Burger King

Spirit Realty Capital Acquires 123 Single-Tenant Retail Properties from Service Properties Trust for $435M

by John Nelson

DALLAS AND NEWTON, MASS. — Spirit Realty Capital Inc. (NYSE: SRC), a net-lease REIT based in Dallas, has purchased a national single-tenant retail portfolio for $435 million. The portfolio’s seller is Service Properties Trust (NASDAQ: SVC), a net-lease retail and lodging REIT based in the western Boston suburb of Newton.

The portfolio spans 26 states and includes 123 stores leased to 54 different concepts. About a third of the portfolio is leased to restaurants, including Wendy’s, Buffalo Wild Wings, KFC, Skyline Chili, Burger King, Rally’s and Popeye’s. The portfolio’s tenant roster also includes service-oriented and furniture concepts such as LA Fitness, Ashley Home Store, O’Reilly Auto Parts, At Home, Mister Car Wash, Carmax, Crunch Fitness and Tire Warehouse.

This transaction is part of SVC’s disposition strategy to sell up to $500 million of net lease assets in connection with its $2.4 billion acquisition of retail properties from Spirit MTA REIT, which Spirit Realty Capital manages.

“Coupled with our other recent net lease sales and agreements to sell totaling $66 million, we have reached our target of $500 million in net lease asset sales, the proceeds of which will be used to reduce the company’s leverage,” says John Murray, president and CEO of SVC, formerly known as Hospitality Properties Trust.

Almost every property is leased on a triple-net basis with 92 percent of the portfolio under contractual rent increases. The approximately 2 million-square-foot portfolio has a weighted average remaining lease term of 8.7 years.

The transaction was executed at an approximate 7.86 percent initial capitalization rate with annual rents of approximately $34.2 million.

“This transaction provided a unique opportunity to acquire high-quality real estate, in solid trade areas with tenants we know well at an attractive risk-adjusted return,” says Jackson Hsieh, president and CEO of Spirit Realty.

As of Sept. 30, Spirit Realty Capital’s owned portfolio spanned more than 30 million square feet across 1,623 single-tenant properties in 48 states. The SVC acquisition will boost its store count by more than 7 percent.

Spirit Realty Capital’s stock price closed on Monday, Nov. 25 at $50.90 per share, up from $37.05 a year ago.

Service Properties Trust’s portfolio spans 48 states, as well as Washington, D.C., Puerto Rico and Canada. The REIT is managed by the operating subsidiary of The RMR Group Inc. (NASDAQ: RMR), an alternative asset management company.

SVC’s stock price closed on Monday at $22.80 per share, down from $26.30 a year ago when it traded under the Nasdaq symbol “HPT.”

— John Nelson

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