Spirit MTA REIT Reaches Agreement for Sale of Assets for $2.4 Billion

– $2.345 Billion for the Sale of All of the Master Trust 2014 Owned
Properties and $55 Million for the Concurrent Sale of Assets Currently
Owned by Spirit Realty Capital –

– At Closing, Expects to Terminate External Management Agreement and
Enter Into Interim Agreement with Spirit Realty Capital for
Substantially Lower Rate –

DALLAS–(BUSINESS WIRE)–Spirit MTA REIT (NYSE: SMTA) (“SMTA” or the “Company”) announced today
that the Board of Trustees has reached a definitive agreement to sell
the Owned Properties held in the Company’s Master Trust 2014 (the
“Trust”) and three assets presently owned by Spirit Realty Capital, Inc
to Hospitality Properties Trust (“HPT”) (NASDAQ: HPT) for $2.4 billion
in total cash consideration, subject to certain adjustments. These three
assets include the fee simple interests in three travel centers that
previously had been subject to mortgage loans held by the Trust. The
closing of the transaction is subject to customary conditions, including
the receipt of the approval of SMTA stockholders, and is expected to
occur in the later part or end of the third quarter of 2019. This
transaction has been approved by the Board of Trustees of HPT and does
not require HPT’s shareholders’ vote. HPT plans to finance this
transaction through a new fully committed $2.0 billion term loan
facility, availability on HPT’s existing revolving credit facility,
certain asset sales and potential issuance of unsecured notes.

As the external manager, Spirit has worked to maximize the value to
shareholders by prudently managing the Company’s assets, protecting the
Company from problem tenants and assisting in their accelerated
strategic alternatives process. Today’s announcement represents the most
critical step in the full wind-down of SMTA and looking ahead, Spirit
will continue to partner with SMTA’s Board of Trustees to liquidate the
few remaining assets and seek maximum recovery on the Shopko B-1 Term
Loan,” said Jackson Hsieh, Chairman of SMTA and President and Chief
Executive Officer of Spirit Realty Capital, Inc.

Consistent with our announcement earlier this year that SMTA would
accelerate its strategic plan, our Board has diligently explored
multiple scenarios in our effort to maximize shareholder value. In
assessing these scenarios, we took into account the pricing, timing, and
certainty of various transactions. Ultimately, we concluded that a sale
of the Trust to Hospitality Properties Trust represented the best
possible outcome for our shareholders. We will continue our work to
close the transaction in the coming months and realize cash value for
the remainder of SMTA’s assets in order to provide special distributions
to our shareholders,” stated Richard J. Stockton, Lead Independent
Trustee of SMTA.

The transaction is structured such that HPT will pay $2.4 billion in
cash, subject to certain adjustments, to SMTA, which SMTA will use to
redeem all of the then-outstanding notes collateralized by the assets of
the Trust (the “Trust Notes”) in connection with the closing. As of
March 31, 2019, the balance of the Trust Notes was approximately $1.93
billion. Under the terms of the transaction, HPT will also pay to SMTA
the make-whole amounts payable in connection with the redemption of the
Trust Notes. The make-whole amount is currently estimated at $72
million, assuming a closing during the third quarter, but it is subject
to change primarily based on the applicable U.S. Treasury rates at the
time of redemption.

Additionally, at the request of HPT, a subsidiary of SMTA has agreed to
acquire from a subsidiary of Spirit Realty Capital, Inc. (NYSE: SRC)
(“Spirit”), SMTA’s external manager, the fee interests in three travel
center properties for $55 million, subject to satisfaction of certain
conditions. As part of this transaction, Spirit has agreed to repay SMTA
the outstanding principal amount of six mortgage notes (the “Mortgage
Loans in Master Trust 2014”) issued by Spirit’s subsidiaries and which
are currently held in the Trust. As of March 31, 2019, the aggregate
balance of the Mortgage Loans in Master Trust 2014 was approximately
$27.1 million. The ownership of the three travel center properties will
be transferred to HPT as part of the transaction, subject to
satisfaction of certain conditions.

Net proceeds to SMTA from this transaction are expected to be
approximately $450 million after taking into consideration (i)
redemption of the Trust Notes, (ii) purchasing the three travel center
properties from SRC, (iii) proceeds from the repayment of the Mortgage
Loans in Master Trust 2014, (iv) cash released by the Trust upon
redemption of the Trust Notes and (v) certain adjustments for working
capital, interim Trust cash flows between signing and closing, and
transaction costs.

Additionally, at closing, SMTA will repurchase from Spirit, at par value
including accrued dividends, its $150 million preferred shares in the
Company (SMTA Preferred Stock) in accordance with the terms of those
shares, and approximately $5.6 million plus any accrued and unpaid
dividends will be paid to satisfy the SubREIT preferred shares in
accordance with their terms. Also at closing, the existing asset
management agreement with Spirit (the “Asset Management Agreement”) and
the Trust property management agreement will terminate. Under the
existing terms of the Asset Management Agreement, SMTA will pay Spirit a
termination fee of approximately $48 million in connection with such
termination, however (i) as a result of Spirit’s termination, SMTA will
not be required to deliver notice to Spirit 180 days in advance of
termination or enter into an eight month transition services period, and
(ii) Spirit has agreed to waive Spirit’s right to receive any promote as
otherwise provided for under the Asset Management Agreement. Spirit and
SMTA will then enter into an interim asset management agreement under
which SMTA will pay Spirit a significantly reduced annual fee of $1
million during the initial one-year term, and $4 million for any renewal
one-year term, plus certain cost reimbursements. This interim agreement
will be terminable at any time by SMTA and after one year by Spirit
without payment of a termination fee.

This strategic transaction is the culmination of several months of
continued effort to maximize the value of our assets with our stated
goal of returning capital to SMTA’s shareholders and materially
resolving the advisory relationship with Spirit. Under the terms of a
further interim agreement with Spirit, at a significantly reduced cost,
the balance of the Company will be liquidated in due course and,
accordingly, we expect the shares to be delisted. We will provide more
specifics regarding this transaction in our proxy statement,” added
Ricardo Rodriguez, President and Chief Executive Officer of SMTA.

The Company remains focused on its efforts to generate additional cash
proceeds through the sale of its remaining assets in the Other
Properties segment, and to seek recovery of the amounts owed by Shopko
under the Shopko B-1 Term Loan.

This transaction is a first step towards winding down and liquidation of
the Company. As such, the Company intends to return net proceeds from
this transaction and other asset sales when appropriate, after taking
into account the payments in respect of the preferred equity stakes,
intervening preferred dividend payments, the declared common dividend
payment, the termination fee to Spirit, satisfaction of outstanding
contingent liabilities and transaction costs associated with the sales.

Further relevant details on the transaction will be disclosed in the
proxy statement for the transaction.

Barclays acted as financial advisor and Fried, Frank, Harris, Shriver &
Jacobson LLP served as legal advisor to SMTA. ICR, LLC acted as
communications advisor to SMTA.

   

Illustrative Transaction Summary
Valuation of Master Trust 2014 Segment

($ in millions)

 
Annualized Cash Rent at March 31, 2019 $     170.9
Purchase Price (Excl. Make-Whole Payment and $55M for Travel Center
Properties)
$ 2,345
Implied Cap Rate (Excl. Make-Whole Payment) 7.3%
Purchase Price (Incl. Make-Whole Payment) (1) $ 2,417
Implied Cap Rate (Incl. Make-Whole Payment) 7.1%

(1) Make-whole payment of $72 million is an estimate based on
the current level of U.S. Treasury rates. This amount is subject to
change based on rates and other factors on the actual redemption date of
the Trust Notes.

   

Pro Forma Components of NAV

($ in millions)

 
Master Trust 2014     At Closing
Total Estimated Transaction Net Proceeds (1) $ 450
 
Academy Distribution Center     March 31, 2019
Academy Annualized Contractual Rent $ 9.5
Academy CMBS Debt Outstanding $ (82.7)
 
Workout Assets     March 31, 2019
Workout Assets Annualized Contractual Rent (2) $ 6.5
Real Estate Investment of Vacant Workout Assets $ 8.9
 
Other Assets     March 31, 2019
Unrestricted Cash $ 108.9
 
Other Liabilities     March 31, 2019
Termination Fees $ 48.1
Dividends Payable (3) $ 28.4
Redeemable Preferred Equity $ 155.1
 
Shares Outstanding as of March 31, 2019 (in millions)   43.1

(1) Approximate figure provided for illustrative purposes.
The final amount at closing is subject to various adjustments as noted
elsewhere in this press release.

(2) Property cost leakage for Workout Assets for the first
quarter of 2019 annualized was $2.3 million.

(3) Represents total of special dividends announced and
payable on April 15, 2019 and July 15, 2019, respectively.

ABOUT SPIRIT MTA REIT

Spirit MTA REIT (NYSE: SMTA) is a net-lease REIT headquartered in
Dallas, Texas. SMTA owns one of the largest, most diversified and
seasoned commercial real estate backed master funding vehicles. SMTA is
managed by a wholly-owned subsidiary of Spirit (NYSE: SRC), one of the
largest publicly traded triple net-lease REITs.

As of March 31, 2019, our diversified portfolio was comprised of 796
properties, including properties securing mortgage loans made by the
Company. Our Owned Properties, with an aggregate gross leasable area of
approximately 13.9 million square feet, are leased to approximately 203
tenants across 43 states and 24 industries. More information about
Spirit MTA REIT can be found on the investor relations page of the
Company’s website at www.spiritmastertrust.com.

[email protected]

Additional Information about the Proposed Transaction and Where to
Find It

This communication relates to the proposed sale of assets by Spirit MTA
REIT and may be deemed to be solicitation material in respect of the
proposed transaction. In connection with the proposed transaction,
Spirit MTA REIT will file a proxy statement (the “Proxy Statement”) with
the Securities and Exchange Commission (the “SEC”), as well as other
relevant materials. This communication is not a substitute for the Proxy
Statement or for any other document that Spirit MTA REIT has filed or
may file with the SEC or send to Spirit MTA REIT’s shareholders in
connection with the proposed transaction. BEFORE MAKING ANY VOTING
DECISION, INVESTORS AND SECURITY HOLDERS OF SPIRIT MTA REIT ARE URGED TO
READ THE PROXY STATEMENT AND OTHER DOCUMENTS FILED WITH THE SEC
CAREFULLY AND IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE BECAUSE THEY
WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION AND
RELATED MATTERS. Investors and security holders will be able to obtain
free copies of the Proxy Statement and other documents filed by Spirit
MTA REIT with the SEC through the website maintained by the SEC at http://www.sec.gov.
Copies of the documents filed by the Company with the SEC will also be
available free of charge on the investor relations page of Spirit MTA
REIT’s website at www.spiritmastertrust.com.
Spirit MTA REIT and its trustees and its executive officer may be
considered participants in the solicitation of proxies from Spirit MTA
REIT’s shareholders with respect to the proposed transaction under the
rules of the SEC. Information about the trustees and the executive
officer of Spirit MTA REIT is set forth in its Annual Report on Form
10-K for the year ended December 31, 2018, which was filed with the SEC
on March 22, 2019, its proxy statement for its 2019 annual meeting of
shareholders, which was filed with the SEC on March 22, 2019, and in
subsequent documents filed with the SEC. Additional information
regarding persons who may be deemed participants in the proxy
solicitations and a description of their direct and indirect interests,
by security holdings or otherwise, will also be included in the Proxy
Statement and other relevant materials to be filed with the SEC when
they become available.

FORWARD-LOOKING AND CAUTIONARY STATEMENTS

This press release may contain forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995 and
other federal securities laws. These forward-looking statements can be
identified by the use of words such as “expect,” “plan,” “will,”
“estimate,” “project,” “intend,” “believe,” “guidance,” “approximately,”
“anticipate,” “may,” “should,” “seek” or the negative of these words and
phrases or similar words or phrases that are predictions of or indicate
future events or trends and that do not relate to historical matters.
You can also identify forward-looking statements by discussions of
strategy, plans or intentions of management. These forward-looking
statements are subject to known and unknown risks and uncertainties that
you should not rely on as predictions of future events. Forward-looking
statements depend on assumptions, data and/or methods which may be
incorrect or imprecise and we may not be able to realize them. The
following risks and uncertainties, among others, could cause actual
results to differ materially from those currently anticipated due to a
number of factors, which include, but are not limited to: industry and
economic conditions; SMTA’s ability to satisfy the conditions to closing
and complete the proposed transaction; SMTA’s dependence on its external
manager, a subsidiary of Spirit Realty Capital, Inc., to conduct its
business and achieve its investment objectives; unknown liabilities
acquired in connection with acquired properties or interests in
real-estate related entities; general risks affecting the real estate
industry and local real estate markets (including, without limitation,
the market value of SMTA’s properties, potential illiquidity of SMTA’s
remaining real estate investments, condemnations, and potential damage
from natural disasters); the financial performance of SMTA’s tenants;
the impact of any financial, accounting, legal or regulatory issues or
litigation that may affect SMTA or its major tenants; volatility and
uncertainty in the financial markets, including potential fluctuations
in the consumer price index; risks associated with its failure or
unwillingness to maintain SMTA’s status as a REIT under the Internal
Revenue Code of 1986, as amended, and other additional risks discussed
in its Annual Report on Form 10-K for the fiscal year ended December 31,
2018. SMTA expressly disclaims any responsibility to update or revise
forward-looking statements, whether as a result of new information,
future events or otherwise, except as required by law.

REPORTING DEFINITIONS AND EXPLANATIONS

Annualized Cash Rent represents Annualized Contractual Rent,
less any rent reserved for.
Annualized Contractual Rent represents the monthly
Contractual Rent multiplied by twelve.
Contractual Rent represents monthly contractual cash rent,
excluding percentage rents, from properties owned fee-simple or
ground leased, recognized during the final month of the reporting
period, adjusted to exclude amounts received from properties sold
during that period and adjusted to include a full month of
contractual rent for properties acquired during that period. We use
Contractual Rent when calculating certain metrics that are useful to
evaluate portfolio credit, asset type, industry and geographic
diversity and to manage risk.

Gross Investment represents the gross acquisition cost
including the contracted purchase price and related capitalized
transaction costs.

Master Trust 2014 is an asset-backed securitization trust
established in 2005, and amended and restated in 2014, which
issues non-recourse notes collateralized by commercial real
estate, net-leases and mortgage loans from time to time. Indirect
special purpose entity subsidiaries of the Company are the
borrowers. This liability is discussed in greater detail in our
financial statements and the notes thereto included in our
periodic reports filed with the SEC.

Other Properties are all properties not included in the
Master Trust 2014.
Owned Properties refers to properties owned fee-simple or
ground leased by Company subsidiaries as lessee.

Real Estate Investment represents the Gross Investment plus
improvements less impairment charges.

SMTA Preferred Stock refers to the 10% Series A Cumulative
Redeemable Preferred Stock.

Workout Assets include tenants or properties that are
targeted for potential future dispositions or other lease
restructurings.

Contacts

Investor Contact:
Spirit MTA REIT
(972) 476-1409

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