Why STORE Capital Has Been A Game Changer

STORE Capital was formed to capitalize on this market opportunity to address the capital needs of middle-market and larger unrated companies by offering them a superior alternative to financing their profit-center real estate with traditional mortgage or bank debt and their own equity.

Summary

  • It certainly doesn’t hurt to have a big-time investor like Berkshire Hathaway validate my REIT pick.
  • I have been consistently pounding the table in reference to my prized outlet center REIT, Tanger Factory Outlet.
  • “You are neither right nor wrong because the crowd disagrees with you. You are right because the data and reasoning are right.” - Ben Graham.

My first article on STORE Capital (STOR) was back on September 3, 2014, just a few weeks before the company listed shares on the New York Stock Exchange. I summed up this REIT uniquely-positioned platform as follows,

STORE is more of bank than a REIT. The company underwrites its investments based more on contract risk than credit risk; other REITs don't offer the same unit-level analysis and risk management tools. Also, this is not a new company, STORE has a vetted management team with decades of experience in underwriting franchise-based credits.”

The title to that first was as follows,

Why Will This New Net Lease REIT Be A Game Changer?

STOR then listed around 27,500,000 shares at an expected price range of $17-19 per unit; the lead underwriters included Credit Suisse Securities (CS), Goldman Sachs (GS), and Morgan Stanley LLC (MS). Here’s how STOR has performed since the IPO:

Look closely, on the lower right corner of the chart (above) you can see a picture of Warren Buffett.

In June 2017, I wrote that “Berkshire Hathaway (BRK.A) (BRK.B)is now a 9.8% owner in Scottsdale-based Store Capital, investing ~$377 million to own shares. Store Capital simultaneously issued 18.6 million shares of company stock in a private placement to a wholly owned subsidiary of Berkshire Hathaway at a price of $20.25 per share.”

Of course, the Buffett news was great for me (and my followers) since I had previously (May 2017) cited that,

I am upgrading shares in STORE from a Buy to a STRONG Buy.”

It certainly doesn’t hurt to have a big-time investor like Berkshire Hathaway validate my REIT pick, and as many of you know, I have been consistently pounding the table in reference to my prized outlet center REIT, Tanger Factory Outlet (SKT). Earlier this week I wrote,

“Buffett has a bet on Sears' revival, or perhaps its reincarnation... and Buffett’s prized investment vehicle, Berkshire Hathaway, has a few chips riding on STOR’s Net Lease model…So riddle me this… why not TANGER?”

Nonetheless, today is not the day to question Berkshire Hathaway’s portfolio-picking strategies, I am here to celebrate the fact that we (Buffett and I) are both happy camper investors who conducted on or own research and concluded that, “You are neither right nor wrong because the crowd disagrees with you. You are right because the data and reasoning are right.” Quite simply, STORE Capital is a Game Changer!

A Unique Player

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