Store Capital Corp (STOR) Portfolio Comprised 97% of Triple-Net Leases, Benefits to Cash Flow

December 23, 2015

Featured in The Wall Street Transcript’s Best CEO Interviews of 2015

Christopher H. Volk, President and CEO of Store Capital Corp (STOR), told TWST this year the REIT’s cash flow benefits from having typical leases of 15 to 20 years, 97% of which don’t require capital expenditures from the REIT for renting the property.

Store Capital Corp

“When we write the leases, the typical lease is for 15 to 20 years. It will have a base rent, and it’ll have some rent increases. I should add that these are triple net leases. Around 97% of our portfolio is comprised of triple net leases, where we have absolutely no obligation at all to maintain or improve the property over time, which obviously benefits our free cash flow,” he said.

Christopher H. Volk
Christopher H. Volk

He says STOR has been able to examine its tenants metrics, and he adds that combining leases aids in lowering potential downside for the REIT.

“Roughly 97% of our properties actually give us store-level profit and loss statements that we can examine. We get tenant financial statements on a regular basis. About 85% of the multiunit property transactions that we do are in the form of master leases, where instead of doing one lease contract on every single property, we can actually aggregate properties across a single lease, which allows us to have a better diversified pool of risk,” he said.

Volk adds that, although he doesn’t give guidance far into the future, in 2014 STOR materially outperformed expectations.

“When we went public at the end of 2014, our general guidance was that we might do $750 million worth of investment volume this year — in 2015. Last year, we ended up doing $1.1 billion worth of acquisitions, so the $750 million outlook for 2015 was materially less than what we did last year. But it’s hard for us to always see out in advance because we run a flow-/relationship-oriented business. It may take 60 days to close a transaction, and it could take six months to find an attractive transaction,” he said.