Item 1. Financial Statements
See accompanying notes.
See accompanying notes.
Notes to Consolidated Financial Statements
(Unaudited)
Note 1. Organization
Organization and Operations
Spirit MTA REIT ("SMTA" or the "Company") operates as an externally managed REIT formed in Maryland. The Company began operations through predecessor legal entities which were wholly-owned subsidiaries of Spirit Realty Capital, Inc. ("Spirit"). On May 31, 2018, Spirit completed the Spin-Off that resulted in the Company's establishment as an independent, publicly traded company. The Spin-Off was effected by means of a pro rata distribution of SMTA common shares to Spirit stockholders of record as of the close of business on the record date. In conjunction with the Spin-Off, SMTA and a wholly-owned subsidiary of Spirit (the "Manager") entered into an Asset Management Agreement under which the Manager provides external management of SMTA. Costs associated with the Spin-Off incurred in the three and nine months ended September 30, 2018 totaled $0.1 million and $8.6 million, respectively, and are reflected as transaction costs on the accompanying consolidated statements of operations and comprehensive loss.
On January 16, 2019, in connection with the Shopko bankruptcy filing, the Company announced that its Board of Trustees elected to accelerate its strategic plan and on June 2, 2019 announced a definitive agreement to sell its interests in Master Trust 2014 to HPT. Costs associated with the execution of strategic alternatives in the two and eight months ended August 31, 2019 totaled $1.3 million and $6.2 million, respectively, and are reflected as transaction costs on the accompanying consolidated statements of operations and comprehensive loss. On September 4, 2019, at a special meeting of the shareholders, the shareholders approved the Master Trust 2014 Sale, as well as the Plan of Voluntary Liquidation. As a result, the Company adopted the liquidation basis of accounting using a convenience date of September 1, 2019, as the difference in dates is not material to presentation of the financial results.
On September 20, 2019, the Company completed the Master Trust 2014 Sale and, as a result, the Asset Management Agreement was terminated, and the Interim Management Agreement went into effect. The Company will receive management services from its Manager under the Interim Management Agreement in connection with its wind down pursuant to the Plan of Voluntary Liquidation. As of September 30, 2019, the Company has a portfolio of 11 unencumbered properties.
Note 2. Plan of Liquidation
The Plan of Voluntary Liquidation provides for an orderly sale of the Company's remaining assets, payment of the Company's liabilities and other obligations, and the winding up of operations and dissolution of the Company following the Master Trust 2014 Sale, which occurred on September 20, 2019. The Plan of Voluntary Liquidation enables the Company to sell any and all of its assets without further approval of the shareholders and provides that liquidating distributions be made to the shareholders as determined by the Board of Trustees. The Company expects to transfer and assign its remaining assets to a liquidating trust, subject to the discretion of the Board of Trustees, in the first quarter of 2020. Upon such transfer and assignment, shareholders will receive interests in the liquidating trust. The liquidating trust expects to pay or provide for all of the Company’s liabilities and distribute any remaining net proceeds from the sale of its remaining assets to the holders of interests in the liquidating trust.
The dissolution process and the amount and timing of distributions to shareholders involves significant risks and uncertainties. Accordingly, it is not possible to predict the timing or aggregate amount which will ultimately be distributed to shareholders, and no assurance can be given that the distributions will equal or exceed the estimate of net assets presented in the consolidated statement of net assets.
The Company expects to continue to qualify as a REIT throughout the liquidation until such time as any remaining assets are transferred into a liquidating trust. The Board of Trustees shall use commercially reasonable efforts to continue to cause the Company to maintain its REIT status, provided however, it may elect to terminate the Company's status as a REIT if it determines that such termination would be in the best interest of shareholders.
13
SPIRIT MTA REIT
Notes to Consolidated Financial Statements
(Unaudited)
Note 3. Summary of Significant Accounting Policies
As a result of the approval of the Plan of Voluntary Liquidation in September 2019, the Company’s financial position and results of operations for the nine months ended September 30, 2019 will be presented using two different presentations. The Company adopted the liquidation basis of accounting as of September 1, 2019 and for the period subsequent to September 1, 2019. As a result, a consolidated statement of net assets is presented, which represents the estimated amount of net cash that the Company will collect as it carries out its Plan of Voluntary Liquidation. In addition, a consolidated statement of changes in net assets reflects changes in net assets from the original estimated values as of September 1, 2019 through the most recent period presented, as further described below.
All financial results and disclosures up through August 31, 2019, prior to adopting the liquidation basis of accounting, will be presented based on a going concern basis, which contemplated the realization of assets and liabilities in the normal course of business. As a result, the balance sheet as of December 31, 2018, and the statements of operations and the statements of cash flows for the eight months ended August 31, 2019 and the comparative nine months ended September 30, 2018 used the going concern basis presentation consistent with the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, as further described below.
Basis of Accounting – Going Concern Basis
The accompanying consolidated financial statements of the Company have been prepared pursuant to the rules and regulations of the SEC. In the opinion of management, the consolidated financial statements include the normal, recurring adjustments necessary for a fair statement of the information required to be set forth therein. The results for interim periods are not necessarily indicative of the results for the entire year. Certain information and note disclosures, normally included in financial statements prepared in accordance with GAAP, have been condensed or omitted from these statements pursuant to SEC rules and regulations for interim financial reports and, accordingly, these financial statements should be read in conjunction with the Company’s audited consolidated financial statements as filed with the SEC in its Annual Report on Form 10-K for the year ended December 31, 2018.
Subsequent to the Spin-Off on May 31, 2018, the consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. The pre-spin consolidated financial statements were prepared on a carve-out basis and reflect significant assumptions and allocations.
For the periods prior to the Spin-Off, the financial position and results of operations reflect a combination of entities under common control that have been carved-out from Spirit’s consolidated financial statements and present Spirit's historical carrying values of the assets and liabilities, consistent with accounting for spin-off transactions in accordance with GAAP. Since the Company prior to the Spin-Off did not represent one entity, a separate capital structure did not exist. As a result, the combined net assets of the predecessor legal entities have been reflected in the consolidated financial statements as net parent investment for periods prior to the Spin-Off. All transactions between Spirit and the predecessor legal entities are considered effectively settled through equity in the consolidated financial statements at the time the transaction is recorded, other than certain mortgages as discussed in Note 13. The settlement of these transactions is reflected as contributions from and distributions to parent in the consolidated statement of changes in equity and contributions from and distributions to parent in the consolidated statements of cash flows as a financing activity.
Through May 31, 2018, the pre-spin consolidated financial statements include expense allocations related to certain Spirit corporate general and administrative functions. These expenses have been allocated based on direct usage or benefit where specifically identifiable, with the remainder allocated pro rata based on property count. All the expense allocations were deemed to have been incurred and settled through net parent investment in the period in which the costs were incurred. Management considers the expense allocation methodology and results to be reasonable. However, the allocations may not be indicative of the actual expense that would have been incurred had the Company operated as an independent, publicly traded company for the periods presented prior to May 31, 2018. At time of the Spin-Off, SMTA entered into an Asset Management Agreement with Spirit to provide these corporate functions.
These consolidated financial statements include certain special purpose entities that were formed to acquire and hold real estate encumbered by indebtedness (see Note 7). Each special purpose entity is a separate legal entity and is the sole owner of its assets and responsible for its liabilities. The assets of these special purpose entities are not available to pay, or otherwise satisfy obligations to, the creditors of any affiliate or owner of another entity unless the special purpose entities have expressly agreed and are permitted under their governing documents. As of December 31, 2018, net assets totaling $2.18 billion were held and net liabilities totaling $2.18 billion were owed by these encumbered special purpose entities included in the accompanying consolidated balance sheets. As of September 30, 2019, there were no encumbered special purpose entities.
14
SPIRIT MTA REIT
Notes to Consolidated Financial Statements
(Unaudited)
Basis of Accounting - Liquidation Basis
As a result of the approval of the Plan of Voluntary Liquidation by the shareholders, the Company adopted the liquidation basis of accounting as of September 1, 2019 and for the periods subsequent to September 1, 2019 in accordance with GAAP. Accordingly, on September 1, 2019 assets were adjusted to their estimated net realizable value, or liquidation value, which represents the estimated amount of cash that the Company expects to collect. Estimated costs to dispose of assets have been presented separately from the real estate assets, net in the consolidated statement of net assets. Liabilities are carried at their contractual amounts due or estimated settlement amounts. The liquidation value of the Company’s net assets is presented on an undiscounted basis.
The Company accrues expenses and income that it expects to incur and earn through the end of liquidation to the extent it has a reasonable basis for estimation. These amounts are classified as a liability for estimated expense in excess of estimated income during liquidation on the consolidated statement of net assets. Actual expenses and income may differ from amounts reflected in the financial statements because of inherent uncertainty in estimating future events. These differences may be material. See Note 4 for further discussion.
Net assets in liquidation represents the estimated liquidation value available to shareholders upon liquidation. Due to the uncertainty in the timing of the anticipated sale dates and the estimated cash flows, actual operating results and sale proceeds may differ materially from the amounts estimated.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Although management believes its estimates are reasonable, actual results could differ from those estimates.
Segment Reporting
The Company views its operations in two segments—Master Trust 2014 and all other properties ("Other Properties"). The Master Trust 2014 segment was sold on September 20, 2019. See Note 10 for further discussion. The Company has no other reportable segments.
Revenue Recognition – Going Concern Basis
Rental Income: Cash and Straight-line Rent
The Company primarily leased real estate to its tenants under long-term, triple-net leases that were classified as operating leases. To evaluate lease classification, the Company assessed the terms and conditions of the lease to determine the appropriate lease term. For the majority of our operating leases, the lease included one or more options to extend, typically for a period of five to ten years per renewal option. The Company’s operating leases sometimes also included an option to terminate or to purchase. The Company did not include these options in its evaluation for lease classification purposes or for recognizing rental income unless the Company was reasonably certain the tenant would exercise the option.
Another component of lease classification which required significant assumptions and judgment was the amount expected to be derived from the property at the end of the lease term. Generally, the Company assumed a value equal to net book value of the property at the date of the assessment, as the Company generally expected fair value to be equal to or greater than net book value. The Company sought to protect residual value through its underwriting of acquisitions, as well as lease structures where the lessee was responsible for maintenance of the property, including insurance protecting any damage to the property. To further protect residual value, the Company supplemented the tenant insurance policy with a master policy covering all properties owned by the Company. Additionally, the Company occasionally invested in capital improvements on properties, re-leasing properties to new tenants or extending lease terms to protect residual value.
The Company’s leases sometimes provided for contingent rent based on a percentage of the tenant’s gross sales, in which case the Company recognized contingent rental revenue when the change in the factor on which the contingent lease payment was based actually occurred.
The Company’s leases generally provided for rent escalations throughout the lease terms. For leases that had contingent rent escalators indexed to future changes in the CPI, rent increased at a multiple of any increase in the CPI over a specified period. Because of the volatility and uncertainty with respect to future changes in the CPI, increases in rental revenue from leases with this type of escalator were recognized when the changes in the rental rates occurred.
15
SPIRIT MTA REIT
Notes to Consolidated Financial Statements
(Unaudited)
For leases that provided for fixed contractual escalations, rental revenue was recognized on a straight-line basis so as to produce a constant periodic rent over the term of the lease. Accordingly, accrued rental revenue, calculated as the aggregate difference between the rental revenue recognized on a straight-line basis and scheduled rents, represented unbilled rent receivables that the Company would receive only if the tenants made all rent payments required through the expiration of the initial term of the leases.
Rental income was subject to an evaluation for collectability, which included management’s estimates of amounts that would not be realized based on an assessment of the risks inherent in the portfolio, considering historical experience, as well as the tenant's payment history and financial condition. The Company recorded a provision for losses against rental income for amounts that were not probable of collection.
Rental Income: Tenant Reimbursement Revenue
Under a triple-net lease, the tenant is typically responsible for all improvements and is contractually obligated to pay all property operating expenses, such as real estate taxes, insurance premiums and repair and maintenance costs. Certain leases contained additional amounts recoverable from tenants for common area maintenance expenses and certain other recoverable expenses, which were non-lease components. The Company elected to combine all of its non-lease components, which were determined to have the same pattern of transfer as the related operating lease component, into a single combined lease component. Tenant reimbursement revenue was variable and recognized as revenue in the period in which the related expenses were incurred, with the related expense included in property costs (including reimbursable). Tenant receivables were carried net of any allowances for amounts that were not probable of collection.
Rental Income: Intangible Amortization
Initial direct costs associated with the origination of a lease were deferred and amortized over the related lease term as an adjustment to rental revenue. In-place lease intangibles were amortized on a straight-line basis over the remaining initial term of the related lease and included in depreciation and amortization expense. Above-market lease intangibles were amortized over the remaining initial terms of the respective leases as a decrease in rental revenue. Below-market lease intangibles were amortized as an increase to rental revenue over the remaining initial term of the respective leases, or over the initial term plus renewal periods when the Company was reasonably certain the tenant would exercise the renewal options. If the Company was reasonably certain a lease would terminate early, the unamortized portion of any related lease intangible was immediately recognized in impairments in the Company’s consolidated statements of operations and comprehensive loss.
Allowance for Doubtful Accounts – Going Concern Basis
Under going concern basis, the Company reviewed its rent and other tenant receivables for collectability on a regular basis, taking into consideration changes in factors such as the tenant’s payment history, the financial condition of the tenant, business conditions in the industry in which the tenant operated, and economic conditions in the area in which the tenant operated. If the collectability of a receivable with respect to any tenant was in doubt, a provision for uncollectible amounts was established or a direct write-off of the specific receivable was made. The Company’s reserve for uncollectible amounts totaled $6.6 million as of December 31, 2018, against accounts receivable balances of $8.2 million. Receivables were written off against the reserves for uncollectible amounts when all possible means of collection had been exhausted. Receivables are presented within deferred costs and other assets, net in the accompanying consolidated balance sheet.
For receivable balances related to the straight-line method of reporting rental revenue, the collectability was assessed in conjunction with the evaluation of rental income as described above. As of December 31, 2018, the Company established a reserve for losses of $0.5 million against straight-line receivables of $28.2 million. These receivables are presented within deferred costs and other assets, net in the accompanying consolidated balance sheet.
16
SPIRIT MTA REIT
Notes to Consolidated Financial Statements
(Unaudited)
Cash, Cash Equivalents and Restricted Cash
Cash and cash equivalents include cash and highly liquid investment securities with maturities at acquisition of three months or less. The Company invests cash primarily in money market funds of major financial institutions with fund investments consisting of highly-rated money market instruments and other short-term instruments. Restricted cash is classified within deferred costs and other assets, net in the accompanying consolidated balance sheet. Cash, cash equivalents and restricted cash consisted of the following (in thousands):
|
|
|
September 30,
2019
|
|
|
December 31,
2018
|
|
|
September 30,
2018
|
|
|
Cash and cash equivalents
|
|
$
|
371,360
|
|
|
$
|
161,013
|
|
|
$
|
16,188
|
|
|
Restricted cash:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Release Account (1)
|
|
|
—
|
|
|
|
16,141
|
|
|
|
9,313
|
|
|
Liquidity Reserve (2)
|
|
|
—
|
|
|
|
5,599
|
|
|
|
5,570
|
|
|
Lender controlled accounts (3)
|
|
|
2,687
|
|
|
|
22,347
|
|
|
|
4,725
|
|
|
Other (4)
|
|
|
—
|
|
|
|
—
|
|
|
|
1,548
|
|
|
Total cash, cash equivalents and restricted cash
|
|
$
|
374,047
|
|
|
$
|
205,100
|
|
|
$
|
37,344
|
|
|
(1)
|
Release Account cash consists of proceeds from the sales of assets pledged as collateral under Master Trust 2014 and is held on deposit until a qualifying substitution is made or the funds are applied as prepayment of principal.
|
|
(2)
|
Liquidity Reserve cash was placed on deposit in conjunction with the issuance of additional series of notes under Master Trust 2014 and is held until there is a cashflow shortfall, as defined in the Master Trust 2014 agreements, or a liquidation of Master Trust 2014 occurs.
|
|
(3)
|
Funds held in lender-controlled accounts are released after scheduled debt service requirements are met. The amount held at September 30, 2019 was comprised of rent-related receipts associated with the Master Trust 2014 prior to the Master Trust 2014 Sale, which were released to unrestricted cash in October 2019.
|
|
(4)
|
Funds held in escrow accounts until the related purchase/sale transaction closes.
|
Goodwill
Goodwill arises from business combinations and represents the excess of the cost of an acquired entity over the net fair value amounts that were assigned to the identifiable assets acquired and the liabilities assumed. Goodwill is tested for impairment at the reporting unit level on an annual basis and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying value. Goodwill was initially allocated to each reporting unit based upon the relative fair value of each reporting unit, resulting in $7.0 million allocated to Master Trust 2014 and $6.5 million allocated to Other Properties. The goodwill related to the Other Properties segment was fully impaired in 2018. The goodwill allocated to the Master Trust 2014 segment was relieved in conjunction with the Master Trust 2014 Sale in September 2019.
Income Taxes
For the period prior to the Spin-Off, the Company applied the provisions of FASB ASC Topic 740, Income Taxes, and computed the provision for income taxes on a separate return basis. The separate return method applied the accounting guidance for income taxes to the stand-alone consolidated financial statements as if the Company was a separate taxpayer and a stand-alone enterprise for the periods presented.
The Company was wholly-owned by Spirit prior to the Spin-Off and was disregarded for federal income tax purposes. The Manager is wholly-owned by Spirit through certain direct and indirect ownership interests and is taxed as a partnership for Federal income tax purposes. Spirit has elected to be taxed as a REIT under the applicable provisions of the Code and, as a result, will not be subject to federal income tax as long as it distributes 100% of its taxable income and satisfies certain other requirements. Therefore, no provision for federal income tax was made in the accompanying consolidated financial statements for the period prior to the Spin-Off.
For the period subsequent to the Spin-Off, the Company elected to be taxed as a REIT under the Code beginning with its initial tax year ended December 31, 2018. As a REIT, the Company generally will not be subject to federal income tax provided it continues to satisfy certain tests concerning the Company’s sources of income, the nature of its assets, the amounts distributed to its shareholders, and the ownership of Company shares. Management believes the Company has qualified and will continue to qualify as a REIT and therefore, no provision has been made for federal income taxes in the accompanying consolidated financial statements. Even if the Company qualifies for taxation as a REIT, it may be subject to state and local income and franchise taxes, and to federal income tax and excise tax on its undistributed income.
17
SPIRIT MTA REIT
Notes to Consolidated Financial Statements
(Unaudited)
The Company is subject to certain other taxes which are reflected as income tax expense in the consolidated statements of operations and comprehensive loss. Franchise taxes are included in general and administrative expenses in the accompanying consolidated statements of operations and comprehensive loss and estimated future taxes are included in liability for estimated expense in excess of estimated income during liquidation in the accompanying consolidated statement of net assets.
New Accounting Pronouncements
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which supersedes the existing guidance for lease accounting Leases (Topic 840). ASU 2016-02 requires lessees to recognize leases on their balance sheets, and leaves lessor accounting largely unchanged. The amendments in this ASU are effective for the fiscal years beginning after December 15, 2018 and interim periods within those fiscal years, and as such, the Company adopted ASU 2016-02 effective January 1, 2019. ASU 2016-02 requires a modified retrospective approach for all leases existing at, or entered into after, the date of initial application, with an option to elect to use certain transition relief as follows:
|
|
•
|
The Company elected to use the package of practical expedients, which permits the Company to not reassess (1) whether any expired or existing contracts are or contain leases, (2) the lease classification for any expired or existing leases and (3) any initial direct costs for any existing leases as of the effective date.
|
|
|
•
|
The Company elected to use the comparative period expedient, which permits the Company to recognize any cumulative adjustments as of the date of initial application and not record adjustments to prior reported periods. As a result of this election, bad debt expense is being presented in "rental income" on a prospective basis, compared to "property costs (including reimbursable)" for periods prior to January 1, 2019. Bad debt expense was $0.9 million for both the two and eight months ended August 31, 2019. The adoption of the lease standard did not result in a cumulative catch-up adjustment to opening equity.
|
|
|
•
|
The Company elected to use the land easements expedient, which permits the Company to not reassess land easements for potential lease classification.
|
|
|
•
|
The Company elected to use the components expedient, which permits the Company to not separate non-lease components from lease components if timing and pattern of transfer is the same. The Company elected this expedient for all lessor operating leases, where certain leases contain non-lease components related to tenant reimbursement, and concluded that the leasing component is the predominant component.
|
|
|
•
|
The Company elected not to use the hindsight expedient, which would require the re-evaluation of the lease term on all leases using current facts and circumstances.
|
As a lessor, our recognition of rental income remained consistent with previous guidance, apart from expanded disclosure requirements. As such, the Company concluded that the overall impact of the ASU had no material impact on the Company's reported revenues, results of operations or financial position.
|
|
|
Note 4. Liability for Estimated Expense in Excess of Estimated Income During Liquidation
|
The liquidation basis of accounting requires the Company to estimate net cash flows from operations and to accrue all income and expenses associated with implementing and completing the Plan of Voluntary Liquidation. As a basis for our assumptions, we currently expect to sell the remaining properties during 2020 and to complete our liquidation by December 31, 2020. The Company currently estimates that it will have expenses in excess of income during the liquidation. These amounts can vary significantly due to, among other things, the timing of property sales, direct costs incurred to complete the sales, the timing and amounts associated with discharging known and contingent liabilities and the costs associated with the winding up of operations. These amounts are estimated and are anticipated to be paid out and collected over the liquidation period.
18
SPIRIT MTA REIT
Notes to Consolidated Financial Statements
(Unaudited)
Upon transition to the liquidation basis of accounting on September 1, 2019, the Company accrued the following income and expenses expected to be incurred during liquidation, had the following cash payments (receipts) in September 2019 and has reclassified income earned, not yet received, to other assets and expenses incurred, not yet paid, to accounts payable and other liabilities in the accompanying consolidated statement of net assets (in thousands):
|
|
|
September 1, 2019
|
|
|
Cash Payments (Receipts)
|
|
|
Remeasurement of Assets and Liabilities
|
|
|
Reclassification for Expenses Incurred and Income Earned
|
|
|
September 30, 2019
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental income (1)
|
|
$
|
7,594
|
|
|
$
|
(5,241
|
)
|
|
$
|
—
|
|
|
$
|
(790
|
)
|
|
$
|
1,563
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property costs (2)
|
|
|
(1,159
|
)
|
|
|
733
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(426
|
)
|
|
General and administrative (3)
|
|
|
(27,620
|
)
|
|
|
9,902
|
|
|
|
—
|
|
|
|
5,162
|
|
|
|
(12,556
|
)
|
|
Related party fees (4)
|
|
|
(51,693
|
)
|
|
|
49,693
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(2,000
|
)
|
|
Cost of real estate investment sales (5)
|
|
|
(4,981
|
)
|
|
|
3,694
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,287
|
)
|
|
Total liability for estimated expense in excess of estimated income during liquidation
|
|
$
|
(77,859
|
)
|
|
$
|
58,781
|
|
|
$
|
—
|
|
|
$
|
4,372
|
|
|
$
|
(14,706
|
)
|
|
|
(1)
|
The majority of the revenue collected in September 2019 relates to the properties sold during September 2019. The September 30, 2019 balance of $1.6 million is comprised of estimated rental income on the five operating properties until their estimated sale in 2020. $0.8 million of rental income for the property leased to Academy, which was sold in September 2019, has been reclassified to other assets in the accompanying consolidated net assets and was collected in October 2019.
|
|
|
(2)
|
The majority of the costs paid relate to the properties sold during September 2019. The September 30, 2019 balance of $0.4 million is related to expenses expected to be incurred on the remaining properties prior to their estimated sale in 2020.
|
|
|
(3)
|
The September 2019 payments primarily relate to legal and consulting fees incurred in conjunction with the Master Trust 2014 Sale. $5.2 million of general and administrative expenses have been reclassified to accounts payable and other liabilities in the accompanying consolidated statement of net assets for actual expenses incurred, not yet paid, in September 2019. The September 30, 2019 balance of $12.6 million includes estimates for professional fees, compensation to the Company’s CEO and members of the Board of Trustees, insurance, taxes and other costs of liquidation.
|
|
|
(4)
|
The September payments include the $48.2 million termination fee for the Asset Management Agreement, as well as 20 days of management fees under the Asset Management Agreement and 10 days of management fees under the Interim Management Agreement. The September 30, 2019 balance of $2.0 million is comprised of 15 months of expected management fees under the terms of the Interim Management Agreement.
|
|
|
(5)
|
$3.7 million paid during September 2019 relates to the three sales completed in September 2019. The September 30, 2019 balance of $1.3 million represents the estimated costs of sales for the remaining 11 properties.
|
Note 5. Net Assets in Liquidation
The following is a reconciliation of shareholders’ deficit under the going concern basis of accounting to net assets in liquidation under the liquidation basis of accounting as of September 1, 2019 (in thousands):
|
Shareholders' deficit as of August 31, 2019
|
|
$
|
(184,178
|
)
|
|
Increase due to estimated net realizable value of investments in real estate
|
|
|
667,006
|
|
|
Decrease due to adjustment of assets and liabilities to net realizable value
|
|
|
(24,089
|
)
|
|
Decrease due to obligation to redeem preferred shares
|
|
|
(3,654
|
)
|
|
Liability for estimated expense in excess of estimated income during liquidation
|
|
|
(77,859
|
)
|
|
Adjustment to reflect the change to the liquidation basis of accounting
|
|
|
561,404
|
|
|
Estimated value of net assets in liquidation as of September 1, 2019
|
|
$
|
377,226
|
|
The net realizable value of investments in real estate for the Master Trust 2014 Sale, the sale of the property leased to Academy and one other property were adjusted to the signed sales agreements, which resulted in a net increase of $667.0 million. All three of these sales were completed in September 2019. In conjunction with these sales, the Master Trust 2014 debt was retired and the CMBS debt on the Academy property was assumed by the buyer. The net realizable value of the remaining 11 properties was derived using the sales comparable approach and the income capitalization approach, resulting in no change in value. Eight of the 11 properties were valued utilizing the sales comparable approach, specifically vacant sales comparables, using price per square foot ranging from $26.86 to $141.47. The remaining three assets were valued utilizing the direct income capitalization rate approach, using capitalization rates ranging from 5.75% to 8.41%. The actual timing and amount of these future sales proceeds may differ materially from our current projection. For example, we used comparable vacant sale properties to derive the net realizable value of the three Children’s Learning Adventure USA, LLC (“CLA”) properties. CLA is currently in bankruptcy and is paying its rental income in accordance with the lease agreement. In the event that CLA successfully emerges from bankruptcy, there is potential for a significant increase in value for these properties.
19
SPIRIT MTA REIT
Notes to Consolidated Financial Statements
(Unaudited)
The adjustment of assets and liabilities to net realizable value was primarily comprised of a $29.0 million write-off of straight-line rent receivables and a $3.8 million write-off of lease-incentive intangibles, which were partially offset by the accrual of $5.2 million tax refund receivable which is expected to be collected in 2020 and a $1.6 million write-off of property tax liability for the transfer of the liability to HPT in conjunction with the Master Trust 2014 Sale.
The decrease due to obligation to redeem preferred shares was comprised of $2.8 million of dividends and pre-payment premiums for the Series A SubREIT Preferred Shares, $0.8 million of dividends for the SMTA Preferred Shares and $16 thousand of dividends and pre-payment premiums for the Series B SubREIT Preferred Shares.
See Note 4 for detail on the liability for estimated expense in excess of estimated income during liquidation.
Net assets in liquidation did not change during the period September 1, 2019 through September 30, 2019. Subsequent to September 30, 2019, $345.4 million, or $8.00 per share, of the net assets were distributed to common shareholders, see Note 14. The remaining undistributed net assets in liquidation of $31.8 million would result in liquidating distributions of approximately $0.74 per share. This estimate of liquidating distributions includes projections of timing and amounts of future sales, as well as costs and expenses to be incurred during the period required to complete the Plan of Voluntary Liquidation as described in Note 4. There is inherent uncertainty with these projections, and they could change materially based on the timing and amount of the sales, the performance of the underlying assets and any changes in the underlying assumptions of the projected cash flows.
Note 6. Investments
Real Estate Investments
As of September 30, 2019, the Company’s net investment in real estate totaled approximately $25.7 million, representing investments in 11 owned properties.
Owned Properties
During the nine months ended September 30, 2019, the Company had the following owned real estate activity (dollars in thousands):
|
For the eight months ended August 31, 2019
|
|
Total Properties
|
|
|
Dollar Amount of Investments
|
|
|
(prior to liquidation basis)
|
|
|
|
|
|
|
|
|
|
Gross balance, December 31, 2018
|
|
|
876
|
|
|
$
|
2,531,248
|
|
|
Acquisitions/improvements
|
|
|
—
|
|
|
|
5,891
|
|
|
Dispositions of real estate (1)(2)
|
|
|
(100
|
)
|
|
|
(199,560
|
)
|
|
Impairments
|
|
|
—
|
|
|
|
(38,655
|
)
|
|
Write-off of intangibles
|
|
|
—
|
|
|
|
(48,112
|
)
|
|
Gross balance, August 31, 2019
|
|
|
776
|
|
|
$
|
2,250,812
|
|
|
Accumulated depreciation
|
|
|
|
|
|
|
(455,995
|
)
|
|
Accumulated amortization
|
|
|
|
|
|
|
(58,413
|
)
|
|
Other non-real estate assets held for sale
|
|
|
|
|
|
|
43
|
|
|
Net balance, August 31, 2019
|
|
|
|
|
|
$
|
1,736,447
|
|
|
|
|
|
|
|
|
|
|
|
|
For the month ended September 30, 2019
|
|
|
|
|
|
|
|
|
|
(post liquidation basis)
|
|
|
|
|
|
|
|
|
|
Net balance, August 31, 2019
|
|
|
776
|
|
|
$
|
1,736,447
|
|
|
Net Adjustments to Realizable Value
|
|
|
—
|
|
|
|
667,006
|
|
|
Net Dispositions
|
|
|
(765
|
)
|
|
|
(2,377,722
|
)
|
|
Net balance, September 30, 2019
|
|
|
11
|
|
|
$
|
25,731
|
|
|
(1)
|
For the eight months ended August 31, 2019, the net gains on the disposal of total properties was $1.7 million.
|
|
(2)
|
Includes 83 properties with a real estate investment of $167.6 million that were transferred to the lender under the Shopko CMBS Loan Agreement.
|
As of September 30, 2019, all remaining assets are considered held for sale under liquidation basis of accounting.
20
SPIRIT MTA REIT
Notes to Consolidated Financial Statements
(Unaudited)
Operating Leases
As of August 31, 2019 and December 31, 2018, the Company held 776 and 876 properties under operating leases, respectively. The following table summarizes the components of rental income recognized on these operating leases in the accompanying consolidated statements of operations (in thousands):
|
|
|
Two Months Ended August 31,
|
|
|
Three Months Ended September 30,
|
|
|
Eight Months Ended August 31,
|
|
|
Nine Months Ended September 30,
|
|
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
|
Base cash rent
|
|
$
|
30,679
|
|
|
$
|
58,402
|
|
|
$
|
127,663
|
|
|
$
|
173,745
|
|
|
Variable cash rent (including reimbursables)
|
|
|
841
|
|
|
|
1,126
|
|
|
|
3,590
|
|
|
|
3,573
|
|
|
Straight-line rent, net of bad debt expense (1)
|
|
|
(303
|
)
|
|
|
844
|
|
|
|
1,546
|
|
|
|
2,482
|
|
|
Amortization of lease intangibles (2)
|
|
|
30
|
|
|
|
(85
|
)
|
|
|
13
|
|
|
|
(261
|
)
|
|
Total rental income
|
|
$
|
31,247
|
|
|
$
|
60,287
|
|
|
$
|
132,812
|
|
|
$
|
179,539
|
|
|
(1)
|
As a result of the Company's adoption of ASU 2016-02 on January 1, 2019, the Company reclassified bad debt expense to rental income on a prospective basis. See Note 3 for additional detail.
|
|
(2)
|
Excludes amortization of in-place leases of $1.3 million and $2.8 million for the two months ended August 31, 2019 and three months ended September 30, 2018, respectively, as well as $5.8 million and $8.1 million for the eight months ended August 31, 2019 and nine months ended September 30, 2018, which is included in depreciation and amortization expense in the accompanying consolidated statements of operations and comprehensive loss.
|
Loans Receivable
During the nine months ended September 30, 2019, the Company had the following loan activity (dollars in thousands):
|
For the eight months ended August 31, 2019
|
|
Mortgage Loans
|
|
|
Other Notes
|
|
|
|
|
|
|
(prior to liquidation basis)
|
|
Properties
|
|
|
Investment
|
|
|
Investment
|
|
|
Total Investment
|
|
|
Principal, December 31, 2018
|
|
|
8
|
|
|
$
|
30,778
|
|
|
$
|
34,416
|
|
|
$
|
65,194
|
|
|
Acquisitions
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Dispositions
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Principal payments and payoffs
|
|
|
—
|
|
|
|
—
|
|
|
|
(34,416
|
)
|
|
|
(34,416
|
)
|
|
Write-off of principal balance
|
|
|
(2
|
)
|
|
|
(2,888
|
)
|
|
|
—
|
|
|
|
(2,888
|
)
|
|
Principal, August 31, 2019
|
|
|
6
|
|
|
$
|
27,890
|
|
|
$
|
—
|
|
|
$
|
27,890
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the month ended September 30, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(post liquidation basis)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal, August 31, 2019
|
|
|
6
|
|
|
$
|
27,890
|
|
|
$
|
—
|
|
|
$
|
27,890
|
|
|
Principal payments and payoffs
|
|
|
(6
|
)
|
|
|
(27,890
|
)
|
|
|
—
|
|
|
|
(27,890
|
)
|
|
Principal, September 30, 2019
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
The mortgage loans were secured by single-tenant commercial properties and generally had fixed interest rates over the term of the loans. Other notes consisted of the Shopko B-1 Term Loan. A loan was placed on non-accrual status when the loan had become 60 days past due, or earlier if management determined that full recovery of the contractually specified payments of principal and interest was doubtful. While on non-accrual status, interest income was recognized only when received. In connection with Shopko’s bankruptcy filing in January 2019, Shopko filed pleadings asserting that any recovery under the Shopko B-1 Term Loan will be limited and may be impaired in full. Therefore, the Company recorded a full allowance for the Shopko B-1 Term Loan and placed the loan on non-accrual status as of December 31, 2018. The Company recovered the full principal balance owed during the eight months ended August 31, 2019. During the two and eight months ended August 31, 2019, the Company recorded interest income on loans receivable of $0.5 million and $2.5 million, respectively on the B-1 Term Loan.
21
SPIRIT MTA REIT
Notes to Consolidated Financial Statements
(Unaudited)
Impairments
The following table summarizes total impairment (recoveries) recognized on the accompanying consolidated statements of operations and comprehensive loss (in thousands):
|
|
|
Two Months Ended August 31,
|
|
|
Three Months Ended September 30,
|
|
|
Eight Months Ended August 31,
|
|
|
Nine Months Ended September 30,
|
|
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
|
Real estate and intangible asset impairment
|
|
$
|
12,795
|
|
|
$
|
9,343
|
|
|
$
|
38,655
|
|
|
$
|
15,431
|
|
|
Recoveries of loan losses
|
|
|
(12,500
|
)
|
|
|
—
|
|
|
|
(33,786
|
)
|
|
|
(16
|
)
|
|
Impairment, net of recoveries for loan losses
|
|
$
|
295
|
|
|
$
|
9,343
|
|
|
$
|
4,869
|
|
|
$
|
15,415
|
|
Note 7. Debt
Master Trust 2014
The Company had access to an asset-backed securitization platform, Master Trust 2014, to raise capital through the issuance of non-recourse, asset-back securities collateralized by commercial real estate, net-leases and mortgage loans. Master Trust 2014 had five bankruptcy-remote, special purpose entities as issuers or co-issuers of the notes. As of December 31, 2018, the notes had an outstanding principal balance of $1.94 billion, unamortized debt discount of $21.2 million and unamortized deferred financing costs of $14.9 million. During the two and eight months ended August 31, 2019, pre-payments of principal of $3.0 million were made, resulting in a loss on debt extinguishment of $0.1 million due to pre-payment premiums. On September 20, 2019, the Company completed the sale of the entities that comprise Master Trust 2014 to HPT, which included 769 owned and financed properties. Upon closing the Master Trust 2014 Sale, all of the outstanding classes and series of the notes issued under the Master Trust 2014 were repaid in full, and the related pre-payment premium of $82 million was paid by HPT.
CMBS
Academy CMBS
On January 22, 2018, the Company entered into a non-recourse loan agreement, which was collateralized by a single distribution center property located in Katy, Texas leased to Academy Sports + Outdoors. As a result of the issuance, the Company received approximately $84.0 million in proceeds, which were distributed to Spirit. As of December 31, 2018, the loan had an outstanding principal balance of $83.0 million and unamortized deferred financing costs of $1.1 million. On September 27, 2019, the Company sold the distribution center, and the outstanding CMBS debt and restricted cash associated with the property was assumed by the buyer.
Shopko CMBS
On November 1, 2018, SMTA, through four indirectly wholly-owned, property-owning subsidiaries, entered into a $165.0 million non-recourse mortgage loan agreement and, on November 27, 2018, $40.0 million of the loan was carved out into a separate mezzanine loan agreement. These Shopko CMBS Loan Agreements were secured by the equity of the entity that owned the four property-owning subsidiaries, which collectively held 85 assets (83 owned properties and two seller-financed notes on properties) that are leased to Shopko. As of December 31, 2018, the loans had an outstanding principal balance of $157.4 million, unamortized deferred financing costs of $5.9 million and a remaining maturity of 0.9 years.
On January 16, 2019, the Company's indirect wholly-owned subsidiaries as borrowers under the Shopko CMBS Loan Agreements defaulted on the loans when those entities ceased to make interest payments as a result of Shopko ceasing to pay its rent obligations following its bankruptcy filing. Upon the default, the full balance of principal outstanding under the loans immediately became due and payable and interest began accruing at the default rate of LIBOR plus 12.50% on the $125.0 million portion and LIBOR plus 18.00% on the $40.0 million mezzanine portion. On March 1, 2019, the Shopko Lenders foreclosed on the equity of the entity that owned the four property-owning subsidiaries. As a result of the foreclosure, the Company recognized a loss on debt extinguishment of $21.3 million during the eight months ended August 31, 2019. The components of the loss on debt extinguishment were $161.3 million of net investments and $21.2 million of restricted cash foreclosed, offset by $155.9 million of net debt and $5.3 million of accrued payables relieved.
22
SPIRIT MTA REIT
Notes to Consolidated Financial Statements
(Unaudited)
Interest Expense
The following table is a summary of the components of interest expense related to the Company’s borrowings (in thousands):
|
|
|
Two Months Ended August 31,
|
|
|
Three Months Ended September 30,
|
|
|
Eight Months Ended August 31,
|
|
|
Nine Months Ended September 30,
|
|
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
|
Interest expense
|
|
$
|
16,526
|
|
|
$
|
25,160
|
|
|
$
|
69,969
|
|
|
$
|
75,555
|
|
|
Non-cash interest expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of deferred financing costs
|
|
|
654
|
|
|
|
855
|
|
|
|
3,692
|
|
|
|
2,581
|
|
|
Amortization of debt discount
|
|
|
1,164
|
|
|
|
1,657
|
|
|
|
4,593
|
|
|
|
5,291
|
|
|
Total interest expense
|
|
$
|
18,344
|
|
|
$
|
27,672
|
|
|
$
|
78,254
|
|
|
$
|
83,427
|
|
Note 8. Shareholders' Equity and Redeemable Preferred Equity
The Company's declaration of trust authorizes it to issue 750,000,000 common shares of beneficial interest, $0.01 par value per share, and 20,000,000 preferred shares of beneficial interest, $0.01 par value per share. The Board of Trustees has the power, without shareholder approval, to increase or decrease the number of common shares the Company is authorized to issue.
Common Shares
SMTA was originally capitalized on November 17, 2017 with the issuance of 10,000 common shares of beneficial interest ($0.01 par value per share) for a total of $10,000.
On May 31, 2018, the distribution date, Spirit completed the Spin-Off of SMTA. On the distribution date, Spirit distributed on a pro rata basis one SMTA common share for every ten shares of Spirit common stock held by each of Spirit's stockholders as of May 18, 2018, which was the record date. As a result, 42,851,010 SMTA common shares were issued on May 31, 2018.
The Company did not declare common share dividends during the three months ended September 30, 2019 but had declared $28.5 million in dividends for the nine months ended September 30, 2019. The Company had 43,177,966 common shares outstanding as of September 30, 2019. During the three and nine months ended September 30, 2018, the Company declared $14.2 million in SMTA Common Stock dividends and had 43,000,862 shares of Common Stock outstanding as of September 30, 2018. Subsequent to September 30, 2019, the Company declared a special dividend of $8.00 per share to holders of SMTA common stock for a total of $345.4 million, which was paid on October 23, 2019.
SMTA Preferred Shares
In conjunction with the Spin-Off, SMTA issued to the Manager and one of its affiliates, also a wholly-owned subsidiary of Spirit, 6.0 million Series A preferred shares with an aggregate liquidation preference of $150.0 million (the "SMTA Preferred Shares"). Redemption value of the SMTA Preferred Shares is equal to the liquidation preference plus any accrued and unpaid dividends and redemption is under the control of SMTA unless a change of control event occurs, as defined in the SMTA Preferred Shares agreements. Therefore, as redemption may occur outside the control of SMTA, the SMTA Preferred Shares are classified as temporary equity.
The SMTA Preferred Shares pay cash dividends at the rate of 10.0% per annum on the liquidation preference of $25.00 per share (equivalent to $0.625 per share on a quarterly basis and $2.50 per share on an annual basis). During the three and nine months ended September 30, 2019, the Company paid $3.8 million and $11.3 million, respectively, in SMTA Preferred Shares dividends. As of September 30, 2019, all 6.0 million shares of 10.0% SMTA Preferred Shares had been repurchased for the full liquidation preference of $150.0 million.
23
SPIRIT MTA REIT
Notes to Consolidated Financial Statements
(Unaudited)
SubREIT Preferred Shares
Prior to the Spin-Off, in exchange for property, SubREIT issued to the Manager 5,000 shares of Series A preferred shares with an aggregate liquidation preference of $5.0 million (the "SubREIT Preferred Shares"). The Series A SubREIT Preferred Shares pay cash dividends at the rate of 18.0% per annum on the liquidation preference of $1,000.00 per share (equivalent to $45.00 per share on a quarterly basis and $180.00 per share on an annual basis). On December 19, 2018, SubREIT issued 125 Shares of Series B SubREIT Preferred Shares with an aggregate liquidation preference of $125 thousand. Series B SubREIT Preferred Shares pay cash dividends at the rate of 12.0% per annum on the liquidation preference of $1,000.00 per share (equivalent to $30.00 per share on a quarterly basis and $120.00 per share on an annual basis).
Redemption value of the SubREIT Preferred Shares is equal to the liquidation preference plus any accrued and unpaid dividends and redemption is under the control of SubREIT unless a change of control event occurs, as defined in the SubREIT Preferred Shares agreements. Therefore, as redemption may occur outside the control of SubREIT, the SubREIT Preferred Shares are classified as temporary equity. In conjunction with the Spin-Off, the Manager sold the SubREIT Preferred Shares to a third-party. On September 30, 2019, SMTA caused the funding for all the Series B SubREIT Preferred Shares to be redeemed by SMTA at their full liquidation preference of $125 thousand, plus $16 thousand for pre-payment penalties and accrued but unpaid dividends, which was effective on October 1, 2019. Subsequent to September 30, 2019, all Series A SubREIT Preferred Shares were redeemed by SMTA at their full liquidation preference, plus a pre-payment premium and accrued but unpaid dividends, which is reflected as redemption of preferred shares in the accompanying consolidated statement of net assets.
During the three and nine months ended September 30, 2019, the Company paid $16 thousand and $474 thousand, respectively, in SubREIT Preferred Shares dividends and pre-payment penalties. There were 5,000 shares of the Series A SubREIT Preferred Shares outstanding as of September 30, 2019.
Share Repurchase Program
In December 2018, the Company's Board of Trustees approved a share repurchase program, which authorized repurchases of up to $50.0 million of the Company's common shares. These repurchases can be made in the open market or through private transactions. The amount and timing of repurchases is dependent on the Board of Trustees' assessment of the capital needs of the Company. No repurchases have been made under the program as of September 30, 2019.
Dividends Declared
During the nine months ended September 30, 2019, the Company's Board of Trustees declared the following dividends for SMTA Preferred Shares and SMTA common shares, and SubREIT's Board of Directors declared the following dividends for SubREIT Preferred Shares:
|
|
|
Declaration Date
|
|
Dividend
Per Share
|
|
|
Record Date
|
|
Total Amount
(in thousands)
|
|
|
Payment Date
|
|
Preferred Shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SMTA Preferred Shares
|
|
March 5, 2019
|
|
$
|
0.625
|
|
|
March 15, 2019
|
|
$
|
3,750
|
|
|
March 29, 2019
|
|
SubREIT Series A Preferred Shares
|
|
February 28, 2019
|
|
$
|
45.000
|
|
|
March 15, 2019
|
|
$
|
225
|
|
|
March 29, 2019
|
|
SMTA Preferred Shares
|
|
May 1, 2019
|
|
$
|
0.625
|
|
|
June 14, 2019
|
|
$
|
3,750
|
|
|
June 28, 2019
|
|
SubREIT Series A Preferred Shares
|
|
May 23, 2019
|
|
$
|
45.000
|
|
|
June 14, 2019
|
|
$
|
225
|
|
|
June 28, 2019
|
|
SubREIT Series B Preferred Shares
|
|
May 29, 2019
|
|
$
|
64.000
|
|
|
June 14, 2019
|
|
$
|
8
|
|
|
June 28, 2019
|
|
SMTA Preferred Shares
|
|
July 1, 2019
|
|
$
|
0.625
|
|
|
September 13, 2019
|
|
$
|
3,750
|
|
|
September 20, 2019
|
|
SubREIT Series B Preferred Shares
|
|
September 30, 2019
|
|
$
|
30.330
|
|
|
September 30, 2019
|
|
$
|
4
|
|
|
September 30, 2019
|
|
SubREIT Series A Preferred Shares
|
|
August 1, 2019
|
|
$
|
45.000
|
|
|
September 13, 2019
|
|
$
|
225
|
|
|
October 1, 2019
|
|
Common Shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SMTA Common Shares
|
|
March 5, 2019
|
|
$
|
0.330
|
|
|
March 29, 2019
|
|
$
|
14,218
|
|
|
April 15, 2019
|
|
SMTA Common Shares
|
|
May 1, 2019
|
|
$
|
0.330
|
|
|
June 28, 2019
|
|
$
|
14,243
|
|
|
July 15, 2019
|
Note 9. Commitments and Contingencies
The Company is periodically subject to claims or litigation in the ordinary course of business, including claims generated from business conducted by tenants on real estate owned by the Company. In these instances, the Company is typically indemnified by the tenant against any losses that might be suffered, and the Company and/or the tenant are insured against such claims.
24
SPIRIT MTA REIT
Notes to Consolidated Financial Statements
(Unaudited)
On March 4, 2019, SMTA received a demand notice from the Shopko Lenders seeking repayment of the loans under the Shopko CMBS Loan Agreements pursuant to SMTA’s guaranty of the loans in which the Shopko Lenders allege, among other things, fraud and intentional misrepresentations by the borrowers. While SMTA believes the allegations were without merit, on July 29, 2019, SMTA resolved the dispute with the Shopko Lenders and reached a confidential settlement. The Company has recorded the cost of the settlement in Shopko-related expenses in the consolidated statements of operations and comprehensive loss for the two and eight months ended August 31, 2019.
As of September 30, 2019, there were no outstanding claims against the Company that are expected to have a material adverse effect on the Company’s financial position.
As of September 30, 2019, the Company had no outstanding commitments to fund improvements or construction on properties the Company currently owns, nor any commitments to acquire new properties.
The Company estimates future costs for known environmental remediation requirements when it is probable that the Company has incurred a liability and the related costs can be reasonably estimated. The Company considers various factors when estimating its environmental liabilities, and adjustments are made when additional information becomes available that affects the estimated costs to study or remediate any environmental issues. When only a wide range of estimated amounts can be reasonably established and no other amount within the range is better than another, the low end of the range is recorded in the consolidated financial statements. As of September 30, 2019, no accruals have been made.
Note 10. Segments
Prior to the completion of the Master Trust 2014 Sale in September 2019, management viewed the operations of the Company as two separate segments—Master Trust 2014 and Other Properties—and made operating decisions based on these two reportable segments. Subsequent to the adoption of the Plan of Voluntary Liquidation, the Company no longer makes operating decisions or assesses performance in separate segments as all remaining assets and liabilities are held for sale.
Master Trust 2014 was an asset-backed securitization platform, see Note 7, with specific criteria for operating the Collateral Pool, including restrictions on use of Release Account cash, concentration thresholds which could not be exceeded, and a minimum debt service coverage ratio which had to be met. On September 20, 2019, the Company completed the Master Trust 2014 Sale. Accordingly, as of September 30, 2019, all remaining assets and liabilities are related to the Other Properties segment.
For periods prior to the completion of the Master Trust 2014 Sale, segment results are comprised of revenues, property management and servicing fees, property costs, depreciation and amortization, impairments, and interest expense. General and administrative expenses, asset management fees under the Asset Management Agreement, transaction costs, and income taxes are not allocated to individual segments for purposes of assessing segment performance.
The performance of the reportable segments prior to the Master Trust 2014 Sale was not comparable with the Company's consolidated results, nor necessarily comparable with similar information for any other REITs. Additionally, because of the interrelationship of the segments prior to the Master Trust 2014 Sale, the information presented is not indicative of how the segments would perform if they operated as independent entities.
25
SPIRIT MTA REIT
Notes to Consolidated Financial Statements
(Unaudited)
Segment results for the two and eight months ended August 31, 2019 and the three and nine months ended September 30, 2018 are as follows (in thousands):
|
|
|
Two Months Ended
August 31, 2019
|
|
|
Three Months Ended
September 30, 2018
|
|
|
|
|
Master Trust
2014
|
|
|
Other
Properties
|
|
|
Total
|
|
|
Master Trust
2014
|
|
|
Other
Properties
|
|
|
Total
|
|
|
Segment Results:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental income
|
|
$
|
28,783
|
|
|
$
|
2,464
|
|
|
$
|
31,247
|
|
|
$
|
45,317
|
|
|
$
|
14,970
|
|
|
$
|
60,287
|
|
|
Interest income on loans receivable
|
|
|
43
|
|
|
|
497
|
|
|
|
540
|
|
|
|
72
|
|
|
|
1,059
|
|
|
|
1,131
|
|
|
Other income
|
|
|
265
|
|
|
|
529
|
|
|
|
794
|
|
|
|
785
|
|
|
|
208
|
|
|
|
993
|
|
|
Property Management and Servicing Fees (1)
|
|
|
(1,294
|
)
|
|
|
—
|
|
|
|
(1,294
|
)
|
|
|
(1,750
|
)
|
|
|
—
|
|
|
|
(1,750
|
)
|
|
Property expenses (including reimbursable)
|
|
|
(1,111
|
)
|
|
|
(315
|
)
|
|
|
(1,426
|
)
|
|
|
(765
|
)
|
|
|
(1,144
|
)
|
|
|
(1,909
|
)
|
|
Depreciation and amortization
|
|
|
(10,476
|
)
|
|
|
(206
|
)
|
|
|
(10,682
|
)
|
|
|
(15,782
|
)
|
|
|
(5,187
|
)
|
|
|
(20,969
|
)
|
|
Impairments, net of recoveries for loan losses
|
|
|
—
|
|
|
|
(295
|
)
|
|
|
(295
|
)
|
|
|
(4,113
|
)
|
|
|
(5,230
|
)
|
|
|
(9,343
|
)
|
|
Interest expense
|
|
|
(17,598
|
)
|
|
|
(746
|
)
|
|
|
(18,344
|
)
|
|
|
(26,551
|
)
|
|
|
(1,121
|
)
|
|
|
(27,672
|
)
|
|
Loss on debt extinguishment
|
|
|
(144
|
)
|
|
|
—
|
|
|
|
(144
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Gain (loss) on disposition of assets
|
|
|
256
|
|
|
|
(35
|
)
|
|
|
221
|
|
|
|
1,386
|
|
|
|
2,824
|
|
|
|
4,210
|
|
|
Segment (loss) income
|
|
$
|
(1,276
|
)
|
|
$
|
1,893
|
|
|
$
|
617
|
|
|
$
|
(1,401
|
)
|
|
$
|
6,379
|
|
|
$
|
4,978
|
|
|
Non-allocated expenses
|
|
|
|
|
|
|
|
|
|
|
(2,628
|
)
|
|
|
|
|
|
|
|
|
|
|
(8,552
|
)
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
$
|
(2,011
|
)
|
|
|
|
|
|
|
|
|
|
$
|
(3,574
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eight Months Ended
August 31, 2019
|
|
|
Nine Months Ended
September 30, 2018
|
|
|
|
|
Master Trust
2014
|
|
|
Other
Properties
|
|
|
Total
|
|
|
Master Trust
2014
|
|
|
Other
Properties
|
|
|
Total
|
|
|
Segment Results:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental income
|
|
$
|
118,204
|
|
|
$
|
14,608
|
|
|
$
|
132,812
|
|
|
$
|
134,323
|
|
|
$
|
45,216
|
|
|
$
|
179,539
|
|
|
Interest income on loans receivable
|
|
|
179
|
|
|
|
2,490
|
|
|
|
2,669
|
|
|
|
224
|
|
|
|
1,740
|
|
|
|
1,964
|
|
|
Other income
|
|
|
949
|
|
|
|
1,967
|
|
|
|
2,916
|
|
|
|
1,623
|
|
|
|
311
|
|
|
|
1,934
|
|
|
Property Management and Servicing Fees (1)
|
|
|
(5,070
|
)
|
|
|
—
|
|
|
|
(5,070
|
)
|
|
|
(5,164
|
)
|
|
|
—
|
|
|
|
(5,164
|
)
|
|
Property expenses (including reimbursable)
|
|
|
(3,541
|
)
|
|
|
(1,346
|
)
|
|
|
(4,887
|
)
|
|
|
(2,998
|
)
|
|
|
(2,575
|
)
|
|
|
(5,573
|
)
|
|
Depreciation and amortization
|
|
|
(42,386
|
)
|
|
|
(4,992
|
)
|
|
|
(47,378
|
)
|
|
|
(46,805
|
)
|
|
|
(16,266
|
)
|
|
|
(63,071
|
)
|
|
Impairments, net of recoveries for loan losses
|
|
|
(5,959
|
)
|
|
|
1,090
|
|
|
|
(4,869
|
)
|
|
|
(9,118
|
)
|
|
|
(6,297
|
)
|
|
|
(15,415
|
)
|
|
Interest expense
|
|
|
(70,628
|
)
|
|
|
(7,626
|
)
|
|
|
(78,254
|
)
|
|
|
(80,348
|
)
|
|
|
(3,079
|
)
|
|
|
(83,427
|
)
|
|
Loss on debt extinguishment
|
|
|
(144
|
)
|
|
|
(21,267
|
)
|
|
|
(21,411
|
)
|
|
|
(363
|
)
|
|
|
—
|
|
|
|
(363
|
)
|
|
Gain (loss) on disposition of assets
|
|
|
1,626
|
|
|
|
114
|
|
|
|
1,740
|
|
|
|
(757
|
)
|
|
|
8,221
|
|
|
|
7,464
|
|
|
Segment (loss) income
|
|
$
|
(6,770
|
)
|
|
$
|
(14,962
|
)
|
|
$
|
(21,732
|
)
|
|
$
|
(9,383
|
)
|
|
$
|
27,271
|
|
|
$
|
17,888
|
|
|
Non-allocated expenses
|
|
|
|
|
|
|
|
|
|
|
(35,115
|
)
|
|
|
|
|
|
|
|
|
|
|
(28,062
|
)
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
$
|
(56,847
|
)
|
|
|
|
|
|
|
|
|
|
$
|
(10,174
|
)
|
|
(1)
|
Property Management and Servicing Fees are included in related party fees in the consolidated statements of operations and comprehensive loss. Asset Management Fees, the other component of related party fees, are included in non-allocated expenses.
|
Dispositions by reportable segment are as follows (dollars in thousands):
|
|
|
Nine Months Ended September 30, 2019
|
|
|
Nine Months Ended September 30, 2018
|
|
|
|
|
Properties
|
|
|
Gross
Proceeds
|
|
|
Properties
|
|
|
Gross
Proceeds
|
|
|
Master Trust 2014 (1)
|
|
|
784
|
|
|
$
|
2,416,445
|
|
|
|
29
|
|
|
$
|
31,796
|
|
|
Other Properties (2)
|
|
|
87
|
|
|
|
112,805
|
|
|
|
10
|
|
|
|
44,022
|
|
|
Total
|
|
|
871
|
|
|
$
|
2,529,250
|
|
|
|
39
|
|
|
$
|
75,818
|
|
|
|
(1)
|
Includes 769 owned and financed properties disposed on September 20, 2019 in the Master Trust 2014 Sale. See Note 7 for further discussion.
|
|
|
(2)
|
Includes 83 properties disposed during the nine months ended September 30, 2019, which relieved Shopko CMBS debt in lieu of generating cash proceeds. See Note 7 for further discussion.
|
26
SPIRIT MTA REIT
Notes to Consolidated Financial Statements
(Unaudited)
Note 11. 2018 Incentive Award Plan
Restricted Common Shares
During the nine months ended September 30, 2019, the Company granted approximately 164 thousand restricted shares under the 2018 Incentive Award Plan to the principal executive officer of the Company and members of the Board of Trustees. Prior to the shareholder approval of the Master Trust 2014 Sale and Plan of Voluntary Liquidation, the Company had 145 thousand unvested restricted shares outstanding. These outstanding restricted shares vested in connection with the aforementioned shareholder meeting and approval, and there were no outstanding restricted shares as of September 30, 2019. 3.3 million shares are available for award under the Plan.
Market-Based Awards
During the nine months ended September 30, 2019, the Company granted approximately 32 thousand shares under market-based awards to the principal executive officer of the Company. The performance period of these grants runs through December 31, 2021. Awards vest in three annual tranches beginning December 31, 2019 and ending December 31, 2021. Potential common shares that the participant is eligible to receive is based on performance goals related to total shareholder return achieved by the Company during the performance period. During the three months ended September 30, 2019, the market-based awards were accelerated in conjunction with shareholder approval of the Master Trust 2014 Sale and were earned at 200% of the target amount, which resulted in 64 thousand market-based awards issued.
Share-based Compensation Expense
For the eight months ended August 31, 2019, the Company recognized $1.4 million in stock-based compensation expense from restricted share and market-based awards. Of this amount, $0.9 million related to restricted shares awarded to members of the Board of Trustees and is included in general and administrative expenses in the accompanying consolidated statements of operations and comprehensive loss. The remaining $0.5 million related to restricted shares and market-based awards granted to the principal executive officer of the Company, an employee of the Manager. This expense is considered a component of the Company’s management fees under the Asset Management Agreement and is included in related party fees in the accompanying consolidated statements of operations and comprehensive loss.
For both the three and nine months ended September 30, 2018, the Company recognized $451.2 thousand in stock-based compensation expense, which is included in general and administrative expenses in the accompanying consolidated statements of operations and comprehensive loss.
As of September 30, 2019, the Company had no remaining unamortized share-based compensation expense as all restricted share awards and market-based awards had vested and paid out. As of December 31, 2018, the remaining unamortized share-based compensation expense totaled $0.8 million, all of which is related to restricted share awards. Amortization is recognized on a straight-line basis over the service period of the awards.
Note 12. Loss Per Share
Loss per share has been computed using the two-class method, which is computed by dividing the sum of distributed earnings to common shareholders and undistributed earnings allocated to common shareholders by the weighted average number of common shares outstanding for the period. In applying the two-class method, undistributed earnings are allocated to both common shares and any participating securities based on the weighted average shares outstanding during the period. Under the two-class method, any earnings attributable to unvested restricted shares are deducted from loss from continuing operations in the computation of net loss attributable to common shareholders.
27
SPIRIT MTA REIT
Notes to Consolidated Financial Statements
(Unaudited)
The table below is a reconciliation of the numerator and denominator used in the computation of basic and diluted net loss per share computed using the two-class method (dollars in thousands):
|
|
|
Two Months Ended August 31,
|
|
|
Three Months Ended September 30,
|
|
|
Eight Months Ended August 31,
|
|
|
Nine Months Ended September 30,
|
|
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
|
Basic and diluted loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss and total comprehensive loss
|
|
$
|
(2,011
|
)
|
|
$
|
(3,574
|
)
|
|
$
|
(56,847
|
)
|
|
$
|
(10,174
|
)
|
|
Less: dividends paid to preferred shareholders
|
|
|
(2,653
|
)
|
|
|
(3,975
|
)
|
|
|
(10,611
|
)
|
|
|
(5,300
|
)
|
|
Less: dividends declared on unvested restricted shares
|
|
|
—
|
|
|
|
(49
|
)
|
|
|
(120
|
)
|
|
|
(49
|
)
|
|
Net loss attributable to common shareholders used in basic and diluted loss per share
|
|
$
|
(4,664
|
)
|
|
$
|
(7,598
|
)
|
|
$
|
(67,578
|
)
|
|
$
|
(15,523
|
)
|
|
Basic weighted average common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding
|
|
|
43,159,931
|
|
|
|
42,974,801
|
|
|
|
43,112,164
|
|
|
|
42,892,727
|
|
|
Less: Unvested weighted average restricted shares
|
|
|
(144,704
|
)
|
|
|
(123,791
|
)
|
|
|
(173,387
|
)
|
|
|
(41,717
|
)
|
|
Weighted average common shares outstanding used in basic loss per share
|
|
|
43,015,227
|
|
|
|
42,851,010
|
|
|
|
42,938,777
|
|
|
|
42,851,010
|
|
|
Net loss per share attributable to common shareholders
|
|
$
|
(0.11
|
)
|
|
$
|
(0.18
|
)
|
|
$
|
(1.57
|
)
|
|
$
|
(0.36
|
)
|
|
Dilutive weighted average common shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding used in diluted loss per share
|
|
|
43,015,227
|
|
|
|
42,851,010
|
|
|
|
42,938,777
|
|
|
|
42,851,010
|
|
|
Net loss per share attributable to common shareholders - diluted
|
|
$
|
(0.11
|
)
|
|
$
|
(0.18
|
)
|
|
$
|
(1.57
|
)
|
|
$
|
(0.36
|
)
|
|
Total potentially dilutive common shares (1)
|
|
|
108,592
|
|
|
|
—
|
|
|
|
107,115
|
|
|
|
—
|
|
|
(1)
|
For the two and eight months ended August 31, 2019, potential dilutive shares consisted of unvested restricted shares and market-based awards. For the three and nine months ended September 30, 2018, there were no adjustments to the weighted average number of common shares outstanding used in the diluted calculation given there were no potentially dilutive shares.
|
Note 13. Related Party Transactions
Cost Sharing Arrangements
In conjunction with the Spin-Off, the Company entered into certain agreements, including the Separation and Distribution Agreement, Tax Matters Agreement, Registration Rights Agreement and Insurance Sharing Agreement. These agreements provide a framework for the relationship between the Company and Spirit after the Spin-Off, by which Spirit may incur certain expenses on behalf of the Company that the Company must reimburse in a timely manner. These agreements, except for the Tax Matters Agreement, were terminated in conjunction with the termination of the Asset Management Agreement. In connection with these arrangements, the Company had accrued payable balances of $1.6 million and $0.1 million to Spirit at September 30, 2019 and December 31, 2018, respectively. Additionally, the Company had accrued receivable balances of $0.1 million and $1.8 million from Spirit at September 30, 2019 and December 31, 2018, respectively, in connection with these arrangements.
Asset Management Agreement
In conjunction with the Spin-Off, the Company entered into the Asset Management Agreement pursuant to which the Manager provided various services subject to the supervision of SMTA's Board of Trustees, including, but not limited to: (i) performing all of SMTA's day-to-day functions, (ii) sourcing, analyzing and executing on investments and dispositions, (iii) determining investment criteria, (iv) performing investment and liability management duties, including financing and hedging, and (v) performing financial and accounting management. As compensation for these services, the Manager was entitled to a management fee of $20 million per annum, payable monthly in arrears. Under certain circumstances, the Manager was also entitled to a promoted interest fee based on the total shareholder return of SMTA's common shares during the relevant period, as well as a termination fee. On June 2, 2019, concurrently with the execution of the agreement for the Master Trust 2014 Sale, the Company entered into a termination agreement of the Asset Management Agreement, which became effective on September 20, 2019. Pursuant to the termination agreement, the Company paid the Manager a termination fee of $48.2 million and the Manager waived its right to receive any promoted interest fee as otherwise provided for under the Asset Management Agreement, resulting in a net reversal of $0.8 million in promoted interest expense for the eight months ended August 31, 2019. On June 2, 2019, the Company and the Manager also entered into an Interim Management Agreement, which became effective September 20, 2019, which provides that the Manager is entitled to an
28
SPIRIT MTA REIT
Notes to Consolidated Financial Statements
(Unaudited)
annual management fee of $1 million for the initial one-year term thereof and $4 million per annum for any renewal term, in each case plus certain cost reimbursements. The Interim Management Agreement is terminable at any time by the Company and, upon a six month notice period, may be terminated at any time after September 20, 2020 by the Manager, in each case without payment of a termination fee. During the two and eight months ended August 31, 2019, asset management fees of $3.3 million and $13.3 million, respectively, were incurred which are included in related party fees in the consolidated statements of operations and comprehensive loss. Additionally, under the terms of the Asset Management Agreement, the Company recognized related party fees of $0.5 million for stock compensation awarded by SMTA to its principal executive officer for the eight months ended August 31, 2019. Asset management fees of $1.7 million and promote fees of $0.8 million were accrued at December 31, 2018, which are included in accounts payable, accrued expenses and other liabilities in the accompanying balance sheet.
Property Management and Servicing Agreement
The Manager provided property management services and special services for Master Trust 2014 under the terms of the Property Management and Servicing Agreement dated May 20, 2014. The property management fees accrued daily at 0.25% per annum of the collateral value of the Master Trust 2014 Collateral Pool other than specially serviced assets, which accrued daily at 0.75% per annum. Property management fees of $1.0 million and $1.6 million and special servicing fees of $0.3 million and $0.2 million were incurred during the two months ended August 31, 2019 and three months ended September 30, 2018, respectively. Property management fees of $4.0 million and $4.6 million and special servicing fees of $1.1 million and $0.5 million were incurred during the eight months ended August 31, 2019 and nine months ended September 30, 2018, respectively. The property management fees and special servicing fees are included in related party fees in the consolidated statements of operations and comprehensive loss. As of December 31, 2018, the Company had accrued payable balances of $0.5 million related to these fees. In conjunction with the Master Trust 2014 Sale, the notes were satisfied and discharged on September 20, 2019 and the Property Management and Servicing Agreement was terminated.
Related Party Loans Receivable
Prior to September 20, 2019, the Company had four mortgage loans receivable where wholly-owned subsidiaries of Spirit were the borrower, and the loans were secured by six single-tenant commercial properties. These mortgage loans, which had a weighted average stated interest rate of 1.00%, were entered into by entities under common control of Spirit in conjunction with the issuance of the Series 2014 notes of Master Trust 2014 because the underlying properties did not qualify to be held directly as collateral by Master Trust 2014 under its governing agreements. These mortgage notes had an outstanding principal of $27.9 million at December 31, 2018, which is included in loans receivable, net on the consolidated balance sheet. The mortgage notes generated $43 thousand and $72 thousand of interest income for the two months ended August 31, 2019 and three months ended September 30, 2018, respectively, and $179 thousand and $223 thousand of interest income for the eight months ended August 31, 2019 and nine months ended September 30, 2018, respectively, which is included in interest income on loans receivable in the consolidated statements of operations and comprehensive loss. In conjunction with the Master Trust 2014 Sale, the remaining balance of the related party loans payable was repaid to the Company in full.
Related Party Notes Payable
In conjunction with the Series 2017-1 notes issuance completed in December 2017, a subsidiary of Spirit, as sponsor of the issuance, retained a 5% economic interest in the Master Trust 2014 Series 2017-1 notes as required by the risk retention rules issued under 17 CFR Part 246. The principal amount due to the Manager under the notes was $33.5 million at December 31, 2018, and is included in mortgages and notes payable, net on the consolidated balance sheet. Interest expense on the consolidated statements of operations and comprehensive loss includes $0.3 million for the two months ended August 31, 2019 and $0.4 million for the three months ended September 30, 2018 in relation to these notes. Interest expense on the consolidated statements of operations and comprehensive loss includes $1.1 million for the eight months ended August 31, 2019 and $1.2 million for the nine months September 31, 2018 in relation to these notes. In conjunction with the Master Trust 2014 Sale, the outstanding principal balance of $33.5 million was paid in full, plus an early repayment premium of $0.9 million was paid by HPT to the Manager in relation to these notes.
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SPIRIT MTA REIT
Notes to Consolidated Financial Statements
(Unaudited)
Related Party Transfers and Acquisitions
The financial statements include transfers of properties between the Company and Spirit and its wholly-owned subsidiaries prior to the Spin-Off. These transactions are reflected in the combined statements of cash flows as distribution to parent. For the nine months ended September 30, 2018, the Company transferred three properties to Spirit with a net book value of $2.1 million and Spirit contributed ten properties to the Company with an aggregate net book value of $44.9 million and a $35.0 million B-1 Term Loan with Shopko as borrower, all of which are reflected as non-cash activity in the consolidated statement of cash flows. For these transactions, due to all entities being under common control, no gain or loss was recognized by the Company and transferred properties were accounted for by the Company at their historical cost basis to Spirit. There were no related party transfers during the nine months ended September 30, 2019.
Expense Allocations
As described in Note 3, the accompanying consolidated financial statements present the operations of the Company as carved-out from the financial statements of Spirit through the date of the Spin-Off. General and administrative expenses and transaction costs were first specifically identified based on direct usage or benefit. The remaining general and administrative expenses and transaction costs for the period prior to the Spin-Off have been allocated to the Company based on relative property count, which the Company believes to be a reasonable methodology. These allocated expenses are centralized corporate costs borne by Spirit for management and other services, including, but not limited to, executive oversight, asset management, property management, treasury, finance, human resources, tax, accounting, financial reporting, information technology and investor relations, as well as transaction costs incurred in connection with the Spin-Off. A summary of the amounts allocated by property count for the period prior to the Spin-Off is provided below (dollars in thousands):
|
|
|
Three Months Ended September 30,
|
|
|
Nine Months Ended September 30,
|
|
|
|
|
2018
|
|
|
2018
|
|
|
Allocated corporate expenses:
|
|
|
|
|
|
|
|
|
|
Cash compensation and benefits
|
|
$
|
—
|
|
|
$
|
3,965
|
|
|
Stock compensation
|
|
|
—
|
|
|
|
2,424
|
|
|
Professional fees
|
|
|
—
|
|
|
|
1,013
|
|
|
Other corporate expenses
|
|
|
—
|
|
|
|
1,068
|
|
|
Total corporate expenses
|
|
$
|
—
|
|
|
$
|
8,470
|
|
|
Transaction Costs
|
|
$
|
—
|
|
|
$
|
3,957
|
|
Corporate expenses have been included within general and administrative expenses in the consolidated statements of operations and comprehensive loss.
Note 14. Subsequent Events
Common Share Dividend
On October 3, 2019, the Board of Trustees declared a cash liquidating distribution of $8.00 per common share, or $345.4 million, for shareholders of record as of October 14, 2019. The dividend was paid on October 23, 2019.
30