Spirit Realty Capital Inc (SRC) 2014 Q2 法說會逐字稿

Good afternoon, ladies and gentlemen, and welcome to the Spirit Realty Capital second-quarter 2014 financial-results conference call. (operator instructions)

This conference is being recorded, and a replay of the call will be available for one week, beginning at 6 p.m. eastern time today. The dial-in details for the replay can be found in today's press release. Additionally, there will be on audio webcast available for the next 30 days on Spirit Realty Capital's website.

It is now my pleasure to turn the call over to Michael Bender, Executive Vice President and Chief Financial Officer of Spirit Realty Capital. Mr. Bender, please proceed.

Thank you, Philip, and good afternoon, everyone. Thank you for joining us.

Here with me today are Tom Nolan, our Chairman and Chief Executive Officer; and Pete Mavoides, our President and Chief Operating Officer.

Tom will start with some introductory comments, and then I'll provide some color on our financial results. Pete will then discuss our portfolio and investment program, and Tom will conclude with summary remarks prior to the Q&A portion of the call.

I would like to note that during this conference call, we will make certain statements that may be considered to be forward-looking statements under federal securities law. These statements are based on Management's current expectations, and the Company's actual future results may differ significantly.

In our periodic reports on file with the SEC, we set forth certain factors that could cause our future results to vary from Management's forward-looking statements.

All information presented on this call is current as of today, August 5, 2014; and Spirit does not intend and undertakes no duty to update forward-looking statements unless required by law.

In addition, reconciliations of non-GAAP financial measures presented on this call, such as FFO, AFFO, and FAD, can be found in the Company's earnings release from earlier today, which is available in the investor-relations section of our website.

With that, here's Tom.

Thank you, Mike, and thank you, everyone, for joining us today.

We are very pleased with our results for the second quarter and for the first half of 2014. This call will be the eighth time we have discussed our results since we went public in September of 2012.

Those of you who were with us at that time of the IPO may recall we set out both tangible and intangible goals for the Company.

We said we wanted to be one of the most transparent and respected companies in the triple-net sector. We also set out very real and tangible portfolio objectives.

We wanted to manage and improve our tenant concentration. We wanted to reduce leverage over time and, importantly, conservatively manage our debt obligations through long-term laddering of maturities. Finally, we wanted to be a smart and strategic acquirer of additional assets.

These remain ongoing objectives for the Company. But as we sit here today on this eighth quarterly call, we hope and trust that we are gaining the confidence of the investment community that we took these IPO objectives seriously and that we are committed to their ongoing implementation.

From a capital-markets perspective, this was a very significant quarter, as we raised over $1 billion through the public issuance of convertible notes and equity.

We have used the net proceeds to strengthen our balance sheet, provide additional capacity for our acquisition program, and to give us financing flexibility and expanded options to manage tenant exposures in our portfolio.

Also, this transaction further diversified our capital sources and mitigated the cost and risks of delivering sustainable and growing cash flow to our shareholders.

Turning to operations, once again our results are consistent with our expectations and demonstrate the predictable and consistent financial performance we have established as our goal.

We remain focused on our organic and disciplined growth strategy of investing in operationally essential, single-tenant, triple-net-lease properties, primarily through sale-leaseback transactions with middle-market operators. We have the scale and capacity to execute our strategy and to adapt to changing market dynamics.

We are optimistic about the future because, among other things, we continue to see a very attractive acquisition environment, and our portfolio remains in excellent shape.

As a result of our strong year-to-date performance and our expectations for the remainder of the year, we are raising our AFFO guidance for 2014 from the initial range of $0.77 to $0.82 per share to a new range of $0.80 to $0.83 per share.

With that, I'll turn things over to Mike, who will walk you through the financial highlights for our second quarter and first half of the year. Mike?

Thank you, Tom.

As Tom mentioned, we are very pleased with our second-quarter 2014 results, which reflect our commitment to delivering consistent and attractive cash flows to our shareholders. As we have outlined our second-quarter and first-half financial results in today's press release, I won't repeat them in detail here.

Instead, I'll review the highlights of the quarter, including the progress we made during the quarter in strengthening our balance sheet, enhancing our acquisition capacity, and providing additional flexibility in financing and managing the portfolio. Lastly, I will discuss our guidance for the remainder of the year.

In the second quarter of 2014, we generated revenues of $152 million, which is more than double the revenues we reported in the second quarter of 2013. The increase reflects the benefits derived from both organic real estate acquisitions and the Cole II merger, completed in the third quarter of 2013, as well as embedded rent growth in the portfolio.

Additionally, we recognized a $2.7-million legal settlement as other income during the second quarter of 2014, following the resolution of a dispute with a tenant. Lease-termination fees of $900,000 were recorded in the second quarter of 2013.

The significant growth in revenue was reflected in adjusted funds from operations, or AFFO. For the second quarter of 2014, AFFO totaled $79 million, or $0.20 per share, compared to $37 million, our $0.24 per share for the second quarter of 2013.

In addition to our consistent operating performance during the quarter, we raised over $1 billion in the capital markets and executed other initiatives to further improve our balance sheet, including -- first, a secondary offering of 26.5 million shares of our common stock, generating proceeds of approximately $271 million; second, establishing an at-the-market program for our common stock, through which we raised almost $17 million on 1.6 million shares sold during the quarter; thirdly, public offerings of $748 million of convertible senior notes, with a weighted-average life of approximately 6 years and a weighted-average interest rate of just under 3.3%.

Fourthly, we completed an exchange offer for $912 million of Spirit Master Funding net-lease mortgage notes, with the new notes carrying an investment-grade rating of A-plus by Standard and Poor's' rating services.

In connection with this exchange, we recognized finance-restructuring costs of $13 million. A significant portion of these costs were incurred to terminate the third-party insurance guarantee that had been provided to bondholders.

Going forward, the associated insurance premium has been eliminated, which equates to roughly $3 million in annual cost savings, based on the 2013 premiums paid.

Fifth, we extinguished $528 million of debt in the second quarter of 2014, with a weighted-average interest rate of 6.54% and weighted-average remaining term of about 25 months.

As we noted at the time of our related capital-markets transactions, we incurred approximately $65 million in debt-extinguishment costs, primarily related to defeasing our $489-million Shopko CMBS loan.

The extinguishment of this loan will significantly reduce our interest expense because the Shopko loan had an interest rate of 6.59%. It also eliminated the refinancing risk of this loan, which was scheduled to mature in 2016; and it unencumbered the related Shopko assets.

Finally, we made milestone progress in addressing a couple of sub-performing tenant situations, which have been ongoing for some time. As a result, we recognized real estate impairment charges during the quarter that totaled $27 million.

The projected impact to AFFO for the remainder of the year is not material and is incorporated in our guidance.

As Tom mentioned, we were very pleased to raise our previously announced 2014 AFFO guidance to a range of $0.80 to $0.83 per share. We are raising our AFFO guidance based on our performance so far this year and in expectation of continued strong acquisition activity.

Lastly, I'll close with a discussion of our dividends.

For the second quarter, we were pleased to have declared cash dividends of $0.16625 per share, which equates to an annualized dividend of $0.665 per share.

For the three months ended June 30, 2014, dividends declared to common shareholders of $66.3 million represented an 84% payout ratio against funds available for distribution.

I would now like to turn the call over to Pete to review our operations. Pete?

Thanks, Mike.

We continue to focus our efforts on growing the portfolio organically, recycling capital accretively, and managing our assets aggressively, all with the goal of delivering stable and predictable cash flows that support our dividend.

In the second quarter of 2014, our gross investment in real estate and related loans totaled $7.5 billion, substantially all of which was invested in 2,369 properties that were 99% occupied.

At quarter's end, we had only 29 properties, representing a total gross investment of $65 million, and 542,000 square feet, that were available for lease.

Our properties have generally leased under long-term, triple-net leases, with a weighted-average remaining maturity of approximately 10.1 years.

As of June 30, 2014, approximately 43% of our annual rent, defined as annualized second-quarter rental revenue, is contributed from properties under master leases; and approximately 87% of our single tenant properties provide for annual rent increases.

As part of our active management and monitoring of risk, we regularly receive unit-level financial statements for approximately 53% of our tenants. For Spirit's reporting tenants, the average unit-level rent coverage for the trailing 12 months was 2.82 times. This compares favorably to 2.66 times for the same period a year ago.

As you know, we view unit-level rent coverage as valuable indicator of how essential our properties are to our tenants' operations and their ability to pay our rent.

We continue to make good progress in increasing our tenant and geographic diversification. As Mike outlined, our capital-market activities during the second quarter have provided us with added flexibility on this front.

During the second quarter of 2014, Shopko, our largest tenant, represented 13.8% of total revenues. We continue to focus on various strategies, including a potential joint venture, our other strategic entity-level transaction, and individual property and (technical difficulty) portfolio sales to manage this concentration downward. No other tenant represented more than 5% of our total revenue in the second quarter of 2014.

As of June 30, 2014, our three largest industry types were general merchandise, at 16.2%; casual dining restaurants, at 9%; and quick-serve restaurants, at 7.7%.

Moving to new investments. We acquired 86 properties in 24 separate real estate transactions, for a total gross investment of $207 million in the second quarter of 2014. One transaction introduced Alaska to our geographic diversification.

These investments had an initial cash yield of 7.72%; 85% of them were direct-sale leasebacks, and 37% of the amount invested was with existing tenants. On average, the associated leases have a remaining term of 18 years.

For the first 6 months of the year, we have invested $365 million in 200 new properties, at an initial cash yield of 7.76%. Of these investments, 71% were direct-sale leasebacks, and 27% were with existing tenants.

These investments are clearly representative of our strategy of investing in small portfolios of granular properties, where there is increased competition from large investors seeking to deploy significant amounts of capital, and from retail investors focused on acquiring properties on a one-off basis.

Our investment pipeline is robust, and we are encouraged by our continued ability to source and close a high volume of transactions at attractive terms.

Consistent with our strategy, we continue to selectively sell assets and recycle the proceeds. During the second quarter of 2014, we sold four vacant properties and one outparcel, generating gross sales proceeds of $9 million.

The market for single-tenant net-lease properties remains very strong, and we continue to work to proactively manage our portfolio.

We are very pleased with our strong position in the triple-net lease market. We have the scale and capital structure we need to continue to deliver sustainable and attractive performance for our shareholders.

We remain focused on growing our portfolio rationally, with compelling, risk-adjusted returns, with small- and middle-market tenants and a disciplined recycling of capital.

With that, I'll turn it back to Tom.

Thank you, Pete.

We are proud to have had another strong quarter of acquisitions and have delivered on our strategy of consistent performance.

We will remain focused on growing our $7-billion-plus portfolio through normal-course acquisitions that meet our investment parameters.

We are accomplishing our related goals of increasing tenant diversity, improving overall credit quality, and enhancing balance-sheet flexibility. I'm proud to be part of this team, and I thank my colleagues here in Scottsdale for their effort.

As always, we appreciate the support we receive from our shareholders and look forward to remaining in touch with all of you as we move forward.

We are now happy to answer any questions you may have.

(operator instructions) Vikram Malhotra from Morgan Stanley.

I had a quick question on the pipeline you're seeing, Pete, just in terms of the different -- the mix of assets, kind of the range of [cap] rates you're seeing, and just your expectations in terms of the first half being -- or the quarterly number being a good run rate.

The pipeline remains robust, and we -- you know, we had a good quarter. I don't know that the third will be as strong, and traditionally the fourth quarter in this space is typically pretty strong.

So we don't have great visibility beyond that, but we're pretty happy with what we've done, and we see a full pipeline. But I think this was a large quarter for us.

In terms of range of cap rates, we're seeing deals and closing deals broadly across the 7s. In the general market, we're seeing a much wider range; but in general, we're typically in the 7% range. And obviously averaging out for the year so far, it's 7%, 7.5%.

Okay. And then with regards to Shopko, are you in a position now to kind of selectively start reducing that, or do you still maybe need to work through the [master leases]? Can you lay out some of the steps before you can actually start getting -- or reducing the exposure there?

Vikram, I think before we lay out any steps, we have to pick a plan, and we're currently evaluating several alternatives, as we outlined in the script. And until we really finalize which path we're going to go down, it would be premature to really start laying out steps.

Clearly, when we raise the capital to retire that debt, we thought there were a number of opportunities for us to work that concentration down. And we remain optimistic that we'll be able to do so, and we're working hard at it.

Okay, thanks, guys.

Juan Sanabria from Bank of America.

Just a quick question. Does guidance include any further acquisitions in the second half?

Guidance does include what we're looking at for the second half of the year, yes.

Is there any -- can you quantity that?

No. And the historical perspective, which really hasn't changed, is that we're very happy to provide guidance, given the predictability of the Company's performance. But we're reluctant for, really, what we believe to be rational reasons, not to put a target acquisition number on the table, simply because that's not the way we look at the business.

We look at the business as not having a target for what to acquire every year, but rather do we like the market, do we think there are attractive acquisition opportunities. And if there are and we like them, then we want to aggressively pursue them. And so for that reason, we've historically not, and continue to not, provide guidance.

Obviously, we have a business plan and a budget. But also, given the predictability of the cash flow, I think you can recognize that even if the acquisition performance was not as robust in the second half as it was in the first half -- and again, I'm not commenting whether it will or wouldn't be -- but if it was, given the predictability of the cash flows and the large enterprise that we already have, we would not have any challenges with the guidance number that we have provided.

That's helpful, thank you. And it looks like you acquired some office assets during the quarter. Can you speak to any sort of cap-rate differentials there or what kind of assets you're looking at and where you see that going as a percentage of the portfolio?

In the quarter, we were 86% retail, and the balance was [some] office. As we've discussed on prior calls, we look at office much through the same operationally essential mantra that we look at the retail real estate. And the office that we've acquired most recently has been kind of medical office, where there is a customer-service aspect to it, and tenants derive their profit from those locations. And so that's what we see there.

Looking forward, that number may vary from quarter to quarter depending upon the mix of deals that we do. But from a broad perspective, I don't expect our retail exposure to go down materially.

And are those other assets, those medical-office-building assets, on campus or affiliated with hospitals?

Some are. Some are more local, doctor-practice office or dentist office, or things like that.

Okay, great. And with Shopko, how should we be thinking about targets in terms of percent of rent and timing of what you think you'll be able to do? I know it's still early days, but should we be thinking about like a 10% of rents over the next year? Or do you hope to be better than that? Any sort of parameters would be helpful.

We're really reluctant, much to Tom's point on the acquisition guidance, to put out numbers that we need to perform to.

I think we've articulated in the past that ideally, we wouldn't have a tenant over 10% and that we're working to get Shopko down. And time will tell how long that takes, but we are working hard at it.

Well, the good news (multiple speakers) we've taken it from 30% at the IPO to less than 14%. So we're -- from our perspective, we're within striking distance of the objective, however long that takes us.

You always hate to put time frames on it, simply because it puts a bull's eye when you're, obviously, negotiating with other parties. But I think we feel good about our ability to execute on the strategy. That was one the key rationales for refinancing the debt. And I think we're -- our expectation is that as we move forward, we will be announcing activity around the Shopko [credit].

Thanks.

Alexander Goldfarb from Sandler O'Neill.

I guess we'll do some quick, rapid-fire questions so I make sure I heard things correctly. I understand that you guys don't provide acquisition guidance, but you do have acquisitions in your FFO guidance, correct?

Yes. It's in the AFFO guidance, Alex. But as you might guess, since we're sitting here in August, the number is not terribly sensitive to what gets done in the balance of the year, in terms of the contribution of any acquisition.

Okay. And so by the same token, you presumably have some [ATM] guidance, or some ATM usage in your numbers, but you're not -- are you disclosing that, or no?

No. And maybe one hint, though -- again, as you'll see at the balance-sheet [date] because of the capital-markets transaction, we did have the revolver completely untapped and I think $120 million sitting on the balance sheet. So that may give you some indication of what we might do in the immediate term, here, but we didn't disclose what we might do later in the year.

Okay. And then the [two eight], that comparison that was for all of your top-ten tenants?

Alex, that was for the entire reporting portfolio.

Okay, great. And then let me just understand -- on the first-quarter call, right before the equity raise, you guys alluded to -- and then subsequently when you did the equity raise, you spoke about it -- but you alluded to the whole benefit of the transaction is the ability to prepay the Shopko debt, break up the master leases into smaller portfolios, and sell those portfolios off.

Now you're talking about a bunch of different options, possibly JVing, possibly still selling it off -- a lot of different options, here. Is this is -- have you gotten a lot of reverse inquiries? Is it that what you originally thought you wanted to do, the market has changed in the interim; or is it that what you thought you wanted to do, as you've now gone down the path to pursue it, you've suddenly discovered a lot more options?

We always -- we knew the options were out there. Paying off the debt has triggered significant reverse inquiries, and we continue to explore the options and evaluate the economic impacts of the various alternatives.

Okay. And just finally, Tom, to your point about transparency, if you did a JV, how does adding a JV to the Spirit platform -- how does that interact, as far as transparency? Does that help or does that hurt and make it less transparent, just because you get the complexity of joint ventures?

I guess I'm not of the view that simply because you have a JV that it lacks transparency. I would agree there's some historical precedent in the industry where joint ventures perhaps aren't as well set out as wholly owned properties.

But I'm convinced -- or I'm quite confident, I should say, that in the event that the track that we took was some sort of JV on this investment that there would not be a diminishment of transparency relating to the Shopko transaction. I think we would make sure that that didn't happen again.

I'm not suggesting that the JV will be the approach, but it's certainly one of the things on the table. And I think we would work hard to meet the standard of somebody looking at it and saying they knew more about it than they knew before.

Okay. That's great. Listen, thank you.

Vincent Chao from Deutsche Bank.

I just had a quick question. I know you were also still working on some multi-tenant asset dispositions, post-Cole acquisition. I'm just curious if you can give us an update on how things are progressing there and if there's anything baked into the outlook on the multi-tenant disposition side.

Vincent, we continue to work on that. And we continue to have traction in selling those assets, and any sort of anticipated sale is baked into the guidance.

From an economic standpoint, the multi-tenant is pretty much economically neutral. The rationale for disposing of the property isn't so much economic as it is -- we're really trying to run a very simple, efficient, triple-net-leased company in the long term.

And so from that standpoint, these assets are being sold, when they are sold, at prices that are generally consistent with how the capital is being redeployed.

So it really doesn't have that significant an economic impact, but we do continue to look at it from a portfolio-management-efficiency-administrative-cost point of view.

Okay. Thanks. And then just going back to the acquisition side of things, just in general the overall markets -- I think Peter, you were saying deals are in the 7% range. You're averaging about 7%, 7.5%, I think, year to date. Should we gauge from those comments that cap rates are still compressing here? And I guess within the portfolio or pipeline of deals that you're looking at, is there any particular geographies or any particular property types that are more or less attractive to you at this point, outside of retail being your main focus, obviously?

I think from an investment-mix perspective, we like the industries we're in. We like the markets we're in. And I would anticipate future acquisitions to look a lot like the portfolio we have constructed.

From a cap-rate perspective, we are seeing slight downward pressure in cap rates. You can see it slightly in our reported numbers. We're buying in a broad range from 7% flat to 8% plus. And where we end up in any given quarter really depends upon the mix of deals that we execute in that quarter. But I think what we've done in the past is a good indicator of what we anticipate going forward.

Okay. And just maybe one last question on the overall demand for single-tenant leases. I think it's sort of 1.5% -- 1% to 2% is the average bump that you guys have in place. I'm just curious if you've seen any ability to maybe increase the rent bump on more recent deals.

Every deal is unique, and every seller has a unique motivation. And we look at the entire economic package.

And so to the extent that we're getting greater growth -- you know, we may be going in at a lower cap rate and giving it up on the front end. And it really, again, just depends on the mix of deals and sellers that quarter.

Obviously, reporting direct-sale leasebacks in the 75% range, plus or minus -- you know, those are deals where we're sitting down and negotiating a fresh lease. And that lease is being cut at closing, and it's a negotiation to get growth versus what we get day one. And we always try to maximize the total economic package that we're looking at.

Okay. I guess I'm reading from that, just on a total economic package (technical difficulty) not a significant change in the environment?

No, no. And we could report a 2% growth rate inherent in all the leases that we structure in the quarter. But going in at a 25-basis-point lower cap rate -- you know, the economics would be the same.

Okay. Thanks, guys.

Rich Moore from RBC Capital Markets.

First thing is -- the impairment again, what was that exactly?

Predominantly one tenant, Rich, and this is a manufacturing company that we've had for a while. And most of the economics have been dealt with previously. But as you know, the accounting for the impairment tends to be lumpy, and it tends to come at a point at which you've decided to dispose of the assets. So we're kind of getting to that juncture, and that's the reason for the timing.

And this was an asset -- just for some background, here -- this was a company -- they happen to be an envelope maker, which is not the most favorable of industries at the moment, for you avid emailers -- but this was a company that had restructured -- years ago, actually. Prior to the Spirit IPO, they had went through their first Chapter 11.

And the company at that time restructured the lease, not to the point where it had an impairment, but a point where much of the economics had actually been taken out at that time.

And the company basically at that time negotiated [kind of] option-value pricing going forward, in the event that the fortunes of this particular company improved -- which, again, given the industry, they didn't -- which is why we specifically made the comment in our writing that the economic impact of this change was something we saw coming, first of all.

And second, the reason we described it as immaterial is that most of the economics, again of this particular investment, were taken out before this company even went through the IPO process.

Okay I got you and so (multiple speakers) --.

And so the option value fundamentally disappeared when the company went Chapter 11 for the second time -- or for those of was who have Chapter-11 experience, it was referred to as a 22. So they were, unfortunately, in the midst of a 22.

All right, Tom, thank you. I got it. And then -- so is that the $41 million or part of the $41 million that's in the assets held for sale?

I don't think that NEC is in the assets held for sale. Those are different properties, and a subset of that vacant 29 properties -- they are properties that we anticipate selling at some point.

Okay, so you're looking -- that group that you have held for sale, though -- I assume you're pretty actively trying to get rid of. Is that right?

Sure. Those would typically be things that we expect in some form or another to dispose of in the next 12 months.

Okay, great. Then if I could ask you a question on the possibility of a JV -- I'm curious, are you guys just doing that with regard to the Shopko (technical difficulty) or is that something that you might pick an institutional partner and do something larger? How are you thinking about that?

I think at this point the reference was purely to Shopko.

Okay. And then did you just get rid of the one CMBS? Is that the only tranche, the one due in June, that was unwound with the transactions you did this quarter? So all the other ones that are there are still, I assume, in place, right?

Well, if I'm following, the Shopko CMBS is the largest -- Shopko CMBS was what we defeased. And that was almost $500 million. The other one is -- there's one more which is significantly smaller. And just to complete the answer, in the defeasance costs there, we retired also some other, non-Shopko-related debt.

Okay. But the ones in [17] with 84 lumber and all that -- those are still there, right?

Yes.

Okay, good. That's great. Thank you, guys. I appreciate it.

Chris Lucas from Capital One Securities.

Really just a couple of housekeeping questions, if I could. Going back to the rent-coverage number, I'm trying to understand whether or not the median would be much different from the mean number that you reported.

It's pretty a normal distribution, Chris.

Okay. And then what percentage of the portfolio does that -- you talked about being the reporting portion of the portfolio -- what does that represent from an [NOI] or revenue perspective?

I would imagine it's pretty [pro rata]. The number I gave was 53%, and that was based upon investment. I would imagine it would be similar to the revenue number. I just don't have it cut like that at this point.

Okay. Actually, that covers it for me. Thank you, guys.

Daniel Donlan from Ladenburg Thalmann.

Just wanted to go back to the guidance real quick. Given that you've done $0.41 in AFFO, to get to $0.80, it would seem like you really wouldn't acquire anything, and/or potentially sell quite a few assets, given the interest-cost savings. So what kind of -- I know you're not giving specifics around it, but how -- I mean, is the $0.80 just a really, really conservative number, or does it assume, basically, no acquisitions?

Well, I know you appreciate that you can't dissect and discuss guidance as to whether it's aggressive or what components -- it is what it is, from the standpoint -- I would hark back on my comments, I guess, earlier, which suggested that in the event that the Company acquired nothing going forward, I think was the reference I made, that we have the capacity to be comfortable that we would be able to perform within the guidance that we had outstanding -- which, again, I think we find consistent with not having a guidance number for acquisitions.

So I guess that's one perspective. And again, the second -- we're sitting here in August, meaning we only have, effectively, five months left in the year, and acquisitions don't that materially change the guidance for 2014. Clearly it would have an impact for 2015, so.

And then as far as how we should think about future funding of acquisitions from a debt perspective, is the -- what's the most attractive form of capital you think that's out there? Some of the peers have used unsecured term loans that are pre-payable at no cost. What type of -- is this something that you guys are exploring? Or how should we think about future funding? Is CMBS still an alternative? Anything there would be helpful.

Sure. I'll give you, probably, a stock answer that you'd, perhaps, expect. But we spend a lot of time working with our colleagues around the country at the various banks and financing institutions, would like to think we're staying on top of the various alternatives for capital debt, equity, whatever it happens to be.

And I think the key is to be able to identify the most attractive components when the time comes. If we were sitting here a year ago and you'd said, gee, are you going to do a convertible debt offering? I'm not sure that necessarily would have been on our radar screen.

But when the time came and we looked at the markets and we looked at the alternatives -- and we looked at term loans then, and we looked at every possible alternative. And we settled on the one we settled on.

So I think it's really incumbent upon us to find the cheapest and most flexible financing we can find that meets our kind of laddered maturity, well-matched, balance-sheet approach that really is one of the cornerstones of the way that we want to manage the Company.

Okay. And just lastly, how much CapEx have you guys spent through the second quarter, year to date?

I think the number is less than $1 million.

Okay.

Actually -- it may be $1.1 million, I think is --.

1.1? Okay.

(multiple speakers) six months. That's [in] six months during the year.

Okay. All right, that's it for me. Thank you.

That concludes the Q&A portion of today's call. I'll turn the call back over now to Tom Nolan.

Great. Well, thank you once again for your interest in Spirit Realty Capital and for listening to our call today. We look forward to speaking with you all again soon. Thank you. Good night.

That concludes today's call. You may all now disconnect. Have a good day.