The new COVID variant Omicron and the fear of new lockdowns
caused the market to drop a little over 4% in a few trading days. This
significant drop has also brought down the stock prices of high-quality Real
Estate Investment Trusts (REIT) because of the fear of lockdowns. In 2020,
REITs suffered due to local government restrictions and declining rental
collections. Today’s article will discuss a REIT that has been downtrading the
past two weeks and brought down further because of the Omicron fears. This high-quality
REIT is STORE Capital stock.
Overview Of STORE Capital Stock
The REIT that we will cover today is STORE Capital
Corporation (STOR). STOR is an internally managed net-lease REIT leader in the
acquisition, investment, and management of Single Tenant Operational Real
Estate, or STORE Properties, its target market and the inspiration for its
name. The REIT is one of the largest and fastest-growing net-lease REITs and
owns an extensive, well-diversified portfolio that consists of investments in
2,788 property locations in 49 states, or $10.3 billion in gross investment dollars,
as of September 30, 2021. The REIT had total revenue of $694.3M in 2020.
A company that operates as a net-lease REIT puts the tenants
who are leasing the property responsible for most of the expenses of the
properties they occupy. For example, the tenant will be responsible for paying
the taxes, insurance fees, and maintenance costs of the property in addition to
rent. This fact keeps operation costs very low for a REIT like STORE Capital.
The company estimates that the market share of STORE properties to
approximately $3.9 trillion in market size. Warren Buffett’s Company, Berkshire
Hathaway, invested $377 million in STORE Capital stock, representing 9.8% of
total shares outstanding.
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