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Spirit Realty's (SRC) Q2 Rent Collection Totals Nearly 75%

Zacks Equity Research
·4 mins read

Spirit Realty Capital, Inc.’s SRC second-quarter rent collections reached 74.4% as of Jul 8. Particularly, base rent collection amounted to 87.7% from the top 10 tenants and 83.7% from the top 20.

Furthermore, the company noted that its rent receipts for June stood at 75.9%, which denotes a decline from April’s 77.3% but an improvement from May’s 70%.

Considering its top 10 tenants, though the company managed to make full rent collections for April, it could make 78.3% for May and 84.8% for June.

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 July as well. There have been significant disruptions in the market and several real estate categories have been widely affected.

Amid this, tenants’ rent-paying capability has become a concern and demand for real estate space has dropped. This has raised concerns over the fate of cash flows of real estate landlords. Remarkably, such impacts are more pronounced on retail real estate fundamentals in the second quarter than in the first.

Retail businesses depend on customer traffic and consumers are avoiding gathering in large public spaces due to the pandemic. This has taken a toll on tenants’ liquidity, who are unable to meet rental obligations. This is expected to impact the company’s near-term performance as it generates majority of base rents from retail properties.

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 even during the pandemic. However, tenants from theaters, entertainment, health and fitness centers, and casual dining restaurants are affected due to the government-mandated closures and social-distancing requirements, raising concerns regarding their rent payments.

The company will report financial and operating results for the June-end quarter before the market opens on Aug 6. The Zacks Consensus Estimate for quarterly funds from operations (FFO) per share is currently pinned at 56 cents per share on revenues of $114.9 million.

Shares of this Zacks Rank #3 (Hold) company have declined 34.2% compared with the real estate market’s fall of 17.4% so far in the year. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.


Stocks to Consider

City Office REIT, Inc.’s CIO FFO per share estimates for the ongoing year have remained unchanged at $1.11 over the past 30 days. The company currently carries a Zacks Rank of 2 (Buy).

Cousins Properties Incorporated’s CUZ Zacks Consensus Estimate for 2020 FFO per share has been revised marginally upward to $2.74 over the past month. The company currently carries a Zacks Rank of 2.

Gladstone Land Corporation’s LAND FFO per share estimate for the ongoing year has been unrevised at 68 cents over the past month. It currently carries 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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