At March 31, 2020, STORE Capital had investments in 2,552 property locations representing 2,500 owned properties (of which 43 are accounted for as financing arrangements and 57 are accounted for as direct financing receivables), 21 properties where all the related land is subject to an operating ground lease and 31 properties which secure mortgage loans. The gross investment portfolio totaled $9.09 billion at March 31, 2020 and consisted of the gross acquisition cost of the real estate investments totaling $8.49 billion, loans and financing receivables with an aggregate carrying amount of $580.9 million and operating ground lease assets totaling $24.0 million. As of March 31, 2020, approximately 39% of these investments are assets of consolidated special purpose entity subsidiaries and are pledged as collateral under the non-recourse obligations of these special purpose entities (Note 4).

The gross dollar amount of the Company’s investments includes the investment in land, buildings, improvements and lease intangibles related to real estate investments as well as the carrying amount of the loans and financing receivables and operating ground lease assets. During the three months ended March 31, 2020, the Company had the following gross real estate and other investment activity (dollars in thousands):

(a)	Excludes $11.8 million of tenant improvement advances disbursed in 2020 which were accrued as of December 31, 2019 and includes $0.2 million of interest capitalized to properties under construction.

(b)	Represents amortization related to operating ground lease (or right-of-use) assets during the three months ended March 31, 2020.

The following table summarizes the revenues the Company recognized from its investment portfolio (in thousands):


	Three Months Ended March 31,
	2020		2019
Rental revenues:
Operating leases (a)	$	163,312	$	149,507
Sublease income - operating ground leases (b)		583		508
Amortization of lease related intangibles and costs		(545)		(524)
Total rental revenues	$	163,350	$	149,491

Interest income on loans and financing receivables:
Mortgage and other loans receivable	$	4,300	$	2,970
Sale-leaseback transactions accounted for as financing arrangements		3,640		82
Direct financing receivables		3,542		3,579
Total interest income on loans and financing receivables	$	11,482	$	6,631

(a)	For the three months ended March 31, 2020 and 2019, includes $608,000 and $802,000, respectively, of property tax tenant reimbursement revenue and includes $25,000 and $36,000, respectively, of variable lease revenue.

(b)	Represents total revenue recognized for the sublease of properties subject to operating ground leases to the related tenants; includes both payments made by the tenants to the ground lessors and straight-line revenue recognized for scheduled increases in the sublease rental payments.

In connection with the adoption of ASC Topic 842 in 2019, the Company elected to combine qualifying lease and nonlease components and will not allocate the consideration in its lease contracts to the lease and nonlease components; it will instead account for them as a single component if the timing and pattern of transfer for the separate components are the same and, if accounted for separately, the lease component would classify as an operating lease.

Significant Credit and Revenue Concentration

STORE Capital’s real estate investments are leased or financed to approximately 490 customers geographically dispersed throughout 49 states. Only one state, Texas (10%), accounted for 10% or more of the total dollar amount of STORE Capital’s investment portfolio at March 31, 2020. None of the Company’s customers represented more than 10% of the Company’s real estate investment portfolio at March 31, 2020, with the largest customer representing 2.8% of the total investment portfolio. On an annualized basis, the largest customer also represented 2.8% of the Company’s total annualized investment portfolio revenues as of March 31, 2020. The Company’s customers operate their businesses across more than 725 concepts and the largest of these concepts represented 2.8% of the Company’s total annualized investment portfolio revenues as of March 31, 2020.

The following table shows information regarding the diversification of the Company’s total investment portfolio among the different industries in which its tenants and borrowers operate as of March 31, 2020 (dollars in thousands):


				Percentage of
	Number of	Dollar		Total Dollar
	Investment	Amount of		Amount of
	Locations	Investments		Investments
Restaurants	785	$	1,285,483	14	%
Early childhood education centers	239		536,305	6
Health clubs	88		492,859	6
Furniture stores	62		481,447	5
Automotive repair and maintenance	176		442,092	5
Farm and ranch supply stores	43		412,498	4
Metal fabrication	79		387,354	4
All other service industries	802		3,109,838	34
All other retail industries	127		876,885	10
All other manufacturing industries	151		1,067,309	12
	2,552	$	9,092,070	100	%

Real Estate Investments

The weighted average remaining noncancelable lease term of the Company’s operating leases with its tenants at March 31, 2020 was approximately 14 years. Substantially all of the leases are triple-net, which means that the lessees are responsible for the payment of all property operating expenses, including property taxes, maintenance and insurance; therefore, the Company is generally not responsible for repairs or other capital expenditures related to the properties while the triple-net leases are in effect. At March 31, 2020, twelve of the Company’s properties were vacant and not subject to a lease.

Scheduled future minimum rentals to be received under the remaining noncancelable term of the operating leases in place as of March 31, 2020, were as follows (in thousands):


Remainder of 2020	$	513,746
2021		684,042
2022		684,536
2023		682,645
2024		680,091
2025		674,896
Thereafter		5,705,400
Total future minimum rentals (a)	$	9,625,356

(a)

Excludes future minimum rentals to be received under lease contracts associated with sale-leaseback transactions accounted for as financing arrangements. See Loans and Financing Receivables section below.

Substantially all the Company’s leases include one or more renewal options (generally two to four five-year options). Since lease renewal periods are exercisable at the option of the lessee, the preceding table presents future minimum lease payments due during the initial lease term only. In addition, the future minimum lease payments presented above do not include any contingent rentals such as lease escalations based on future changes in CPI.

Intangible Lease Assets

The following details intangible lease assets and related accumulated amortization (in thousands):


	March 31,		December 31,
	2020		2019
In-place leases	$	43,249	$	44,425
Ground lease-related intangibles		19,449		19,449
Above-market leases		9,492		9,492
Total intangible lease assets		72,190		73,366
Accumulated amortization		(29,970)		(28,948)
Net intangible lease assets	$	42,220	$	44,418

Aggregate lease intangible amortization included in expense was $1.1 million and $1.7 million during the three months ended March 31, 2020 and 2019, respectively. The amount amortized as a decrease to rental revenue for capitalized above-market lease intangibles was $0.3 million during both the three months ended March 31, 2020 and 2019.

Based on the balance of the intangible assets at March 31, 2020, the aggregate amortization expense is expected to be $3.0 million for the remainder of 2020, $3.8 million in 2021, $3.7 million in 2022, $3.3 million in 2023, $2.7 million in 2024 and $2.2 million in 2025; the amount expected to be amortized as a decrease to rental revenue is expected to be $0.8 million for the remainder of 2020, $0.6 million in 2021 and $0.4 million in each of the years 2022 through 2025. The weighted average remaining amortization period is approximately eight years for the in-place lease intangibles, approximately 44 years for the amortizing ground lease-related intangibles and approximately six years for the above-market lease intangibles.

Operating Ground Lease Assets

As of March 31, 2020, STORE Capital had operating ground lease assets aggregating $24.0 million. Typically, the lease payment obligations for these leases are the responsibility of the tenants operating on the properties, in accordance with the Company’s leases with those respective tenants. The Company recognized total lease cost for these operating ground lease assets of $600,000 and $524,000 during the three months ended March 31, 2020 and 2019, respectively. For the three months ended March 31, 2020 and 2019, the Company also recognized in rental revenues $583,000 and $508,000, respectively, of sublease revenue associated with its operating ground leases.

The future minimum lease payments to be paid under the operating ground leases as of March 31, 2020 were as follows (in thousands):


			Ground
	Ground		Leases
	Leases		Paid by
	Paid by		STORE Capital's
	STORE Capital		Tenants (a)		Total
Remainder of 2020	$	23	$	1,888	$	1,911
2021		31		2,347		2,378
2022		31		2,302		2,333
2023		31		6,052		6,083
2024		31		1,981		2,012
2025		33		1,666		1,699
Thereafter		3,042		30,931		33,973
Total lease payments		3,222		47,167		50,389
Less imputed interest		(2,608)		(23,565)		(26,173)
Total operating lease liabilities - ground leases	$	614	$	23,602	$	24,216

(a)

STORE Capital’s tenants, who are generally sub-tenants under the ground leases, are responsible for paying the rent under these ground leases. In the event the tenant fails to make the required ground lease payments, the Company would be primarily responsible for the payment, assuming the Company does not re-tenant the property or sell the leasehold interest. Of the total $47.2 million commitment, $16.5 million is due for periods beyond the current term of the Company’s leases with the tenants. Amounts exclude contingent rent due under three leases where the ground lease payment, or a portion thereof, is based on the level of the tenant’s sales.

Loans and Financing Receivables

The Company’s loans and financing receivables are summarized below (dollars in thousands):


	Interest		Maturity	March 31,		December 31,
Type	Rate (a)		Date	2020		2019
Five mortgage loans receivable	8.09	%	2020 - 2022	$	35,418	$	33,073
Five mortgage loans receivable	8.43	%	2032 - 2038		18,703		18,760
Eleven mortgage loans receivable (b)	8.51	%	2051 - 2059		149,976		149,766
Total mortgage loans receivable					204,097		201,599
Equipment and other loans receivable	8.53	%	2020 - 2026		23,350		25,066
Total principal amount outstanding—loans receivable					227,447		226,665
Unamortized loan origination costs					1,180		1,197
Sale-leaseback transactions accounted for as financing arrangements (c)	7.81	%	2034 - 2043		187,107		186,614
Direct financing receivables					170,165		170,329
Allowance for credit and loan losses (d)					(5,003)		(2,538)
Total loans and financing receivables				$	580,896	$	582,267

(a)	Represents the weighted average interest rate as of the balance sheet date.

(b)	Four of these mortgage loans allow for prepayment in whole, but not in part, with penalties ranging from 20% to 70% depending on the timing of the prepayment.

(c)

In accordance with ASC Topic 842, represents transactions accounted for as financing arrangements rather than as investments in real estate subject to operating leases. Interest rate shown is the weighted average initial rental or capitalization rate on the leases; the leases mature between 2034 and 2043 and the purchase options expire between 2024 and 2039.

(d)	Balance includes $2.5 million of credit loss reserves recognized upon the adoption of ASC Topic 326 on January 1, 2020 and $2.5 million of loan loss reserves recognized prior to December 31, 2019.

Loans Receivable

At March 31, 2020, the Company held 47 loans receivable with an aggregate carrying amount of $225.1 million. Twenty-one of the loans are mortgage loans secured by land and/or buildings and improvements on the mortgaged property; the interest rates on 11 of the mortgage loans are subject to increases over the term of the loans. Five of the mortgage loans are shorter-term loans (maturing prior to 2023) that generally require monthly interest-only payments for an established period and then monthly principal and interest payments with a balloon payment at maturity. The remaining mortgage loans receivable generally require the borrowers to make monthly principal and interest payments based on a 40-year amortization period with balloon payments, if any, at maturity or earlier upon the occurrence of certain other events. The equipment and other loans generally require the borrower to make monthly interest-only payments with a balloon payment at maturity.

The long-term mortgage loans receivable generally allow for prepayments in whole, but not in part, without penalty or with penalties ranging from 1% to 20%, depending on the timing of the prepayment, except as noted in the table above. All other loans receivable allow for prepayments in whole or in part without penalty. Absent prepayments, scheduled maturities are expected to be as follows (in thousands):


	Scheduled
	Principal		Balloon		Total
	Payments		Payments		Payments
Remainder of 2020	$	3,092	$	25,279	$	28,371
2021		1,931		15,026		16,957
2022		2,738		6,974		9,712
2023		2,873		1,203		4,076
2024		3,131		—		3,131
2025		1,560		912		2,472
Thereafter		144,410		18,318		162,728
Total principal payments	$	159,735	$	67,712	$	227,447

Sale-Leaseback Transactions Accounted for as Financing Arrangements

As of March 31, 2020, the Company had $187.1 million of investments acquired through sale-leaseback transactions accounted for as financing arrangements rather than as investments in real estate subject to an operating lease; revenue from these arrangements is recognized in interest income rather than as rental revenue. The scheduled future payments (excluding any contingent payments) to be received under these agreements as of March 31, 2020, were as follows (in thousands):


Remainder of 2020	$	10,914
2021		14,613
2022		14,684
2023		14,761
2024		14,896
2025		15,036
Thereafter		209,776
Total future scheduled payments	$	294,680

Direct Financing Receivables

As of March 31, 2020 and December 31, 2019, the Company had $170.2 million and $170.3 million, respectively, of investments accounted for as direct financing leases under previous accounting guidance; the components of these investments were as follows (in thousands):


	March 31,		December 31,
	2020		2019
Minimum lease payments receivable	$	374,520	$	378,659
Estimated residual value of leased assets		22,610		22,610
Unearned income		(226,965)		(230,940)
Net investment	$	170,165	$	170,329

As of March 31, 2020, the future minimum lease payments to be received under the direct financing lease receivables are expected to be $12.5 million for the remainder of 2020 and average approximately $16.9 million for each of the next five years.

Provision for Credit Losses

In accordance with ASC Topic 326, the Company evaluates the collectibility of its portfolio of loans and financing receivables on a quarterly basis in accordance with the expected credit loss model. The Company groups individual loans and financing receivables based on implied credit ratings associated with each borrower. Based on credit quality indicators as of March 31, 2020, $198.9 million of loans and financing receivables were categorized as investment grade and $385.8 million were categorized as non-investment grade. During the three months ended March 31, 2020, there were no provisions for credit losses, no write-offs charged against the allowance and no recoveries of amounts previously written off.

The year of origination for loans and financing receivables with a credit quality indicator of investment grade are $88.7 million in 2019, $29.7 million in 2018, none in 2017 and $80.5 million prior to 2017. The year of origination for loans and financing receivables with a credit quality indicator of non-investment grade are $162.5 million in 2019, $46.2 million in 2018, $13.2 million in 2017 and $163.9 million prior to 2017.