Store rate

STORE CAPITAL CORP Management’s Discussion and Analysis of Financial Condition and Results of Operations (Form 10-Q)

In this Quarterly Report on Form 10-Q, we refer to STORE Capital Corporation as
"we," "us," "our" or "the Company" unless we specifically state otherwise or the
context indicates otherwise.

Special note regarding forward-looking statements

This quarterly report contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended (the Securities Act), and
Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange
Act). Such forward-looking statements include, without limitation, statements
concerning our business and growth strategies, investment, financing and leasing
activities and trends in our business, including trends in the market for
long-term, triple-net leases of freestanding, single-tenant properties. Words
such as "expects," "anticipates," "intends," "plans," "likely," "will,"
"believes," "seeks," "estimates," and variations of such words and similar
expressions are intended to identify such forward-looking statements. Such
statements involve known and unknown risks, uncertainties and other factors that
may cause our actual results, performance or achievements to be materially
different from the results of operations or plans expressed or implied by such
forward-looking statements. Although we believe that the assumptions underlying
the forward-looking statements contained herein are reasonable, any of the
assumptions could be inaccurate, and therefore such statements included in this
quarterly report may not prove to be accurate. In light of the significant
uncertainties inherent in the forward-looking statements included herein, the
inclusion of such information should not be regarded as a representation by us
or any other person that the results or conditions described in such statements
or our objectives and plans will be achieved. For a further discussion of these
and other factors that could impact future results, performance or transactions,
see "Item 1A. Risk Factors" in our Annual Report on Form 10-K for the year ended
December 31, 2021 filed with the Securities and Exchange Commission on February
25, 2022.

Forward-looking statements and such risks, uncertainties and other factors speak
only as of the date of this quarterly report. New risks and uncertainties arise
over time and it is not possible for us to predict those events or how they may
affect us. Many of the risks identified herein and in our periodic reports have
been and will continue to be heightened as a result of the ongoing and numerous
adverse effects arising from the novel coronavirus (COVID-19) pandemic. We
expressly disclaim any obligation or undertaking to update or revise any
forward-looking statement contained herein, to reflect any change in our
expectations with regard thereto, or any other change in events, conditions or
circumstances on which any such statement is based, except to the extent
otherwise required by law.

Insight

We were formed in 2011 to invest in and manage Single Tenant Operational Real
Estate, or STORE Property, which is our target market and the inspiration for
our name. A STORE Property is a property location at which a company operates
its business and generates sales and profits, which makes the location a profit
center and, therefore, fundamentally important to that business. Due to the
long-term nature of our leases, we focus our acquisition activity on properties
that operate in industries we believe have long-term relevance, the majority of
which are service industries. Our customers operate their businesses under a
wide range of brand names or business concepts. As of June 30, 2022,
approximately 910 brand names or business concepts in over 120 industries were
represented in our investment portfolio. By acquiring the real estate from the
operators and then leasing the real estate back to them, the operators become
our long-term tenants, and we refer to them as our customers. Through the
execution of these sale-leaseback transactions, we fill a need for our customers
by providing them a source of long-term capital that enables them to avoid the
need to incur debt and/or employ equity in order to finance the real estate that
is essential to their business.

We are a Maryland corporation organized as an internally managed real estate
investment trust, or REIT. As a REIT, we will generally not be subject to
federal income tax to the extent that we distribute all our taxable income to
our stockholders and meet other requirements.

Our shares of common stock have been listed on the New York Stock Exchange since
our initial public offering, or IPO, in November 2014 and trade under the ticker
symbol "STOR."

Since our inception in 2011, we have selectively created over
$13.5 billion real estate investments. From June 30, 2022our investment portfolio totaled approximately $11.4 billionconsisting of investments in 3,012

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property locations across the United States. All the real estate we acquire is
held by our wholly owned subsidiaries, many of which are special purpose
bankruptcy remote entities formed to facilitate the financing of our real
estate. We predominantly acquire our single-tenant properties directly from our
customers in sale-leaseback transactions where our customers sell us their
operating properties and then simultaneously enter into long-term triple-net
leases with us to lease the properties back. Accordingly, our properties are
fully occupied and under lease from the moment we acquire them.

We generate our cash from operations primarily through the monthly lease
payments, or "base rent", we receive from our customers under their long-term
leases with us. We also receive interest payments on loans receivable, which are
a smaller part of our portfolio. We refer to the monthly scheduled lease and
interest payments due from our customers as "base rent and interest". Most of
our leases contain lease escalations every year or every several years that are
based on the lesser of the increase in the Consumer Price Index or a stated
percentage (if such contracts are expressed on an annual basis, currently
averaging approximately 1.8%), which allows the monthly lease payments we
receive to increase somewhat over the life of the lease contracts. As of June
30, 2022, approximately 99% of our leases (based on base rent) were "triple-net"
leases, which means that our customers are responsible for all the operating
costs such as maintenance, insurance and property taxes associated with the
properties they lease from us, including any increases in those costs that may
occur as a result of inflation. The remaining leases have some landlord
responsibilities, generally related to maintenance and structural component
replacement that may be required on such properties in the future, although we
do not currently anticipate incurring significant capital expenditures or
property-level operating costs under such leases. Because our properties are
single tenant properties, almost all of which are under long-term leases, it is
not necessary for us to perform any significant ongoing leasing activities on
our properties. As of June 30, 2022, the weighted average remaining term of our
leases (calculated based on base rent) was approximately 13.2 years, excluding
renewal options, which are exercisable at the option of our tenants upon
expiration of their base lease term. Leases approximating 99% of our base rent
as of June 30, 2022, provide for tenant renewal options (generally two to four
five-year options) and leases approximating 11% of our base rent provide our
tenants the option, at their election, to purchase the property from us at a
specified time or times (generally at the greater of the then fair market value
or our cost, as defined in the lease contracts).

We have dedicated an internal team to review and analyze ongoing tenant
financial performance, both at the corporate level and with respect to each
property we own, in order to identify properties that may no longer be part of
our long-term strategic plan. As part of that continuous active-management
process, we may decide to sell properties where we believe the property no
longer fits within our plan. Because we have generally been able to acquire
assets and originate new leases at lease rates above the online commercial real
estate auction marketplace, we have been able to sell these assets on both
opportunistic and strategic bases, typically for a gain. This gain acts to
partially offset any possible losses we may experience in the real estate
portfolio.

Since early 2020, the world has been impacted by the COVID-19 pandemic. At
various times, the COVID-19 pandemic has primarily impacted us through
government mandated limits (i.e., required closures or limits on operations and
social distancing requirements) imposed on our tenants' businesses and
continuing public perceptions regarding safety, which have impacted certain
tenants' ability to pay their rent to us. As government-mandated restrictions
have been lifted, our tenants have increased their business activity and their
ability to meet their financial obligations to us under their lease contracts.
As a result, our rent and interest collections have returned to pre-pandemic
levels and, essentially, all of our properties are open for business.

We worked directly with our impacted tenants during the pandemic to help them
continue to meet their rent payment obligations to us, including providing
short-term rent deferral arrangements. These arrangements included a structured
rent relief program through which we allowed tenants that were highly and
adversely impacted by the pandemic to defer the payment of their rent on a
short-term basis. During the six months ended June 30, 2022, we recognized an
additional $1.0 million of net revenue related to deferral arrangements and
collected $7.2 million in repayments of amounts previously deferred. Our tenants
continue to repay the receivables generated as a result of the deferral
arrangements, in accordance with their terms.

Cash and capital resources

From June 30, 2022our investment portfolio amounted to approximately
$11.4 billion, consisting of investments in 3,012 real estate locations. Substantially all of our cash flow from operations comes from our investment portfolio.

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Our primary cash expenditures are the principal and interest payments we make on
the debt we use to finance our real estate investment portfolio and the general
and administrative expenses of managing the portfolio and operating our
business. Since substantially all our leases are triple net, our tenants are
generally responsible for the maintenance, insurance and property taxes
associated with the properties they lease from us. When a property becomes
vacant through a tenant default or expiration of the lease term with no tenant
renewal, we incur the property costs not paid by the tenant, as well as those
property costs accruing during the time it takes to locate a substitute tenant
or sell the property. As of June 30, 2022, the weighted average remaining term
of our leases was approximately 13.2 years and the contracts related to just 18
properties, representing 0.3% of our annual base rent and interest, are due to
expire during the remainder of 2022; 78% of our leases have ten years or more
remaining in their base lease term. As of June 30, 2022, 16 of our 3,012
properties were vacant and not subject to a lease, which represents a 99.5%
occupancy rate. We expect to incur some property-level operating costs from time
to time in periods during which properties that become vacant are being
remarketed. In addition, we may recognize an expense for certain property costs,
such as real estate taxes billed in arrears, if we believe the tenant is likely
to vacate the property before making payment on those obligations or may be
unable to pay such costs in a timely manner. Property costs are generally not
significant to our operations, but the amount of property costs can vary quarter
to quarter based on the timing of property vacancies and the level of
underperforming properties. We may advance certain property costs on behalf of
our tenants but expect that the majority of these costs will be reimbursed by
the tenant and do not anticipate that they will be significant to our
operations.

We intend to continue to grow through additional real estate investments. To
accomplish this objective, we must continue to identify real estate acquisitions
that are consistent with our underwriting guidelines and raise future additional
capital to make such acquisitions. We acquire real estate with a combination of
debt and equity capital, proceeds from the sale of properties and cash from
operations that is not otherwise distributed to our stockholders in the form of
dividends. When we sell properties, we generally reinvest the cash proceeds from
those sales in new property acquisitions. We also periodically commit to fund
the construction of new properties for our customers or to provide them funds to
improve and/or renovate properties we lease to them. These additional
investments will generally result in increases to the rental revenue or interest
income due under the related contracts. As of June 30, 2022, we had commitments
to our customers to fund improvements to owned or mortgaged real estate
properties totaling approximately $135.1 million, the majority of which is
expected to be funded in the next twelve months.

Funding strategy

Our debt capital is initially provided on a short-term, temporary basis through
a multi-year, variable rate unsecured revolving credit facility with a group of
banks. We manage our long-term leverage position through the strategic and
economic issuance of long-term fixed-rate debt on both a secured and unsecured
basis. By matching the expected cash inflows from our long-term real estate
leases with the expected cash outflows of our long-term fixed rate debt, we
"lock in", for as long as is economically feasible, the expected positive
difference between our scheduled cash inflows on the leases and the cash
outflows on our debt payments. By locking in this difference, or spread, we seek
to reduce the risk that increases in interest rates would adversely impact our
profitability. In addition, we may use various financial instruments designed to
mitigate the impact of interest rate fluctuations on our cash flows and
earnings, including hedging strategies such as interest rate swaps and caps,
depending on our analysis of the interest rate environment and the costs and
risks of such strategies. We also ladder our debt maturities in order to
minimize the gap between our free cash flow (which we define as our cash from
operations less dividends plus proceeds from our sale of properties) and our
annual debt maturities; we have no significant debt maturities until 2024.

As of June 30, 2022, all our long-term debt was fixed-rate debt, or was
effectively converted to a fixed-rate for the term of the debt, and our weighted
average debt maturity was 6.4 years. As part of our long-term debt strategy, we
develop and maintain broad access to multiple debt sources. We believe that
having access to multiple debt markets increases our financing flexibility
because different debt markets may attract different kinds of investors, thus
expanding our access to a larger pool of potential debt investors. Also, a
particular debt market may be more competitive than another at any particular
point in time.

The long-term debt we have issued to date is comprised of both secured
non-recourse borrowings, the vast majority of which is investment-grade rated,
and senior investment-grade unsecured borrowings. We are currently rated Baa2,
BBB and BBB by Moody's Investors Service, S&P Global Ratings and Fitch Ratings,
respectively. In October 2021, S&P Global Ratings raised its outlook on the
Company to positive from stable and affirmed its BBB issuer credit

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rating. In conjunction with our investment-grade debt strategy, we target a
level of debt net of cash and cash equivalents that approximates 5½ to 6 times
our estimated annualized amount of earnings (excluding gains or losses on sales
of real estate and provisions for impairment) before interest, taxes,
depreciation and amortization (based on our current investment portfolio). Our
leverage, expressed as the ratio of debt (net of cash and cash equivalents) to
the cost of our investment portfolio, was approximately 41% at June 30, 2022.

Our secured non-recourse borrowings are obtained through multiple debt markets -
primarily the asset-backed securities debt market. The vast majority of our
secured non-recourse borrowings were made through an investment-grade-rated debt
program we designed, which we call our Master Funding debt program. By design,
this program provides flexibility not commonly found in most secured
non-recourse debt and which is described in Non-recourse Secured Debt below. To
a much lesser extent, we may also obtain fixed-rate non-recourse mortgage
financing through the commercial mortgage-backed securities debt market or from
banks and insurance companies secured by specific properties we pledge as
collateral.

Our goal is to employ a prudent blend of secured non-recourse debt through our
flexible Master Funding debt program, paired with senior unsecured debt that
uses our investment grade credit ratings. By balancing the mix of secured and
unsecured debt, we can effectively leverage those properties subject to the
secured debt in the range of 60%-70% and, at the same time, target a more
conservative level of overall corporate leverage by maintaining a large pool of
properties that are unencumbered. As of June 30, 2022, our secured non-recourse
borrowings had a loan-to-cost ratio of approximately 59% and approximately 34%
of our investment portfolio serves as collateral for this long-term debt. The
remaining 66% of our portfolio properties, aggregating approximately
$7.6 billion at June 30, 2022, are unencumbered and this unencumbered pool of
properties provides us the flexibility to access long-term unsecured borrowings.
The result is that our growing unencumbered pool of properties can provide
higher levels of debt service coverage on the senior unsecured debt than would
be the case if we employed only unsecured debt at our overall corporate leverage
level. We believe this debt strategy can lead to a lower cost of capital for the
Company, especially as we can issue AAA rated debt from our Master Funding debt
program, as described further below.

The availability of debt to finance commercial real estate in the United States
can, at times, be impacted by economic and other factors that are beyond our
control. An example of adverse economic factors occurred during the recession of
2007 to 2009 when availability of debt capital for commercial real estate was
significantly curtailed. We seek to reduce the risk that long-term debt capital
may be unavailable to us by maintaining the flexibility to issue long-term debt
in multiple debt capital markets, both secured and unsecured, and by limiting
the period between the time we acquire our real estate and the time we finance
our real estate with long-term debt. In addition, we have arranged our unsecured
revolving credit facility to have a multi-year term with extension options in
order to reduce the risk that short term real estate financing would not be
available to us. As we continue to grow our real estate portfolio, we also
intend to continue to manage our debt maturities to reduce the risk that a
significant amount of our debt will mature in any single year in the future.
Because our long-term secured debt generally requires monthly payments of
principal, in addition to the monthly interest payments, the resulting principal
amortization also reduces our refinancing risk upon maturity of the debt. As our
outstanding debt matures, we may refinance the maturing debt as it comes due or
choose to repay it using cash and cash equivalents or our unsecured revolving
credit facility. For example, as part of our fourth issuance of senior unsecured
public notes in November 2021, we prepaid, without penalty, $85.9 million of
STORE Master Funding Series 2013-3 Class A-2 notes and, in connection with our
$600.0 million bank term loan transaction in April 2022, we prepaid, without
penalty, $134.5 million of STORE Master Funding Series 2014-1, Class A-2 notes.
Similar to these prepayment transactions, we may prepay other existing long-term
debt in circumstances where we believe it would be economically advantageous to
do so.

Unsecured revolving credit facility

Typically, we use our $600.0 million unsecured revolving credit facility to
acquire our real estate properties, until those borrowings are sufficiently
large to warrant the economic issuance of long-term fixed-rate debt, the
proceeds from which we use to repay the amounts outstanding under our revolving
credit facility. As of June 30, 2022, we had $45.0 million outstanding under our
unsecured revolving credit facility.

Our unsecured revolving credit facility also includes an accordion
$1.0 billionwhich gives us a maximum borrowing capacity of $1.6 billion. The installation matures in June 2025 and includes two six-month extension options,

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subject to certain conditions. Borrowings under the facility require monthly
payments of interest at a rate selected by us of either (1) LIBOR plus a credit
spread ranging from 0.70% to 1.40%, or (2) the Base Rate, as defined in the
credit agreement, plus a credit spread ranging from 0.00% to 0.40%. The credit
spread used is based on our credit rating as defined in the credit agreement. We
are also required to pay a facility fee on the total commitment amount ranging
from 0.10% to 0.30%. The currently applicable credit spread for LIBOR-based
borrowings is 0.85% and the facility fee is 0.20%. Our credit agreement does
allow for a further reduction in the pricing for LIBOR-based borrowings if
certain environmental sustainability metrics are met.

Under the terms of the facility, we are subject to various restrictive financial
and nonfinancial covenants which, among other things, require us to maintain
certain leverage ratios, cash flow and debt service coverage ratios and secured
borrowing ratios. Certain of these ratios are based on our pool of unencumbered
assets, which aggregated to approximately $7.6 billion at June 30, 2022. The
facility is recourse to us, and, as of June 30, 2022, we were in compliance with
the financial and nonfinancial covenants under the facility.

Senior unsecured term debt

In November 2021, we completed our fourth issuance of underwritten public notes
in an aggregate principal amount of $375.0 million with a coupon rate of 2.70%,
and as of June 30, 2022, we had an aggregate principal amount of $1.4 billion of
underwritten public notes outstanding. These senior unsecured notes bear a
weighted average coupon rate of 3.63% and interest on these notes is paid
semi-annually. The supplemental indentures governing our public notes contain
various restrictive covenants, including limitations on our ability to incur
additional secured and unsecured indebtedness. As of June 30, 2022, we were in
compliance with these covenants. Prior to our inaugural issuance of public debt
in March 2018, our unsecured long-term debt had been issued through the private
placement of notes to institutional investors and through groups of lenders who
also participate in our unsecured revolving credit facility; the financial
covenants of the privately placed notes are similar to our unsecured revolving
credit facility, and, as of June 30, 2022, we were in compliance with these
covenants.

In April 2022, we entered into a term loan agreement under which we borrowed an
aggregate $600.0 million of floating-rate, unsecured term loans; the loans
consist of a $400.0 million five-year loan and a $200.0 million seven-year loan.
The interest rate on each of the term loans resets daily at Daily Simple SOFR
plus an adjustment of 0.10% plus a credit rating-based credit spread ranging
from 0.75% to 1.60% on the five-year loan and 1.25% to 2.20% on the seven-year
loan. The applicable credit spread is currently 0.95% for the five-year loan and
1.25% for the seven-year loan. In conjunction with entering into these
floating-rate term loans, we also entered into interest rate swap agreements
that effectively convert the floating rates to a weighted average fixed rate of
3.68%. Additionally, in connection with the transaction, we paid down
outstanding balances on our unsecured revolving credit facility and prepaid,
without penalty, $134.5 million of STORE Master Funding Series 2014-1, Class A-2
notes, which bore an interest rate of 5.0% and were scheduled to mature in 2024.

The term loan agreement includes an incremental borrowing feature that allows us
to request additional term borrowings under terms set forth at the time of the
incremental borrowing. The term loans were arranged with a group of lenders that
also participate in our unsecured revolving credit facility. The financial
covenants of the term loans match the covenants of the unsecured revolving
credit facility. As of June 30, 2022, we were in compliance with these
covenants. The term loans are senior unsecured obligations, require monthly
interest payments and may be prepaid at any time; the seven-year loan has a
prepayment premium of 2% if repaid in year one and 1% if repaid in year two.

The aggregate principal amount of our senior unsecured notes and term loans was $2.4 billion of the June 30, 2022.

Debt secured without recourse

As of June 30, 2022, approximately 31% of our real estate investment portfolio
served as collateral for outstanding borrowings under our STORE Master Funding
debt program. We believe our STORE Master Funding program allows for flexibility
not commonly found in non-recourse debt, often making it preferable to
traditional debt issued in the commercial mortgage-backed securities market.
Under the program, STORE Capital serves as both master

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and special servicer for the collateral pool, allowing for active portfolio
monitoring and prompt issue resolution. In addition, features of the program
allowing for the sale or substitution of collateral, provided certain criteria
are met, facilitate active portfolio management. Through this debt program, we
arrange for bankruptcy remote, special purpose entity subsidiaries to issue
multiple series of investment grade asset backed net lease mortgage notes, or
ABS notes, from time to time as additional collateral is added to the collateral
pool and leverage can be added in incremental note issuances based on the value
of the collateral pool.

The ABS notes are generally issued by our wholly owned special purpose entity
subsidiaries to institutional investors through the asset backed securities
market. These ABS notes are typically issued in two classes, Class A and Class
B. At the time of issuance, the Class A notes represent approximately 70% of the
appraised value of the underlying real estate collateral owned by the issuing
subsidiaries and are currently rated AAA or A+ by S&P Global Ratings. The Series
2018-1 transaction in October 2018 marked our inaugural issuance of AAA rated
notes and our Series 2019-1 transaction in November 2019 marked our first
issuance of 15-year notes. We believe these two precedent transactions both
broadened the market for our STORE Master Funding debt program and gave us
access to lower cost secured debt which is evidenced by our most recent Series
2021-1 transaction in June 2021 which was issued at a weighted average coupon
rate of 2.80%.

The Class B notes, which are subordinated to the Class A notes as to principal
repayment, represent approximately 5% of the appraised value of the underlying
real estate collateral and are currently rated BBB by S&P Global Ratings. As of
June 30, 2022, there was an aggregate $190.0 million in principal amount of
Class B notes outstanding. We have historically retained these Class B notes and
they are held by one of our bankruptcy remote, special purpose entity
subsidiaries. The Class B notes are not reflected in our financial statements
because they eliminate in consolidation. Since the Class B notes are considered
issued and outstanding, they provide us with additional financial flexibility in
that we may sell them to a third party in the future or use them as collateral
for short term borrowings as we have done from time to time in the past.

The ABS notes outstanding at June 30, 2022 totaled $2.1 billion in Class A
principal amount and were supported by a collateral pool of approximately
$3.6 billion representing 1,163 property locations operated by 214 customers.
The amount of debt that can be issued in any new series is determined by the
structure of the transaction and the aggregate amount of collateral in the pool
at the time of issuance. In addition, the issuance of each new series of notes
is subject to the satisfaction of several conditions, including that there is no
event of default on the existing note series and that the issuance will not
result in an event of default on, or the credit rating downgrade of, the
existing note series.

A significant portion of our cash flow is generated by the special purpose
entities comprising our STORE Master Funding debt program. For the six months
ended June 30, 2022, excess cash flow, after payment of debt service and
servicing and trustee expenses, totaled $93.0 million on cash collections of
$154.0 million, which represents an overall ratio of cash collections to debt
service, or debt service coverage ratio (as defined in the program documents),
of greater than 2.5 to 1 on the STORE Master Funding program. If at any time the
debt service coverage ratio generated by the collateral pool is less than 1.3 to
1, excess cash flow from the STORE Master Funding entities will be deposited
into a reserve account to be used for payments to be made on the net lease
mortgage notes, to the extent there is a shortfall. We currently expect to
remain above program minimum debt service coverage ratios for the foreseeable
future.

To a lesser extent, we may also obtain debt in discrete transactions through
other bankruptcy remote, special purpose entity subsidiaries, which debt is
solely secured by specific real estate assets and is generally non-recourse to
us (subject to certain customary limited exceptions). These discrete borrowings
are generally in the form of traditional mortgage notes payable, with principal
and interest payments due monthly and balloon payments due at their respective
maturity dates, which typically range from seven to ten years from the date of
issuance. Our secured borrowings contain various covenants customarily found in
mortgage notes, including a limitation on the issuing entity's ability to incur
additional indebtedness on the underlying real estate. Certain of the notes also
require the posting of cash reserves with the lender or trustee if specified
coverage ratios are not maintained by the special purpose entity or the tenant.

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Debt Summary
As of June 30, 2022, our aggregate secured and unsecured long-term debt had an
outstanding principal balance of $4.7 billion, a weighted average maturity of
6.4 years and a weighted average interest rate of just over 3.8%. The following
is a summary of the outstanding balance of our borrowings as well as a summary
of the portion of our real estate investment portfolio that is either pledged as
collateral for these borrowings or is unencumbered as of June 30, 2022:

                                                                     Gross Investment Portfolio Assets
                                                              Special Purpose
                                             Outstanding          Entity             All Other
(In millions)                                Borrowings        Subsidiaries         Subsidiaries       Total
STORE Master Funding net-lease mortgage
notes payable                               $       2,128    $           3,608     $            -     $  3,608
Other mortgage notes payable                          148                  261                  -          261
Total non-recourse debt                             2,276                3,869                  -        3,869
Unsecured notes and term loans payable              2,400                    -                  -            -
Unsecured credit facility                              45                    -                  -            -
Total unsecured debt (including
revolving credit facility)                          2,445                    -                  -            -
Unencumbered real estate assets                         -                6,319              1,284        7,603
Total debt                                  $       4,721    $          10,188     $        1,284     $ 11,472

Our decision to use either senior unsecured term debt, STORE Master Funding or
other non-recourse traditional mortgage loan borrowings depends on our view of
the most strategic blend of unsecured versus secured debt that is needed to
maintain our targeted level of overall corporate leverage as well as on
borrowing costs, debt terms, debt flexibility and the tenant and industry
diversification levels of our real estate assets. As we continue to acquire real
estate, we expect to balance the overall degree of leverage on our portfolio by
growing our pool of portfolio assets that are unencumbered. Our growing pool of
unencumbered assets will increase our financial flexibility by providing us with
assets that can support senior unsecured financing or that can serve as
substitute collateral for existing debt. Should market factors, which are beyond
our control, adversely impact our access to these debt sources at economically
feasible rates, our ability to grow through additional real estate acquisitions
will be limited to any undistributed amounts available from our operations and
any additional equity capital raises.

Equity

We access the equity markets in various ways. As part of these efforts, we have
established "at the market" equity distribution programs, or ATM programs,
pursuant to which, from time to time, we may offer and sell registered shares of
our common stock through a group of banks acting as our sales agents. Most
recently, in November 2020, we established a $900.0 million ATM program (the
2020 ATM Program) and currently have about $286.0 million of availability under
this program.

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The following tables show the issuances of ordinary shares under the ATM 2020 program (in millions, except share and per share information):

                                    Three Months Ended June 30, 2022
               Weighted Average                         Sales Agents'     Other Offering
Shares Sold     Price per Share     Gross Proceeds       Commissions       

Expenses Net income

   3,068,633   $           27.52   $           84.4    $          (0.9)   $         (0.1)   $        83.4

                                     Six Months Ended June 30, 2022
               Weighted Average                         Sales Agents'     Other Offering
Shares Sold     Price per Share     Gross Proceeds       Commissions       

Expenses Net income

   8,607,771   $           29.38   $          252.9    $          (3.1)   $         (0.2)   $       249.6

                               Inception of Program Through June 30, 2022
               Weighted Average                         Sales Agents'     Other Offering
Shares Sold     Price per Share     Gross Proceeds       Commissions       

Expenses Net income

  19,449,302   $           31.55   $          613.7    $          (8.5)   $         (0.8)   $       604.4


Cash Flows

Substantially all our cash from operations is generated by our investment
portfolio. As shown in the following table, net cash provided by operating
activities for the six months ended June 30, 2022 increased by $62.6 million
over the same period in 2021, primarily as a result of the increase in the size
of our real estate investment portfolio, which generated additional rental
revenue and interest income. Our investments in real estate, loans and financing
receivables during the first six months of 2022 were $281.9 million more than
the same period in 2021. During the six months ended June 30, 2022, our
investment activity was primarily funded with a combination of cash from
operations, borrowings on our revolving credit facility, proceeds from the
issuance of stock, proceeds from the sale of real estate properties and net
proceeds received from our term loan borrowings. Investment activity during the
same period in 2021 was primarily funded with a combination of cash from
operations, proceeds from the sale of real estate properties, proceeds from the
issuance of stock and borrowings on our unsecured credit revolving facility.
From a financing perspective, our activities provided $364.8 million of net cash
during the six months ended June 30, 2022 as compared to $252.3 million during
the same period in 2021. Financing activities in 2022 include the aggregate
$600.0 million of bank term loans we entered into in April and $176.2 million of
aggregate debt repayments on our secured long-term debt. We paid dividends to
our stockholders totaling $214.3 million and $195.4 million during the first six
months of 2022 and 2021, respectively; we increased our quarterly dividend in
the third quarter of 2021 by 6.9% to an annualized $1.54 per common share.

                                                   Six Months Ended June 30,       Increase
(In thousands)                                        2022            2021 

(Lessen)

Net cash flow generated by operating activities $327,865 $265,292 $62,573
Net cash used in investing activities

                 (730,275)      (435,906)      (294,369)
Net cash provided by financing activities               364,765        252,283        112,482
Net (decrease) increase in cash, cash
equivalents and restricted cash                  $     (37,645)    $    

81,669 ($119,314)


As of June 30, 2022, we had liquidity of $30.9 million on our balance sheet.
Management believes that our current cash balance, the $555.0 million of
immediate borrowing capacity available on our unsecured revolving credit
facility, the cash generated by our operations as well as the $1.0 billion of
liquidity available to us under the accordion feature of our recently amended
credit facility, is more than sufficient to fund our operations for the
foreseeable future and allow us to acquire the real estate for which we
currently have made commitments. In order to continue to grow our real estate
portfolio in the future beyond the excess cash generated by our operations and
our ability to borrow, we would expect to raise additional equity capital
through the sale of our common stock.

Recently issued accounting pronouncements

See note 2 of the June 30, 2022 unaudited condensed consolidated financial statements.

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Significant Accounting Policies and Estimates

The preparation of financial statements in conformity with U.S. generally
accepted accounting principles, or GAAP, requires our management to use judgment
in the application of accounting policies, including making estimates and
assumptions. We base estimates on the best information available to us at the
time, our experience and on various other assumptions believed to be reasonable
under the circumstances. These estimates affect the reported amounts of assets
and liabilities, disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting periods. If our judgment or interpretation of the facts and
circumstances relating to various transactions or other matters had been
different, it is possible that different accounting would have been applied,
resulting in a different presentation of our condensed consolidated financial
statements. From time to time, we reevaluate our estimates and assumptions. In
the event estimates or assumptions prove to be different from actual results,
adjustments are made in subsequent periods to reflect more current estimates and
assumptions about matters that are inherently uncertain. A summary of our
critical accounting policies is included in our Annual Report on Form 10-K for
the fiscal year ended December 31, 2021 in the section entitled "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

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Contents

Real estate portfolio information

As of June 30, 2022, our total investment in real estate and loans approximated
$11.4 billion, representing investments in 3,012 property locations,
substantially all of which are profit centers for our customers. These
investments generate cash flows from approximately 800 contracts predominantly
structured as net leases. The weighted average non-cancellable remaining term of
our leases was approximately 13.2 years.

Our real estate portfolio is highly diversified. As of June 30, 2022, our 3,012
property locations were operated by 579 customers across the United States. Our
customers are typically established regional and national operators, with
approximately 50% of our base rent and interest coming from customers with over
$200.0 million in annual revenues. Our largest customer represented
approximately 2.9% of our portfolio at June 30, 2022, and our top ten largest
customers represented 17.7% of base rent and interest. Our customers operate
their businesses across approximately 910 brand names or business concepts in
over 120 industries. The largest of the business concepts represented 2.1% of
our base rent and interest as of June 30, 2022 and approximately 85% of the
concepts represented less than 1% of base rent and interest.

The following tables summarize the diversification of our real estate portfolio
based on the percentage of base rent and interest, annualized based on rates in
effect on June 30, 2022, for all of our leases, loans and financing receivables
in place as of that date.

Diversification by Customer

From June 30, 2022our real estate locations were operated by 579 customers and the following table identifies our ten largest customers:

                                                                   % of
                                                                 Base Rent      Number
                                                                    and           of
Customer                                                         Interest     Properties
Spring Education Group Inc. (Stratford School/Nobel Learning
Communities)                                                           2.9 %          28
LBM Acquisition, LLC (Building materials distribution)                 2.8 

156

Fleet Farm Group LLC                                                   2.1             9
Cadence Education, Inc. (Early childhood/elementary
education)                                                             2.0 

76

Dufresne Spencer Group Holdings, LLC (Ashley Furniture
HomeStore)                                                             1.6 

30

CWGS Group, LLC (Camping World/Gander Outdoors)                        1.4 

20

Zips Holdings, LLC                                                     1.3 

46

Great Outdoors Group, LLC (Cabela's)                                   1.3 
           8
American Multi-Cinema, Inc.                                            1.2            14
At Home Stores LLC                                                     1.1            11
All other (569 customers)                                             82.3         2,614
Total                                                                100.0 %       3,012


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Diversification by Industry

As of June 30, 2022, our customers' business concepts were diversified across
more than 120 industries within the service, retail and manufacturing sectors of
the U.S. economy. The following table summarizes those industries into 80
industry groups:


                                                           % of                        Building
                                                         Base Rent      Number          Square
                                                            and           of           Footage
Customer Industry Group                                  Interest     Properties    (in thousands)
Service:
Restaurants-full service                                       6.9 %         356             2,520
Restaurants-limited service                                    4.8           403             1,278
Early childhood education centers                              6.0           279             2,927
Automotive repair and maintenance                              5.8         
 253             1,461
Health clubs                                                   5.1            94             3,286
Pet care facilities                                            3.3           185             1,758
Medical and dental                                             3.3           168             1,533
Lumber & construction materials wholesalers                    3.2           167             6,877
All other service (33 industry groups)                        25.4           518            26,485
Total service                                                 63.8         2,423            48,125

Detail:

All retail (18 industry groups)                               15.4         
 260            14,824
Total retail                                                  15.4           260            14,824
Manufacturing:
Metal fabrication                                              5.8           114            14,720
Food processing                                                3.4            33             4,532
All other manufacturing (19 industry groups)                  11.6         
 182            23,629
Total manufacturing                                           20.8           329            42,881
Total                                                        100.0 %       3,012           105,830


Diversification by Geography

Our portfolio is also highly diversified by geography, as our property locations
can be found in every state except Hawaii. The following table details the top
ten geographical locations of the properties as of June 30, 2022:

                               % of
                             Base Rent
                                and        Number of
State                        Interest      Properties
Texas                             11.1 %          353
Illinois                           6.1            185
Georgia                            5.5            170
California                         5.5             84
Florida                            5.0            161
Wisconsin                          5.0             89
Ohio                               4.7            148
Arizona                            4.3             92
Tennessee                          3.7            127
Michigan                           3.6            116
All other (39 states) (1)         45.5          1,487
Total                            100.0 %        3,012


(1) Includes a building at Ontario, Canada which represents less than 0.3% of

    base rent and interest.


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Contract Expirations

The following table presents the maturity schedule of our leases, loans and financing receivable as of June 30, 2022:

                                                   % of
                                                 Base Rent
                                                    and         Number of
Year of Lease Expiration or Loan Maturity (1)    Interest     Properties (2)
Remainder of 2022                                      0.3 %              18
2023                                                   1.1                21
2024                                                   0.6                22
2025                                                   0.9                23
2026                                                   1.5                55
2027                                                   1.6                55
2028                                                   2.8                67
2029                                                   4.6               153
2030                                                   3.3               139
2031                                                   4.9               209
Thereafter                                            78.4             2,234
Total                                                100.0 %           2,996

(1) Year of expiry of contracts in place at June 30, 2022 and exclude all

Tenant option renewal periods.

(2) Excludes 16 vacant buildings not subject to a lease in June

    30, 2022.


Results of Operations

Overview

As of June 30, 2022, our real estate investment portfolio had grown to
approximately $11.4 billion, consisting of investments in 3,012 property
locations in 49 states, operated by 579 customers in various industries.
Approximately 94% of the real estate investment portfolio represents commercial
real estate properties subject to long-term leases, approximately 6% represents
mortgage loan and financing receivables on commercial real estate properties and
a nominal amount represents loans receivable secured by our tenants' other
assets.

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  Table of Contents

Three and Six Months Ended June 30, 2022 Compared to Three and Six Months Ended
June 30, 2021

                                   Three Months Ended                         Six Months Ended
                                        June 30,             Increase             June 30,             Increase
(In thousands)                     2022         2021        (Decrease)       2022         2021        (Decrease)
Total revenues                   $ 223,772    $ 192,046    $     31,726    $ 445,888    $ 374,307    $     71,581
Expenses:
Interest                            45,908       41,709           4,199       89,907       83,537           6,370
Property costs                       2,314        5,168         (2,854)        6,555        9,831         (3,276)
General and administrative          15,938       16,089           (151)       32,954       41,095         (8,141)
Depreciation and amortization       76,017       65,035          10,982    
 148,656      128,602          20,054
Provisions for impairment            5,300        6,600         (1,300)        6,212       13,950         (7,738)
Total expenses                     145,477      134,601          10,876      284,284      277,015           7,269
Other income:
Net gain on dispositions of
real estate                         13,656        5,880           7,776       19,732       21,550         (1,818)
Loss from non-real estate,
equity method investments          (1,175)        (705)           (470)      (3,332)      (1,068)         (2,264)
Income before income taxes          90,776       62,620          28,156      178,004      117,774          60,230
Income tax expense                     271          189              82          477          383              94
Net income                       $  90,505    $  62,431    $     28,074    $ 177,527    $ 117,391    $     60,136


Revenues

The increase in revenues period over period was driven primarily by the growth
in the size of our real estate investment portfolio, which generated additional
rental revenues and interest income. Our real estate investment portfolio grew
from approximately $10.0 billion in gross investment amount representing 2,738
properties as of June 30, 2021 to approximately $11.4 billion in gross
investment amount representing 3,012 properties at June 30, 2022. The weighted
average real estate investment amounts outstanding during the three-month
periods were approximately $11.2 billion in 2022 and $9.8 billion in 2021.
During the six-month periods, the weighted average real estate investment
amounts were approximately $11.0 billion in 2022 and $9.7 billion in 2021. Our
real estate investments were made throughout the periods presented and were not
all outstanding for the entire period; accordingly, a portion of the increase in
revenues between periods is related to recognizing a full year of revenue in
2022 on acquisitions that were made during 2021. Similarly, the full revenue
impact of acquisitions made during the first half of 2022 will not be seen until
the second half of 2022. A smaller component of the increase in revenues between
periods is related to rent escalations recognized on our lease contracts; over
time, these rent increases can provide a strong source of revenue growth. During
the three and six months ended June 30, 2022, we collected $0.1 million and
$4.7 million, respectively, in early lease termination fees, primarily related
to certain property sales, which are included in other income; we did not
recognize any similar revenues during 2021.

As previously noted, we provided short-term rent deferral arrangements to
certain of our tenants during the pandemic to help them continue to meet their
rent payment obligations to us. Essentially all of our rent deferral
arrangements with our tenants have now ended and our tenants continue to repay
previously deferred rent in accordance with their agreements.

The majority of our investments are made through sale-leaseback transactions in
which we acquire the real estate from the owner-operators and then
simultaneously lease the real estate back to them through long-term leases based
on the tenant's business needs. The initial rental or capitalization rates we
achieve on sale-leaseback transactions, calculated as the initial annualized
base rent divided by the purchase price of the properties, vary from transaction
to transaction based on many factors, such as the terms of the lease, the
property type including the property's real estate fundamentals and the market
rents in the area on the various types of properties we target across the United
States. There are also online commercial real estate auction marketplaces for
real estate transactions; properties acquired through these online marketplaces
are often subject to existing leases and offered by third party sellers. In
general, because we provide tailored customer lease solutions in sale-leaseback
transactions, our lease rates historically have been higher and subject to less
short-term market influences than what we have seen in the auction marketplace
as a whole. In addition, since our

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Contents

real estate lease contracts are a substitute for both borrowings and equity that
our customers would otherwise have to commit to their real estate locations, we
believe there is a relationship between lease rates and market interest rates
and that lease rates are also influenced by overall capital availability. The
industry experienced capitalization rate compression in 2021; similarly, the
weighted average lease rate we achieved on the investments we closed in the
latter half of 2021 and into early 2022 reflected this rate compression. The
weighted average lease rate we achieved on our new investments was 7.2% and 7.1%
for the three and six months ended June 30, 2022, respectively, as compared to
7.8% for both the three and six months ended June 30, 2021. We saw upward
movement in capitalization rates in the second quarter of 2022 and we expect
this upward trend may continue as we move through the remainder of the year.

Interest charges

We fund the growth in our real estate investment portfolio with excess cash flow
from our operations after dividends and principal payments on debt, net proceeds
from periodic sales of real estate, net proceeds from equity issuances and
proceeds from issuances of long-term fixed-rate debt. We typically use our
unsecured revolving credit facility to temporarily finance the properties we
acquire.

The following table summarizes our interest expense for the periods presented:

                                           Three Months Ended                Six Months Ended
                                                June 30,                         June 30,
(Dollars in thousands)                    2022           2021              2022           2021
Interest expense - credit facility     $       368    $       330       $       868    $       330
Interest expense - credit facility
fees                                           304            304               604            604
Interest expense - long-term debt
(secured and unsecured)                     43,889         38,681            85,337         78,323
Capitalized interest                       (1,676)          (204)           (2,086)          (418)
Amortization of deferred financing
costs and other                              3,023          2,598             5,184          4,698
Total interest expense                 $    45,908    $    41,709       $    89,907    $    83,537
Credit facility:
Average debt outstanding               $   107,670    $   120,659       $   144,155    $    60,663
Average interest rate during the
period (excluding facility fees)               1.4 %          1.1 %        
    1.2 %          1.1 %
Long-term debt (secured and
unsecured):
Average debt outstanding               $ 4,554,788    $ 3,636,077       $ 4,399,610    $ 3,691,578
Average interest rate during the
period                                         3.9 %          4.3 %        

3.9% 4.2%


The increase in average outstanding long-term debt was the primary driver for
the increase in interest expense on long-term debt. Long-term debt added after
June 30, 2021 consisted of $375.0 million of 2.70% senior unsecured notes issued
in November 2021 and $600.0 million of unsecured floating-rate bank term loans
issued in April 2022; the term loans have been effectively converted to a
weighted average fixed-rate of 3.68% through the use of interest rate swaps.
Long-term debt repaid in full, without penalties, since June 30, 2021 included
$83.3 million of STORE Master Funding Series 2013-2, Class A-2 notes in July
2021, $85.9 million of Series 2013-3 Class A-2 notes in November 2021 and $134.5
million of Series 2014-1, Class A-2 notes in April 2022. The three series of
STORE Master Funding notes that were repaid were scheduled to mature in 2023 or
2024 and bore a weighted average interest rate of 5.1%. As of June 30, 2022, we
had $4.7 billion of long-term debt outstanding with a weighted average interest
rate of just over 3.8%.

We typically use our revolving credit facility on a short-term, temporary basis
to acquire real estate properties until those borrowings are sufficiently large
to warrant the economic issuance of long-term fixed-rate debt, the proceeds of
which we generally use to pay down the amounts outstanding under our revolving
credit facility. For the three months ended June 30, 2022, interest expense
associated with our revolving credit facility increased as compared to the same
period in 2021 primarily as a result of an increase in the average interest
rate, partially offset by a decrease in the average amount of borrowings
outstanding during the second quarter of 2022 as compared to 2021. For the six
months ended June 30, 2022, interest expense associated with our revolving
credit facility increased from 2021 primarily as a result of the increased level
of borrowings outstanding on the revolver during the first half of 2022. As of
June 30, 2022, we had $45.0 million of borrowings outstanding under our
revolving credit facility.

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  Table of Contents

Property Costs

Approximately 99% of our leases are triple net, meaning that our tenants are
generally responsible for the property-level operating costs such as taxes,
insurance and maintenance. Accordingly, we generally do not expect to incur
property-level operating costs or capital expenditures, except during any period
when one or more of our properties is no longer under lease or when our tenant
is unable to meet their lease obligations. Our need to expend capital on our
properties is further reduced due to the fact that some of our tenants will
periodically refresh the property at their own expense to meet their business
needs or in connection with franchisor requirements. As of June 30, 2022, we
owned 16 properties that were vacant and not subject to a lease and the lease
contracts related to just 12 properties we own are due to expire during the
remainder of 2022. We expect to incur some property costs related to the vacant
properties until such time as those properties are either leased or sold. The
amount of property costs can vary quarter to quarter based on the timing of
property vacancies and the level of underperforming properties.

As of June 30, 2022, we had entered into operating ground leases as part of
several real estate investment transactions. The ground lease payments made by
our tenants directly to the ground lessors are presented on a gross basis in the
condensed consolidated statement of income, both as rental revenues and as
property costs. For the few lease contracts where we collect property taxes from
our tenants and remit those taxes to governmental authorities, we reflect those
payments on a gross basis as both rental revenue and as property costs.

Here is a summary of the costs of ownership (in thousands):

                                                          Three Months Ended June 30,                  Six Months Ended June 30,
                                                         2022                         2021            2022                       2021
Property-level operating costs (a)                 $            665                 $   3,600    $         3,380               $  6,731
Ground lease-related intangibles amortization
expense                                                         117                       117                234                    234
Operating ground lease payments made by STORE
Capital                                                         100                       106                133                    179
Operating ground lease payments made by STORE
Capital tenants                                                 511                       509              1,037                  1,033
Operating ground lease straight-line rent
expense                                                         210                       212                406                    409
Property taxes payable from tenant impounds                     711        
              624              1,365                  1,245
Total property costs                               $          2,314                 $   5,168    $         6,555               $  9,831

Building-level operating costs primarily include expenses associated with (a) vacant or non-performing buildings, property management costs for the

    few properties that have specific landlord obligations and the cost of
    performing property site inspections from time to time.


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General and administrative expenses

General and administrative expenses include compensation and benefits;
professional fees such as portfolio servicing, legal, accounting and rating
agency fees; and general office expenses such as insurance, office rent and
travel costs. General and administrative costs totaled $15.9 million and $33.0
million for the three and six months ended June 30, 2022, respectively, as
compared to $16.1 million and $41.1 million, respectively, for the same periods
in 2021.

General and administrative expenses for the first six months of 2021 included
$10.1 million related to the expense for certain modified performance-based
stock based compensation awards granted in 2018 and 2019; excluding this
one-time expense catch-up from 2021 expenses, general and administrative
expenses increased $2.0 million for the first six months of 2022 as compared to
2021.

We expect that general and administrative expenses will continue to rise in some
measure as our real estate investment portfolio grows. Certain expenses, such as
property related insurance costs and the costs of servicing the properties and
loans comprising our real estate portfolio, increase in direct proportion to the
increase in the size of the portfolio. However, general and administrative
expenses as a percentage of the portfolio have decreased over time due to
efficiencies and economies of scale. Excluding noncash, stock-based compensation
expense from both periods, general and administrative expenses for the
twelve-month period ended June 30, 2022 represented 0.44% of average portfolio
assets as compared to 0.46% for the comparable twelve-month period ended June
30, 2021.

Depreciation expense

Depreciation and amortization expense, which increases in proportion to the
increase in the size of our real estate portfolio, rose from $65.0 million and
$128.6 million for the three and six months ended June 30, 2021, respectively,
to $76.0 million and $148.7 million, respectively, for the comparable periods in
2022.

Provisions for Impairment

During the three and six months ended June 30, 2022, we recognized $5.3 million
and $6.5 million, respectively, in provisions for the impairment of real estate,
and during the six months ended June 30, 2022, recognized a net reduction of
$0.3 million in provisions for credit losses related to our loans and financing
receivables. We recognized an aggregate $6.6 million and $14.0 million in
provisions for the impairment of real estate and credit losses during the three
and six months ended June 30, 2021, respectively.

net profit on the sale of real estate

As part of our ongoing active portfolio management process, we sell properties
from time to time in order to enhance the diversity and quality of our real
estate portfolio and to take advantage of opportunities to recycle capital.
During the three months ended June 30, 2022, we recognized a $13.7 million
aggregate net gain on the sale of 13 properties. In comparison, for the three
months ended June 30, 2021, we recognized a $5.9 million aggregate net gain on
the sale of 13 properties. For the six months ended June 30, 2022, we recognized
a $19.7 million aggregate net gain on sale of 24 properties as compared to an
aggregate net gain of $21.5 million on the sale of 57 properties for the same
period in 2021.

Net Income

For the three and six months ended June 30, 2022, our net income was
$90.5 million and $177.5 million, respectively, reflecting increases from $62.4
million and $117.4 million, respectively, for the comparable periods in 2021.
The change in net income is primarily comprised of a net increase resulting from
the growth in our real estate investment portfolio, which generated additional
rental revenues and interest income, and lower general and administrative
expenses, property costs and impairments which were primarily offset by
increases in depreciation and amortization and interest expense, as noted above.

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Non-GAAP Measures

Our reported results are presented in accordance with U.S. generally accepted
accounting principles, or GAAP. We also disclose Funds from Operations, or FFO,
and Adjusted Funds from Operations, or AFFO, both of which are non-GAAP
measures. We believe these two non-GAAP financial measures are useful to
investors because they are widely accepted industry measures used by analysts
and investors to compare the operating performance of REITs. FFO and AFFO do not
represent cash generated from operating activities and are not necessarily
indicative of cash available to fund cash requirements; accordingly, they should
not be considered alternatives to net income as a performance measure or to cash
flows from operations as reported on a statement of cash flows as a liquidity
measure and should be considered in addition to, and not in lieu of, GAAP
financial measures.

We compute FFO in accordance with the definition adopted by the Board of
Governors of the National Association of Real Estate Investment Trusts, or
NAREIT. NAREIT defines FFO as GAAP net income, excluding gains (or losses) from
extraordinary items and sales of depreciable property, real estate impairment
losses, and depreciation and amortization expense from real estate assets,
including the pro rata share of such adjustments of unconsolidated subsidiaries.

To derive AFFO, we modify the NAREIT computation of FFO to include other
adjustments to GAAP net income related to certain revenues and expenses that
have no impact on our long-term operating performance, such as straight-line
rents, amortization of deferred financing costs and stock-based compensation. In
addition, in deriving AFFO, we exclude certain other costs not related to our
ongoing operations, such as the amortization of lease-related intangibles and
executive severance and transition costs.

FFO is used by management, investors and analysts to facilitate meaningful
comparisons of operating performance between periods and among our peers
primarily because it excludes the effect of real estate depreciation and
amortization and net gains (or losses) on sales, which are based on historical
costs and implicitly assume that the value of real estate diminishes predictably
over time, rather than fluctuating based on existing market conditions.
Management believes that AFFO provides more useful information to investors and
analysts because it modifies FFO to exclude certain additional revenues and
expenses such as, as applicable, straight-line rents, including construction
period rent deferrals, and the amortization of deferred financing costs,
stock-based compensation, lease-related intangibles and executive severance and
transition costs as such items have no impact on long-term operating
performance. As a result, we believe AFFO to be a more meaningful measurement of
ongoing performance that allows for greater performance comparability.
Therefore, we disclose both FFO and AFFO and reconcile them to the most
appropriate GAAP performance metric, which is net income. STORE Capital's FFO
and AFFO may not be comparable to similarly titled measures employed by other
companies.

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The following is a reconciliation of net income (which we believe is the most comparable GAAP measure) to FFO and AFFO.

                                                  Three Months Ended June 30,         Six Months Ended June 30,
(In thousands)                                      2022               2021             2022             2021
Net Income                                     $        90,505     $      62,431    $     177,527     $   117,391
Depreciation and amortization of real
estate assets                                           75,947            64,974          148,513         128,481
Provision for impairment of real estate                  5,300             6,600            6,500          11,950
Net gain on dispositions of real estate               (13,656)           (5,880)         (19,732)        (21,550)
Funds from Operations (a)                              158,096           128,125          312,808         236,272
Adjustments:
Straight-line rental revenue:
Fixed rent escalations accrued                         (2,109)           (2,468)          (3,611)         (3,979)
Construction period rent deferrals                       1,071             1,109            2,437           1,737
Amortization of:
Equity-based compensation (b)                            3,409             4,789            6,477          17,694
Deferred financing costs and other (c)                   3,023             2,598            5,184           4,698
Lease-related intangibles and costs                        800               960            1,478           1,787
(Reduction in) provisions for loan losses                    -             
   -            (288)           2,000
Lease termination fees                                       -                 -          (4,174)               -
Capitalized interest                                   (1,676)             (204)          (2,086)           (418)
Loss from non-real estate, equity method
investments                                              1,175               705            3,332           1,068
Adjusted Funds from Operations (a)             $       163,789     $     

135,614 $321,557 $260,859

FFO and AFFO for the three months ended June 30, 2022 and 2021, include

approximately $0.3 million and $2.9 millionrespectively, and, for the six

months ended June 30, 2022 and 2021, include approximately $1.0 million and

$4.9 millionrespectively, of the net turnover which is subject to the

deferral agreements entered into in response to the COVID-19 pandemic, we (a) recognize such deferral agreements as rental revenue and a corresponding amount

increase in receivables. FFO and AFFO for the three months ended June 30th,

2022 and 2021, exclude approx. $3.8 million and $5.4 million,

respectively, and, for the six months ended June 30, 2022 and 2021, exclude

approximately $7.2 million and $11.3 millionrespectively, collected under

these short-term deferral arrangements.

For the six months ended June 30, 2021stock-based compensation expense (b) included $10.1 million related to the modification of certain

performance-based awards granted in 2018 and 2019.

For the periods of three and six months ended June 30, 2022 and 2021, includes $0.8
(c) million and $0.5 million, respectively, of accelerated amortization of

    deferred financing costs related to the prepayment of debt.


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