SCOTTSDALE, AZ—Shares of STORE Capital (STOR) were up over 9% as of mid-morning Monday after the net lease REIT disclosed that Warren Buffet's Berkshire Hathaway had taken a 9.8% ownership stake. STORE issued 18.6 million shares of company stock in a private placement to a wholly owned Berkshire Hathaway subsidiary at $20.25 per share, for a total of $377 million.
“Berkshire Hathaway's investment solidly positions STORE for continued growth, while adding measurably to our already strong financial position,” says Christopher Volk, STOR's president and CEO. “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 a blog posting for Forbes.com on Monday, REIT analyst Brad Thomas noted that he had recently upgraded STOR to a “strong BUY” rating. “The market is not giving STORE credit for constructing the economics of its business to have substantial margins for error, or to place this idea in a more positive light, margins of safety,” Thomas wrote.
STOR—its full name is an acronym for Single-Tenant Operational Real Estate—cites its contract quality, financial strength, portfolio monitoring, portfolio characteristics and organizational structure among its margins of safety. For example, 97% of the REIT's leases require the delivery of property-level financial statements.
“By obtaining quarter sales reports from most tenants, STOR can measure performance of each individual property,” Thomas wrote on Monday. “This communication channel provides it with an advantage with which the company can mitigate risk and provide a higher degree of predictability.”
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Paul Bubny
Paul Bubny is managing editor of Real Estate Forum and GlobeSt.com. He has been reporting on business since 1988 and on commercial real estate since 2007. He is based at ALM Real Estate Media Group's offices in New York City.
