SPIRIT REALTY CAPITAL, INC. - 10-Q filing on 2023-11-02

Investments (Tables)

9 Months Ended

Sep. 30, 2023

During the nine months ended September 30, 2023, the Company had the following real estate activity (dollars in thousands):


	Number of Properties									Dollar Amount of Investments
	Held in Use			Held for Sale			Total			Held in Use			Held for Sale			Total
Gross balance, December 31, 2022		2,098			17			2,115		$	9,122,163		$	61,581		$	9,183,744
Acquisitions/improvements (1)		30			—			30			497,876			—			497,876
Dispositions of real estate (2)		(63	)		(45	)		(108	)		(138,326	)		(112,526	)		(250,852	)
Transfers to Held for Sale		(69	)		69			—			(146,491	)		146,491			—
Transfers from Held for Sale		2			(2	)		—			3,675			(3,675	)		—
Impairments (3)		—			—			—			(10,738	)		(8,593	)		(19,331	)
Reset of gross balances (4)		—			—			—			(21,595	)		(4,748	)		(26,343	)
Gross balance, September 30, 2023		1,998			39			2,037			9,306,564			78,530			9,385,094
Accumulated depreciation and amortization											(1,548,231	)		(16,985	)		(1,565,216	)
Net balance, September 30, 2023 (5)										$	7,758,333		$	61,545		$	7,819,878

(1) Includes investments of $66.2 million in revenue producing capitalized expenditures and $4.0 million of non-revenue producing capitalized expenditures during the nine months ended September 30, 2023.

(2) For the nine months ended September 30, 2023, the net gains on disposal of properties held in use and held for sale were $39.4 million and $27.1 million, respectively.

(3) Impairments on owned real estate is comprised of real estate and intangible asset/liability impairment.

(4) Represents write-off of gross investment balances against the related accumulated depreciation and amortization balances as a result of basis reset due to impairment or intangibles and tenant improvements which have been fully amortized.

(5) Reconciliation of total owned investments to the accompanying consolidated balance sheet at September 30, 2023 is as follows:


Real estate assets held for investment, net	$	7,468,643
Intangible lease assets, net		389,100
Real estate assets under direct financing leases, net		7,404
Real estate assets held for sale, net		61,545
Intangible lease liabilities, net		(106,814	)
Net balance	$	7,819,878

Schedule of Operating Lease Income

The following table summarizes the components of rental income recognized on these operating leases in the consolidated statements of operations (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Base Cash Rent (1)	$	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 (2)		8,227		10,875		26,127		28,465
Amortization of above- and below- market lease intangibles, net (3)		78		475		767		1,700
Total rental income	$	188,205	$	180,296	$	561,765	$	520,930

(1) Includes net impact of amounts (reserved) of $(0.3) million and $(0.4) million for the three and nine months ended September 30, 2023, and $(0.6) million and $(0.5) million for the three and nine months ended September 30, 2022, respectively.

(2) Includes net impact of amounts (reserved)/recovered of $(2.1) million and $(4.1) million for the three and nine months ended September 30, 2023, respectively, and $1.2 million and $1.1 million for the three and nine months ended September 30, 2022, respectively.

(3) Excludes amortization of in-place leases of $10.7 million and $32.7 million for the three and nine months ended September 30, 2023, respectively, and $11.3 million and $32.6 million for the three and nine months ended September 30, 2022, respectively, which is included in depreciation and amortization expense in the consolidated statements of operations.

Schedule of Minimum Future Contractual Rent to be Received from Operating Lease

Minimum future rent at September 30, 2023 is as follows (in thousands):


	September 30, 2023
Remainder of 2023	$	171,402
2024		686,874
2025		677,829
2026		653,584
2027		615,008
Thereafter		5,110,923
Total future minimum rentals	$	7,915,620

Schedule of Lease Intangible Assets and Liabilities, Net of Accumulated Amortization

The following table details lease intangible assets and liabilities, net of accumulated amortization (in thousands):


	September 30, 2023			December 31, 2022
In-place leases	$	536,730		$	559,962
Above-market leases		104,204			101,594
Less: accumulated amortization		(251,834	)		(237,686	)
Intangible lease assets, net	$	389,100		$	423,870

Below-market leases	$	165,224		$	179,187
Less: accumulated amortization		(58,410	)		(61,110	)
Intangible lease liabilities, net	$	106,814		$	118,077

Schedule of Loan Receivable Activity

The following table details our loans receivable activity (in thousands):


	Principal Balance			Allowance for Credit Loss			Total
December 31, 2022	$	23,700		$	(677	)	$	23,023
Loans issued		48,750			(18,799	)		29,951
Loan payments received		(25	)		—			(25	)
September 30, 2023	$	72,425		$	(19,476	)	$	52,949

Summary of Impairment and Credit Losses Recognized

The following table summarizes impairments and allowance for credit losses recognized in the consolidated statements of operations (in thousands):


	Three Months Ended September 30,						Nine Months Ended September 30,
	2023			2022			2023		2022
Real estate asset impairment	$	3,951		$	1,632		$	18,754	$	10,535
Intangible net (liability)/asset impairment		(27	)		(61	)		577		434
Allowance for credit losses on loans receivable		15,334			—			16,721		127
Total impairment loss	$	19,258		$	1,571		$	36,052	$	11,096