Spirit Realty Capital Closes $510M A+ Rated Net-Lease Mortgage Notes

Subsidiaries of Spirit Realty Capital have issued $510 million worth of net-lease mortgage notes under its Spirit Master Funding securitization structure.
Peter Mavoides

Peter Mavoides, Spirit Realty

Subsidiaries of Spirit Realty Capital have issued $510 million worth of net-lease mortgage notes under its Spirit Master Funding securitization structure.

“The asset-backed master funding program and the asset-backed securitization markets allow the company to issue investment-grade bonds and benefit from the liquidity and demand for those bonds as well as the corresponding cost of capital, even though it is not an investment-grade borrower,” Peter Mavoides, Spirit Realty’s president & COO told Commercial Property Executive. “It’s a unique source of capital for us and it allows us to finance ourselves in a very cost-effective way.”

The issuance was comprised of two classes of notes that were each rated

A+ at issuance by Standard & Poor’s Rating Services, and have a blended coupon rate of 4.4230 percent, with a weighted average life of 9.4 years.

“First and foremost this is a $510 million piece of financing, which is significant in of its own right, but more importantly it match funds our investments,” Mavoides added. “The debt had a long-dated underlying term, as well as an attractive coupon when you match with our long-dated assets and attractive cap rates, so it allows the company to lock in its spread against the cost of equity for a long period of time.”

Additionally, Mavoides said, by accessing the asset-backed securitization market, Spirit is able to finance its properties that are very granular in nature in an efficient way without all the costs associated with doing a more difficult CMBS type financing.

The transaction is exempt from registration under the Securities Act and sold to Qualified Institutional Buyers under Rule 144A.

Spirit’s Master Funding program provides the company with a platform to lock in attractively priced, fixed-rate capital to match-fund its acquisitions of operationally essential real estate net leased to quality, middle market companies.

“The Master Funding program is an ongoing program that allows us to continue to contribute collateral and continue to issue bonds within this program under similar terms,” Mavoides said. “It’s very much a dynamic sort of pool that we can continue to access capital to fund ongoing investments.”

Spirit has been quite active in the acquisition market of late. According to Mavoides, there have been a number of investment opportunities that it capitalized on and this was a nice time to access the bond markets, because rates are low and there’s ample demand looking for this type of bond product.

“The asset-backed finance market has been an active part of our capital structure on the liability side and we anticipate it continuing to be an active source of debt capital for us going forward,” he concluded. “It’s a very efficient, cost-effective way for us to finance our assets and manage our assets on an ongoing basis.”