SPIRIT REALTY CAPITAL, INC. OVERVIEW
Spirit Realty Capital, Inc. is aNew York Stock Exchange listed company under the ticker symbol "SRC." We are a self-administered and self-managed REIT with in-house capabilities including acquisition, credit research, asset management, portfolio management, real estate research, legal, finance and accounting functions. We primarily invest in single-tenant real estate assets throughoutthe United States , which are generally acquired through sale-leaseback transactions and subsequently leased on a long-term, triple-net basis to high quality tenants with business operations within retail, industrial, office and other industries. Single tenant, operationally essential real estate consists of properties that are free-standing, commercial real estate facilities where our tenants conduct activities that are essential to the generation of their sales and profits. Under a triple-net lease, the tenant is typically responsible for all improvements and is contractually obligated to pay all property operating expenses, such as real estate taxes, insurance premiums and repair and maintenance costs. As ofDecember 31, 2020 , our owned real estate represented investments in 1,860 properties. Our properties are leased to 301 tenants across 48 states and 28 retail industries. As ofDecember 31, 2020 , our owned properties were approximately 99.6% occupied (based on the number of economically yielding properties). Our operations are carried out through theOperating Partnership .OP Holdings , one of our wholly-owned subsidiaries, is the sole general partner and owns approximately 1% of theOperating Partnership . We and one of our wholly-owned subsidiaries are the only limited partners, and together own the remaining 99% of theOperating Partnership . Although theOperating Partnership is wholly-owned by us, in the future, we may issue partnership interests in theOperating Partnership to third parties in exchange for property owned by such third parties. In general, any partnership interests in theOperating Partnership issued to third parties would be exchangeable for cash or, at our election, shares of our common stock at specified ratios set when such partnership interests in theOperating Partnership are issued. We have elected to be taxed as a REIT for federal income tax purposes commencing with our taxable year endedDecember 31, 2005 . We believe that we have been organized and have operated in a manner that has allowed us to qualify as a REIT for federal income tax purposes commencing with such taxable year, and we intend to continue operating in such a manner. OnMay 31, 2018 , we completed a Spin-Off of all our interests in the assets that collateralizedMaster Trust 2014, our properties leased toShopko , and certain other assets into an independent, publicly traded REIT, SMTA. In conjunction with the Spin-Off, we entered into the Asset Management Agreement with SMTA, pursuant to which the Company acted as external asset manager for SMTA for an annual management fee of$20.0 million . InSeptember 2019 , SMTA sold the assets held inMaster Trust 2014 and approved a plan of liquidation. The Asset Management Agreement was terminated, and the Interim Management Agreement with SMTA became effective. Pursuant to the Interim Management Agreement, we were entitled to receive$1 million during the initial one-year term and$4 million for any renewal one-year term to manage and liquidate the remaining SMTA assets. The Interim Management Agreement was terminated effectiveSeptember 4, 2020 and we have no further continuing involvement with SMTA. Given the onset of the COVID-19 pandemic in 2020, many of our tenants requested rent deferrals or other forms of relief. Our discussions with tenants requesting relief substantially focused on industries that have been directly disrupted by the COVID-19 pandemic and restrictions intended to prevent its spread, particularly movie theaters, casual dining restaurants, entertainment, health and fitness and hotels. These and other industries may be further impacted in the future depending on various factors, including the duration of the COVID-19 pandemic, the reinstitution of restrictions intended to prevent its spread or the imposition of new, more restrictive measures. Even after such restrictions are lifted or reduced, the willingness of customers to visit our tenants' businesses may be reduced due to lingering concerns regarding the continued risk of COVID-19 transmission and heightened sensitivity to risks associated with the transmission of other diseases. For the year endedDecember 31, 2020 , we deferred$31.9 million of rent, of which we recognized$26.3 million in rental income (the remaining$5.6 million was deemed not probable of collection), and abated$6.3 million of rent. As ofDecember 31, 2020 , we had an accounts receivable balance of$20.2 million related to deferred rent. For the year 35 -------------------------------------------------------------------------------- Table of Contents endedDecember 31, 2021 , we expect to see significant reductions in the impact of COVID-19 and have currently granted additional rent deferrals of$9.2 million and abatements of$1.0 million . For rent deferrals, the deferral periods range generally from one to six months, with an average deferral period of four months and an average repayment period of 12 months. Of the tenants who we have granted rent deferrals, 19% are public companies and the weighted average remaining lease term of leases with deferrals is 10.2 years (based on Base Rent). Although we are and will continue to be actively engaged in rent collection efforts related to uncollected rent, as well as working with certain tenants who have requested rent deferrals, we can provide no assurance that such efforts or our efforts in future periods will be successful, particularly in the event that the COVID-19 pandemic and restrictions intended to prevent its spread continue for a prolonged period. Refer to Part I, Item 1A. "Risk Factors" for additional information about the potential impact of the COVID-19 pandemic and restrictions intended to prevent its spread on our business, financial condition, results of operations, cash flows, liquidity and ability to satisfy our debt service obligations and make distributions to our stockholders. CRITICAL ACCOUNTING POLICIES AND ESTIMATES Our accounting policies are determined in accordance with GAAP. The preparation of our financial statements requires us to make estimates and assumptions that are subjective in nature and, as a result, our actual results could differ materially from our estimates. Estimates and assumptions include, among other things, subjective judgments regarding the fair values and useful lives of our properties for depreciation and lease classification purposes, the collectability of receivables and asset impairment analysis. Set forth below are the more critical accounting policies that require management judgment and estimates in the preparation of our consolidated financial statements. See Notes 2 and 8 to the consolidated financial statements for additional details. Purchase Accounting and Acquisition of Real Estate; Lease Intangibles We evaluate a number of factors in estimating fair value of real estate acquisitions, including building age, building location, building condition, rent comparables from similar properties, and terms of in-place leases, if any. Lease intangibles, if any, acquired in conjunction with the purchase of real estate represent the value of in-place leases and above or below-market leases. In-place lease intangibles are valued based on our estimates of costs related to tenant acquisition and the carrying costs that would be incurred during the time it would take to locate a tenant if the property were vacant, considering current market conditions and costs to execute similar leases at the time of the acquisition. We then allocate the purchase price (including acquisition and closing costs) to land, building, improvements and equipment based on their relative fair values. For properties acquired with in-place leases, we allocate the purchase price of real estate to the tangible and intangible assets and liabilities acquired based on their estimated fair values. Above and below-market lease intangibles are recorded based on the present value of the difference between the contractual amounts to be paid pursuant to the leases at the time of acquisition of the real estate and our estimate of current market lease rates for the property, measured over a period equal to the remaining initial term of the lease and, in certain instances, over the renewal period. Rental Income: Cash and Straight-line Rent We primarily lease real estate to our tenants under long-term, triple-net leases that are classified as operating leases. To evaluate lease classification, we assess the terms and conditions of the lease to determine the appropriate lease term and do not include options to extend, terminate or purchase in our evaluation for lease classification purposes or for recognizing rental income unless we are reasonably certain the tenant will exercise the option. Lease classification also requires an estimation of the residual value of the property at the end of the lease term. For acquisitions, we use the estimated tangible fair value of the property at the date of acquisition. For lease modifications, we generally use sales comparables or a direct capitalization approach to determine fair value. Our leases generally provide for rent escalations throughout the term of the lease. For leases with fixed rent escalators, rental income is recognized on a straight-line basis to produce a constant periodic rent over the term of the lease. For leases with contingent rent escalators, increases in rental revenue are recognized when the changes in the rental rates have occurred. Some of our leases also provide for contingent rent based on a percentage of the tenant's gross sales, which is recognized when the change in the factor on which the contingent lease payment is based actually occurs. InApril 2020 , the FASB released a Staff Q&A regarding the accounting for lease concessions related to the effects of the COVID-19 pandemic, noting that the underlying premise in requiring a modified lease to be accounted for as if it 36 -------------------------------------------------------------------------------- Table of Contents were a new lease under ASC 842 is that the modified terms and conditions affect the economics of the lease for the remainder of the lease term. As such, the FASB staff clarified that it would be acceptable for entities to make an election to account for lease concessions related to the effects of the COVID-19 pandemic consistent with how those concessions would be accounted for under ASC 842 as though enforceable rights and obligations for those concessions existed (regardless of whether those enforceable rights and obligations for the concessions explicitly exist in the contract). We made this election and account for rent deferrals by increasing the rent receivables as receivables accrue and continuing to recognize income during the deferral period. Lease concessions other than rent deferrals are evaluated to determine if a substantive change to the consideration in the original lease contract has occurred and should be accounted for as a lease modification. Rental income, including deferred rent, is subject to an evaluation for collectability, which includes our estimates of amounts that will not be realized based on an assessment of the risks inherent in the portfolio, considering historical experience, as well as the tenant's payment history and financial condition. We do not recognize rental income for amounts that are not probable of collection. Impairment We review our real estate investments and related lease intangibles periodically for indicators of impairment including, but not limited to: the asset being held for sale, vacant or non-operating, tenant bankruptcy or delinquency, and leases expiring in 60 days or less. For assets with indicators of impairment, we then evaluate if its carrying amount may not be recoverable. We consider factors such as expected future undiscounted cash flows, estimated residual value, market trends (such as the effects of leasing demand and competition) and other factors in making this assessment. An asset is considered impaired if its carrying value exceeds its estimated undiscounted cash flows. Impairment is calculated as the amount by which the carrying value exceeds the estimated fair value, or for assets held for sale, the amount by which the carrying value exceeds fair value less costs to sell. Estimating future cash flows and fair values is highly subjective and such estimates could differ materially from actual results. The fair values of real estate and intangible assets are determined using the following information, depending on availability, in order of preference: signed purchase and sale agreements or letters of intent; broker opinions of value; market prices for comparable properties; estimates of residual value; and expectations for the use of the real estate. REIT Status We elected to be taxed as a REIT for federal income tax purposes commencing with our taxable year endedDecember 31, 2005 . We believe that we have been organized and have operated in a manner that has allowed us to qualify as a REIT commencing with such taxable year, and we intend to continue operating in such a manner. To maintain our REIT status, we are required to annually distribute to our stockholders at least 90% of our REIT taxable income, determined without regard to the dividends paid deduction and excluding any net capital gain, and meet the various other requirements imposed by the Code relating to such matters as operating results, asset holdings, distribution levels and diversity of stock ownership. Provided that we qualify for taxation as a REIT, we are generally not subject to corporate level federal income tax on the earnings distributed to our stockholders that we derive from our REIT qualifying activities. We are still subject to state and local income and franchise taxes and to federal income and excise tax on our undistributed income. If we fail to qualify as a REIT in any taxable year and are unable to avail ourselves of certain savings provisions set forth in the Code, all of our taxable income would be subject to federal corporate tax, including any applicable alternative minimum tax for taxable years beginning beforeJanuary 1, 2018 . Unless entitled to relief under specific statutory provisions, we would be ineligible to elect to be treated as a REIT for the four taxable years following the year for which we lose our qualification. It is not possible to state whether in all circumstances we would be entitled to this statutory relief. 37 -------------------------------------------------------------------------------- Table of Contents RESULTS OF OPERATIONS In this section, we discuss the results of our operations for the year endedDecember 31, 2020 compared to the year endedDecember 31, 2019 . For a discussion of the year endedDecember 31, 2019 compared to the year endedDecember 31, 2018 , please refer to Part II, Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year endedDecember 31, 2019 . Years Ended December 31, (In Thousands) 2020 2019 Change % Change Revenues: Rental income$ 479,901 $ 438,691 $ 41,210 9.4 % Interest income on loans receivable 998 3,240 (2,242 ) (69.2 )% Earned income from direct financing leases 571 1,239 (668 ) (53.9 )% Related party fee income 678 69,218 (68,540 ) (99.0 )% Other income 1,469 4,039 (2,570 ) (63.6 )% Total revenues 483,617 516,427 (32,810 ) (6.4 )% Expenses: General and administrative 48,380 52,424 (4,044 ) (7.7 )% Termination of interest rate swaps - 12,461 (12,461 ) (100.0 )% Property costs (including reimbursable) 24,492 18,637 5,855 31.4 % Deal pursuit costs 2,432 844 1,588 NM Interest 104,165 101,060 3,105 3.1 % Depreciation and amortization 212,620 175,465 37,155 21.2 % Impairments 81,476 24,091 57,385 NM Total expenses 473,565 384,982 88,583 23.0 % Other income: Loss on debt extinguishment (7,227 ) (14,330 ) 7,103 (49.6 )% Gain on disposition of assets 24,156 58,850 (34,694 ) (59.0 )% Preferred dividend income from SMTA - 10,802 (10,802 ) (100.0 )% Total other income 16,929 55,322 (38,393 ) (69.4 )% Income before income tax expense 26,981 186,767 (159,786 ) (85.6 )% Income tax expense (273 ) (11,501 ) 11,228 (97.6 )% Net income$ 26,708 $ 175,266 $ (148,558 ) (84.8 )% NM - Percentages over 100% are not displayed. Changes related to operating properties Rental income; Property costs (including reimbursable); Depreciation and amortization The components of rental income are summarized below: Years Ended December 31, (In Thousands) 2020 2019 Base Cash Rent$ 453,013 $ 404,720 Variable cash rent (including reimbursables) 13,176
12,737
Straight-line rent, net of uncollectible reserve 11,876
16,924
Amortization of above- and below- market lease intangibles, net 1,836 4,310 Total rental income$ 479,901 $ 438,691
The increase in Base Cash Rent, the largest component of rental income, year-over-year was driven by our net acquisitions, which also was the driver for the increase in depreciation and amortization. We acquired 146 properties
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during 2020 with a total of $58.4 million of annual
in-place
rent (monthly fixed rent at date of transaction multiplied by 12). During the
same period, we disposed of 38 properties, 20 of which were vacant and the
remaining 18 had annual
in-place
rents of $4.5 million . Our acquisition and disposition activity for the year
ended December 31, 2020 is summarized below (in thousands):
[[Image Removed]]
The increase in Base Cash Rent due to net acquisitions was partially offset by
an increase in amounts deemed not probable of collection, driven by tenant
credit issues from the
COVID-19
pandemic, from a net recovery of $0.4 million for the year ended December 31,
2019 to a net reduction of $10.9 million for the year ended December 31, 2020 . A
majority of these tenant credit issues relate to tenants in the movie theater
industry and we expect movie theater operators to continue to face headwinds in
2021. The increase year-over-year was also reduced by $6.3 million of rent
abatements for the year ended December 31, 2020 , which were executed as relief
due to the
COVID-19
pandemic.
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.
As such, the change in variable cash rent is driven by the change in property
costs year-over-year. For the year ended December 31, 2020 , property costs
included $14.5 million of reimbursable expenses, compared to $14.9 million for
2019. As such, variable cash rent and reimbursable property costs remained
relatively flat year-over-year. The remaining $10.0 million of property costs
for the year ended December 31, 2020 were
non-reimbursable,
compared to $3.7 million for 2019. The increase in
non-reimbursable
costs of $6.3 million was driven by an increase in
non-reimbursable
property taxes of $3.7 million due to tenant credit issues from the
COVID-19
pandemic, as well as an increase in carrying costs of vacant properties of
$2.2 million due to a decreased average occupancy during 2020 compared to 2019.
Non-cash
rental income consists of straight-line rental revenue, amortization of above-
and below-market lease intangibles and bad debt expense.
Non-cash
rental income decreased period-over-period primarily as a result of a
$14.7 million increase in straight-line rental revenue deemed not probable of
collection, driven by tenant credit issues from the
COVID-19
pandemic. This was partially offset by an increase in straight-line rental
revenue of $9.7 million year-over-year as a result of acquisitions and lease
modifications.
Impairments
Impairments increased year-over-year on underperforming properties, with
$49.0 million of impairments recorded on 28 properties for the year ended
December 31, 2020 , compared to $18.6 million of impairments recorded on 27
properties in the comparative year. The increase was driven by multi-tenant
properties, as well as single occupant properties with tenants in the health and
fitness, casual dining and movie theater industries, all of which were
significantly impacted by the
COVID-19
pandemic.
Impairments also increased year-over-year on Vacant properties, with
$14.2 million of impairments recorded on eight properties for the year ended
December 31, 2020 , compared to $5.5 million of impairments recorded on seven
properties in the comparative year.
Finally, the increase in impairments year-over-year was caused by $18.2 million
of impairments recorded on lease intangible assets, primarily as a result of a
tenant bankruptcy that had credit issues prior to the
COVID-19
pandemic which resulted in the termination of the lease for four properties, and
$0.1 million of credit loss allowance on our direct financing lease during the
year ended December 31, 2020 , with no comparable impairments recognized in 2019.
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Gain on disposition of assets
Gain on disposition of assets decreased year-over-year. During the year ended
December 31, 2020 , we disposed of 38 properties and recorded net gains totaling
$24.2 million . There were $23.2 million in net gains on the sale of 18 active
properties and $1.3 million in net gains on the sale of 20 Vacant properties.
These gains were partially offset by a $0.2 million loss recorded on the sale of
a notes receivable and $0.1 million in other net losses.
During the year ended December 31, 2019 , we disposed of 44 properties and
recorded net gains totaling $58.9 million . There were $69.1 million in net gains
on the sale of 23 active properties and $1.5 million in net gains on the sale of
18 Vacant properties. One property was returned to the lender in conjunction
with CMBS debt extinguishment and two properties were leasehold interests that
were surrendered to the lessors, which did not result in a gain or loss on
disposition. Additionally, one building in a multi-tenant property was sold,
resulting in a net loss of $11.7 million , and the remaining stand-alone occupied
building of this property was retained.
Changes related to debt
Interest expense; Loss on debt extinguishment; Termination of interest rate
swaps
Our debt as of December 31, 2019 and 2020 is summarized below (in thousands):
[[Image Removed]]
In January 2019 , we terminated the 2015 Credit Agreement and the 2015 Term Loan
Agreement, resulting in a loss on debt extinguishment of $0.7 million , and
entered into the 2019 Revolving Credit and Term Loan Agreement, comprised of the
2019 Credit Facility and
A-1
Term Loans. We also simultaneously entered into delayed draw
A-2
Term Loans, which were drawn in May 2019 to repurchase the 2019 Convertible
Notes at their maturity.
In June 2019 , we issued the 2029 Senior Notes and extinguished the Master Trust
2013 notes, resulting in a loss on debt extinguishment of $15.0 million . In
September 2019 , we issued the 2027 Senior Notes and the 2030 Senior Notes.
Proceeds from these issuances were primarily utilized to terminate the
A-1
Term Loans and
A-2
Term Loans, which resulted in a loss on debt extinguishment of $5.3 million .
Additionally, during 2019, we extinguished two CMBS loans, resulting in a net
gain on debt extinguishment of $6.7 million .
During the first half of 2020, we entered into the 2020 Term Loans. In August
2020 , we issued $450.0 million of 2031 Senior Notes, which triggered a mandatory
repayment of $222.0 million of the 2020 Term Loans that resulted in a loss on
debt extinguishment of $1.0 million . Remaining proceeds from the 2031 Senior
Notes issuance were primarily utilized to repurchase $154.6 million of
Convertible 2021 Notes, resulting in a loss on debt extinguishment of
$6.2 million . Subsequent to December 31, 2020 , we repaid the remaining 2020 Term
Loans in full and expect to settle the remaining 2021 Convertible Notes in cash
during 2021.
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These changes in our debt structure resulted in an overall increase in our total
debt outstanding, but with a reduction in our weighted average interest rate
from 3.85% at December 31, 2019 to 3.64% at December 31, 2020 . As such, we had a
slight increase in total interest expense year-over-year:
Years Ended December 31,
(In Thousands) 2020 2019
Interest expense - revolving credit facilities
5,201
Interest expense - term loans 3,545
15,448
Interest expense - Senior Unsecured Notes 61,750
29,286
Interest expense - mortgages and notes payable 12,028
18,733
Interest expense - Convertible Notes 10,728
17,245
Interest expense - interest rate swaps - 972 Non-cash interest expense 12,428 14,175 Total interest expense$ 104,165 $ 101,060 Finally, inSeptember 2019 , we terminated our interest rate swaps, which were entered into as a hedge against our variable-rate debt, in conjunction with the repayment of the A-1 Term Loans and A-2 Term Loans. This termination resulted in a fee of$24.8 million . As we continued to hold variable-rate debt at time of termination, a portion of the hedged transactions remained probable to occur. Therefore, only$12.5 million was initially expensed and the remainder of the termination fee is being amortized over the remaining initial term of the interest rate swaps to interest expense. Changes related to SMTA Related party fee income; Preferred dividend income from SMTA; Income tax expense In conjunction with the Spin-Off, we entered into the Asset Management Agreement with SMTA pursuant to which we provided a management team responsible for implementing SMTA 's business strategy and performing certain services for SMTA. We also provided property management services and special services forMaster Trust 2014, which was contributed to SMTA as part of the Spin-Off. Upon SMTA's sale ofMaster Trust 2014 inSeptember 2019 , both the Asset Management Agreement and the Property Management and Servicing Agreement were terminated. We simultaneously entered into the Interim Management Agreement at a reduced annual rate, under which we agreed to manage and liquidate the remaining SMTA assets until its termination effectiveSeptember 4, 2020 . The following table summarizes our related party fee income under these agreements: Years Ended December 31, (In Thousands) 2020 2019 Management fees (1)$ 678 $ 15,635 Property management and special services fees -
5,427
Termination fee related to the Asset Management Agreement -
48,156
Total related party fee income$ 678
(1) Includes
Spirit for the year ended
Related party fee income was earned through a wholly-owned TRS and was subject to federal and state income tax. As such, the termination fee income earned in the third quarter of 2019 resulted in an increased income tax expense for the year endedDecember 31, 2019 . Additionally, as part of the Spin-Off, SMTA issued to us 10% Series A preferred shares, which generated$10.8 million of preferred dividend income for the year endedDecember 31, 2019 . InSeptember 2019 , in conjunction with SMTA's sale ofMaster Trust 2014, SMTA repurchased the preferred shares at their aggregate liquidation preference of$150.0 million . 41 -------------------------------------------------------------------------------- Table of Contents Changes related to general and administrative expenses Year-over-year general and administrative expenses decreased by$4.0 million , driven by a decrease in compensation expenses of$4.7 million , primarily as a result of decreased accruals for market-based and merit-based compensation, as well as a$0.7 million decrease in travel expenses as a result of the COVID-19 pandemic. Decreases year-over-year were partially offset by$1.7 million of expenses recognized during the year endedDecember 31, 2020 related to the COVID-19 pandemic, mainly as a result of increased legal fees for executing rent deferral and abatement agreements. LIQUIDITY AND CAPITAL RESOURCES Forward equity issuance InJune 2020 , we entered into forward sale agreements with certain financial institutions acting as forward purchasers in connection with an offering of 9.2 million shares of common stock at an initial public offering price of$37.35 per share, before underwriting discounts and offering expenses. The forward purchasers borrowed and sold an aggregate of 9.2 million shares of common stock in the offering. We did not receive any proceeds from the sale of our shares of common stock by the forward purchasers at the time of the offering. The forward sale price that we received upon physical settlement of the agreements, which was initially$35.856 per share, was 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. As ofDecember 31, 2020 , we had physically settled all 9.2 million of these shares for net proceeds of$319.1 million . ATM Program InNovember 2020 , the Board of Directors approved a new$500.0 million ATM program, and we terminated the 2016 ATM Program. Sales of shares of our common stock under the 2020 ATM Program may be made in sales deemed to be "at the market offerings" as defined in Rule 415 under the Securities Act. The 2020 ATM Program contemplates that, in addition to the issuance and sale by us of shares of our common stock to or through the agents, we may enter into separate forward sale agreements with one of the agents or one of their respective affiliates (in such capacity, each, a "forward purchaser" and, collectively, the "forward purchasers"). When we enter into a forward sale agreement with any forward purchaser, we expect that such forward purchaser will attempt to borrow from third parties and sell, through the relevant agent, acting as sales agent for such forward purchaser, shares of our common stock to hedge such forward purchaser's exposure under such 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 currently expect to fully physically settle any forward sale agreement with the relevant 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. 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. During the year endedDecember 31, 2020 , 7.1 million shares were sold under the ATM Programs, comprised of 3.6 million under the 2016 ATM Program and 3.5 million sold under the 2020 ATM Program. All of these sales were sold by forward purchasers through agents under the applicable ATM Program and pursuant to forward sales agreements. The forward sale price that we will 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. During the year endedDecember 31, 2020 , 2.9 million of these shares were physically settled for net proceeds of$109.2 million . As ofDecember 31, 2020 , there were 4.1 million shares remaining under open forward sales agreements. Assuming the full physical settlement of those open forward sales agreements, we have remaining capacity of$369.7 million under the 2020 ATM Program as ofDecember 31, 2020 . 42 -------------------------------------------------------------------------------- Table of Contents 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, when market conditions warrant, issuances of equity securities, including shares of our common stock under our 2020 ATM program. As ofDecember 31, 2020 , available liquidity was comprised of$70.3 million in cash and cash equivalents,$800.0 million of borrowing capacity under the 2019 Credit Facility and$13.0 million in restricted cash and restricted cash equivalents. Also, as ofDecember 31, 2020 , we had$151.5 million of expected proceeds available assuming the full physical settlement of our open forward equity contracts and remaining capacity of$369.7 million under our 2020 ATM Program. We believe that this available liquidity makes us well positioned to navigate any macroeconomic uncertainty resulting from the COVID-19 pandemic restrictions intended to prevent its spread. 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 ourOperating 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. Refer to "Part I, Item 1A. Risk Factors" for additional information about the potential impact of the COVID-19 pandemic and restrictions intended to prevent its spread on our business, financial condition, results of operations, cash flows, liquidity and ability to satisfy our debt service obligations and make distributions to our stockholders. 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. 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 As ofDecember 31, 2020 , the aggregate gross commitment under the 2019 Credit Facility was$800.0 million , which may be increased up to$1.2 billion by exercising an accordion feature, subject to satisfying certain requirements and obtaining additional lender commitments. The 2019 Credit Facility has a maturity ofMarch 31, 2023 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 defined in the 2019 Facilities Agreements). As ofDecember 31, 2020 , there were no subsidiaries that met this requirement. As ofDecember 31, 2020 , the 2019 Credit Facility bore interest at 1-Month LIBOR plus 0.90%, with no borrowings outstanding, and a ratings-based facility fee in the amount of 0.20% per annum. As ofDecember 31, 2020 , there were no letters of credit outstanding. Amounts available for borrowing under the 2019 Credit Facility remained subject to compliance with certain customary restrictive covenants including:
• Maximum leverage ratio (defined as consolidated total indebtedness of the
Company, net of certain cash and cash equivalents, to total asset value) of
0.60:1.00;
• Minimum fixed charge coverage ratio (defined as EBITDA of the Company, to
fixed charges) of 1.50:1.00;
• Maximum secured indebtedness leverage ratio (defined as consolidated
secured indebtedness of the Company, net of certain cash and cash
equivalents, to total asset value) of 0.50:1:00;
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• Minimum unsecured interest coverage ratio (defined as consolidated net
operating income from unencumbered properties, to unsecured interest
expense) of 1.75:1.00; and
• Maximum unencumbered leverage ratio (defined as consolidated unsecured
indebtedness of the Company, net of certain cash and cash equivalents, to
total unencumbered asset value) of 0.60:1:00.
In addition to these covenants, the 2019 Credit Agreement also included other customary affirmative and negative covenants, such as (i) limitation on liens and negative pledges; (ii) transactions with affiliates; (iii) limitation on mergers, consolidations and sales of all or substantially all assets; (iv) maintenance of status as a REIT and listing on any national securities exchange; and (v) material modifications to organizational documents. As ofDecember 31, 2020 , the Corporation and theOperating Partnership were in compliance with these covenants. 2020 Term Loans As ofDecember 31, 2020 ,$178.0 million was outstanding under the 2020 Term Loan Agreement. OnJanuary 4, 2021 , we repaid the 2020 Term Loans in full. The 2020 Term Loans had a maturity ofApril 2, 2022 and bore interest at a rate of LIBOR plus an applicable margin of 1.50% per annum. Senior Unsecured Notes As ofDecember 31, 2020 , we had the following Senior Unsecured Notes outstanding (dollars in thousands): Stated Interest December 31, Maturity Date Rate 2020 2026 Senior Notes September 15, 2026 4.45 %$ 300,000 2027 Senior Notes January 15, 2027 3.20 %$ 300,000 2029 Senior Notes July 15, 2029 4.00 %$ 400,000 2030 Senior Notes January 15, 2030 3.40 %$ 500,000 2031 Senior Notes February 15, 2031 3.20 %$ 450,000 Total Senior Unsecured Notes 3.61 %$ 1,950,000 Interest on the Senior Unsecured Notes is payable onJanuary 15 andJuly 15 of each year, except for the 2026 Senior Notes, for which interest is payable onMarch 15 andSeptember 15 of each year, and the 2031 Senior Notes, for which interest is payable onFebruary 15 andAugust 15 of each year. The Senior Unsecured Notes are redeemable in whole at any time or in part from time to time, at theOperating 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) prior to their respective maturity dates, the redemption price will not include a make-whole premium. The indentures governing the Senior Unsecured Notes subject the Corporation andOperating Partnership to certain customary restrictive covenants that limit their ability to incur additional indebtedness, including:
• Maximum leverage ratio (defined as consolidated total indebtedness, to
total consolidated undepreciated real estate assets plus the Company's
other assets, excluding accounts receivable and
non-real
estate intangibles) of 0.60:1.00;
• Minimum unencumbered asset coverage ratio (defined as total consolidated
undepreciated real estate assets plus the Company's other assets, excluding
accounts receivable and
non-real
estate intangibles, to consolidated total unsecured indebtedness) of
1.50:1:00;
• Maximum secured indebtedness leverage ratio (defined as consolidated total
secured indebtedness, to total consolidated undepreciated real estate
assets plus the Company's other assets, excluding accounts receivable and
non-real
estate intangibles) of 0.40:1.00; and
• Minimum fixed charge coverage ratio (defined as consolidated income
available for debt service, to the annual service charge) of 1.50:1.0.
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The indentures governing the Senior Unsecured Notes also include other customary
affirmative and negative covenants, including (i) maintenance of the
Corporation's existence; (ii) payment of all taxes, assessments and governmental
charges levied against the Corporation; (iii) reporting on financial
information; and (iv) maintenance of properties and insurance. As of
December 31, 2020 , the Corporation and the Operating Partnership were in
compliance with these covenants.
CMBS
In general, the obligor of our asset level debt is a special purpose entity that
holds 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 December 31, 2020 , we had five fixed-rate CMBS loans with $214.2 million
of aggregate outstanding principal, a weighted-average contractual interest rate
of 5.47% and a weighted-average maturity of 2.8 years. Approximately 86.93% of
this debt is partially amortizing and requires a balloon payment at maturity.
The following table shows the scheduled principal repayments, including
amortization, of the CMBS fixed-rate loans as of December 31, 2020 (dollars in
thousands):
Weighted
Number of Number of Stated Interest Average Stated Scheduled Year of Maturity Loans Properties Rate Range Rate Principal Balloon Total 2021 - - -% - %$ 4,365 $ -$ 4,365 2022 - - -% - 4,617 - 4,617 2023 3 86 5.23%-5.50% 5.46 3,074 197,912 200,986 2024 - - -% - 590 - 590 2025 1 1 6.00% 6.00 610 16 626 Thereafter 1 1 5.80% 5.80 3,000 53 3,053 Total 5 88 5.47 %$ 16,256 $ 197,981 $ 214,237 Convertible Notes As ofDecember 31, 2020 , the Convertible Notes were comprised of$190.4 million aggregate principal amount of 3.75% convertible notes maturing onMay 15, 2021 . Interest on the 2021 Notes is payable semi-annually in arrears onMay 15 andNovember 15 of each year. Holders may convert the 2021 Notes prior toNovember 15, 2020 only under specific circumstances: (i) if the closing price of our common stock for each of the last 20 trading days (whether or not consecutive) during the last 30 consecutive trading days in the quarter is greater than or equal to 130% of the conversion price for the Convertible Notes; (ii) during the five business day period after any 10 consecutive trading day period in which the trading price per$1,000 principal amount of the Convertible Notes for each trading day of the measurement period was less than 98% of the product of the last closing price of our common stock and the conversion rate for the Convertible Notes; (iii) if we call any or all of the Convertible Notes for redemption prior to the redemption date; or (iv) upon the occurrence of specified corporate events as described in the Convertible Notes prospectus supplement. FromNovember 15, 2020 to the close of business on the second scheduled trading day immediately preceding the maturity date of the 2021 Notes, holders may convert the 2021 Notes at any time, regardless of the foregoing circumstances. Upon conversion, we will pay or deliver cash, shares of common stock or a combination of cash and shares of common stock, at our election. The conversion rate is subject to adjustment for some events, including dividends paid in excess of threshold amounts stipulated in the agreement, but will not be adjusted for any accrued and unpaid interest. As ofDecember 31, 2020 , the conversion rate was 17.4458 per$1,000 principal note. If we undergo a fundamental change (as defined in the 2021 Notes' supplemental indenture), holders may require us to repurchase all or any portion of their notes at a repurchase price equal to 100% of the principal amount of such notes to be repurchased, plus accrued and unpaid interest. 45 -------------------------------------------------------------------------------- Table of Contents Debt Maturities Future principal payments due on our various types of debt outstanding as ofDecember 31, 2020 (in thousands): Total 2021 2022 2023 2024 2025 Thereafter 2019 Credit Facility $ - $ - $ - $ - $ - $ - $ - 2020 Term Loans 178,000 - 178,000 - - - - Senior Unsecured Notes 1,950,000 - - - - - 1,950,000 CMBS 214,237 4,365 4,617 200,986 590 626 3,053 Convertible Notes 190,426 190,426 - - - - -$ 2,532,663 $ 194,791 $ 182,617 $ 200,986 $ 590 $ 626 $ 1,953,053 Contractual Obligations The following table provides information with respect to our commitments, including acquisitions under contract, as ofDecember 31, 2020 (in thousands): Contractual Obligations Payment due by period 1-3 3-5 Total Less than 1 year years years More than 5 years Debt - Principal$ 2,532,663 $ 194,791
(1) 606,997 85,958 160,908 141,125 219,006
Acquisitions Under Contract
(2) 47,985 47,985 - - - Capital Improvements 12,655 12,404 251 - - Operating Lease Obligations 7,818 1,301 2,457 2,476 1,584 Total$ 3,208,118 $ 342,439$ 547,219 $ 144,817 $ 2,173,643 (1) Debt - Interest has been calculated based on outstanding balances as ofDecember 31, 2020 through their respective maturity dates and excludes unamortized non-cash
deferred financing costs of
of $7.8 million .
(2) Contracts contain standard cancellation clauses contingent on results of due
diligence.
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. Under
the 2017 Tax Legislation, 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. Refer to "Part I, Item 1A. Risk Factors" for additional
information about the potential impact of the
COVID-19
pandemic and restrictions intended to prevent its spread on our business,
financial condition, results of operations, cash flows, liquidity and ability to
satisfy our debt service obligations and make distributions to our stockholders.
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CASH FLOWS
In this section, we discuss our cash flows for the year ended December 31, 2020
compared to the year ended December 31, 2019 . For a discussion of the year ended
December 31, 2019 compared to the year ended December 31, 2018 , please refer to
Part II, Item 7, "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, 2019 .
The following table presents a summary of our cash flows for the years ended
December 31, 2020 and 2019 (in thousands):
Years Ended December 31,
2020 2019 Change
Net cash provided by operating activities
(747,750 ) (894,999 ) 147,249
Net cash provided by financing activities 490,713 504,548 (13,835 )
Net increase (decrease) in cash, cash
equivalents and restricted cash $ 57,275 $
(51,398 )
As ofDecember 31, 2020 , we had$83.3 million of cash, cash equivalents, and restricted cash as compared to$26.0 million as ofDecember 31, 2019 . Operating Activities Our cash flows from operating activities are primarily dependent upon the occupancy level of our portfolio, the rental rates specified in our leases, the collectability of rent and the level of our operating expenses and other general and administrative costs. The decrease in net cash provided by operating activities was primarily attributable to the following:
• a decrease in related party fee income of
primarily attributable to the
connection with the termination of the Asset Management Agreement in
• a decrease in preferred dividends received from SMTA of
result of SMTA repurchasing the preferred shares in
• an increase in cash interest paid of
the 2027 Senior Notes, 2029 Senior Notes, 2030 Senior Notes, and 2031
Senior Notes.
The decrease was partially offset by the following:
• termination fee costs of
rate swaps in 2019,
• a decrease in cash taxes paid of
decrease in taxable income in 2020 and sale of MTA, and
• a net increase in cash rental revenue of
acquisitions over the trailing twelve month period, partially offset by
year ended December 31, 2020 as a result of the
COVID-19
pandemic.
Investing Activities
Cash used in investing activities is generally used to fund property
acquisitions, for investments in loans receivable and for capital expenditures.
Cash provided by investing activities generally relates to the disposition of
real estate and other assets.
Net cash used in investing activities during the year ended December 31, 2020
included $867.5 million for the acquisition of 146 properties and $12.7 million
of capitalized real estate expenditures. These outflows were partially offset by
$100.6 million in net proceeds from the disposition of 38 properties and the
sale of one loan receivable. Additionally, the outflows were further offset by
the collection of $31.8 million of principal on loans receivable, which includes
$28.7 million for the paydown of the outstanding loan balances.
During the same period in 2019, net cash used in investing activities included
$1.3 billion for the acquisition of 334 properties and $47.7 million of
capitalized real estate expenditures. These outflows were partially offset by
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$253.6 million in net proceeds from the disposition of 44 properties,
$150.0 million in proceeds from redemption of preferred equity investment in
SMTA, $33.5 million in collections of the Master Trust Notes and $11.0 million
in collections of principal on loans receivable and real estate assets under
direct financing leases.
Financing Activities
Generally, our net cash provided by or used in financing activities is impacted
by our borrowings under our revolving credit facilities and term loans,
issuances of
net-lease
mortgage notes, common stock and debt offerings and repurchases and dividend
payments on our common and preferred stock.
Net cash provided by financing activities during the year ended December 31,
2020 was primarily attributable to borrowings of $445.5 million under senior
unsecured notes, net proceeds from the issuance of common stock of
$428.3 million and net borrowings of $178.0 million under term loans. These
amounts were partially offset by payment of dividends to equity owners of
$270.8 million , repayment of $154.6 million on convertible notes, net repayments
of $116.5 million on our revolving credit facilities, deferred financing costs
of $6.6 million , common stock repurchases for employee tax withholdings totaling
$4.4 million , repayment of $4.1 million on mortgages and notes payable and debt
extinguishment costs of $4.0 million .
During the same period in 2019, net cash provided by financing activities was
primarily attributable to borrowings of $1.2 billion under senior unsecured
notes and net proceeds from the issuance of common stock of $677.4 million .
These amounts were partially offset by net payments on the convertible notes,
term loans, mortgages and notes payable, and revolving credit facilities of
$402.5 million , $420.0 million , $242.0 million , and $29.8 million , respectively.
Additionally, there were debt extinguishment costs of $15.3 million and deferred
financing costs of $22.1 million during 2019. Payment of dividends to equity
owners during 2019 was $236.9 million , and the common stock share repurchase for
employee tax withholdings totaled $2.5 million .
Non-GAAP
Financial Measures
FFO AND AFFO
We calculate FFO in accordance with the standards established by NAREIT. FFO
represents 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. 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.
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, such as transactions costs
associated with our
Spin-Off,
default interest and fees on
non-recourse
mortgage indebtedness, debt extinguishment gains (losses), costs associated with
termination of interest rate swaps, costs associated with performing on a
guarantee of a former tenant's debt, and certain
non-cash
items. These certain
non-cash
items include
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),
non-cash
interest expense (comprised of amortization of deferred financing costs and
amortization of net debt discount/premium) and
non-cash
compensation expense.
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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, 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.
EBITDA
re,
Adjusted EBITDA
re
and Annualized Adjusted EBITDA
re
EBITDAre is a
non-GAAP
financial measure and is computed in accordance with standards established by
NAREIT. EBITDAre is computed 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 impairments of depreciated property.
Adjusted EBITDAre represents EBITDAre as adjusted for revenue producing
acquisitions and dispositions for the quarter as if such acquisitions and
dispositions had occurred as of the beginning of the quarter and for certain
items that we believe are not indicative of our core operating performance, such
as transactions costs associated with our
Spin-Off,
debt extinguishment gains (losses), and costs associated with performing on a
guarantee of a former tenant's debt. 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, 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) (computed in accordance
with GAAP) as a performance measure.
Annualized Adjusted EBITDAre is calculated as Adjusted EBITDAre for the quarter,
adjusted for amounts deemed not probable of collection (recoveries) for
straight-line rent related to prior periods 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 EBITDA
re
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 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. A
reconciliation of interest-bearing debt (computed in accordance with GAAP) to
Adjusted Debt is included in the financial information accompanying this report.
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FFO and AFFO
Years Ended December 31,
(Dollars in thousands, except per share
data) 2020 2019 2018
Net income attributable to common
stockholders $ 16,358 $ 164,916 $ 121,700
Portfolio depreciation and amortization 212,038 174,895 197,346
Portfolio impairments 81,476 24,091 17,668
Gain on disposition of assets (24,156 ) (58,850 ) (14,355 )
FFO attributable to common stockholders $ 285,716 $ 305,052 $ 322,359
Loss (gain) on debt extinguishment 7,227 14,330 (26,729 )
Deal pursuit costs 2,432 844 549
Transaction costs - - 21,391
Non-cash
interest expense 12,428 14,175 22,866
Accrued interest and fees on defaulted
loans - 285 1,429
Straight-line rent, net of related bad debt
expense (11,876 ) (16,924 ) (15,382 )
Other amortization and
non-cash
charges (918 ) (2,769 ) (2,434 )
Swap termination costs - 12,461 -
Non-cash
compensation expense 12,640 14,277 15,114
Other G&A costs associated with
Spin-Off - - 1,841
Other expense - - 5,319
Costs related to
COVID-19
(1) 1,798 - -AFFO attributable to common stockholders
(2)$ 309,447 $
341,731
Net income per share of common stock - diluted$ 0.15 $
1.81
FFO per share of common stock - diluted
(3)$ 2.73 $
3.34
AFFO per share of common stock - diluted
(3)$ 2.95 $
3.75
AFFO per share of common stock, excluding AM termination fee and Haggen settlement (3)(4)$ 2.95 $
3.34
Weighted average shares of common stock
outstanding - diluted 104,535,384 90,869,312 86,476,449
(1) Costs related to
COVID-19are included in general and administrative expense and primarily relate to
legal fees for executing rent deferral or abatement agreements.
(2) AFFO for the year ended
rental income recognized in conjunction with the FASB's relief for deferral
agreements extended as a result of the
COVID-19
pandemic.
(3) 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:
Years Ended December 31,
2020 2019 2018
FFO $ 0.8 million $ 1.2 million $ 1.4 million
AFFO $ 0.9 million $ 1.4 million $ 1.5 million (4) AFFO attributable to common stockholders for the year ended
2019, excluding
in income tax expense. The termination fee was received in conjunction with
SMTA's sale of
Asset Management Agreement on
stockholders has not been adjusted to exclude the following amounts for the
year ended
(ii) property management and servicing fees of
dividend income from SMTA
party notes receivable of
$0.2 million .
AFFO attributable to common stockholders for the year ended
excludes proceeds from the Haggen settlement of $19.1 million .
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Adjusted Debt, Adjusted EBITDAre and Annualized Adjusted EBITDAre
December 31,
(Dollars in thousands) 2020 2019
Revolving credit facilities $ - $ 116,500
Term loans 177,309 -
Senior Unsecured Notes, net 1,927,348 1,484,066
Mortgages and notes payable, net 212,582 216,049
Convertible Notes, net 189,102 336,402
Total debt, net 2,506,341 2,153,017
Unamortized debt discount, net 7,807 9,272
Unamortized deferred financing costs 18,515 17,549
Cash and cash equivalents (70,303 ) (14,492 )
Restricted cash balances held for the benefit of lenders (12,995 ) (11,531 )
Adjusted Debt $ 2,449,365 $ 2,153,815
Three Months
Ended December 31,
(Dollars in thousands) 2020 2019
Net income $ 29,170 $ 4,657
Interest 26,307 24,598
Depreciation and amortization 55,054 48,867
Income tax benefit (133 ) (229 ) (Gain) loss on disposition of assets (12,347 ) 11,910 Portfolio impairments 11,547 10,860 EBITDA re$ 109,598 $ 100,663 Adjustments to revenue producing acquisitions and dispositions 4,596
6,881
Deal pursuit costs 802
270
(Gain) loss on debt extinguishment (25 ) 2,857 Costs related to COVID-19 (1) 358 - Adjusted EBITDA re$ 115,329 $ 110,671 Adjustments related to straight-line rent (2) (506 ) - Other adjustments for Annualized Adjusted EBITDA re (3) 397 58 Annualized Adjusted EBITDA re$ 460,880 $ 442,916 Adjusted Debt / Annualized Adjusted EBITDA re (4) 5.3x 4.9x (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 relates to recoveries on straight-line rent receivable balances
deemed not probable of collection in previous periods.
(3) Adjustments for the three months ended
annualization would not be appropriate are comprised of certain recoveries
related to prior period amounts (rent deemed not probable of collection,
abatements, property costs and tax expenses) and certain general and
administrative expenses. For the same period in 2019, adjustments are
composed of certain other income,
write-offof intangibles and other compensation-related adjustments where annualization
would not be appropriate.
(4) Adjusted Debt / Annualized Adjusted EBITDA
re
would be 5.0x if the 4.1 million shares under open forward sales agreements
had been settled as of December 31, 2020 .
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