Nov 3, 2014
Executives
Mary Jensen - VP of IR Michael Bender – SVP and CFO Thomas Nolan Jr. – Chairman and CEO Peter Mavoides – President and COO
Analysts
Vikram Malhotra - Morgan Stanley Alexander Goldfarb - Sandler O’Neill Juan Sanabria – Bank of America, Merrill Lynch Chris Lucas – Capital One Security
Operator
Good afternoon, ladies and gentlemen and welcome to the Spirit Realty Capital's Third Quarter 2014 Earnings Conference Call. At this time, all lines have been placed on listen-only mode.
Please note that today's conference call is being recorded. An audio replay will be available for one week beginning at 6 PM Eastern Time today and the webcast will be available for the next 30 days.
The dial-in details for the replay can be found in today's press release and can be obtained from the Investor Relations section of Spirit Realty's website at www.spiritrealty.com. After the speakers' remarks there will be question-and-answer period.
(Operator Instructions) I will now turn the conference over to -- I'll now turn the call over to Ms. Mary Jensen, Vice President of Investor Relations for Spirit Realty Capital.
Please proceed.
Mary Jensen
Thank you. Joining us today on the call are Tom Nolan, our Chairman and CEO, Pete Mavoides, our President and COO and Mike Bender, our CFO.
Tom will give a brief overview of the quarter and update you on how we're progressing on our stated business plan. Pete will then renew up to speed on the current transaction activity and portfolio activity and before taking your questions, Mike will provide additional color on the financial results that were issued earlier today as well as summary of our 2015 guidance.
Please note that during the 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 expectation 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, November 3, 2014.
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 which was issued earlier today, and available on the Investor Relations section of this website.
With that, I would like to turn the call over to Chairman and CEO, Mr. Tom Nolan.
Thomas Nolan Jr.
Thank you, Mike. And thank you everyone for joining us today.
Our third quarter earnings call signifies another milestone as we continue to establish our track record as one of the premier net leased REITs in the industry. It has been two years since we made our public debut in the year since we completed the significant acquisition of the Cole II portfolio.
Today we're one of the leading net leased REITs with an enterprise value of over $8 billion. Our corporate philosophy has not changed since we took the company public two years ago.
We continue to make our shareholders, our number one priority and as such, we're focused on maintaining and growing a high quality portfolio that supports sustainable earnings growth and predictable dividends for our shareholders. We've also recapitalized our balance sheet with flexible, attractively priced, well-added capital.
These transactions have reduced our leverage since the IPO and improved our cost of capital to fuel future growth through acquisitions. Our portfolio strategy is as important as our capital plan.
We continue to benefit from the current market conditions, seeking real estate investments and sales opportunities using our consistent and disciplined underwriting. We're seeing solid risk adjusted opportunities that are consistent with our core strategy to invest and prudently grow the portfolio.
Current market conditions are also allowing us to capitalize on opportunities to sell selected assets so that we can proactively manage risk within the portfolio. An integral part of our portfolio management strategy involves the active management of tenant diversity.
Two years ago, our largest tenant represented more than 30% of our revenues. Today it is less than half of that.
We've taken significant steps to provide ourselves with the flexibility to reduce that concentration further and while we continue to evaluate options in that regard, it is our policy not to speculate on prospective transactions or to discuss transactions in process. Moving on to operations, our investment in asset management teams have been doing an excellent job.
Since the IPO, in addition to the Cole II portfolio, we've invested in over $1 billion of real estate and real estate related assets, primarily though sale leaseback transactions. In addition, we've proactively disposed off more than $500 million in noncore real estate assets.
These activities continue to strengthen the portfolio with credit worth tenants, which allow us to have the predictable income streams that support our dividend and future growth. In summary, the results of this quarter reflect that our team is focused on creating value for our shareholders through proactive asset management, accretive investing and prudent balance sheet management.
Now I'll turn things over to Pete, who will provide a detailed review of our operations during the quarter and our expectations for 2015. Pete?
Peter Mavoides
Thanks Tom. Our internal growth drivers remain strong during the quarter, supported by our investment and asset management initiatives, which continue to generate consistent cash flows.
We ended the third quarter with a $7.8 million growth investment in real estate and related loans with substantially all of it invested in 2,408 properties. As of September 30, 2014, approximately two million square feet was available for lease, representing 40 properties with a total gross investment of $161.5 million.
This represented occupancy of 98%, which we consider essentially full. Our leases are generally long-term with a single tenant on a triple net lease terms and the weighted average maturity remaining of approximately 10.2 years.
As of September 30, 2014, approximately 44% of our annual rent defined as annualized third quarter rental revenue is contributed from properties under master leases and approximately 87% of our single tenant properties provide periodic rent increases. As part of our asset management strategy, we review our tenants' financial statements and analyze unit level rent coverage, which was again healthy in the third quarter.
Our portfolio represents strong income producing profit centers, which are operationally essential to our tenants. For the trailing 12 months, our unit level rent coverage was 2.8 times for our reporting tenants.
This compares favorably to 2.7 times for the same period a year ago. As you know, we view this as a valuable indicator of how essential our properties are to our tenant's operations and their ability to pay rent.
We continue to increase our tenant and geographic diversification through acquisitions and dispositions. We also continue to assess our current tenant concentration.
During the quarter, our largest tenant ShopKo, a $3 million large well established pharmacy and general merchandize retailer located in the Midwest represented 14.3% of total revenues. We continue to process rightsizing this concentration.
We are currently in negotiations with multiple parties on a variety of transactions. Given the ongoing nature of these discussions, we cannot comment further at this point.
Our real estate portfolio as of September 30, 2014, was diversified geographically across 49 states and among various industry types. Our largest state Texas, Illinois and Wisconsin accounted for 12, 6.7% and 4.8% of the annual rent contribute -- contribution of the real estate portfolio respectively.
Our top three industry types as of September 30 were general merchandizing, accounting for 16.3%, followed by casual dining at 9.3%, and quick serve restaurants at 7.3%. Moving to new investments, the markets of real estate transactions remain active and the credit worthiness of our tenants continue to improve at a steady pace with the overall economic landscape.
As a result, we had a good third quarter of transactions and our investment team continues to execute on a solid investment pipeline going into the fourth quarter and into early 2015. During the quarter, we acquired 51 properties totaling $206 million.
These investments had initial cash yield of 7.5% and have a remaining term of approximately 14.3 years. More than 33% of our transactions consisted of direct sale lease backs or 67% of that amount was invested with existing tenants.
Through the first nine months of the year, we have invested more than $572 million in 251 new properties at an initial cash yield of 7.7%. More than 57% of these investments represent direct sale leasebacks and 43% represented transactions with our existing tenants.
These investments demonstrate our ability to source inflows small portfolio acquisitions where we believe we are able to exercise meaningful pricing power with less competition from large investors. The slight decline in cap rate from our prior quarter is more a function of the specific deals that closed in the quarter and is not indicative of a shift in our underwriting for the overall market.
We remain optimistic in our ability to source and close new investments with attractive pricing and lease terms, while proactively selling properties. During the third quarter 2014, we sold 12 properties generating growth sales proceeds of $29.5 million.
We believe that actively managing our real estate portfolio is an essential component to creating overall long-term asset value. As market conditions cooperate, we will continue to seize opportunities as they present themselves in order to create the scale and capital structure necessary to deliver sustainable shareholder value.
With that, I'll turn things over to Mike.
Michael Bender
Thank you, Pete, Our financial results for the quarter and year-to-date are in line with our expectations. Those results are out and in our press release and accessible through the Investor Relations section of our website.
Consequently I would like to review the more salient parts of the quarter and how they tie in with our stated business strategy and the guidance we provided on our last call. AFFO for the third quarter totaled $83.1 million, or $0.21 per diluted share, which was in line with the increased guidance range we provided last quarter.
Total revenue for the third quarter ended September 30, 2014, totaled $152.6 million, representing an a 9% increase from the comparable quarter in 2013. The increase was driven by significant acquisition volume and continued rent growth throughout the quarter and the year.
Total operating expenses were in line with expectations. General and administrative expenses in the third quarter totaled $12 million, which included a $1.7 million one-time [cam] (ph) adjustment.
This was book to bad debt expense and was part of a set of uncollected receivables from the Cole II portfolio. Absent this expense G&A would have totaled $10.4 million for 6.8% of revenue.
At September 30, 2014 our cash and cash equipments totaled $50.1 million. During the quarter on July 15, 2014, we paid our second quarter cash dividend of $0.16625 per common share.
During the quarter the Board also declared a third quarter cash dividend of the same amount which was paid on October 15. On an annualized basis, our dividend represents $0.665 per common share representing a yield of approximately 6.1% based on our September 30 closing price and a payout ratio of approximately 80%.
Moving on to guidance, we neared our previously stated 2014 AFFO guidance range of $0.80 to $0.83 per common share to $0.81 to $0.83 per common share. I will now provide our 2015 AFFO guidance.
We are establishing an AFFO guidance range of $0.84 to $0.86 per common share, which assumes net income of $0.22 to $0.24 per share and excludes any non-recurring items that are not reflective of our ongoing operations and includes $0.61 per share respected real estate depreciation and amortization plus $0.01 per share related to non-cash items and real estate transactions cost. As in the past, we do not provide guidance on acquisition or disposition activity.
However, our estimates do includes subjects related to health activities. With that Tom, Pete and I will be happy to take the questions.
Operator
(Operator Instructions) Our first question will come from the line of Vikram Malhotra. Please proceed.
Vikram Malhotra -
Thank you. Guys I wanted to just clarify -- I know you are not giving details or talking about ShopKo, but you did list a few properties few weeks ago.
So I am just trying to get a sense of have you -- do you have now flexibility to lift asset from individual basis or is that something you're still looking to get or was this more of one-off lifting?
Morgan Stanley
Thank you. Guys I wanted to just clarify -- I know you are not giving details or talking about ShopKo, but you did list a few properties few weeks ago.
So I am just trying to get a sense of have you -- do you have now flexibility to lift asset from individual basis or is that something you're still looking to get or was this more of one-off lifting?
Michael Bender
No we believe we haven’t -- we listen those assets because we believe we have the ability to transact on those assets and we're hopeful that through our marketing process we'll find buyers of those assets.
Vikram Malhotra -
Because I was under the impression I guess and may be this was wrong, but I was under the impression that you had -- there were obviously three mater leases on the assets, on the ShopKo assets and in order to sell them individually you would have to sort of re-negotiate or get flexibility in order to sell those assets, is that fair?
Morgan Stanley
Because I was under the impression I guess and may be this was wrong, but I was under the impression that you had -- there were obviously three mater leases on the assets, on the ShopKo assets and in order to sell them individually you would have to sort of re-negotiate or get flexibility in order to sell those assets, is that fair?
Michael Bender
We have a latest with ShopKo which is public document. I think the lease speaks for itself in terms of the ability that we have and clearly we're operating under the full walls at the lease as you would expect.
As Pete alluded to, there were a number of conversations and negotiations that are occurring, but it really -- we're really left with just saving that at this time because we simply don’t want to speculate on what may occur and what negotiations may occur, what transaction may occur. But clearly what we are moving forward on is within our ability as the lease is currently constructed.
Vikram Malhotra -
Okay. And then just I guess last one just to clarify how, given that it's in process, can you just update us as to how you are thinking about the exposure in general?
Are you thinking you would like some exposure or how are you thinking about at this point and I understand that that's my change going forward, but how you're thinking about ShopKo as a whole?
Morgan Stanley
Okay. And then just I guess last one just to clarify how, given that it's in process, can you just update us as to how you are thinking about the exposure in general?
Are you thinking you would like some exposure or how are you thinking about at this point and I understand that that's my change going forward, but how you're thinking about ShopKo as a whole?
Michael Bender
Yeah Vikram as we said in the past, we are completely comfortable with that ten credit risk. What we are uncomfortable with is having a 14% tenant and have committed to work that down over time.
So it's not a pairing of the exposure because of riskiness and inherent and the exposure is just purely due to the size and we'll right size that as market conditions permit.
Vikram Malhotra -
Okay. Thanks guys.
Morgan Stanley
Okay. Thanks guys.
Thomas Nolan Jr.
You're welcome.
Operator
Our next question comes from the line of Alexander Goldfarb. Please proceed.
Alexander Goldfarb - Sandler O’Neill
Yes good evening. Just on the ShopKo part, just and maybe it's just the way the portfolio stands but this quarter it was listed as 14.3% exposure and last quarter it was 13.8%.
So is this because you scaled back some of other assets or we're there some additional assets that suddenly came into the pool that are part of exiting the pool?
Thomas Nolan Jr.
Yeah no Alex, that’s really simply a function of ShopKo having a rent bump that occurred actually into the second quarter. So you only had a portion of that increase reflected in that period and then the total run rate amount in Q3.
Alexander Goldfarb - Sandler O’Neill
Okay.
Thomas Nolan Jr.
Obviously we have tenants that rents go up contractually every year. We have other tenants where it goes up on different timeframes and the ShopKo tenant which again this leads as a disclosed document to ShopKo, lease rent only go up once every three years.
So you get that bump in the third year. That bump happened in this particular quarter.
So because the irony is we made more money from them, which caused the concentration to go up because from my standpoint I guess that’s a good problem to have. We got more money for them as the leads bump was executed?
Thomas Nolan Jr.
Yeah that is true. Rent paying tenants usually are a good thing.
Alexander Goldfarb - Sandler O’Neill
Now I am sure that you're expecting it to be asked the big question. Obviously we had a little accounting hiccup over the ARCP.
Just your take, I guess two part question on this; one how many of the sellers have assets were you competing with against ARCP, such that maybe there is more opportunity for you or maybe it's a totally different seller set, in which case there is no impact. And then two, if ARCP had to prune assets or sell or divest or anything, is there opportunity -- are there assets that are in there that are desirable to you guys, or they were totally a different animal at which point it's just not really anything that would be interested for your guys in a material way?
Thomas Nolan Jr.
Yeah, I am going to let Pete answer that question Alex. Obviously it's an excellent question.
I do want to preface it just by saying that we want to be very cautious about discussing what has occurred there and obviously it's a very dynamic situation and I think we'll keep our comments quite general relative to the impacts on the market, but I'll turn it over to Pete to discuss the specifics.
Peter Mavoides
Yes I think where we compete on the buy side Alex, it's not a complete overlap of opportunity sets, but as you can imagine they were pretty veracious acquirer and so certainly we ran into them on a number of occasions and we see them frequently as the largest buyer of net leased properties in the space. And so to the extent that they were to pull back from the market and buy less, we would anticipate some benefit from that.
on the potential for them to prune assets, we saw a lot of the assets that they acquired in the market and compete in and lost and there is certainly a lot of assets in that portfolio that our investment model of being operationally essential being granular, being well leased high quality tenants and to the extent that some of those properties were offered to sell or reoffered to sell to the market, we would be interested if the pricing were right and the underwriting was right.
Alexander Goldfarb - Sandler O’Neill
Okay. And then just finally Michael you mentioned a comment about 2015 guidance that there is some sort of level of acquisitions or dispositions baked in there, can you just quantify that?
Michael Bender
No, but I appreciate that you asked Alex and I know you’ve heard the speech before. We make that statement because we're obviously putting out guidance, it's a business plan, it's a business plan we're confident in achieving.
It has portfolio activity in it, but we simply have a philosophy to put out a number of proposed acquisitions as kind of inconsistent with the way that we run the business. The business is for us.
We acquire assets to create shareholder value. What we try to do is to give our current outlook of the acquisition environment and that outlook could be current.
You could think of it as looking out over the next quarter because that's how we see the market and I think we've given indications we think that this is an attractive market and we are continuing to acquire what we -- the position that we simply do not want to be in is to be -- is to have a acquisition target as if that is the objective as opposed to ultimately creating accretive investments and so we all know markets can change and they can change quickly. They can change dynamically and the reality is if we decide that the acquisition market is not as favorable as it current is, then we would expect that our behavior would change appropriately and therefore we don't want to have a target out there that we would then be needing to amend.
As far as the guidance is concerned, clearly we believe that depending on any set of circumstances depending on how aggressively we are on acquisitions, dispositions [are not] (ph) aggressive, we're comfortable that we can meet the guidance regardless of again how that acquisition dynamic changes over the next calendar year.
Unidentified Analyst
Okay. That's fine.
I appreciate it. Thank you.
Thomas Nolan Jr.
You're welcome.
Operator
Our next question will come from the line of Juan Sanabria. Please proceed.
Juan Sanabria – Bank of America, Merrill Lynch
Hi, good afternoon. Just to follow-up on the guidance question, maybe just to ask in a different way, what would be your guidance if you stripped out all acquisition assumptions?
Thomas Nolan Jr.
No again that would tell -- suggest what the -- our acquisition number is and therefore we would be providing acquisition guidance. So it's just we're providing a range, it has acquisition disposition portfolio management activity in it.
We're confident we could hit that range depending on whatever level of activity we believe the market determines, but by providing a non-acquisition number, we would in essence providing guidance of acquisitions, which again is against our philosophy of portfolio management.
Juan Sanabria – Bank of America, Merrill Lynch
Okay. And does the low end include activity as well?
Thomas Nolan Jr.
Again and don't -- it's a range and it's a range that we're comfortable we can hit within the levels of a band of activity.
Juan Sanabria – Bank of America, Merrill Lynch
Okay. I guess fair enough.
On ShopKo, have you had to negotiate with the tenant to restructure any of the leases to a prior question in any form and if so kind of what was the give and take in that negotiation with the tenant?
Thomas Nolan Jr.
Juan as we said, we're in a number of negotiations on a variety of transactions. If we had amended the master lease, that's a material document that's public and so you could imagine, we would have disclosed that.
Juan Sanabria – Bank of America, Merrill Lynch
Okay. And then just last one for me on the dispositions, what were the cap rates on those and not sure that they can -- if the buildings were vacant or there was an NOI that you could apply cap -- or derive the cap rate from.
Thomas Nolan Jr.
Our disposition activity represented a live variety of activity including vacant properties and including risk mitigation sales and including accretive sales and so even assets were purchased via purchase options. So we have a range of cap rates from five up to 10 representing various transactions and so the average really wouldn’t be meaningful.
Juan Sanabria – Bank of America, Merrill Lynch
So no weighted average. Okay.
Thank you.
Operator
(Operator Instructions) Our next question will come from the line of Chris Lucas. Please proceed.
Thomas Nolan Jr.
Did we lose Chris?
Operator
Chris, please use your mute option. Your line is open.
Sorry about that. If I could just ask another question related to guidance, but I was literally looking for the organic growth, you were expecting the same store NOI growth for next year.
Michael Bender
Well, as we've said before, we tend to originate kind of in the 1% to 2% bump range and that's on I think 85% to 87% of the portfolio, something like that.
Chris Lucas – Capital One Security
Okay. And then you mentioned in your prepared remarks related to the rent coverage currently versus a year ago, I guess I was trying to understand how much of the portfolio that represents?
Michael Bender
That's roughly about half of the portfolio Chris.
Chris Lucas – Capital One Security
Okay. And then maybe Tom, let me ask this question as it relates to the acquisition environment, I guess a year ago, given where your capital was and the flexibility was, how do you feel about your opportunity set today versus a year ago?
Thomas Nolan Jr.
I think that speaking for myself, speaking for the team and the acquisition group; I think we feel that the company is very well positioned. We've seen a tightening of cap rates over the last 12 months, but it's been modest and I think the corresponding capital -- cost of capital both on the debt and equity side, our cost of capital has improved and the debt markets have been -- have been very robust.
And so the spread and this is a spread investing opportunity, this is what these companies such as ourselves are doing which is to accretively add to the portfolio. I think we're looking today and we're looking at the spread that remains high by historical standards.
When we look at the -- even though cap rates have tightened somewhat, the cost of capital has tightened further and that remains a very large space. I think -- and there are a lot of naturally we have competitors.
We come across the usual group of competitors, but there is a lot of product available to buy. So we don't feel as though we're challenged.
As a matter of fact, we think with a very good stable of opportunities to look at and again if and as these conditions continue, I think you would expect that we would continue to be an active acquirer of real estate consistent with what we've been doing over the last couple of quarters.
Chris Lucas – Capital One Security
And then the last question for me just relates to the sort of portfolio level, which has been sort of drift down, is there anything specific going on there. Is it just simply non-renewals of leases that are coming or is there a specific -- one specific deal or is there something there that you could maybe offer some guidance as to what's going on there?
Thomas Nolan Jr.
I am not sure -- and going on I think we may have missed your specific question?
Chris Lucas – Capital One Security
Just the occupancy change has been drifting down, just trying to get…
Peter Mavoides
We had some -- during the quarter we had some credit situations that came to maturity during the quarter during the quarter where we took back properties from tenants that we had been wrestling with for a long period of time and so that just happened during the quarter that spiked it up and we will continue to work that down. As we've said in the past, operating between 98% and 99% and where we think it stabilized the portfolio.
Chris Lucas – Capital One Security
And how do you expect or resolve those specific vacancies? Are you looking at just selling those assets or is there an opportunity to re-lease that you think you got a good chance on?
Thomas Nolan Jr.
We have 40 vacant properties against our 2400 plus and we rented those properties with various brokers and try to maximize value. So some of those will be re-let, some of them will be sold out and it really at the end of the day, it's just it will be the most sufficient execution that generate the best return for us and it tends to be 50-50 mix.
Chris Lucas – Capital One Security
Okay. Great.
Thank you.
Operator
Our next question will come from the line of [Ross]. Please proceed.
Unidentified Analyst
Hey guys. Good afternoon.
Thomas Nolan Jr.
Hey Ross.
Unidentified Analyst
Hey Tom. Can you give us a sense of what leverage levels that you’ve put into your business plan for next year specifically related to the guidance you put out?
Thomas Nolan Jr.
Well I think we've said consistently that we're comfortable at the leverage levels that we're at. We have brought it down from the time of the IPO which was a commitment that we made at that time.
We have been bringing it down and then it tends to fluctuate I think within the zone that we're currently in. We're in the low 7's and that's going to continue to pick up a little bit in between potential equity transactions and then float down.
So we're certainly not intending a dramatic shift in capitalization strategy. We're very comfortable with where we are and we continue to look at leverage as -- we're just focused on is it matched, is it latter and do we have the right type of leverage on our books and then when to make sure that that level does not get outside of our -- of the zones that they were operating under.
But there isn’t a dramatic shift from what we've had over the last year.
Unidentified Analyst
Sure and I see you did not select to issue any equity under the ATM in the third quarter, I am just curious why did you not like the stock price in the 11.5 to 12 range or were you comfortable that following the second quarter issuance that you were okay for one.
Thomas Nolan Jr.
Well first of all following the issuance, we were locked out and I don't remember the exact date that the lock out expired, so we were not in the market. So I think the 60 days following the equity issuance and after that it becomes a fact of circumstances situation as we were getting the of the quarter, it just -- it didn't necessarily happen, but clearly we have the ATM, it's the tool and I would expect that it's a tool that ultimately the company will call for.
But the beginning of the quarter, again the lock-out was…
Peter Mavoides
And we came out of that capital transaction pretty close.
Thomas Nolan Jr.
Right. We've been -- because that particular transaction was over-subscribed and we did upsize it, there was as Pete suggested substantial liquidity through the quarter.
Unidentified Analyst
Tom you had mentioned I think in an answer to your prior question that you guidance for next year included portfolio management activity. I am wondering does that statement include anything related to ShopKo or is that a full separate strategic low asset that has not been included in that.
Thomas Nolan Jr.
No I think ShopKo is -- when we discussed portfolio management, ShopKo is an integral component of that.
Unidentified Analyst
Okay. Appreciate.
Last question I have, your guidance midpoint to midpoint from '14 to '15 implies 3.5% growth, which I would quality as not being sexy perhaps, but not horrible. I am just curious how you think about that growth rate relative to ultimately what you would consider to be perhaps a longer run growth rate for the company?
Is that what you think we should that Sprit over some longer period of time?
Thomas Nolan Jr.
Well I think that first of all our view on guidance is put out a prudent number that we are confident that that can be hit. So as a management team, we spend every day looking at opportunities that could create additional shareholder growth, but there is a difference between putting out a guidance number again from your basic business and looking at those opportunities.
I do think that the triple net space has a lower overall growth rate. We're an income oriented product with long term leases.
We believe the value that we're bringing to the equation has predictable cash flow that's growing and that a growth rate much higher as a status quo or an under-writable sort of growth rate, I am not sure is really appropriate for the triple net lease industry, which again, which is the longest, is the most stable cash flows, it has the longest term leases. It has the most [debt] (ph) in the industry.
So I don't -- fact and circumstances can change in the capital markets and that can change our outlook going forward, but I think right now as of growth with the current dividend that we're paying and an ability to create further value from transactions now contemplated with part of our guidance I think is something we're very comfortable with.
Unidentified Analyst
Thanks appreciate.
Operator
That concludes the Q&A portion of today's call. I'll turn the call back over to Mr.
Tom Nolan.
Thomas Nolan Jr.
Thank you very much. We are pleased with our quarterly results and believe that value for our shareholders is supported by our operating discipline, which is systemic to Spirit Realty Capital.
We've a quality portfolio with creditworthy tenants which create predictable and solid cash flows. We strive for the highest level of integrity, transparency and discipline at all levels of the organization and we have a professional seasoned management team with decades of experience in the triple net industry.
At the time of the IPO we made a commitment to our then new shareholders to strive towards becoming one of the premier companies in the triple net industry. We look forward to another year or delivering on those commitments.
For those of you that will be at this week's NAREIT conference, we look forward to seeing you all in Atlanta. Thank you very much.
Operator
Ladies and gentlemen, that concludes today's call. You may now disconnect.