AP NEWS

STORE Capital Announces Second Quarter 2018 Operating Results

August 2, 2018

SCOTTSDALE, Ariz.--(BUSINESS WIRE)--Aug 2, 2018--STORE Capital Corporation (NYSE: STOR, “STORE Capital” or the “Company”), an internally managed net-lease real estate investment trust (REIT) that invests in S ingle T enant O perational R eal E state, today announced operating results for the second quarter and six months ended June 30, 2018.

Highlights

For the quarter ended June 30, 2018:

Total revenues of $131.2 million Net income of $62.2 million, or $0.31 per basic and diluted share, including an aggregate net gain of $19.9 million on dispositions of real estate AFFO of $91.1 million, or $0.46 per basic share and $0.45 per diluted share Declared a regular quarterly cash dividend per common share of $0.31 Invested $335.1 million in 111 properties at a weighted average initial cap rate of 8.0% Raised net proceeds of $187.3 million from the sale of an aggregate of approximately 7.1 million common shares under the Company’s at-the-market equity program

For the six months ended June 30, 2018:

Total revenues of $257.0 million Net income of $112.2 million, or $0.57 per basic and diluted share, including an aggregate net gain of $29.5 million on dispositions of real estate AFFO of $177.0 million, or $0.90 per basic share and $0.89 per diluted share Declared regular cash dividends per common share aggregating $0.62 Invested $655.5 million in 214 properties at a weighted average initial cap rate of 7.9% Raised net proceeds of $286.3 million from the sale of an aggregate of approximately 11.3 million common shares under the Company’s at-the-market equity program Expanded the unsecured revolving credit facility to $600 million and the accordion feature to $800 million, raising maximum borrowing capacity to $1.4 billion in February 2018 Closed inaugural public debt offering, issuing $350 million in aggregate principal amount of investment-grade senior unsecured notes in March 2018

Management Commentary

“This year marks our fourth consecutive year of realizing investment activity in excess of $100 million monthly for the first half of the year,” said Christopher Volk, Chief Executive Officer. “But what sets this quarter apart is our record investment granularity. Our expanded business development efforts are evident, with more than fifty transactions averaging just $6.5 million each. This work is foundational to our future growth, sustained high level of investment diversity, and the delivery of superior property-level investment returns. We concluded the quarter with solid portfolio performance, a balance sheet positioned for sustained growth and a more protected shareholder dividend, all of which are exciting as we look forward to fulfilling our potential for the second half of the year.”

Financial Results

Total Revenues

Total revenues were $131.2 million for the second quarter of 2018, an increase of 14.9% from $114.2 million for the second quarter of 2017.

Total revenues for the first half of 2018 were $257.0 million, an increase of 15.7% from $222.2 million for the first half of 2017. The increase was driven primarily by the growth in the size of STORE Capital’s real estate investment portfolio, which grew from $5.5 billion in gross investment amount representing 1,770 property locations and 371 customers at June 30, 2017 to $6.7 billion in gross investment amount representing 2,084 property locations and 412 customers at June 30, 2018.

Net Income

Net income was $62.2 million, or $0.31 per basic and diluted share, for the second quarter of 2018, an increase from $61.1 million, or $0.35 per basic and diluted share, for the second quarter of 2017. Net income for the second quarter of 2018 includes an aggregate net gain on dispositions of real estate of $19.9 million as compared to $25.7 million for the same period in 2017.

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

Net income for the six months ended June 30, 2018 was $112.2 million, or $0.57 per basic and diluted share, an increase of 21.3% from $92.4 million, or $0.55 per basic and diluted share, for the six months ended June 30, 2017. Net income for the first half of 2018 includes an aggregate net gain on dispositions of real estate of $29.5 million as compared to $29.4 million for the same period in 2017.

Adjusted Funds from Operations (AFFO)

AFFO increased 19.2% to $91.1 million, or $0.46 per basic share and $0.45 per diluted share, for the second quarter of 2018, compared to AFFO of $76.4 million, or $0.44 per basic and diluted share, for the second quarter of 2017.

AFFO for the six months ended June 30, 2018 was $177.0 million, or $0.90 per basic share and $0.89 per diluted share, an increase of 20.9% from $146.4 million, or $0.88 per basic and diluted share, for the six months ended June 30, 2017. The increase in AFFO for the three- and six-month periods between years 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 $0.31 for the second quarter ended June 30, 2018. This dividend, totaling $63.6 million, was paid on July 16, 2018 to stockholders of record on June 29, 2018.

Real Estate Portfolio Highlights

Investment Activity

The Company originated $335.1 million of gross investments representing 111 property locations during the second quarter of 2018, adding eight net new customers. These investments had a weighted average initial cap rate of 8.0%. Total investment activity for the first half of 2018 was $655.5 million representing 214 property locations with an initial weighted average cap rate of 7.9%. 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, with most escalations tied to the consumer price index and subject to a cap. For acquisitions made during the first six months of 2018, the weighted average annual lease escalation was 1.8%.

Disposition Activity

During the six months ended June 30, 2018, the Company sold 48 properties and recognized an aggregate net gain on the dispositions of real estate of $29.5 million; 26 of these 48 properties were sold in the second quarter for an aggregate net gain of $19.9 million. For the six months ended June 30, 2018, proceeds from the dispositions of real estate aggregated $175.7 million as compared to an aggregate original investment amount of $161.0 million for the properties sold.

Portfolio

At June 30, 2018, STORE Capital’s real estate portfolio totaled $6.7 billion representing 2,084 property locations. Approximately 95% of the portfolio represents commercial real estate properties subject to long-term leases, 5% represents mortgage loans and direct 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 June 30, 2018, the portfolio’s annualized base rent and interest (based on rates in effect on June 30, 2018 for all lease and loan contracts) totaled $537.7 million as compared to $452.6 million a year ago. The weighted average non-cancelable remaining term of the leases at June 30, 2018 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 Company’s portfolio.

* Based on annualized base rent and interest.

Capital Transactions

The Company established a new $500 million “at the market” equity distribution program, or ATM program, in February 2018, and terminated its previous $400 million ATM Program established in September 2016. During the second quarter of 2018, the Company sold an aggregate of approximately 7.1 million common shares at a weighted average share price of $26.64 and raised approximately $187.3 million in net proceeds after the payment of sales agents’ commissions and offering expenses. During the first six months of 2018, the Company sold approximately 11.3 million common shares at a weighted average share price of $25.86 and raised approximately $286.3 million in net proceeds after the payment of sales agents’ commissions and offering expenses.

In March 2018, the Company completed its first public debt offering, issuing $350 million in aggregate principal amount of its unsecured, investment-grade rated 4.50% Senior Notes, due March 2028. The net proceeds from the issuance were primarily used to pay down amounts outstanding under the Company’s credit facility.

In February 2018, the Company expanded its unsecured revolving credit facility from $500 million to $600 million and the accordion feature from $300 million to $800 million for a total maximum borrowing capacity of $1.4 billion. The amended credit facility matures in February 2022 and includes two six-month extension options, subject to certain conditions.

2018 Guidance

Affirming its 2018 guidance initially presented in November 2017, the Company currently expects 2018 AFFO per share to be within a range of $1.78 to $1.84, based on projected 2018 annual real estate acquisition volume, net of projected property sales, of approximately $900 million. This AFFO per share guidance equates to anticipated net income, excluding gains or losses on sales of property, of $0.83 to $0.88 per share, plus $0.88 to $0.89 per share of expected real estate depreciation and amortization, plus approximately $0.07 per share related to such items as straight-line rent and the amortization of stock-based compensation and deferred financing costs. 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. The midpoint of our AFFO guidance is based on a weighted average cap rate on new acquisitions of 7.75% and target leverage in the range of 5½ to 6 times run-rate net debt to EBITDA.

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 second quarter ended June 30, 2018 operating results and answer questions.

Live conference call: 855-656-0920 (domestic) or 412-542-4168 (international) Conference call replay available through August 16, 2018: 877-344-7529 (domestic) or 412-317-0088 (international) Replay access code: 10122326 Live and archived webcast: http://ir.storecapital.com/webcasts

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 2,084 property locations, substantially all of which are profit centers, in 49 states. Additional information about STORE Capital can be found on its website at www.storecapital.com.

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

FFO and AFFO

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 intangibles.

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 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 companies.

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