Retail landlord Spirit Realty Capital plans to issue another $510 million of bonds backed by the triple-net lease receivables on 864 commercial real estate properties.

Morgan Stanley is the structuring agent on the deal and will act as a joint bookrunner along with Deutsche Bank Securities.

In a net lease, the lessee agrees to pay some or all of the common expenses of operating the property in addition to lease payment. A triple-net lease is one requiring the lessees to pay the maintenance, taxes, and insurance.  

S&P has an 'A+' to the two tranches of notes to be issued via Spirit Master Funding's Series 2014-4. The master trust previously issued three series: 2014-1, 2014-2, and 2014-3.  

The loan-to-value ratio on the collateral backing all of the series is 70%.

Spirit is the second-largest publicly traded triple-net lease REIT in the U.S. The firm’s focus is single-tenant, “operationally essential” real estate across the country. These kinds of properties “are generally freestanding, commercial real estate facilities where tenants conduct primarily retail, service or distribution activities that Spirit believes are essential to their sales and profits,” S&P said in its presale report.  

Among the transaction’s weakness, according to S&P, are the ability of tenants to move out of the underlying properties and the location of some properties in sparsely populated areas. The time needed to find replacement tenants when leases expire or terminate may reduce cash flows, the presale states. 

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