Spirit Realty Capital(SRC) - 2023 Q3 - Quarterly Report

Report Information This section provides essential filing details for the Quarterly Report on Form 10-Q, including registrant status, stock information, and outstanding shares - This is a Quarterly Report (Form 10-Q) filed by SPIRIT REALTY CAPITAL, INC. for the quarterly period ended September 30, 2023[1][2] - The registrant is a Large accelerated filer and has filed all required reports and submitted Interactive Data Files during the preceding 12 months[4] - As of October 30, 2023, 141,331,218 shares of common stock were outstanding[4] | Title of each class | Trading Symbol(s) | Name of each exchange on which registered | | :-------------------------------- | :---------------- | :---------------------------------------- | | Common stock, par value $0.05 per share | SRC | New York Stock Exchange | | 6.000% Series A Cumulative Redeemable Preferred Stock, par value $0.01 per share | SRC-A | New York Stock Exchange | Glossary This section defines key financial and operational terms used throughout the report, including debt facilities, financial measures, and rental metrics - The glossary defines key terms used in the report, covering debt facilities, financial measures like AFFO and FFO, and operational metrics such as Annualized Base Rent (ABR)[8][9] PART I — FINANCIAL INFORMATION This part presents the unaudited financial statements and management's discussion and analysis of the company's financial condition and results of operations Item 1. Financial Statements (Unaudited) This section presents the unaudited consolidated financial statements for the period ended September 30, 2023, including balance sheets, statements of operations, comprehensive income, stockholders' equity, cash flows, and detailed notes Consolidated Balance Sheets This section provides a snapshot of the company's financial position, detailing assets, liabilities, and stockholders' equity as of September 30, 2023, and December 31, 2022 | Metric (in thousands) | September 30, 2023 | December 31, 2022 | Change (2023 vs 2022) | | :------------------------------------ | :------------------- | :------------------ | :-------------------- | | Total assets | $8,650,208 | $8,472,866 | +$177,342 | | Total liabilities | $4,157,415 | $3,911,550 | +$245,865 | | Total stockholders' equity | $4,492,793 | $4,561,316 | -$68,523 | | Total debt, net | $3,820,248 | $3,575,309 | +$244,939 | | Cash and cash equivalents | $134,166 | $8,770 | +$125,396 | | Real estate assets held for investment, net | $7,468,643 | $7,421,306 | +$47,337 | Consolidated Statements of Operations This section presents the company's revenues, expenses, and net income for the three and nine months ended September 30, 2023, compared to the prior year - Net income attributable to common stockholders decreased by 51.5% for the three months and 12.8% for the nine months ended September 30, 2023, compared to 2022[15] - Total expenses increased significantly, primarily due to a substantial rise in impairments ($19.2 million vs $1.6 million for Q3, $36.1 million vs $11.1 million for 9M) and interest expense ($36.9 million vs $31.0 million for Q3, $105.0 million vs $84.6 million for 9M)[15] | Metric (in thousands, except per share) | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :-------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Total revenues | $193,375 | $182,904 | $570,965 | $526,235 | | Total expenses | $158,333 | $129,305 | $447,839 | $378,773 | | Net income | $38,468 | $76,640 | $188,822 | $215,436 | | Net income attributable to common stockholders | $35,881 | $74,053 | $181,059 | $207,673 | | Basic EPS | $0.25 | $0.54 | $1.28 | $1.56 | | Diluted EPS | $0.25 | $0.54 | $1.28 | $1.56 | | Dividends declared per common share | $0.6696 | $0.6630 | $1.9956 | $1.9390 | Consolidated Statements of Comprehensive Income This section presents the company's comprehensive income, including net income and other comprehensive income items, for the three and nine months ended September 30, 2023 - Total comprehensive income decreased significantly, primarily due to a lower net income attributable to common stockholders and a reduction in net reclassification of amounts from Accumulated Other Comprehensive Income/Loss (AOCIL) compared to the prior year[17] | Metric (in thousands) | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :------------------------------------ | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net income attributable to common stockholders | $35,881 | $74,053 | $181,059 | $207,673 | | Net reclassification of amounts from AOCIL | $8,260 | $40,204 | $21,208 | $41,608 | | Total comprehensive income | $44,141 | $114,257 | $202,267 | $249,281 | Consolidated Statements of Stockholders' Equity This section details changes in the company's stockholders' equity, including common stock, accumulated deficit, and other comprehensive income, as of September 30, 2023 - Total stockholders' equity decreased by $68.5 million from December 31, 2022, to September 30, 2023, primarily because dividends declared on common stock ($282.0 million) exceeded net income attributable to common stockholders ($181.1 million) and other comprehensive income[19] | Metric (in thousands) | September 30, 2023 | December 31, 2022 | | :------------------------------------ | :------------------- | :------------------ | | Total Stockholders' Equity | $4,492,793 | $4,561,316 | | Accumulated Deficit | $(3,036,475) | $(2,931,640) | | Accumulated Other Comprehensive Income | $55,296 | $34,088 | | Common Stock Shares Outstanding | 141,331,218 | 141,231,219 | Consolidated Statements of Cash Flows This section outlines the company's cash inflows and outflows from operating, investing, and financing activities for the nine months ended September 30, 2023 - Net cash provided by operating activities increased by $34.7 million, while net cash used in investing activities decreased significantly by $752.5 million, primarily due to fewer acquisitions and higher proceeds from dispositions[24][143][144] - Net cash from financing activities shifted from a $755.7 million inflow in 2022 to a $46.4 million outflow in 2023, mainly due to no common stock issuances in 2023 (vs. $531.6 million in 2022) and a net decrease in debt financing[24][149] | Metric (in thousands) | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :------------------------------------ | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $373,548 | $338,885 | | Net cash used in investing activities | $(250,058) | $(1,002,541) | | Net cash (used in) provided by financing activities | $(46,422) | $755,686 | | Net increase in cash, cash equivalents and restricted cash | $77,068 | $92,030 | | Cash, cash equivalents and restricted cash, end of period | $139,021 | $109,829 | Notes to Consolidated Financial Statements This section provides detailed explanations and disclosures supporting the consolidated financial statements, covering accounting policies, investments, debt, equity, and other financial aspects NOTE 1. ORGANIZATION Spirit Realty Capital, Inc. operates as a self-managed REIT, investing in single-tenant, operationally essential real estate in the U.S. through long-term, triple-net leases - The Company operates as a self-administered and self-managed REIT, focusing on single-tenant, operationally essential real estate in the U.S. with long-term, triple-net leases[29] - The Corporation owns approximately 99% of the Operating Partnership, Spirit Realty, L.P., through which its operations are primarily carried out[30] NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This note outlines significant accounting policies, including GAAP accrual basis, consolidation principles, revenue recognition for rental and interest income, and policies for cash, taxes, and EPS - The Company prepares consolidated financial statements on the accrual basis, in accordance with GAAP, consolidating the Corporation and its wholly-owned subsidiaries, including the Operating Partnership[31][32] - Rental income from long-term, triple-net operating leases is recognized on a straight-line basis for fixed escalators, with variable rent recognized when changes occur and tenant reimbursement revenue recognized when expenses are incurred[36][37][40] - The Corporation has elected to be taxed as a REIT and believes it qualifies, thus generally not subject to federal income tax[48] | Cash Component (in thousands) | September 30, 2023 | December 31, 2022 | | :------------------------------ | :------------------- | :------------------ | | Cash and cash equivalents | $134,166 | $8,770 | | Restricted cash: 1031 Exchange proceeds | $4,210 | $53,183 | | Restricted cash: Tenant security deposits | $645 | — | | Total cash, cash equivalents and restricted cash | $139,021 | $61,953 | NOTE 3. INVESTMENTS This note details the company's real estate investments, including owned properties, leases, and loans receivable, summarizing activity, rental income, lease intangibles, impairments, and credit losses - As of September 30, 2023, the Company's gross investment in owned real estate properties totaled $9.4 billion, geographically dispersed across 49 states, with Texas representing 15.7% of the total gross investment[53] - The Company recorded significant allowances for loan losses in 2023, totaling $16.7 million for the nine months ended September 30, 2023, primarily due to changes in borrowers' financial positions[64][65][66][67] | Real Estate Activity (Nine Months Ended Sep 30, 2023, in thousands) | Number of Properties | Dollar Amount of Investments | | :-------------------------------------------------- | :------------------- | :--------------------------- | | Gross balance, December 31, 2022 | 2,115 | $9,183,744 | | Acquisitions/improvements | 30 | $497,876 | | Dispositions of real estate | (108) | $(250,852) | | Transfers to Held for Sale | — | — | | Impairments | — | $(19,331) | | Gross balance, September 30, 2023 | 2,037 | $9,385,094 | | Rental Income Component (in thousands) | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Base Cash Rent | $173,569 | $162,467 | $516,486 | $471,052 | | Variable cash rent (including reimbursables) | $6,331 | $6,479 | $18,385 | $19,713 | | Straight-line rent, net of uncollectible reserve | $8,227 | $10,875 | $26,127 | $28,465 | | Amortization of above- and below-market lease intangibles, net | $78 | $475 | $767 | $1,700 | | Total rental income | $188,205 | $180,296 | $561,765 | $520,930 | NOTE 4. DEBT This note summarizes the company's debt, including credit facilities, term loans, Senior Unsecured Notes, and mortgages payable, detailing interest rates, maturities, and interest expense components - As of September 30, 2023, the Company had $1.2 billion of borrowing capacity available under the 2019 Credit Facility with no outstanding borrowings, and $200.0 million available under the delayed-draw 2023 Term Loans[74][76] | Debt Type (in thousands) | September 30, 2023 | December 31, 2022 | | :----------------------- | :------------------- | :------------------ | | Revolving credit facilities | $0 | $55,500 | | Term loans, net | $1,090,198 | $792,309 | | Senior Unsecured Notes, net | $2,725,505 | $2,722,514 | | Mortgages payable, net | $4,545 | $4,986 | | Total debt, net | $3,820,248 | $3,575,309 | | Weighted Average Effective Interest Rates (9M 2023) | 3.68% | N/A | | Debt Maturity (in thousands) | Total | | :--------------------------- | :---- | | Remainder of 2023 | $141 | | 2024 | $590 | | 2025 | $600,626 | | 2026 | $300,469 | | 2027 | $800,497 | | Thereafter | $2,152,087 | | Total | $3,854,410 | | Interest Expense Component (in thousands) | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :---------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Revolving credit facilities | $612 | $3,550 | $4,237 | $8,520 | | Term loans | $10,857 | $2,940 | $25,589 | $2,940 | | Senior Unsecured Notes | $22,313 | $22,313 | $66,939 | $66,939 | | Mortgages payable | $65 | $73 | $201 | $225 | | Non-cash amortization (deferred financing costs, debt discount, interest rate swaps) | $3,357 | $2,495 | $9,032 | $6,690 | | Capitalized interest | $(285) | $(415) | $(1,005) | $(741) | | Total interest expense | $36,919 | $30,956 | $104,993 | $84,573 | NOTE 5. STOCKHOLDERS' EQUITY This note details changes in stockholders' equity, including common stock activity under the 2021 ATM Program, preferred stock outstanding, and dividends declared for both common and preferred shares - As of September 30, 2023, approximately $208.7 million of capacity remained available under the 2021 ATM Program, with no shares sold during the nine months ended September 30, 2023[86] - The Company had 6.9 million shares of Series A Preferred Stock outstanding, paying cumulative cash dividends of 6.00% per annum ($1.50 per share annually)[87] | Dividend Type | Declaration Date | Dividend Per Share | Total Amount (in thousands) | | :-------------- | :--------------- | :----------------- | :-------------------------- | | Common Stock | Feb 22, 2023 | $0.6630 | $93,675 | | Common Stock | May 3, 2023 | $0.6630 | $93,700 | | Common Stock | Aug 9, 2023 | $0.6696 | $94,635 | | Preferred Stock | Feb 22, 2023 | $0.3750 | $2,588 | | Preferred Stock | May 3, 2023 | $0.3750 | $2,588 | | Preferred Stock | Aug 9, 2023 | $0.3750 | $2,587 | NOTE 6. COMMITMENTS AND CONTINGENCIES This note addresses the company's legal proceedings, environmental remediation, and capital commitments, confirming no material outstanding claims or environmental liabilities as of September 30, 2023 - As of September 30, 2023, there were no outstanding claims or litigation expected to have a material adverse effect on the Company's financial position, results of operations, or cash flows[90] - The Company had commitments totaling $138.1 million as of September 30, 2023, with $12.2 million for future acquisitions and the remainder for property improvements, with $20.6 million expected to be funded by year-end 2023[92] NOTE 7. DERIVATIVE AND HEDGING ACTIVITIES This note describes the company's use of interest rate derivative contracts as cash flow hedges to manage variable interest rate exposure, detailing their fair value and impact on AOCIL and operations - The Company uses interest rate derivative contracts (swaps) to manage interest rate risk on variable-rate debt, designating them as cash flow hedges[93] - For the nine months ended September 30, 2023, $21.2 million was recorded in AOCIL related to cash flow hedge derivatives, with an estimated $28.8 million expected to be reclassified as a decrease to interest expense in the next 12 months[97] | Interest Rate Swap (in thousands) | Notional Amount | Fixed Interest Rate | Maturity Date | Fair Value of Asset (Sep 30, 2023) | | :-------------------------------- | :-------------- | :------------------ | :------------ | :--------------------------------- | | Swap 1 | $300,000 | 2.501% | Aug 22, 2027 | $20,340 | | Swap 2 | $200,000 | 2.507% | Aug 22, 2027 | $13,478 | | Swap 3 | $300,000 | 2.636% | Aug 22, 2025 | $12,403 | | Swap 4 | $300,000 | 3.769% | Jun 15, 2025 | $6,090 | | Swap 5 | $200,000 | 3.590% | Jun 15, 2025 | $3,921 | | Total | $1,300,000 | | | $56,232 | NOTE 8. FAIR VALUE MEASUREMENTS This note provides fair value measurements for the company's financial instruments, including recurring interest rate swaps and nonrecurring impaired real estate assets, along with estimated fair values of loans and debt - As of September 30, 2023, the Company held 15 properties impaired during 2023, with fair values estimated using unobservable inputs like price per square foot from PSAs, LOIs, BOVs, or comparable properties[100] | Description | Fair Value (Sep 30, 2023, in thousands) | Fair Value Hierarchy Level | | :------------------------ | :-------------------------------------- | :------------------------- | | Interest rate swap assets | $56,232 | Level 2 | | Impaired properties (2023) | $38,284 | Level 3 | | Loans receivable, net | $51,747 | N/A | | Term loans, net | $1,100,705 | Level 2 | | Senior Unsecured Notes, net | $2,339,854 | Level 1 | | Mortgages payable, net | $4,229 | Level 2 | NOTE 9. INCENTIVE AWARD PLAN This note details the company's Amended Incentive Award Plan, covering restricted share and market-based awards granted to officers, directors, and employees, including grants, valuation, and compensation expense - During the nine months ended September 30, 2023, the Company granted 139 thousand restricted shares and 189 thousand target market-based awards[104][105] - Stock-based compensation expense for the nine months ended September 30, 2023, was $15.1 million, an increase from $12.8 million in the prior year[107] | Unamortized Stock-Based Compensation (in thousands) | September 30, 2023 | December 31, 2022 | | :-------------------------------------------------- | :------------------- | :------------------ | | Restricted share awards | $5,700 | $4,727 | | Market-based awards | $18,625 | $15,165 | | Total | $24,325 | $19,892 | NOTE 10. INCOME PER SHARE This note reconciles the numerator and denominator for basic and diluted net income per share, computed using the two-class method - Diluted EPS decreased from $0.54 to $0.25 for the three months and from $1.56 to $1.28 for the nine months ended September 30, 2023, compared to the same periods in 2022[109] | Metric | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :-------------------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net income attributable to common stockholders used in basic and diluted income per share (in thousands) | $35,743 | $73,911 | $180,647 | $207,261 | | Basic weighted average shares of common stock outstanding | 141,124,401 | 136,314,369 | 141,094,907 | 132,835,210 | | Diluted weighted average shares of common stock outstanding | 141,149,865 | 136,314,369 | 141,103,395 | 132,965,297 | | Net income per share attributable to common stockholders - basic | $0.25 | $0.54 | $1.28 | $1.56 | | Net income per share attributable to common stockholders - diluted | $0.25 | $0.54 | $1.28 | $1.56 | NOTE 11. SUBSEQUENT EVENTS This note discloses a significant subsequent event: Spirit Realty Capital, Inc. entered into a Merger Agreement with Realty Income Corporation on October 29, 2023, expected to close in Q1 2024 - On October 29, 2023, Spirit Realty Capital, Inc. entered into a Merger Agreement with Realty Income Corporation[110] - Spirit common stock will convert into 0.762 shares of Realty Income common stock, and Spirit Series A Preferred Stock will convert into Realty Income Series A Preferred Stock with substantially similar terms[111] - The merger is subject to Spirit's shareholder approval and is expected to close during the first quarter of 2024[113] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's discussion and analysis of the company's financial condition and results, covering business strategy, accounting policies, liquidity, operations, and property portfolio Special Note Regarding Forward-looking Statements This section highlights that the report contains forward-looking statements subject to risks and uncertainties, where actual results may differ materially from predictions - The report contains forward-looking statements subject to numerous risks and uncertainties, and actual results may differ materially from predictions[115][116] - Key risks include industry and economic conditions, financial market volatility, business strategy success, tenant financial performance, interest rate changes, access to capital markets, and maintaining REIT qualification[117][118] Overview This section provides an overview of Spirit Realty Capital, Inc. as an internally-managed net-lease REIT, its diversified property portfolio, and operational structure - Spirit Realty Capital, Inc. is an internally-managed net-lease REIT focused on single-tenant, operationally essential real estate in the U.S., leased on a long-term, triple-net basis[119] - As of September 30, 2023, the Company owned a diversified portfolio of 2,037 properties operated by 338 tenants, with in-place Annualized Base Rent (ABR) of $690.1 million[120] - The Company operates through Spirit Realty, L.P., where the Corporation and a subsidiary collectively own 99% of the Operating Partnership[121] Critical Accounting Policies and Estimates This section states that financial statement preparation requires management judgment in applying accounting policies and estimates, with no material changes during the reporting period - The preparation of financial statements requires management judgment in applying accounting policies and making estimates, with no material changes to these policies during the reporting periods[122] Supplemental Guarantor Disclosures This section notes that the Company and Operating Partnership's debt securities are guaranteed by the Company, and summarized financial information is excluded due to immaterial differences from consolidated statements - The Company and the Operating Partnership have debt securities (Senior Unsecured Notes) guaranteed by the Company on a senior, full, and unconditional basis[124] - Summarized financial information for the Company and Operating Partnership is excluded because their assets, liabilities, and results of operations are not materially different from the consolidated financial statements[125] Liquidity and Capital Resources This section discusses the company's short-term and long-term liquidity strategies, funding sources, debt instruments, maturities, cash flow changes, and REIT distribution policy - As of September 30, 2023, available liquidity included $134.2 million in cash, $4.2 million in 1031 Exchange proceeds, $1.2 billion borrowing capacity under the 2019 Credit Facility, and $200.0 million under the delayed-draw 2023 Term Loans[129] - Long-term capital needs are planned to be met through registered debt or equity securities, asset-level financing, and fixed-rate secured or unsecured notes and bonds[130] - Net cash provided by operating activities increased by $34.7 million for the nine months ended September 30, 2023, driven by higher cash rental revenue and interest received, partially offset by increased cash interest paid[143] - The Company is required to distribute 90% of its taxable income annually to maintain REIT qualification[146] | Debt Type (in thousands) | Total Principal Payments Due as of Sep 30, 2023 | | :----------------------- | :---------------------------------------------- | | 2019 Credit Facility | $0 | | Term loans | $1,100,000 | | Senior Unsecured Notes | $2,750,000 | | Mortgages payable | $4,410 | | Total | $3,854,410 | Results of Operations This section analyzes the company's financial performance for the three and nine months ended September 30, 2023, detailing changes in revenues, expenses, and other income, attributing them to acquisitions, dispositions, tenant credit, interest rates, and compensation - Rental income increased by $7.9 million (QoQ) and $40.8 million (YoY) primarily due to the net acquisition of higher-priced assets[150][152] - Impairments significantly increased to $19.3 million (QoQ) and $36.1 million (YoY), driven by an increased focus on accretive capital recycling and higher allowances for credit losses on loans receivable[150][159] - General and administrative expenses increased by $2.6 million for the nine months ended September 30, 2023, mainly due to higher compensation expenses from non-cash compensation and internal promotions[162] | Metric (in thousands) | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :------------------------------------ | :---------------------------- | :---------------------------- | :---------------------------- | :---------------------------- | | Total Revenues | $193,375 | $182,904 | $570,965 | $526,235 | | Total Expenses | $158,333 | $129,305 | $447,839 | $378,773 | | Net Income | $38,468 | $76,640 | $188,822 | $215,436 | | Gain on disposition of assets | $3,661 | $23,302 | $66,450 | $63,107 | | Impairments | $19,258 | $1,571 | $36,052 | $11,096 | | Interest Expense | $36,919 | $30,956 | $104,993 | $84,573 | Property Portfolio Information This section provides detailed property portfolio information, including diversification by tenant, lease expirations, geographic concentration, asset type, tenant industry, occupancy rate, and weighted average remaining lease term | Metric | Value | | :-------------------- | :---- | | Properties | 2,037 | | Occupancy | 99.6% | | States | 49 | | Tenants | 338 | | Tenant Industries | 37 | | Weighted average remaining non-cancellable initial term of leases (based on ABR) | 10.2 years | | Top Tenant Concepts (as of Sep 30, 2023) | Percent of ABR | | :--------------------------------------- | :------------- | | Life Time Fitness | 4.3% | | Invited Clubs | 3.1% | | BJ's Wholesale Club | 2.3% | | At Home | 2.1% | | Dave & Buster's / Main Event | 1.9% | | Church's Chicken | 1.9% | | Dollar Tree / Family Dollar | 1.9% | | Circle K / Clean Freak | 1.8% | | Home Depot | 1.7% | | GPM | 1.5% | | Lease Expirations (as of Sep 30, 2023) | Number of Properties | Percent of ABR | | :------------------------------------- | :------------------- | :------------- | | Remainder of 2023 | 4 | 0.2% | | 2024 | 32 | 1.7% | | 2025 | 51 | 3.1% | | 2026 | 111 | 6.2% | | 2027 | 146 | 8.1% | | Thereafter | 883 | 52.0% | | Geographic Concentration (as of Sep 30, 2023) | Percent of ABR | | :-------------------------------------------- | :------------- | | Texas | 15.3% | | Florida | 6.6% | | Ohio | 6.5% | | Georgia | 5.9% | | Michigan | 4.3% | | Tennessee | 3.8% | | California | 3.7% | | Indiana | 3.3% | | Illinois | 2.9% | | North Carolina | 2.7% | | Asset Type / Tenant Industry (as of Sep 30, 2023) | Percent of ABR | | :------------------------------------------------ | :------------- | | Retail (Total) | 64.5% | | Health & Fitness | 7.6% | | Convenience Stores | 5.0% | | Car Washes | 4.6% | | Quick Service Restaurants | 4.3% | | Non-Retail (Total) | 35.5% | | Distribution | 11.6% | | Manufacturing | 11.3% | | Industrial Outdoor Storage | 3.1% | | Country Club | 3.1% | Off-Balance Sheet Arrangements This section confirms that the company did not have any material off-balance sheet arrangements as of September 30, 2023 - As of September 30, 2023, the Company did not have any material off-balance sheet arrangements[172] New Accounting Pronouncements This section states that there were no new accounting pronouncements during the reporting period - There were no new accounting pronouncements during the period[173] Non-GAAP Financial Measures This section defines and reconciles non-GAAP financial measures like FFO, AFFO, and Adjusted Debt, providing supplemental insights into operating performance and financial condition - FFO (Funds From Operations) is calculated as net income attributable to common stockholders, excluding real estate-related depreciation and amortization, impairment charges, and net gains/losses from property dispositions[174] - AFFO (Adjusted Funds From Operations) further adjusts FFO for items not indicative of core operating performance, such as non-cash interest expenses, non-cash revenues, and non-cash compensation expense[175] | Non-GAAP Metric (in thousands, except per share) | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :------------------------------------------------ | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | FFO attributable to common stockholders | $130,701 | $126,777 | $386,752 | $371,837 | | AFFO attributable to common stockholders | $131,001 | $122,785 | $385,170 | $357,156 | | FFO per share of common stock - Diluted | $0.92 | $0.93 | $2.74 | $2.79 | | AFFO per share of common stock - Diluted | $0.93 | $0.90 | $2.73 | $2.68 | | Debt Metric (in thousands) | September 30, 2023 | September 30, 2022 | | :------------------------- | :------------------- | :------------------- | | Adjusted Debt | $3,716,034 | $3,445,130 | | Adjusted Debt / Annualized Adjusted EBITDAre | 5.2 x | 5.2 x | | Annualized Adjusted EBITDAre | $708,220 | $665,044 | Item 3. Quantitative and Qualitative Disclosures About Market Risk This section discusses the company's exposure to financial market risks, primarily interest rate risk, and mitigation strategies like long-term leases and interest rate swaps - The Company is exposed to interest rate risk, which can significantly influence operating results, particularly the difference between revenue from assets and interest expense on borrowings[184][185] - As of September 30, 2023, $2.8 billion of indebtedness was fixed-rate (Senior Unsecured Notes and mortgages payable) with a weighted average stated interest rate of 3.25%[186] - $1.1 billion of indebtedness was variable-rate (2022 and 2023 Term Loans), but interest rate swaps resulted in an effective weighted average fixed rate of 3.86%[186] | Debt Instrument (in thousands) | Carrying Value (Sep 30, 2023) | Estimated Fair Value (Sep 30, 2023) | | :----------------------------- | :------------------------------ | :---------------------------------- | | 2019 Credit Facility | $0 | $0 | | Term loans, net | $1,090,198 | $1,100,705 | | Senior Unsecured Notes, net | $2,725,505 | $2,339,854 | | Mortgages payable, net | $4,545 | $4,229 | Item 4. Controls and Procedures This section reports on the effectiveness of the company's disclosure controls and procedures and internal control over financial reporting, concluding they were effective with no material changes - The Company's disclosure controls and procedures were evaluated and deemed effective as of September 30, 2023[189] - There were no material changes to the Company's internal control over financial reporting during the quarter ended September 30, 2023[190] PART II — OTHER INFORMATION This part covers various other information, including legal proceedings, risk factors, equity sales, defaults, mine safety, other disclosures, and a list of exhibits [Item 1.