Earlier in August, Spirit Realty Capital, Inc (New)(NYSE:SRC) reported the spin-off of a distinct publicly traded REIT, named “SpinCo”, which anticipated to have gross real estate investments of $2.7 billion. Incremental debt proceeds of $400 Million is anticipated to be raised for company’s future growth, share repurchases or debt reduction.
There are several benefits that are expected for the Spirit stockholders from the reported spin-off. The company will look for assets with higher investment grade corresponding tenants, with an anticipated focus on bigger portfolios. SpinCo will assess and focus on asset acquisitions using the advantages of investment grade leverage via the Master Trust Funding vehicle, while looking for a wide range of plans to lower exposure to Shopko, including out-parcel development, redevelopment and sales. The company will externally run SpinCo.
Spirit plans to release new notes in Master Trust ’A’, intending 75% loan to value in this plan, and raise increased debt proceeds on certain resources directed into SpinCo. The total intended loan proceeds, which will stay in company, are expected to be $400 million and are anticipated to be utilized for incremental real estate acquisitions, share repurchases or debt reduction.
SpinCo will be able to follow a wide range of tactics to enhance the valuable and large Shopko portfolio by using future sale proceeds from assets leased to Shopko as capital for imminent growth. At the same time, it isolates and removes the Shopko assets, a structural obstacle for company since its IPO.
The company’s portfolio will be mainly focused on tenants in the industrial and service sectors. In addition, its investment grade equivalent tenancy will surge to around 45%, portfolio segmentation will enhance considerably and no tenant will exhibit over 5% of total Contractual Rent. Post spin-off, the company’s balance sheet is anticipated to have considerably enhanced credit metrics.