Another article written by SLG President, Bill Stanley, was featured on the investment research website, Seeking Alpha.

1. VEREIT – BETWEEN A ROCK AND HARD PLACE?
Much has been written about VER’s FFO multiple and many have suggested that it is unfairly low as
compared to peers.
VER reported the following in its September 30, 2015 10Q:
“As of September 30, 2015, the Company had $9.0 billion of debt outstanding, including net
premiums, with a weighted-average years to maturity of 4.0 years and weighted-average interest
rate of 3.65%”
The 10Q shows $89.53(M) of Interest Expense Net for the quarter. A basic breakout of the debt stack is
as follows:
(000) W/A W/A
Outstanding Balance Yrs to Maturity Interest Rate
Fixed-rate debt 3,233,275 5.4 5.03%
Recorded Premiums 60,182
3,293,457
Outstanding Balance Interest Rate Maturity Date
2017 Senior Notes 1,300,000 2.00% 2/6/17
2019 Senior Notes 750,000 3.00% 2/6/19
2024 Senior Notes 500,000 4.60% 2/6/24
Recorded Discount (2,941)
Tot Bal & W/A Interest Rate 2,547,059 2.80%
Outstanding Balance Interest Rate Maturity Date
2018 Convertible Notes 597,500 3.00% 1/8/18
2020 Convertible Notes 402,500 3.75% 12/15/20
Recorded Discount (18,965)
Tot Bal & W/A Interest Rate 981,035 3.30%
Balance (9-30-15) Interest Rate
Credit Facility 1,100,000 2.19%
Term Loan 1,000,000 3.28%
Total 2,100,000
Other Debt 35,137
Recorded Premiums 312
35,449
TOTAL 8,957,000

2. By taking the Debt Stack (less discounts or premiums) and making certain assumptions about the cost of
refinancing as the various debts come due, note that:
a) Interest rates are rising
b) VER may be challenged to regain an Investment Grade Rating in the immediate future, which
would raise refinancing costs
(000) HYPOTHETICAL RISING RATES IN VARIOUS YEARS
2015 2016 2017 2018 2019 2020 2021
Fixed-rate debt 3,233,275 5.03% 5.40% 5.40% 5.40% 5.40% 5.40% 6.00%
2017 Senior Notes 1,300,000 2.00% 2.00% 5.00% 6.00% 6.00% 6.00% 6.00%
2019 Senior Notes 750,000 3.00% 3.00% 3.00% 3.00% 5.80% 6.00% 6.00%
2024 Senior Notes 500,000 4.60% 4.60% 4.60% 4.60% 4.60% 6.00% 6.00%
2018 Convertible Notes 597,500 3.00% 3.00% 3.00% 4.20% 6.00% 6.00% 6.00%
2020 Convertible Notes 402,500 3.75% 3.75% 3.75% 3.75% 3.75% 3.75% 6.00%
Credit Facility 1,100,000 2.19% 2.19% 3.00% 3.00% 3.00% 3.00% 3.00%
Term Loan 1,000,000 3.28% 2.38% 3.50% 3.50% 3.50% 3.50% 3.50%
Other 35,449 3.65% 3.00% 3.00% 3.00% 3.00% 3.00% 3.00%
Tot Bal & W/A IR 8,918,724 3.65% 3.70% 4.30% 4.60% 4.90% 5.00% 5.30%
Interest Expense 325,336 328,069 387,179 407,349 438,729 447,604 476,060
Note: discounts or premiums not shown in above hypothetical model
Based on these assumptions, after five years FFO could be reduced by the effects of rising interest rates
and rising costs of refinancing, perhaps by as much as $122,268 based upon this hypothetical.
The impact of higher interest rates will be lessened as debt is reduced through asset sales. However, as
discussed in the next session, selling assets may have an even greater impact on FFO. Thus, the cure
might even be worse than the disease.
ASSET SALE IMPACT
Management has announced that it intends to de-lever by selling assets. In fact, an additional sale of
Red Lobster Properties was announced on Dec. 18, 2015.
And while this may be a prudent course of action, it may result in a further FFO decline particularly with
the higher yielding assets being sold. For example, assuming an 8% cap rate and applying the stated
weighted average interest rate, selling assets results in the following:

3. HYPOTHETICAL ASSET SALE IMPACT
Assets Sold 1,000,000 2,000,000 3,000,000
Assumed Debt 520,000 1,040,000 1,560,000
Cost of Debt 3.65% 3.65% 3.65%
Asset Yield 8.00% 8.00% 8.00%
Spread 4.35% 4.35% 4.35%
FFO Reduction 43,522 87,000 130,500
* Assumes a 51.58% debt to equity ratio ($18,704,888 Assets, $9,647,663 Liabilities, per the 9/30/15
Balance Sheet
The company recorded a ($210,139) write-off of Goodwill allocated to the REI segment disposition. As
such, the value of some assets being held might be lower that the value that they will fetch upon sale.
The issue then is what are these assets really worth on the open market and are they being held on the
balance sheet at an inflated price given current market conditions?
DIVIDENDS
Based on VER’s dividend policy, the Company does retain excess cash that can be deployed to reduce
debt.
Some commentators would argue that this is money that should be returned to shareholders.
However, management may be reluctant to pay out a dividend that they believe will need to be reduced
in the future.
OUTLIERS
VER faces various shareholder lawsuits which, if successful, may have the effect of causing the Company
to sell assets that are levered and at prices that are not currently reflected on the balance sheet.
MY CONCLUSIONS
1. Rising interest rates could negatively impact FFO.
2. Selling Assets (particularly high yielding assets), could negatively impact FFO.
3. Shareholder lawsuits could negatively impact FFO.
William Stanley, the author of this article, is currently a long stock award shareholder of VER.
The preceding represents the opinions of Mr. Stanley and The Stanley-Laman Group, Ltd., a Registered
Investment Advisor, and are not intended to be investment recommendations.
Investing in any strategy involves the risk of loss of principal and may not be suitable for all investors.
Investors are advised to consult with qualified investment professionals relative to their individual
circumstance and objectives