STORE Capital Announces First Quarter 2019 Operating Results

Affirms 2019 Guidance

Capital Corporation
(NYSE: STOR, “STORE Capital” or the “Company”),
an internally managed net-lease real estate investment trust (REIT) that
invests in Single Tenant Operational Real Estate,
today announced operating results for the first quarter ended March 31,


For the quarter ended March 31, 2019:

  • Total revenues of $156.6 million
  • Net income of $45.6 million, or $0.20 per basic and diluted share,
    including net loss of $1.9 million on dispositions of real estate
  • AFFO of $107.8 million, or $0.48 per basic and diluted share
  • Declared a regular quarterly cash dividend per common share of $0.33
  • Invested $393.3 million in 83 properties at a weighted average initial
    cap rate of 7.8%
  • Raised net proceeds of $158.3 million from the sale of an aggregate
    5.0 million common shares under the Company’s at-the-market equity
  • Closed second public debt offering, issuing $350.0 million in
    aggregate principal amount of investment-grade senior unsecured notes
    in February 2019

Management Commentary

“We had an active first quarter and a great start to the year with solid
portfolio performance and investment activity of nearly $400 million at
an average cap rate of 7.83%,” said Chris Volk, President and Chief
Executive Officer of STORE Capital. “The granularity and steady pace of
our investments enabled us to improve our level of portfolio diversity.
At the same time, we grew our AFFO nearly 26%, continued to elevate our
unencumbered assets, successfully executed our second public unsecured
note offering, maintained our conservative balance sheet profile and
improved our shareholder dividend protection with a conservative 69%
dividend payout ratio. We are excited about the rest of the year as we
look to grow and improve our market-leading platform.”

Financial Results

Total Revenues

Total revenues were $156.6 million for the first quarter of 2019, an
increase of 24.5% from $125.8 million for the first quarter of 2018. The
increase was driven primarily by the growth in the size of STORE
Capital’s real estate investment portfolio, which grew from $6.5 billion
in gross investment amount representing 2,000 property locations and 404
customers at March 31, 2018 to $8.0 billion in gross investment amount
representing 2,334 property locations and 447 customers at March 31,

Net Income

Net income was $45.6 million, or $0.20 per basic and diluted share, for
the first quarter of 2019, a decrease from $50.0 million, or $0.26 per
basic and diluted share, for the first quarter of 2018. Net income for
the first quarter of 2019 included an aggregate net loss on dispositions
of real estate of $1.9 million as compared to an aggregate net gain on
dispositions of real estate of $9.6 million for the same period in 2018.

Net income includes such items as gain or loss on dispositions of real
estate and provisions for impairment, which can vary from quarter to
quarter and impact net income and period-to-period comparisons.

Adjusted Funds from Operations (AFFO)

AFFO increased 25.5% to $107.8 million, or $0.48 per basic and diluted
share, for the first quarter of 2019, compared to AFFO of $85.9 million,
or $0.44 per basic and diluted share, for the first quarter of 2018. The
year-over-year increase in AFFO was primarily driven by additional
rental revenues and interest income generated by the growth in the
Company’s real estate investment portfolio.

Dividend Information

As previously announced, STORE Capital declared a regular quarterly cash
dividend per common share of $0.33 for the first quarter ended March 31,
2019. This dividend, totaling $74.7 million, was paid on April 15, 2019
to stockholders of record on March 29, 2019.

Real Estate Portfolio Highlights

Investment Activity

The Company originated $393.3 million of gross investments representing
83 property locations during the first quarter of 2019, adding 13 net
new customers. These investments had a weighted average initial cap rate
of 7.8%. The Company defines “initial cap rate” for property
acquisitions as the initial annual cash rent divided by the purchase
price of the property. STORE’s leases customarily have lease
escalations, most of which are tied to the consumer price index and
subject to a cap. For acquisitions made during the first three months of
2019, the weighted average annual lease escalation was 1.9%.

Disposition Activity

During the quarter ended March 31, 2019, the Company sold four
properties and recognized an aggregate net loss of $1.9 million on the
disposition of four properties.


At March 31, 2019, STORE Capital’s real estate portfolio totaled
$8.0 billion representing 2,334 property locations. Approximately 96% of
the portfolio represents commercial real estate properties subject to
long-term leases, 4% represents mortgage loans and financing receivables
primarily on commercial real estate buildings (located on land the
Company owns and leases to its customers) and a nominal amount
represents loans receivable secured by the tenants’ other assets. As of
March 31, 2019, the portfolio’s annualized base rent and interest (based
on rates in effect on March 31, 2019 for all lease and loan contracts)
totaled $646.4 million as compared to $520.2 million a year ago. The
weighted average non-cancelable remaining term of the leases at March
31, 2019 was approximately 14 years.

The Company’s portfolio of real estate investments is highly diversified
across customers, brand names or business concepts, industries and
geography. The following table presents a summary of the portfolio.

Portfolio At A Glance – As of March 31, 2019    
Investment property locations   2,334
States 50
Customers 447
Industries in which customers operate 109
Proportion of portfolio from direct origination ~80%
Contracts with STORE-preferred terms*(1) 94%
Weighted average annual lease escalation(2) 1.8%
Weighted average remaining lease contract term ~14 years
Occupancy(3) 99.7%
Properties not operating but subject to a lease(4) 30
Investment locations subject to a ground lease 20
Investment portfolio subject to NNN leases* 98%
Investment portfolio subject to Master Leases*(5) 91%
Average investment amount/replacement cost (new)(6) 81%
Locations subject to unit-level financial reporting 98%
Median unit fixed charge coverage ratio (FCCR)/4-Wall coverage ratio(7) 2.2x/2.6x
Contracts rated investment grade(8)   ~75%

* Based on annualized base rent and interest.



Represents the percentage of our lease contracts that were
created by STORE or contain preferred contract terms such as
unit-level financial reporting, triple-net lease provisions and,
when applicable, master lease provisions.


Represents the weighted average annual escalation rate of the
entire portfolio as if all escalations occurred annually. For
escalations based on a formula including CPI, assumes the stated
fixed percentage in the contract or assumes 1.5% if no fixed
percentage is in the contract. For contracts with no escalations
remaining in the current lease term, assumes the escalation in the
extension term. Calculation excludes contracts representing less
than 0.2% of annualized base rent and interest where there are no
further escalations remaining in the current lease term and there
are no extension options.


The Company defines occupancy as a property being subject to a
lease or loan contract. As of March 31, 2019, eight of the
Company’s properties were vacant and not subject to a contract.


Represents the number of the Company’s investment locations
that have been closed by the tenant but remain subject to a lease.


Percentage of investment portfolio in multiple properties with
a single customer subject to master leases. Approximately 84% of
the investment portfolio involves multiple properties with a
single customer, whether or not subject to a master lease.


Represents the ratio of purchase price to replacement cost
(new) at acquisition.


STORE Capital calculates a unit’s FCCR generally as the ratio
of (i) the unit’s EBITDAR, less a standardized corporate overhead
expense based on estimated industry standards, to (ii) the unit’s
total fixed charges, which are its lease expense, interest expense
and scheduled principal payments on indebtedness (if applicable).
The 4-Wall coverage ratio refers to a unit’s FCCR before taking
into account standardized corporate overhead expense. The weighted
average unit FCCR and 4-Wall coverage ratios were 3.0x and 3.8x,


Represents the percentage of the Company’s contracts that have
a STORE Score that is investment grade. The Company measures the
credit quality of its portfolio on a contract-by-contract basis
using the STORE Score, which is a proprietary risk measure
reflective of both the credit risk of the Company’s tenants and
the profitability of the operations at the properties. As of March
31, 2019, STORE Capital’s tenants had a median tenant credit
profile of approximately ‘Ba2’ as measured by Moody’s Analytics
RiskCalc rating scale. Considering the profitability of the
operations at each of its properties and STORE’s assessment of the
likelihood that each of the tenants will choose to continue to
operate at the properties in the event of their insolvency, the
credit quality of its contracts, or STORE Score, is enhanced to a
median of ‘Baa3’.

Capital Transactions

The Company established a $750 million “at the market” equity
distribution program, or ATM Program, in November 2018, and terminated
its previous program. During the first quarter of 2019, the Company sold
an aggregate of approximately 5.0 million common shares at a weighted
average share price of $32.31 and raised approximately $158.3 million in
net proceeds after the payment of sales agents’ commissions and offering
expenses. Since the start of the November 2018 program, the Company has
sold approximately 13.2 million common shares at a weighted average
share price of $30.73 and raised approximately $399.4 million in net
proceeds after the payment of sales agents’ commissions and offering

In late February 2019, the Company completed its second public debt
offering, issuing $350.0 million in aggregate principal amount of
unsecured, investment-grade rated 4.625% Senior Notes, due March 2029.
The net proceeds from the issuance were used primarily to pay down
amounts outstanding under the Company’s credit facility.

2019 Guidance

Affirming its 2019 guidance initially presented in November 2018, the
Company currently expects 2019 AFFO per share to be within a range of
$1.90 to $1.96, based on projected 2019 annual real estate acquisition
volume, net of projected property sales, of approximately $1.1 billion.
This AFFO per share guidance equates to anticipated net income,
excluding gains or losses on sales of property, of $0.88 to $0.91 per
share, plus $0.96 to $0.98 per share of expected real estate
depreciation and amortization, plus approximately $0.06 to $0.07 per
share related to noncash items. The midpoint of our AFFO per share
guidance is based on a weighted average initial cap rate on new
acquisitions of 7.85% and target leverage in the range of 5½ to 6 times
run-rate net debt to EBITDA. AFFO per share is sensitive to the timing
and amount of real estate acquisitions, property dispositions and
capital markets activities during the year, as well as to the spread
achieved between the lease rates on new acquisitions and the interest
rates on borrowings used to finance those acquisitions.

Conference Call and Webcast

A conference call and audio webcast with analysts and investors will be
held later today at 12:00 p.m. Eastern Time / 9:00 a.m. Scottsdale,
Arizona Time, to discuss first quarter ended March 31, 2019 operating
results and answer questions.

  • Live conference call: 855-656-0920 (domestic) or 412-542-4168
  • Conference call replay available through May 16, 2019: 877-344-7529
    (domestic) or 412-317-0088 (international)
  • Replay access code: 10130093
  • Live and archived webcast:

About STORE Capital

STORE Capital Corporation is an internally managed net-lease real estate
investment trust, or REIT, that is the leader in the acquisition,
investment and management of Single Tenant Operational Real Estate,
which is its target market and the inspiration for its name. STORE
Capital is one of the largest and fastest growing net-lease REITs and
owns a large, well-diversified portfolio that consists of investments in
2,334 property locations, substantially all of which are profit centers,
in all 50 states. Additional information about STORE Capital can be
found on its website at

Forward-Looking Statements

Certain statements contained in this press release that are not
historical facts contain forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933, as amended, and within the
meaning of Section 21E of the Securities Exchange Act of 1934, as
amended, that are subject to the “safe harbor” created by those
sections. Forward-looking statements can be identified by the use of
words such as “estimate,” “anticipate,” “expect,” “believe,” “intend,”
“may,” “will,” “should,” “seek,” “approximate” or “plan,” or the
negative of these words and phrases or similar words or phrases.
Forward-looking statements, by their nature, involve estimates,
projections, goals, forecasts and assumptions and are subject to risks
and uncertainties that could cause actual results or outcomes to differ
materially from those expressed in the forward-looking statements. For
more information on risk factors for STORE Capital’s business, please
refer to the periodic reports the Company files with the Securities and
Exchange Commission from time to time. These forward-looking statements
herein speak only as of the date of this press release and should not be
relied upon as predictions of future events. STORE Capital expressly
disclaims any obligation or undertaking to update or revise any
forward-looking statements contained herein, to reflect any change in
STORE Capital’s expectations with regard thereto, or any other change in
events, conditions or circumstances on which any such statement is
based, except as required by law.

Non-GAAP Financial Measures


STORE Capital’s reported results are presented in accordance with U.S.
generally accepted accounting principles, or GAAP. The Company also
discloses Funds from Operations, or FFO, and Adjusted Funds from
Operations, or AFFO, both of which are non-GAAP measures. Management
believes these two non-GAAP financial measures are useful to investors
because they are widely accepted industry measures used by analysts and
investors to compare the operating performance of REITs. FFO and AFFO do
not represent cash generated from operating activities and are not
necessarily indicative of cash available to fund cash requirements;
accordingly, they should not be considered alternatives to net income as
a performance measure or to cash flows from operations as reported on a
statement of cash flows as a liquidity measure and should be considered
in addition to, and not in lieu of, GAAP financial measures.

The Company computes FFO in accordance with the definition adopted by
the Board of Governors of the National Association of Real Estate
Investment Trusts, or NAREIT. NAREIT defines FFO as GAAP net income,
excluding gains (or losses) from extraordinary items and sales of
depreciable property, real estate impairment losses, and depreciation
and amortization expense from real estate assets, including the pro rata
share of such adjustments of unconsolidated subsidiaries.

To derive AFFO, the Company modifies the NAREIT computation of FFO to
include other adjustments to GAAP net income related to certain non-cash
revenues and expenses that have no impact on the Company’s long-term
operating performance, such as straight-line rents, amortization of
deferred financing costs and stock-based compensation. In addition, in
deriving AFFO, the Company excludes certain other costs not related to
its ongoing operations, such as the amortization of lease-related

FFO is used by management, investors and analysts to facilitate
meaningful comparisons of operating performance between periods and
among the Company’s peers primarily because it excludes the effect of
real estate depreciation and amortization and net gains (or losses) on
sales, which are based on historical costs and implicitly assume that
the value of real estate diminishes predictably over time, rather than
fluctuating based on existing market conditions. Management believes
that AFFO provides more useful information to investors and analysts
because it modifies FFO to exclude certain additional non-cash revenues
and expenses such as straight-line rents, including construction period
rent deferrals, and the amortization of deferred financing costs,
stock-based compensation and lease-related intangibles as such items may
cause short-term fluctuations in net income but have no impact on
long-term operating performance. The Company believes that these costs
are not an ongoing cost of the portfolio in place at the end of each
reporting period and, for these reasons, the portion expensed is added
back when computing AFFO. As a result, the Company believes AFFO to be a
more meaningful measurement of ongoing performance that allows for
greater performance comparability. Therefore, the Company discloses both
FFO and AFFO and reconciles them to the most appropriate GAAP
performance metric, which is net income. STORE Capital’s FFO and AFFO
may not be comparable to similarly titled measures employed by other


STORE Capital Corporation

Condensed Consolidated Statements of Income

(In thousands, except share and per share data)

      Three months ended

March 31,

  2019         2018
Rental revenues $ 149,491 $ 119,900
Interest income on loans and financing receivables 6,631 5,521
Other income   516     421
Total revenues   156,638     125,842
Interest 38,068 29,339
Property costs 2,584 1,341
General and administrative 11,983 10,851
Depreciation and amortization 53,716 42,310
Provisions for impairment   2,610     1,570
Total expenses   108,961     85,411
(Loss) gain on dispositions of real estate   (1,928 )   9,634
Income from operations before income taxes 45,749 50,065
Income tax expense   193     105
Net income $ 45,556   $ 49,960
Net income per share of common stock – basic and diluted: $ 0.20   $ 0.26

Weighted average common shares outstanding:


  222,184,754     194,686,790



  222,637,301     194,876,748
Dividends declared per common share $ 0.33   $ 0.31

STORE Capital Corporation

Condensed Consolidated Balance Sheets

(In thousands, except share and per share data)

    March 31,



December 31,

(unaudited) (audited)
Real estate investments:
Land and improvements $ 2,402,332 $ 2,280,280
Buildings and improvements 5,120,324 4,888,440
Intangible lease assets   82,699     85,148  
Total real estate investments 7,605,355 7,253,868
Less accumulated depreciation and amortization   (631,989 )   (585,913 )
6,973,366 6,667,955
Real estate investments held for sale, net 15,291
Operating ground lease assets 22,111
Loans and financing receivables   356,999     351,202  
Net investments 7,367,767 7,019,157
Cash and cash equivalents 37,352 27,511
Other assets, net   74,223     67,303  
Total assets $ 7,479,342   $ 7,113,971  
Liabilities and stockholders’ equity
Credit facility $ $ 135,000
Unsecured notes and term loans payable, net 1,261,023 916,720
Non-recourse debt obligations of consolidated special purpose
entities, net
2,037,165 2,008,592
Dividends payable 74,676 72,954
Operating lease liabilities 27,559
Accrued expenses, deferred revenue and other liabilities   89,764     117,204  
Total liabilities   3,490,187     3,250,470  
Stockholders’ equity:
Common stock, $0.01 par value per share, 375,000,000 shares
authorized, 226,290,532 and 221,071,838 shares issued and
outstanding, respectively 2,263 2,211
Capital in excess of par value 4,286,250 4,129,082
Distributions in excess of retained earnings (298,331 ) (267,651 )
Accumulated other comprehensive loss   (1,027 )   (141 )
Total stockholders’ equity   3,989,155     3,863,501  
Total liabilities and stockholders’ equity $ 7,479,342   $ 7,113,971  
STORE Capital Corporation
Reconciliations of Non-GAAP Financial Measures
(In thousands, except per share data)
Funds from Operations and Adjusted Funds from Operations
    Three months ended

March 31,

  2019         2018  
Net income $ 45,556 $ 49,960
Depreciation and amortization of real estate assets 53,639 42,068
Provision for impairment of real estate 2,610
Loss (gain) on dispositions of real estate, net of tax (1)   1,928     (9,578 )
Funds from Operations   103,733     82,450  
Straight-line rental revenue:
Fixed rent escalations accrued (1,253 ) (1,829 )
Construction period rent deferrals 608 717
Amortization of:
Equity-based compensation 1,686 1,466
Deferred financing costs and other 2,051 2,103
Lease-related intangibles and costs 693 640
Provision for loan losses 1,570
Capitalized interest (418 ) (397 )
Loss (gain) on defeasance/extinguishment of debt   735     (814 )
Adjusted Funds from Operations $ 107,835   $ 85,906  
Dividends declared to common stockholders $ 74,676   $ 61,394  
Net income per share of common stock: (2)
Basic and Diluted $ 0.20   $ 0.26  
FFO per share of common stock: (2)
Basic and Diluted $ 0.47   $ 0.42  
AFFO per share of common stock: (2)
Basic and Diluted $ 0.48   $ 0.44  


For the three months ended March 31, 2018, includes $56,000 of
income tax expense associated with gains recognized on the
dispositions of certain properties.


Under the two-class method, earnings attributable to unvested
restricted stock are deducted from earnings in the computation of
per share amounts where applicable.

STORE Capital Corporation

Investment Portfolio

March 31, 2019

Real Estate Portfolio Information

As of March 31, 2019, STORE Capital’s total investment in real estate
and loans approximated $8.0 billion, representing investments in 2,334
property locations, substantially all of which are profit centers for
its customers. The Company’s real estate portfolio is highly
diversified. The following tables summarize the diversification of the
real estate portfolio based on the percentage of base rent and interest,
annualized based on rates in effect on March 31, 2019, for all leases,
loans and financing receivables in place as of that date.

Diversification by Customer

STORE Capital has a diverse customer base. At March 31, 2019, the
Company’s property locations were operated by 447 customers. The largest
single customer represented 2.7% of annualized base rent and interest
and the top ten customers totaled 18.0% of annualized base rent and
interest. The following table identifies STORE Capital’s ten largest
customers as of March 31, 2019:


% of
Base Rent and


Number of

AVF Parent, LLC (Art Van Furniture) 2.7 % 23
Fleet Farm Group LLC 2.4 9
Bass Pro Group, LLC (Cabela’s) 2.0 9
Cadence Education, Inc. (Early childhood/elementary education) 1.7 42
American Multi-Cinema, Inc. (AMC/Carmike/Starplex) 1.7 14
Dufresne Spencer Group Holdings, LLC (Ashley Furniture HomeStore) 1.6 22
Stratford School, Inc. (Elementary and middle schools) 1.6 17
Zips Holdings, LLC 1.5 42
US LBM Holdings, LLC (Building materials distribution) 1.4 46
CWGS Group, LLC (Camping World/Gander Outdoors) 1.4 19
All other (437 customers) 82.0   2,091
Total 100.0 % 2,334


Investor and Media Contacts:
Financial Profiles, Inc.
Conlon, 310-622-8220
Tricia Ross, 310-622-8226
[email protected]

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