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Spirit Realty's (SRC) Focus Back on External Growth, Stock Up

Zacks Equity Research
·4 mins read

Spirit Realty Capital, Inc. SRC recently reinitiated its acquisition guidance. The company expects to complete full-year acquisitions, including revenue-producing capital expenditures, of $600-$650 million. The move indicates the company’s confidence in its tenant base, and cash flows and return of focus on inorganic growth in the remaining part of this year.

The company expects to complete $375-$425 million of acquisitions and roughly $100 million of dispositions in the second half of 2020. So far in the quarter, it has accomplished acquisitions of $165 million.

Shares of the company rallied 3.8% during Tuesday’s regular session, reflecting bullish sentiments.

The company’s September rent collections have already exceeded 92%. Moreover, according to the company’s September 2020 Investor presentation that offered all tenant updates based on available information as of Sep 8, August rent collections reached 90.2%. Base rent collection amounted to 100% from the top 10 tenants and 99% from the top 20.

This marks an improvement from July’s base rent collection of 86%, with full receipts from the top 10 tenants and 95% from the top 20, as well as the second-quarter base rent collection of 75%, with 87.7% receipts from the top 10 tenants and 83.6% from the top 20.

Notably, the year began on a positive note with a resilient economy and decent job-market strength. However, things got weary in March due to the coronavirus pandemic, with the challenging situation continuing into September as well. There have been significant disruptions in the market and several real estate categories have been widely affected. Tenants’ rent-paying capabilities became a concern and demand for real estate space has been affected, raising concerns over the fate of cash flows of real estate landlords.

Nonetheless, situations have improved now and with deferrals run-off and stores reopening, there will likely be continued rent collection improvement for Spirit Realty through the end of the year.

For this net-lease REIT, which mainly invests in single-tenant, operationally essential real estate assets, exposure to convenience stores, grocery, drug stores/pharmacies, and other asset types where tenants sell ‘essential’ goods ensures steady cash flows, as these industries flourished amid the pandemic. However, tenants from theaters, entertainment, health and fitness centers, and casual dining restaurants have been affected amid the social-distancing requirements, raising concerns regarding their rent payments.

The company will report financial and operating results for the September-end quarter after the market closes on Nov 2. The Zacks Consensus Estimate for quarterly funds from operations (FFO) per share is currently pinned at 68 cents on revenues of $115.6 million.

Shares of this Zacks Rank #2 (Buy) company have gained 34.3% compared with the real estate market’s rally of 28.3% in the past six months. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Other Stocks to Consider

Alpine Income Property Trust, Inc.’s PINE FFO per share estimate for 2020 has been revised 2.6% upward to $1.18 over the past month. It currently carries a Zacks Rank of 2.

Duke Realty Corporation’s DRE Zacks Consensus Estimate for the current-year FFO per share moved up 3.5% to $1.49 over the past two months. The company currently carries a Zacks Rank of 2.

Sabra Healthcare REIT, Inc.’s SBRA FFO per share estimate for the ongoing year has moved 1.8% north to $1.74 over the past month. The company currently holds a Zacks Rank of 2.

Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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Duke Realty Corporation (DRE) : Free Stock Analysis Report
 
Sabra Healthcare REIT, Inc. (SBRA) : Free Stock Analysis Report
 
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Alpine Income Property Trust, Inc. (PINE) : Free Stock Analysis Report
 
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