November 30, 2004
Mail Stop 0409
Morton H. Fleischer
Chairman of the Board and Chief Executive Officer
Spirit Finance Corporation
14631 N. Scottsdale Road
Suite 200
Scottsdale, Arizona 85254
Re: Spirit Finance Corporation
Amendment No. 1 to Registration Statement on Form S-11
Filed November 19, 2004
Registration No. 333-119810
Dear Mr. Fleischer:
The staff conducted a limited review of the above filing.
We
limited our review to disclosure regarding the initial public
offering and to ensure that the disclosure is consistent with the
disclosure found in the resale registration statement (333-
116408).
Where indicated, we think you should revise your document in
response
to these comments. If you disagree, we will consider your
explanation as to why our comment is inapplicable or a revision is
unnecessary. Please be as detailed as necessary in your
explanation.
In some of our comments, we may ask you to provide us with
supplemental information so we may better understand your
disclosure.
After reviewing this information, we may or may not raise
additional
comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or any other aspect
of
our review. Feel free to call us at the telephone numbers listed
at
the end of this letter.
General
1. We note your response to our prior comment number 1 and your
new
disclosure on page 32 suggesting that you intend to use at least
$230.3 million of the possible $276.8 - $318.6 million in net
proceeds to repay indebtedness. In light of the fact that up to
83%
of the net proceeds of your offering will be used in the repayment
of
debt, please revise your disclosure in the summary and business
sections to deemphasize proposed acquisitions for which you have
limited financing and for which you have not allocated funds from
this offering, and place emphasis rather on the indebtedness you
intend to retire. Your disclosure should include a discussion of
the following:
* The terms of the indebtedness you intend to pay, including
whether
the facilities in question provide for revolving aggregate amounts
available for borrowing.
* Whether there will be any premium payment required for early
retirement of the indebtedness and how you expect the early
payment
of these debts to affect your borrowing relationship with these
and
other lenders.
* How this repayment affects your leverage strategy. In this
connection, please revise any discussion of your leverage strategy
throughout the prospectus to indicate that your post-offering
leverage will be substantially lower than your disclosed goal of
60%.
Use of Proceeds, page 32
2. Please reconcile your disclosure in the final paragraph on page
32
that you may need a significant amount of time to fully invest the
net proceeds of the offering in your intended real estate
investments
with your disclosure in the prior paragraph that you only intend
to
use $33.9 million of the proceeds for real estate investments,
which
appear to be identified and subject to binding purchase
agreements.
Risk Factors, pages 13 - 30
3. We note your response to our prior comment number 17. Please
include a risk factor discussing the possibility of higher lease
default rates in light of the fact that all of your properties are
operated by non-investment grade companies
Our Pending Real Estate Investments, pages 60 - 62
4. We have reviewed your response to Comment No. 20 from our last
comment letter, and we re-issue the comment. Currently, your
disclosure is not balanced and gives undue weight to the potential
acquisitions that are non-binding and whose aggregate transaction
value greatly exceeds your current resources. Please revise to
remove the table found on page 62.
Management, page 70
5. Please disclose that the board of directors has determined that
Messrs. Mitchem, Oreffice, Barnes, Sylla, Roath and Parish as well
as
Dr. Blessing are independent directors pursuant to the standards
promulgated by the New York Stock Exchange and the Commission.
Underwriting, pages 123 - 127
6. We have reviewed your response to our prior comment number 21.
Please tell us whether Banc of America Securities LLC and
Flagstone
Securities have previously cleared their online offering
procedures
with the staff of the Commission and, if not, please
supplementally
supply the following additional information:
* You indicate that BAS may deliver the prospectus by posting a
version of it on its branded website. Please tell us how BAS
intends
to obtain proof that individual investors have accessed the
document.
* Please supply us with screen shots of the website of BAS
containing
the prospectus as well as copies of all proposed communications
associated with any electronic distribution.
7. We note that both BAS and Flagstone Securities intend to make
versions of the preliminary prospectus available to potential
investors electronically in PDF format. Please confirm that both
BAS
and Flagstone Securities will also supply each recipient of a PDF
version of the prospectus with a free version of the software
necessary to download and open the document, as well as free
technical support.
Consolidated Statements of Operations, page F-3
8. In the next amendment, please revise the format of the
statement
to show clearly how much "Stock-based compensation expense" is
attributable to each line item of expense (i.e., general and
administrative, etc.).
Exhibits
Exhibit 5.1, Legal Opinion
9. We have reviewed the draft legal opinion. We note that counsel
relied upon a certificate executed by an officer of the company as
stated in paragraph number 6, on page 1 of the opinion. Please
provide a revised form of legal opinion that confirms that each
representation from the officer`s certificate upon which counsel
relied in rendering its opinion is a factual representation, not a
legal one.
10. We refer to the parenthetical assumption contained in the
paragraph numbered 2 on page 2 of the opinion which assumes that
the
total number of common shares issued and outstanding after the
offering will not exceed the total number of shares that the
company
is authorized to issue under the charter. Since counsel has
represented that it has examined the charter and the registration
statement, it is not clear why it is unable to opine on this
matter.
In addition, this assumption goes to the heart of whether the
securities are legally issued and is inappropriate. Please have
counsel remove the assumption.
Exhibit 8.1, Tax Opinion
11. Please have tax counsel opine that the discussion of material
tax
consequences under the heading, "Material United States Federal
Income Tax Consequences," to the extent it constitutes matters of
law
or legal conclusions, is correct in all material respects.
* * * *
As appropriate, please amend your registration statement
in
response to these comments. You may wish to provide us with
marked
copies of the amendment to expedite our review. Please furnish a
cover letter with your amendment that keys your responses to our
comments and provides any requested supplemental information.
Detailed cover letters greatly facilitate our review. Please
understand that we may have additional comments after reviewing
your
amendment and responses to our comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filings reviewed by the staff to
be
certain that they have provided all information investors require
for
an informed decision. Since the company and its management are in
possession of all facts relating to a company`s disclosure, they
are
responsible for the accuracy and adequacy of the disclosures they
have made.
We will consider a written request for acceleration of the
effective date of the registration statement as a confirmation of
the
fact that those requesting acceleration are aware of their
respective
responsibilities under the Securities Act of 1933 and the
Securities
Exchange Act of 1934 as they relate to the proposed public
offering
of the securities specified in the above registration statement.
We
will act on the request and, pursuant to delegated authority,
grant
acceleration of the effective date.
We direct your attention to Rules 460 and 461 regarding
requesting acceleration of a registration statement. Please allow
adequate time after the filing of any amendment for further review
before submitting a request for acceleration. Please provide this
request at least two business days in advance of the requested
effective date.
You may contact Deborah Wilson, Staff Accountant, at (202)
942-
2956 or Donna DiSilvio, Branch Chief, at (202) 942-1852 if you
have
questions regarding comments on the financial statements and
related
matters. Please contact Amanda McManus, Attorney-Advisor, at
(202)
942-7184 or me at (202) 942-1972 with any other questions.
Sincerely,
Owen Pinkerton
Senior Counsel
cc: Paul E Belitz, Esq. (via facsimile)
Michael Zeig, Esq. (via facsimile)
Kutak Rock LLP
??
??
??
??
Spirit Finance Corporation
Page 5