Business Overview
STORE Capital LLC (NYSE: STOR) is a leading real estate investment trust (REIT) that specializes in acquiring, owning, and managing single-tenant operational real estate properties across the United States. With a diverse portfolio of over 3,200 property locations, STORE Capital has established itself as a prominent player in the net-lease real estate sector.STORE Capital's investment strategy focuses on acquiring and leasing properties to companies that operate across a wide range of industries, including service, service-oriented retail, and manufacturing. The company's portfolio is geographically diversified, with properties located in 49 states, mitigating concentration risk. STORE Capital's long-term, triple-net leases provide stable and predictable cash flows, with the majority of its tenants responsible for property-level operating expenses such as taxes, insurance, and maintenance.
Financial Performance
In the latest quarter ended June 30, 2023, STORE Capital reported quarterly revenue of $279.4 million, up from $253.6 million in the same period last year. This increase was driven by the growth in the company's real estate investment portfolio, which generated additional rental revenues and interest income. For the six months ended June 30, 2023, the company reported revenue of $554.7 million, compared to $422.4 million in the combined period of February 3, 2023, through June 30, 2023, and January 1, 2023, through February 2, 2023.Net income for the three months ended June 30, 2023, was $31.2 million, compared to a net loss of $39.7 million in the same period last year. For the six-month period ended June 30, 2023, net income was $52.0 million, compared to a net loss of $49.5 million in the combined period. The improvement in net income was primarily driven by the growth in the company's real estate investment portfolio, increased gain on disposition of real estate, and a decrease in interest expense.
STORE Capital's annual net income for the fiscal year ended December 31, 2023, was $327.9 million, with annual revenue of $910.2 million. The company's annual operating cash flow for the same period was $674.4 million.
Liquidity and Capital Structure
As of June 30, 2023, STORE Capital had $482.2 million in cash and cash equivalents, providing ample liquidity to fund its operations and future growth initiatives. The company's debt profile is well-diversified, with $6.2 billion in long-term debt outstanding, including secured and unsecured notes and term loans. The weighted average interest rate on this debt was 4.4% as of June 30, 2023, with a weighted average maturity of 4.4 years.STORE Capital's capital structure is further strengthened by its access to various financing sources, including a $753.9 million unsecured revolving credit facility, of which $375.0 million was outstanding as of June 30, 2023. The company also has a well-established STORE Master Funding debt program, which allows it to issue non-recourse, asset-backed securities to finance its real estate investments.
Growth Strategies and Outlook
STORE Capital's growth strategies focus on expanding its real estate investment portfolio through strategic acquisitions and development projects. The company has a robust pipeline of potential investment opportunities, with a strong focus on industries it believes have long-term relevance, such as service and service-oriented retail.In its latest guidance, STORE Capital revised its same-store revenue assumptions and core FFO per share guidance for 2023. The company now expects same-store revenue to decline by 1.5% to 0.5% for the full year, with core FFO per share in the range of $16.50 to $16.85. This revised outlook reflects the impact of more competitive market conditions for new move-in rents, which the company expects to moderate in the second half of the year.
Despite the near-term challenges, STORE Capital remains optimistic about its long-term growth prospects. The company's diversified portfolio, strong liquidity position, and disciplined capital allocation strategies position it well to navigate the current market environment and capitalize on future opportunities.
Risks and Challenges
While STORE Capital's business model has proven resilient, the company faces several risks and challenges that investors should consider. These include:1. Tenant concentration risk
: Although STORE Capital's portfolio is diversified across industries and geographies, the company's top tenants still account for a significant portion of its revenue.2. Competitive landscape
: The net-lease real estate sector is highly competitive, and STORE Capital may face pressure on rental rates and occupancy levels in certain markets.3. Macroeconomic conditions
: Unfavorable changes in economic conditions, such as rising interest rates or a slowdown in consumer spending, could impact the company's tenants and, consequently, its financial performance.4. Regulatory and legislative changes
: Alterations to tax laws, zoning regulations, or other government policies could affect STORE Capital's operations and profitability.Despite these risks, STORE Capital's diversified portfolio, experienced management team, and prudent financial practices have enabled the company to navigate challenging market conditions and deliver consistent performance over time.