Buffett Bets on Store Capital

Focus: REITs

Brad Thomas Image Brad Thomas Editor, Forbes Real Estate Investor

Brad Thomas recently upgraded Store Capital (STOR) to a strong buy in his Forbes Real Estate Investor. Here's the real estate investing expert's latest assessment.

Net lease REITs should get a nice boost today thanks to Warren Buffett. More specifically, Berkshire Hathaway (BRK.A) is now a 9.8% owner in Scottsdale-based Store Capital.

Berkshire Hathaway has invested $377 million in Store.  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.

Chros Volk, CEO at Store commented, "An investment in our company from one of history's most admired investors represents a vote of confidence in our experienced leadership team and an affirmation of our profit-center real estate investment and management approach."

In addition, STOR's largest holders include Vanguard Group (15% stake), Fidelity Management & Research (14% stake) and Principal Financial (11%).

Store is a leading net lease REIT that has 1,750 properties with 369 customers (about 17 net new customers quarterly) that represent roughly 590 contracts and 30 transactions closed quarterly) with an average transaction size below $9 million.

The company has generally stayed away from commodity retailers, even if the goods that they purvey are non-discretionary. Store has also stayed away from service providers not requiring human interaction (i.e. bank branches).

Store has intentionally weighted its portfolio heavily to service industries, including restaurants, movie theaters, fitness clubs, early childhood education, veterinary clinics and more.

The result is that only 3% of the company's entire investment portfolio is within close proximity (a quarter mile in any direction) to any Sears (SHLD), J.C.