Spirit Realty Capital, Inc. (SRC)

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Spirit Realty Capital, Inc. (SRC)

Q3 2012 Earnings Conference Call

November 07, 2012, 17:00 p.m. ET


Michael Bender - SVP and CFO

Tom Nolan Jr. - Chairman and CEO

Pete Mavoides - President and COO


RJ Milligan - Raymond James

Joshua Barber - Stifel Nicolaus

Alexander Goldfarb - Sandler O’Neil

Rich Moore - RBC Capital Markets

Ross Nussbaum - UBS



Good afternoon ladies and gentlemen and welcome to Spirit Realty Capital Third Quarter 2012 Earnings Conference Call. At this time all lines have been placed on listen-only mode. (Operator Instructions) This conference call is being recorded and a replay of the call will be available beginning at 6 PM Eastern Time for one week. The dial-in details for the replay can be found in today’s press release. Additionally there will be an audio webcast available on Spirit Realty Capital’s website at www.SpiritRealty.com, an archive of which will be available for 30 days.

It is now my pleasure to turn the call over to Michael Bender, Senior Vice President and Chief Financial Officer of Spirit Realty Capital. Mr. Bender, please proceed.

Michael Bender

Thank you, Colby, and good afternoon everyone. Thank you for joining us today for Spirit Realty Capital’s first earnings conference call as a public company. Here with me to discuss our third quarter 2012 financial performance are Tom Nolan, Chairman and Chief Executive Officer; and Pete Mavoides, President and Chief Operating Officer.

Tom will review our third quarter performance and provide you with an overview of our strategic priorities in the current environment and over the near-term. I will then provide you with more specific financials and Pete will walk you through our portfolio acquisition program. Tom will wrap up or prepared remarks to the summary of our progress executing our strategy and our view of the market and the current market condition and after that we will be happy to take your question.

Before I turn the floor over to Tom, I’d like to say that during this conference call, we will make certain statements that may be considered to be forward-looking statements under Federal Securities law. The company’s actual future results may differ significantly from the matters discussed in these forward-looking statements, and we may not release provision to those forward-looking statements to reflect changes after the statements were made.

I’d now like to turn the call over to Tom Nolan, Spirit Realty Capital’s Chairman and Chief Executive Officer. Please go ahead Tom.

Tom Nolan Jr.

Thank you very much Mike and thank you everyone who has joined us today for your interest in Spirit Realty Capital. This is our first earnings call, it's really my first opportunity to thank everyone for the support we received on the road show and we look forward to having a productive and informative dialogue with all of you moving forward.

Clearly, the IPO was the main headline of the quarter and I will let Mike summarize that in greater detail shortly as well as provide more detail on our financial results. But first, let me make a couple of general comments. As a public company we are confident that the Spirit is well positioned to execute on our operating and investment strategy, which we believe will deliver long-term shareholder value. A strategy is focused on both generating attractive, predictable cash flow and growing our portfolio through a disciplined acquisition program, but the ultimate goal of course to increase our cash available for distribution so that we can continue to provide an attractive and sustainable dividend for our shareholders.

Since this is our first quarterly call, I thought it will be useful to provide a quick recap of our business model. At Spirit Realty Capital we invest in single tenant operationally essential real estate throughout the United States. That is our tenants conduct activities on these site that are essential to the generation of their sales and process. We primarily in invest in properties leased in well run middle and small market companies so the attractive credit characteristics and stable operating histories.

Our tenants are primarily engaged in the retail service and distribution industries. These tenants lease the properties in a long-term triple net basis and just to remind everyone under a triple net lease the tenant is typically responsible for all improvements that contractually obligated to pay our property expenses such as taxes, insurance and repairs and maintenance.

Our business model is to deliver value to our shareholders with an emphasis on generating stable and predictable cash flows from our current roster of high quality tenants under long-term leases. We also see significant market opportunities to further expand and diversify our portfolio through a disciplined investment strategy that targets accretive investments.

We have an extensive network of tenant and broker relationships and a proven track record of underwriting acquisitions to meet those investment criteria. The scale of our portfolio also allows us to make acquisition without introducing additional concentration risk.

Speaking of concentration, we recognized that the concentration in our portfolio of the Shopko Pamida properties will attract investor interest to some times to come. And justifiably so, that as we noted in the road show it's important to emphasize that Shopko has a long history of solid stable financial performance. Additionally, the recent combination of Shopko and Pamida is a good development for our portfolio and that it creates a stronger tenant but ultimately better sales and margins.

Make no mistake as we stated on the road show, it remains our long-term goal to reduce the Shopko concentration, but in the meantime we are pleased with the solid and consistent performance of that company. In addition, because we include Shopko’s financial reports in our 10-Q and Ks, we believe this transparency will benefit Spirit as it will allow our investors to gain the comfort we do as we monitor its financial performance going forward.

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