Investments (Tables)

6 Months Ended

Jun. 30, 2022

Investments.

Schedule of gross real estate and loan activity

During the six months ended June 30, 2022, the Company had the following gross real estate and other investment activity (dollars in thousands):

	Number of	Dollar
	Investment	Amount of
	Locations	Investments
Gross investments, December 31, 2021	2,866	$	10,748,937
Acquisition of and additions to real estate (a) (b)	156		842,044
Investment in loans and financing receivables	17		62,369
Sales of real estate	(24)		(107,764)
Principal collections on loans and financing receivables (b)	(3)		(58,913)
Net change in operating ground lease assets (c)			(717)
Provisions for impairment			(6,212)
Other			(7,521)
Gross investments, June 30, 2022 (d)			11,472,223
Less accumulated depreciation and amortization (d)			(1,292,202)
Net investments, June 30, 2022	3,012	$	10,180,021

(a) Excludes $19.1 million of tenant improvement advances disbursed in 2022 which were accrued as of December 31, 2021.

(b) Includes $8.9 million relating to a mortgage loan receivable which was repaid in full through a non-cash transaction in which the Company acquired the underlying collateral property (buildings and improvements) and leased them back to a customer.

(c) Represents amortization recognized on operating ground lease assets during the six months ended June 30, 2022.

(d) Includes the dollar amount of investments ($25.5 million) and the accumulated depreciation ($2.3 million) related to real estate investments held for sale at June 30, 2022.

Schedule of revenue recognized from investment portfolio

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

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Rental revenues:
Operating leases (a)(c)	$	209,882	$	180,004	$	411,774	$	349,320
Sublease income - operating ground leases (b)		703		702		1,406		1,405
Amortization of lease related intangibles and costs		(591)		(542)		(1,125)		(1,233)
Total rental revenues	$	209,994	$	180,164	$	412,055	$	349,492
Interest income on loans and financing receivables:
Mortgage and other loans receivable (c)	$	5,877	$	5,191	$	13,756	$	11,120
Sale-leaseback transactions accounted for as financing arrangements		5,686		4,464		11,013		8,560
Direct financing receivables		1,476		2,005		3,200		4,543
Total interest income on loans and financing receivables	$	13,039	$	11,660	$	27,969	$	24,223

(a) For the three months ended June 30, 2022 and 2021, includes $711,000 and $624,000, respectively, of property tax tenant reimbursement revenue and includes $0.3 million and $3.1 million, respectively, of variable lease revenue. For the six months ended June 30, 2022 and 2021, includes $1.4 million and $1.2 million, respectively, of property tax reimbursement revenue and includes $0.8 million and $6.2 million, 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.

(c) For the three and six months ended June 30, 2022, includes $0.3 million and $1.0 million, respectively, of revenue that has been recognized related to rent and financing relief arrangements granted as a result of the COVID-19 pandemic with a corresponding increase in receivables which are included in other assets, net on the condensed consolidated balance sheets. For the three and six months ended June 30, 2021, includes $2.9 million and $4.9 million, respectively, of revenue related to COVID-19 rent and financing relief arrangements.

Schedule of investment portfolio diversification by industry

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 June 30, 2022 (dollars in thousands):

				Percentage of
	Number of	Dollar		Total Dollar
	Investment	Amount of		Amount of
	Locations	Investments		Investments
Restaurants	759	$	1,330,875	12	%
Automotive repair and maintenance	253		674,775	6
Early childhood education centers	279		657,557	6
Metal fabrication	114		652,881	6
Health clubs	94		599,714	5
Furniture stores	65		425,003	4
Farm and ranch supply stores	41		377,293	3
All other service industries	1,038		3,956,364	34
All other retail industries	154		1,137,374	10
All other manufacturing industries	215		1,660,387	14
Total (a)	3,012	$	11,472,223	100	%

(a) Includes the dollar amount of investments ($25.5 million) related to real estate investments held for sale at June 30, 2022.

Schedule of future minimum rentals to be received under operating leases

Scheduled future minimum rentals to be received under the remaining noncancelable term of the operating leases in place as of June 30, 2022, are as follows (in thousands):

Remainder of 2022	$	428,853
2023		858,487
2024		851,339
2025		847,880
2026		841,577
2027		829,838
Thereafter		6,714,451
Total future minimum rentals (a)	$	11,372,425

(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.

Schedule detailing intangible lease assets and related accumulated amortization

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

	June 30,		December 31,
	2022		2021
In-place leases	$	42,683	$	35,522
Ground lease-related intangibles		19,449		19,449
Total intangible lease assets		62,132		54,971
Accumulated amortization		(25,531)		(25,285)
Net intangible lease assets	$	36,601	$	29,686

Summary of future minimum lease payments

The future minimum lease payments to be paid under the operating ground leases as of June 30, 2022 were as follows (in thousands):

			Ground
	Ground		Leases
	Leases		Paid by
	Paid by		STORE Capital's
	STORE Capital		Tenants (a)		Total
Remainder of 2022	$	200	$	1,569	$	1,769
2023		4,149		2,629		6,778
2024		55		2,711		2,766
2025		57		2,395		2,452
2026		57		2,233		2,290
2027		57		2,227		2,284
Thereafter		3,014		42,282		45,296
Total lease payments		7,589		56,046		63,635
Less imputed interest		(2,790)		(27,498)		(30,288)
Total operating lease liabilities - ground leases	$	4,799	$	28,548	$	33,347

(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 $56.0 million commitment, $19.0 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.

Schedule summarizing loans and direct financing receivables

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

	Interest		Maturity	June 30,		December 31,
Type	Rate (a)		Date	2022		2021
Six mortgage loans receivable	7.98	%	2022 - 2026	$	114,171	$	114,911
Three mortgage loans receivable	8.83	%	2032 - 2036		11,674		14,444
Fourteen mortgage loans receivable (b)	8.51	%	2051 - 2062		193,008		216,547
Total mortgage loans receivable					318,853		345,902
Equipment and other loans receivable	7.34	%	2022 - 2036		18,386		25,409
Total principal amount outstanding—loans receivable					337,239		371,311
Unamortized loan origination costs					963		1,046
Sale-leaseback transactions accounted for as financing arrangements (c)	7.51	%	2034 - 2043		316,180		255,483
Direct financing receivables					61,063		78,637
Allowance for credit and loan losses (d)					(5,259)		(9,208)
Total loans and financing receivables				$	710,186	$	697,269

(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 sale-leaseback 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 2042.

(d) Balance includes $2.5 million of loan loss reserves recognized prior to December 31, 2019, $2.5 million credit loss reserves recognized upon the adoption of ASC Topic 326 on January 1, 2020 and an aggregate $3.9 million of credit losses recognized since the adoption of ASC Topic 326 net of $3.7 million of loans that were written-off against previously established reserves.

Schedule of maturities of loans receivable

Absent prepayments, scheduled maturities are expected to be as follows (in thousands):

	Scheduled
	Principal		Balloon		Total
	Payments		Payments		Payments
Remainder of 2022	$	1,524	$	25,292	$	26,816
2023		3,221		78,479		81,700
2024		2,121		—		2,121
2025		1,916		—		1,916
2026		1,877		20,371		22,248
2027		1,576		548		2,124
Thereafter		182,139		18,175		200,314
Total principal payments	$	194,374	$	142,865	$	337,239

Schedule of future payments to be received under sale-leaseback transactions accounted for as financing arrangements

The scheduled future minimum rentals to be received under these agreements (which will be reflected in interest income) as of June 30, 2022, were as follows (in thousands):

Remainder of 2022	$	12,114
2023		24,289
2024		24,436
2025		24,589
2026		24,697
2027		24,812
Thereafter		295,257
Total future scheduled payments	$	430,194

Schedule of the components of the investments accounted for as direct financing receivables

As of both June 30, 2022 and December 31, 2021, the Company had $61.1 million and $78.6 million, respectively, of investments accounted for as direct financing leases under previous accounting guidance; the components of these investments were as follows (in thousands):

	June 30,		December 31,
	2022		2021
Minimum lease payments receivable	$	123,031	$	159,371
Estimated residual value of leased assets		6,889		8,938
Unearned income		(68,857)		(89,672)
Net investment	$	61,063	$	78,637