|
1,205 |
|
Property costs (including reimbursable) |
|
|
7,613 |
|
|
|
8,255 |
|
|
|
(642 |
) |
Deal pursuit costs |
|
|
573 |
|
|
|
365 |
|
|
|
208 |
|
Interest |
|
|
33,547 |
|
|
|
26,023 |
|
|
|
7,524 |
|
Depreciation and amortization |
|
|
78,213 |
|
|
|
69,108 |
|
|
|
9,105 |
|
Impairments |
|
|
5,255 |
|
|
|
127 |
|
|
|
5,128 |
|
Total expenses |
|
|
141,080 |
|
|
|
118,552 |
|
|
|
22,528 |
|
Other income: |
|
|
|
|
|
|
|
|
|
Loss on debt extinguishment |
|
|
— |
|
|
|
(172 |
) |
|
|
172 |
|
Gain on disposition of assets |
|
|
49,187 |
|
|
|
877 |
|
|
|
48,310 |
|
Other income |
|
|
— |
|
|
|
5,679 |
|
|
|
(5,679 |
) |
Total other income |
|
|
49,187 |
|
|
|
6,384 |
|
|
|
42,803 |
|
Income before income tax expense |
|
|
96,396 |
|
|
|
56,228 |
|
|
|
40,168 |
|
Income tax expense |
|
|
(223 |
) |
|
|
(172 |
) |
|
|
(51 |
) |
Net income |
|
$ |
96,173 |
|
|
$ |
56,056 |
|
|
$ |
40,117 |
|
Changes related to operating properties
The components of rental income are summarized below (in thousands):
31
Base Cash Rent; Depreciation and amortization
The increase in Base Cash Rent, the largest component of rental income, was driven by our net acquisitions, which also was the driver for the increase in depreciation and amortization. We acquired 138 properties during the trailing twelve months ended March 31, 2023, with a total of $78.3 million of annual in-place rent. During the same period, we disposed of 94 properties, of which 14 were vacant and the remaining 80 had annual in-place rents of $25.1 million. Our acquisitions and dispositions for the trailing twelve months ended March 31, 2023 is summarized below (in thousands):
We have had minimal tenant credit issues since March 31, 2021 and recognized net recoveries of amounts previously reserved of $0.2 million and $0.1 million for the three months ended March 31, 2023 and 2022, respectively.
Variable cash rent; Property costs (including reimbursable)
Variable cash rent is primarily comprised of tenant reimbursements, where our tenants are obligated under the lease agreement to reimburse us for certain property costs we incur, less reimbursements we deem not probable of collection. The decrease in both variable cash rent (including reimbursable) and property costs (including reimbursable) was driven by a decrease in reimbursable property taxes due to certain one-time amounts recorded during the three months ended March 31, 2022. This decrease in property costs (including reimbursable) was partially offset by an increase in non-reimbursable legal fees due to one-time amounts recorded in the comparative period.
The components of variable cash rent and property costs are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31, |
|
|
Increase / |
|
|
|
2023 |
|
|
2022 |
|
|
(Decrease) |
|
Tenant reimbursable income, net of uncollectable reserve |
|
$ |
5,049 |
|
|
$ |
6,202 |
|
|
$ |
(1,153 |
) |
Other variable cash rent |
|
|
746 |
|
|
|
1,016 |
|
|
|
(270 |
) |
Total variable cash rent (including reimbursable) |
|
$ |
5,795 |
|
|
$ |
7,218 |
|
|
$ |
(1,423 |
) |
|
|
|
|
|
|
|
|
|
|
Reimbursable property costs |
|
$ |
5,049 |
|
|
$ |
6,174 |
|
|
$ |
(1,125 |
) |
Non-reimbursable property costs |
|
|
2,564 |
|
|
|
2,081 |
|
|
|
483 |
|
Total property costs (including reimbursable) |
|
$ |
7,613 |
|
|
$ |
8,255 |
|
|
$ |
(642 |
) |
Straight-line rent, net of uncollectible reserve; Amortization of above- and below- market lease intangibles, net
Non-cash rental income consists of straight-line rental revenue and amortization of above- and below-market lease intangibles, less amounts we deem not probable of collection. Straight-line rental revenue increased for the comparative period, driven by net acquisitions. Due to our minimal tenant credit issues, we had zero reserves for straight-line rental revenue in either comparative period.
32
Impairments
For both comparative periods, we maintained low tenant credit issues and low vacancy rates. We recorded impairment as follows (impairment in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31, |
|
|
2023 |
|
|
2022 |
|
|
Count: |
|
|
Impairment: |
|
|
Count: |
|
|
Impairment: |
|
Underperforming properties |
|
11 |
|
|
$ |
4,424 |
|
|
|
— |
|
|
$ |
— |
|
Vacant properties |
|
1 |
|
|
|
328 |
|
|
|
— |
|
|
|
— |
|
Total |
|
|
|
$ |
4,752 |
|
|
|
|
|
$ |
— |
|
Additionally, in accordance with ASU 2016-13, we recognize an allowance for credit loss when we issue a loan. As such, we recorded a $0.1 million allowance upon issuing a loan receivable in the first quarter of 2022. In the first quarter of 2023, we issued a new loan receivable and funded an add-on to an existing loan, for which we recorded a total allowance of $0.5 million.
Gain on disposition of assets
Gain on disposition of assets increased year-over-year due to an increase in disposition volume, specifically of occupied properties as a result of an increased focus on accretive capital recycling, which we expect to continue throughout 2023. We recognized net gains on disposition of assets as follows (net gain/(loss) in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31, |
|
|
2023 |
|
|
2022 |
|
|
Count: |
|
|
Net Gain / (Loss): |
|
|
Count: |
|
Net Gain / (Loss): |
|
Occupied properties sold |
39 |
|
|
$ |
49,187 |
|
|
1 |
|
$ |
178 |
|
Vacant properties sold |
|
— |
|
|
|
— |
|
|
4 |
|
|
562 |
|
Other |
|
|
|
|
— |
|
|
|
|
|
137 |
|
Total |
|
|
|
$ |
49,187 |
|
|
|
|
$ |
877 |
|
Changes related to debt
Interest expense; Loss on debt extinguishment
Our debt outstanding is summarized below (in thousands):
In March 2022, we amended and restated the 2019 Revolving Credit and Term Loan Agreement, resulting in a loss of $0.2 million on the partial debt extinguishment. In August 2022, we entered into the 2022 Term Loans, comprised of a $300.0 million tranche which matures in 2025 and a $500.0 million tranche which matures in 2027. In conjunction with the 2022 Term Loans, we entered into interest rate swaps beginning in September 2022 to swap the variable rate for a fixed rate. In November 2022, we entered into the 2023 Term Loan Agreement for $500.0 million of 2.5-year delayed-draw term loans with a six month draw period, none of which has been drawn as of March 31, 2023.
33
Our weighted average stated interest rate increased from 2.92% at March 31, 2022 to 3.36% at March 31, 2023 primarily as a result of a higher level of total debt outstanding, along with a rise in market interest rates. The components of interest expense are summarized below (in thousands):
Changes related to general and administrative expenses
The increase in general and administrative expense was primarily driven by an increase in compensation expenses of $1.3 million year-over-year. The increase in compensation expenses was due to increases in non-cash compensation, primarily due to a higher grant date fair value for the 2023 market-based awards granted in the first quarter of 2023 compared the fair value of the 2020 market-based awards which expired unvested, as well as internal promotions.
Changes related to other income
We were contingently liable for $5.7 million of debt owed by one of our former tenants, which we fully reserved in 2018 due to the tenant filing for bankruptcy. No payments were made in relation to this contingent liability and, as the underlying debt had a maturity of March 15, 2022, we reversed our reserve in the first quarter of 2022.
34
Property Portfolio Information
|
|
|
|
|
|
|
|
|
|
|
2,083 |
99.8% |
49 |
347 |
37 |
Properties |
Occupancy |
States |
Tenants |
Tenant Industries |
Diversification By Tenant
The following is a summary of tenant concentration for our owned real estate properties as of March 31, 2023:
|
|
|
|
|
|
|
|
|
|
|
|
|
Tenant Concept (1) |
|
Number of
Properties |
|
|
Total Square Feet
(in thousands) |
|
|
Percent of
ABR |
|
Life Time Fitness |
|
|
13 |
|
|
|
1,474 |
|
|
|
4.3 |
% |
Invited Clubs |
|
|
21 |
|
|
|
1,005 |
|
|
|
2.7 |
% |
BJ's Wholesale Club |
|
|
11 |
|
|
|
1,233 |
|
|
|
2.3 |
% |
At Home |
|
|
16 |
|
|
|
1,861 |
|
|
|
2.1 |
% |
Church's Chicken |
|
|
160 |
|
|
|
231 |
|
|
|
1.9 |
% |
Dave & Buster's / Main Event |
|
|
15 |
|
|
|
807 |
|
|
|
1.9 |
% |
Circle K / Clean Freak |
|
|
77 |
|
|
|
245 |
|
|
|
1.9 |
% |
Dollar Tree / Family Dollar |
|
|
133 |
|
|
|
1,230 |
|
|
|
1.9 |
% |
Home Depot |
|
|
8 |
|
|
|
946 |
|
|
|
1.7 |
% |
GPM |
|
|
107 |
|
|
|
301 |
|
|
|
1.5 |
% |
Other(2) |
|
|
1,517 |
|
|
|
50,428 |
|
|
|
77.8 |
% |
Vacant |
|
|
5 |
|
|
|
556 |
|
|
|
— |
|
Total |
|
|
2,083 |
|
|
|
60,317 |
|
|
|
100.0 |
% |
(1) Tenant concentration represents concentration by the legal entities ultimately responsible for obligations under the lease agreements or affiliated entities. Concentration is shown by tenant concept, which represents the brand or trade name under which the tenant operates. Other tenants may operate under the same or similar brand or trade name.
(2) No tenants within other individually account for greater than 1.5% of ABR.
Lease Expirations
As of March 31, 2023, the weighted average remaining non-cancellable initial term of our leases (based on ABR) was 10.4 years. The following is a summary of lease expirations for our owned real estate as of March 31, 2023, assuming that tenants do not exercise any renewal options or early termination rights:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leases Expiring In: |
|
Number of
Properties |
|
|
Total Square Feet
(in thousands) |
|
|
ABR
(in thousands) |
|
|
Percent of
ABR |
|
Remainder of 2023 |
|
|
57 |
|
|
|
1,080 |
|
|
$ |
14,455 |
|
|
|
2.1 |
% |
2024 |
|
|
46 |
|
|
|
1,521 |
|
|
|
17,312 |
|
|
|
2.5 |
% |
2025 |
|
|
51 |
|
|
|
2,398 |
|
|
|
21,864 |
|
|
|
3.2 |
% |
2026 |
|
|
119 |
|
|
|
4,987 |
|
|
|
45,496 |
|
|
|
6.6 |
% |
2027 |
|
|
167 |
|
|
|
4,395 |
|
|
|
59,504 |
|
|
|
8.6 |
% |
2028 |
|
|
151 |
|
|
|
3,610 |
|
|
|
46,972 |
|
|
|
6.8 |
% |
2029 |
|
|
319 |
|
|
|
2,965 |
|
|
|
44,441 |
|
|
|
6.5 |
% |
2030 |
|
|
69 |
|
|
|
2,506 |
|
|
|
24,225 |
|
|
|
3.5 |
% |
2031 |
|
|
77 |
|
|
|
3,675 |
|
|
|
36,223 |
|
|
|
5.3 |
% |
2032 |
|
|
141 |
|
|
|
3,632 |
|
|
|
35,291 |
|
|
|
5.1 |
% |
Thereafter |
|
|
881 |
|
|
|
28,992 |
|
|
|
343,346 |
|
|
|
49.8 |
% |
Vacant |
|
|
5 |
|
|
|
556 |
|
|
|
— |
|
|
|
— |
|
Total owned properties |
|
|
2,083 |
|
|
|
60,317 |
|
|
$ |
689,129 |
|
|
|
100.0 |
% |
35
Diversification By Geography
The following is a summary of geographic concentration for our owned real estate properties as of March 31, 2023:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Location |
|
Number of
Properties |
|
|
Total Square Feet
(in thousands) |
|
|
Percent of
ABR |
|
|
Location
(continued) |
|
Number of
Properties |
|
|
Total Square Feet
(in thousands) |
|
|
Percent of
ABR |
|
Texas |
|
|
297 |
|
|
|
7,403 |
|
|
|
14.6 |
% |
|
Kentucky |
|
|
47 |
|
|
|
563 |
|
|
|
1.3 |
% |
Florida |
|
|
154 |
|
|
|
2,813 |
|
|
|
7.6 |
% |
|
Massachusetts |
|
|
8 |
|
|
|
750 |
|
|
|
1.2 |
% |
Ohio |
|
|
104 |
|
|
|
5,640 |
|
|
|
6.6 |
% |
|
Louisiana |
|
|
26 |
|
|
|
653 |
|
|
|
1.2 |
% |
Georgia |
|
|
145 |
|
|
|
2,840 |
|
|
|
5.9 |
% |
|
Arkansas |
|
|
47 |
|
|
|
690 |
|
|
|
1.1 |
% |
Michigan |
|
|
98 |
|
|
|
2,859 |
|
|
|
4.3 |
% |
|
Kansas |
|
|
20 |
|
|
|
958 |
|
|
|
0.9 |
% |
Tennessee |
|
|
118 |
|
|
|
2,518 |
|
|
|
3.8 |
% |
|
New Hampshire |
|
|
18 |
|
|
|
660 |
|
|
|
0.8 |
% |
California |
|
|
29 |
|
|
|
1,569 |
|
|
|
3.5 |
% |
|
Alaska |
|
|
9 |
|
|
|
319 |
|
|
|
0.8 |
% |
Illinois |
|
|
57 |
|
|
|
1,513 |
|
|
|
3.3 |
% |
|
New Jersey |
|
|
13 |
|
|
|
466 |
|
|
|
0.7 |
% |
Indiana |
|
|
43 |
|
|
|
3,734 |
|
|
|
3.0 |
% |
|
Connecticut |
|
|
7 |
|
|
|
910 |
|
|
|
0.7 |
% |
North Carolina |
|
|
84 |
|
|
|
1,854 |
|
|
|
2.8 |
% |
|
Idaho |
|
|
14 |
|
|
|
226 |
|
|
|
0.6 |
% |
Alabama |
|
|
105 |
|
|
|
1,470 |
|
|
|
2.6 |
% |
|
Iowa |
|
|
12 |
|
|
|
1,304 |
|
|
|
0.6 |
% |
New York |
|
|
36 |
|
|
|
1,930 |
|
|
|
2.5 |
% |
|
Washington |
|
|
9 |
|
|
|
160 |
|
|
|
0.5 |
% |
Arizona |
|
|
44 |
|
|
|
903 |
|
|
|
2.4 |
% |
|
Maine |
|
|
28 |
|
|
|
103 |
|
|
|
0.4 |
% |
Missouri |
|
|
66 |
|
|
|
1,541 |
|
|
|
2.4 |
% |
|
West Virginia |
|
|
12 |
|
|
|
198 |
|
|
|
0.4 |
% |
Colorado |
|
|
33 |
|
|
|
1,264 |
|
|
|
2.4 |
% |
|
Nebraska |
|
|
10 |
|
|
|
262 |
|
|
|
0.4 |
% |
South Carolina |
|
|
69 |
|
|
|
1,168 |
|
|
|
2.4 |
% |
|
Rhode Island |
|
|
4 |
|
|
|
152 |
|
|
|
0.3 |
% |
Maryland |
|
|
12 |
|
|
|
1,413 |
|
|
|
2.4 |
% |
|
Delaware |
|
|
2 |
|
|
|
128 |
|
|
|
0.3 |
% |
Virginia |
|
|
47 |
|
|
|
1,526 |
|
|
|
2.3 |
% |
|
North Dakota |
|
|
4 |
|
|
|
110 |
|
|
|
0.3 |
% |
Minnesota |
|
|
30 |
|
|
|
1,241 |
|
|
|
2.3 |
% |
|
Montana |
|
|
3 |
|
|
|
152 |
|
|
|
0.3 |
% |
New Mexico |
|
|
35 |
|
|
|
863 |
|
|
|
1.8 |
% |
|
Oregon |
|
|
3 |
|
|
|
104 |
|
|
|
0.2 |
% |
Oklahoma |
|
|
59 |
|
|
|
1,139 |
|
|
|
1.7 |
% |
|
South Dakota |
|
|
2 |
|
|
|
30 |
|
|
|
0.1 |
% |
Pennsylvania |
|
|
31 |
|
|
|
1,057 |
|
|
|
1.6 |
% |
|
Wyoming |
|
|
1 |
|
|
|
35 |
|
|
|
0.1 |
% |
Mississippi |
|
|
51 |
|
|
|
993 |
|
|
|
1.6 |
% |
|
U.S. Virgin Islands |
|
|
1 |
|
|
|
38 |
|
|
|
0.1 |
% |
Utah |
|
|
18 |
|
|
|
976 |
|
|
|
1.5 |
% |
|
Nevada |
|
|
1 |
|
|
|
12 |
|
|
* |
|
Wisconsin |
|
|
16 |
|
|
|
1,105 |
|
|
|
1.4 |
% |
|
Vermont |
|
|
1 |
|
|
|
2 |
|
|
* |
|
* Less than 0.1%
36
Diversification By Asset Type and Tenant Industry
The following is a summary of asset type concentration, the industry of the underlying tenant operations for our retail properties and the underlying property use for our non-retail properties as of March 31, 2023:
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset Type |
Tenant Industry / Underlying Use |
Number of
Properties |
|
|
Total Square Feet
(in thousands) |
|
|
Percent of
ABR |
|
Retail |
|
|
1,772 |
|
|
|
29,615 |
|
|
|
67.0 |
% |
|
Health & Fitness |
|
53 |
|
|
|
3,208 |
|
|
|
7.9 |
% |
|
Convenience Stores |
|
302 |
|
|
|
961 |
|
|
|
5.3 |
% |
|
Quick Service Restaurants |
|
335 |
|
|
|
731 |
|
|
|
4.6 |
% |
|
Car Washes |
|
110 |
|
|
|
525 |
|
|
|
4.6 |
% |
|
Casual Dining |
|
125 |
|
|
|
892 |
|
|
|
4.4 |
% |
|
Movie Theaters |
|
32 |
|
|
|
1,656 |
|
|
|
3.5 |
% |
|
Dealerships |
|
33 |
|
|
|
1,091 |
|
|
|
3.3 |
% |
|
Entertainment |
|
29 |
|
|
|
1,275 |
|
|
|
3.1 |
% |
|
Drug Stores |
|
75 |
|
|
|
966 |
|
|
|
3.1 |
% |
|
Dollar Stores |
|
217 |
|
|
|
2,058 |
|
|
|
3.0 |
% |
|
Automotive Service |
|
125 |
|
|
|
1,025 |
|
|
|
3.0 |
% |
|
Home Improvement |
|
35 |
|
|
|
2,114 |
|
|
|
3.0 |
% |
|
Supercenters & Clubs |
|
17 |
|
|
|
1,864 |
|
|
|
2.7 |
% |
|
Home Décor |
|
21 |
|
|
|
2,459 |
|
|
|
2.5 |
% |
|
Home Furnishings |
|
28 |
|
|
|
1,277 |
|
|
|
2.1 |
% |
|
Sporting Goods |
|
20 |
|
|
|
1,154 |
|
|
|
1.9 |
% |
|
Department Stores |
|
18 |
|
|
|
1,619 |
|
|
|
1.8 |
% |
|
Grocery |
|
31 |
|
|
|
1,459 |
|
|
|
1.7 |
% |
|
Other |
|
29 |
|
|
|
900 |
|
|
|
1.6 |
% |
|
Early Education |
|
41 |
|
|
|
450 |
|
|
|
1.4 |
% |
|
Specialty Retail |
|
31 |
|
|
|
668 |
|
|
|
1.1 |
% |
|
Automotive Parts |
|
54 |
|
|
|
381 |
|
|
|
0.7 |
% |
|
Discount Retail |
|
4 |
|
|
|
341 |
|
|
|
0.4 |
% |
|
Pet Supplies & Service |
|
4 |
|
|
|
201 |
|
|
|
0.3 |
% |
|
Vacant |
|
3 |
|
|
|
340 |
|
|
|
— |
|
Non-Retail |
|
|
311 |
|
|
|
30,702 |
|
|
|
33.0 |
% |
|
Distribution |
|
136 |
|
|
|
13,588 |
|
|
|
11.2 |
% |
|
Manufacturing |
|
76 |
|
|
|
12,241 |
|
|
|
10.6 |
% |
|
Office |
|
9 |
|
|
|
1,182 |
|
|
|
3.0 |
% |
|
Country Club |
|
21 |
|
|
|
1,005 |
|
|
|
2.7 |
% |
|
Industrial Outdoor Storage |
|
21 |
|
|
|
1,145 |
|
|
|
2.0 |
% |
|
Medical |
|
29 |
|
|
|
416 |
|
|
|
1.6 |
% |
|
Flex |
|
14 |
|
|
|
511 |
|
|
|
0.8 |
% |
|
Data Center |
|
2 |
|
|
|
276 |
|
|
|
0.7 |
% |
|
Hotel |
|
1 |
|
|
|
122 |
|
|
|
0.4 |
% |
|
Vacant |
|
2 |
|
|
|
216 |
|
|
|
— |
|
Total |
|
|
2,083 |
|
|
|
60,317 |
|
|
|
100.0 |
% |
Off-Balance Sheet Arrangements
As of March 31, 2023, we did not have any material off-balance sheet arrangements.
New Accounting Pronouncements
None.
37
Non-GAAP Financial Measures
FFO: FFO is calculated in accordance with the standards established by NAREIT as net income (loss) attributable to common stockholders (computed in accordance with GAAP), excluding real estate-related depreciation and amortization, impairment charges and net (gains) losses from property dispositions. By excluding amounts which do not relate to or are not indicative of operating performance, we believe FFO provides a performance measure that captures trends in occupancy rates, rental rates and operating costs when compared year-over-year. 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 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.
AFFO: AFFO is an operating performance measure 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, such as net gains (losses) on debt extinguishment, deal pursuit costs, costs related to the COVID-19 pandemic, income associated with expiration of a contingent liability related to a guarantee of a former tenant's debt and certain non-cash items. These certain non-cash items include certain non-cash interest expenses (comprised of amortization of deferred financing costs, amortization of net debt discount/premium, and amortization of interest rate swap losses), non-cash revenues (comprised of straight-line rents net of bad debt expense, amortization of lease intangibles, and amortization of net premium/discount on loans receivable), and non-cash compensation expense.
Other equity REITs may not calculate FFO and AFFO as we do, and, accordingly, our FFO and AFFO may not be comparable to such other equity REITs’ FFO and AFFO. FFO and AFFO do not represent cash generated from operating activities determined in accordance with GAAP, are 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 stockholders (computed in accordance with GAAP) as a performance measure.
Adjusted Debt: Adjusted Debt represents interest bearing debt (reported in accordance with GAAP) adjusted to exclude unamortized debt discount/premium and deferred financing costs and reduced by cash and cash equivalents and 1031 Exchange proceeds. 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.
EBITDAre: EBITDAre is computed in accordance with the standards established by NAREIT as net income (loss) (computed in accordance with GAAP), excluding interest expense, income tax expense, depreciation and amortization, net (gains) losses from property dispositions, and impairment charges.
Adjusted EBITDAre: Adjusted EBITDAre represents EBITDAre as adjusted for revenue producing acquisitions, capital expenditures and dispositions for the quarter (as if such acquisitions and dispositions had occurred as of the beginning of the quarter), construction rent collected, not yet recognized in earnings, and for other certain items that we believe are not indicative of our core operating performance. These other certain items include deal pursuit costs, net (gains) losses on debt extinguishment, costs related to the COVID-19 pandemic, and non-cash compensation. 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 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) (computed in accordance with GAAP) as a performance measure.
Annualized Adjusted EBITDAre: Annualized Adjusted EBITDAre is calculated as Adjusted EBITDAre, adjusted for straight-line rent related to prior periods, including amounts deemed not probable of collection (recoveries), and 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.
Adjusted Debt to Annualized Adjusted EBITDAre: Adjusted Debt to Annualized Adjusted EBITDAre is used 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. We believe the 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.
38
FFO and AFFO
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31, |
|
(In thousands, except per share data) |
|
2023 |
|
|
2022 |
|
Net income attributable to common stockholders |
|
$ |
93,585 |
|
|
$ |
53,468 |
|
Portfolio depreciation and amortization |
|
|
78,069 |
|
|
|
68,965 |
|
Portfolio impairments |
|
|
5,255 |
|
|
|
127 |
|
Gain on disposition of assets |
|
|
(49,187 |
) |
|
|
(877 |
) |
FFO attributable to common stockholders |
|
$ |
127,722 |
|
|
$ |
121,683 |
|
Loss on debt extinguishment |
|
|
— |
|
|
|
172 |
|
Deal pursuit costs |
|
|
573 |
|
|
|
365 |
|
Non-cash interest expense, excluding capitalized interest |
|
|
2,780 |
|
|
|
1,937 |
|
Straight-line rent, net of uncollectible reserve |
|
|
(9,920 |
) |
|
|
(8,575 |
) |
Other amortization and non-cash charges |
|
|
(349 |
) |
|
|
(647 |
) |
Non-cash compensation expense |
|
|
5,230 |
|
|
|
4,025 |
|
Costs related to COVID-19 (1) |
|
|
— |
|
|
|
6 |
|
Other income |
|
|
— |
|
|
|
(5,679 |
) |
AFFO attributable to common stockholders |
|
$ |
126,036 |
|
|
$ |
113,287 |
|
|
|
|
|
|
|
|
Net income per share of common stock - Diluted |
|
$ |
0.66 |
|
|
$ |
0.42 |
|
FFO per share of common stock - Diluted (2) |
|
$ |
0.90 |
|
|
$ |
0.95 |
|
AFFO per share of common stock - Diluted (2) |
|
$ |
0.89 |
|
|
$ |
0.88 |
|
|
|
|
|
|
|
|
Weighted average shares of common stock outstanding - Diluted |
|
|
141,055,850 |
|
|
|
128,360,431 |
|
(1)Costs related to COVID-19 are included in general and administrative expense and primarily relate to legal fees for executing rent deferral or abatement agreements.
(2)Dividends paid and undistributed earnings allocated, if any, to unvested restricted stockholders are deducted from FFO and AFFO for the computation of the per share amounts. The following amounts were deducted:
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
2023 |
|
2022 |
FFO |
|
$0.2 million |
|
$0.2 million |
AFFO |
|
$0.2 million |
|
$0.2 million |
39
Adjusted Debt, Adjusted EBITDAre and Annualized Adjusted EBITDAre
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
(In thousands) |
|
2023 |
|
|
2022 |
|
2019 Credit Facility |
|
$ |
98,000 |
|
|
$ |
519,500 |
|
2022 Term Loans, net |
|
|
792,813 |
|
|
|
— |
|
Senior Unsecured Notes, net |
|
|
2,723,503 |
|
|
|
2,719,597 |
|
Mortgages payable, net |
|
|
4,841 |
|
|
|
5,412 |
|
Total debt, net |
|
|
3,619,157 |
|
|
|
3,244,509 |
|
Unamortized debt discount, net |
|
|
9,231 |
|
|
|
10,511 |
|
Unamortized deferred financing costs |
|
|
24,301 |
|
|
|
19,701 |
|
Cash and cash equivalents |
|
|
(4,871 |
) |
|
|
(24,229 |
) |
1031 Exchange proceeds / Funds held in escrow |
|
|
(12,983 |
) |
|
|
(2,347 |
) |
Adjusted Debt |
|
$ |
3,634,835 |
|
|
$ |
3,248,145 |
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
(In thousands) |
|
2023 |
|
|
2022 |
|
Net income |
|
$ |
96,173 |
|
|
$ |
56,056 |
|
Interest |
|
|
33,547 |
|
|
|
26,023 |
|
Depreciation and amortization |
|
|
78,213 |
|
|
|
69,108 |
|
Income tax expense |
|
|
223 |
|
|
|
172 |
|
Gain on disposition of assets |
|
|
(49,187 |
) |
|
|
(877 |
) |
Portfolio impairments |
|
|
5,255 |
|
|
|
127 |
|
EBITDAre |
|
$ |
164,224 |
|
|
$ |
150,609 |
|
Adjustments to revenue producing acquisitions and dispositions |
|
|
1,193 |
|
|
|
5,314 |
|
Construction rent collected, not yet recognized in earnings |
|
|
503 |
|
|
|
509 |
|
Deal pursuit costs |
|
|
573 |
|
|
|
365 |
|
Gain on debt extinguishment |
|
|
— |
|
|
|
172 |
|
Costs related to COVID-19 (1) |
|
|
— |
|
|
|
6 |
|
Non-cash compensation expense |
|
|
5,230 |
|
|
|
4,025 |
|
Other income |
|
|
— |
|
|
|
(5,679 |
) |
Adjusted EBITDAre |
|
$ |
171,723 |
|
|
$ |
155,321 |
|
Other adjustments for Annualized EBITDAre (2) |
|
|
(487 |
) |
|
|
(213 |
) |
Annualized Adjusted EBITDAre |
|
$ |
684,944 |
|
|
$ |
620,432 |
|
|
|
|
|
|
|
|
Total Debt, Net / Annualized Net Income (3) |
|
|
9.4 |
x |
|
|
14.5 |
x |
Adjusted Debt / Annualized Adjusted EBITDAre (4) |
|
|
5.3 |
x |
|
|
5.2 |
x |
(1)Costs related to COVID-19 are included in general and administrative expense and primarily relate to legal fees for executing rent deferral or abatement agreements.
(2)Adjustment for the three months ended March 31, 2023 relates to current period recoveries related to prior period property costs and rent deemed not probable of collection. For the same period in 2022, the adjustments are comprised of net current period recoveries related to prior period rent deemed not probable of collection and prior period property costs.
(3)Represents net income for the three months ended March 31, 2023 and 2022, respectively, annualized.
(4)Adjusted Debt / Annualized Adjusted EBITDAre would be 5.0x if the 3.1 million shares under open forward sales agreements had been settled as of March 31, 2022.
40