Spirit Realty Capital Inc. plans to create a separate, publicly traded real estate investment trust by spinning off substantially all of its Shopko-leased properties and its Master Trust 2014 assets, confirming an earlier report.
The spinoff company plans to file a Form 10 registration statement with the SEC by the end of the fourth quarter and will elect to be treated as a REIT. Pending such registration statement being declared effective and other conditions, the spinoff should be finalized by the end of the first half of 2018, after which Spirit shareholders will receive a stock distribution.
The majority of the spinoff's board will be independent, and it will have shared service, asset management and strategic alliance agreements with Spirit.
In a release, Spirit President and CEO Jackson Hsieh said he expects the plan to "generate significant proceeds for growth, remove and isolate certain structural impediments, and create two companies that have unique capital structures with strong tenancy to fit their specific business strategies."
Spirit said it plans to issue new notes in Master Trust A, with a 75% loan-to-value ratio, and to raise additional debt proceeds on certain assets injected into the spinoff. The company will retain the total loan proceeds, estimated to be $400 million, which it plans to use for incremental real estate acquisitions, debt reduction, or share repurchases.
Spirit expects the leveraged spinoff to have more than 925 properties, with a gross real estate investment of $2.7 billion and roughly $220 million in annualized contractual rent. The Master Trust 2014 properties that will be spun off are part of Spirit's asset-backed securitization program.
Meanwhile, Spirit post-spinoff will own more than 1,540 properties, with a gross real estate investment of $5.4 billion and roughly $395 million in annualized contractual rent.
Morgan Stanley and Moelis & Co. are the financial advisers, while Latham & Watkins LLP is the legal adviser to Spirit.