Spirit Realty Owns Retailers' Properties


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Spirit Realty Capital ( SRC ) is a real estate investment trust that invests in free-standing, single-tenant commercial buildings.

Its tenants are typically well-known retailers, such as Home Depot, Church's Chicken, KFC and CarMax auto dealerships. The tenants operate on a net lease basis, meaning they pay expenses usually borne by landlords, like property taxes, insurance and maintenance.

Spirit completed a merger in July 2013 with Cole Credit Property Trust II that gives it an enterprise value of more than $7 billion.

The company now has more than 1,900 properties in 48 states. It claims the merger gives it more scale and diversification.

Last October, it sold the Camelback Mountain Resort, a ski resort in the Pocono Mountains of Pennsylvania, for $69.25 million. The company said at the time Camelback was a profitable investment but outside Spirit's core business of owning retail, service or distribution properties. Spirit says it will redeploy the money in core products.

General and discount retailers make up the largest category of properties in its portfolio at 30%. Restaurants, both quick service and casual dining, account for 18.9%. At the other extreme, convenience stores and car washes make up 2.6%.

Properties are nearly all leased with more than a decade left on the leases.

The company was formed in 2003 and went public in September 2012. It's something of a turnaround play. After three profitable years in 2004, 2005 and 2006, it lost money through 2012. Analysts expect funds from operation, the REIT equivalent of earnings, to rise 23% in 2014.

Spirit announced a quarterly dividend of 16.625 cents a share for Q4, putting the annual yield at 6.2%. The dividend has a three- to five-year annualized growth rate of 15%.

The stock appears to be forming the right side of a base. It's 11% off a high.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing Investing Ideas
Referenced Stocks: SRC

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