In this Quarterly Report on Form 10-Q, we refer to
STORE Capital Corporationas "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, 2021filed with the Securities and Exchange Commissionon 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.
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 Marylandcorporation 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 Exchangesince our initial public offering, or IPO, in November 2014and trade under the ticker symbol "STOR."
Since our inception in 2011, we have selectively created over
28 Table of Contents 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 millionof net revenue related to deferral arrangements and collected $7.2 millionin 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
29 Table of Contents 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.
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 Ratingsand Fitch Ratings, respectively. In October 2021, S&P Global Ratingsraised its outlook on the Company to positive from stable and affirmed its BBB issuer credit 30
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 billionat 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 Statescan, 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 millionof STORE Master Funding Series 2013-3 Class A-2 notes and, in connection with our $600.0 millionbank term loan transaction in April 2022, we prepaid, without penalty, $134.5 millionof 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 millionunsecured 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 millionoutstanding under our unsecured revolving credit facility.
Our unsecured revolving credit facility also includes an accordion
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 billionat 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
November 2021, we completed our fourth issuance of underwritten public notes in an aggregate principal amount of $375.0 millionwith a coupon rate of 2.70%, and as of June 30, 2022, we had an aggregate principal amount of $1.4 billionof 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 millionof floating-rate, unsecured term loans; the loans consist of a $400.0 millionfive-year loan and a $200.0 millionseven-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 millionof 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
Debt secured without recourse
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 Capitalserves as both master 32
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
AAAor A+ by S&P Global Ratings. The Series 2018-1 transaction in October 2018marked our inaugural issuance of AAA rated notes and our Series 2019-1 transaction in November 2019marked 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 2021which 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 millionin 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, 2022totaled $2.1 billionin Class A principal amount and were supported by a collateral pool of approximately $3.6 billionrepresenting 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 millionon 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. 33 Table of Contents Debt Summary
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 $ - $ 3,608Other 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.
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 millionATM program (the 2020 ATM Program) and currently have about $286.0 millionof availability under this program. 34 Table of Contents
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)
$ 83.4Six 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)
$ 249.6Inception 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)
$ 604.4Cash 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, 2022increased by $62.6 millionover 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 millionmore 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 millionof net cash during the six months ended June 30, 2022as compared to $252.3 millionduring the same period in 2021. Financing activities in 2022 include the aggregate $600.0 millionof bank term loans we entered into in April and $176.2 millionof aggregate debt repayments on our secured long-term debt. We paid dividends to our stockholders totaling $214.3 millionand $195.4 millionduring 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 $1.54per common share. Six Months Ended June 30, Increase (In thousands) 2022 2021
Net cash flow generated by operating activities
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
June 30, 2022, we had liquidity of $30.9 millionon our balance sheet. Management believes that our current cash balance, the $555.0 millionof immediate borrowing capacity available on our unsecured revolving credit facility, the cash generated by our operations as well as the $1.0 billionof 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
35 Table of Contents
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, 2021in the section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations." 36
Real estate portfolio information
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 millionin 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, 2022and 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
% 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
Fleet Farm Group LLC 2.1 9
Cadence Education, Inc.(Early childhood/elementary education) 2.0
Dufresne Spencer Group Holdings, LLC( Ashley FurnitureHomeStore) 1.6
CWGS Group, LLC(Camping World/Gander Outdoors) 1.4
Zips Holdings, LLC1.3
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 37 Table of Contents 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
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
base rent and interest. 38 Table of Contents Contract Expirations
The following table presents the maturity schedule of our leases, loans and financing receivable as of
% 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
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. 39 Table of Contents Three and Six Months Ended
June 30, 2022Compared to Three and Six Months Ended June 30, 2021Three 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 $ 71,581Expenses: 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 $ 60,136Revenues 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 billionin gross investment amount representing 2,738 properties as of June 30, 2021to approximately $11.4 billionin 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 billionin 2022 and $9.8 billionin 2021. During the six-month periods, the weighted average real estate investment amounts were approximately $11.0 billionin 2022 and $9.7 billionin 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 millionand $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 40
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.
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 $ 330Interest 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 $ 83,537Credit facility: Average debt outstanding $ 107,670 $ 120,659 $ 144,155 $ 60,663Average 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 $ 3,691,578Average interest rate during the period 3.9 % 4.3 %
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, 2021consisted of $375.0 millionof 2.70% senior unsecured notes issued in November 2021and $600.0 millionof 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, 2021included $83.3 millionof STORE Master Funding Series 2013-2, Class A-2 notes in July 2021, $85.9 millionof Series 2013-3 Class A-2 notes in November 2021and $134.5 millionof 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 billionof 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 millionof borrowings outstanding under our revolving credit facility. 41 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 $ 6,731Ground 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. 42 Table of Contents
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 millionand $33.0 millionfor the three and six months ended June 30, 2022, respectively, as compared to $16.1 millionand $41.1 million, respectively, for the same periods in 2021. General and administrative expenses for the first six months of 2021 included $10.1 millionrelated 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 millionfor 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, 2022represented 0.44% of average portfolio assets as compared to 0.46% for the comparable twelve-month period ended June 30, 2021.
Depreciation and amortization expense, which increases in proportion to the increase in the size of our real estate portfolio, rose from
$65.0 millionand $128.6 millionfor the three and six months ended June 30, 2021, respectively, to $76.0 millionand $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 millionand $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 millionin provisions for credit losses related to our loans and financing receivables. We recognized an aggregate $6.6 millionand $14.0 millionin provisions for the impairment of real estate and credit losses during the three and six months ended June 30, 2021, respectively.
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 millionaggregate net gain on the sale of 13 properties. In comparison, for the three months ended June 30, 2021, we recognized a $5.9 millionaggregate net gain on the sale of 13 properties. For the six months ended June 30, 2022, we recognized a $19.7 millionaggregate net gain on sale of 24 properties as compared to an aggregate net gain of $21.5 millionon 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 millionand $177.5 million, respectively, reflecting increases from $62.4 millionand $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. 43 Table of Contents 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 Governorsof 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'sFFO and AFFO may not be comparable to similarly titled measures employed by other companies. 44 Table of Contents
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 $ 117,391Depreciation 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)
FFO and AFFO for the three months ended
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
2022 and 2021, exclude approx.
respectively, and, for the six months ended
these short-term deferral arrangements.
For the six months ended
performance-based awards granted in 2018 and 2019.
For the periods of three and six months ended
(c) million and $0.5 million, respectively, of accelerated amortization of
deferred financing costs related to the prepayment of debt. 45 Table of Contents
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