Real estate investment trust STORE Capital (NYSE:STOR) isn’t well known by many investors, but for investors focused on the long term, it’s definitely one to put on their radar. In this Fool Live video clip, recorded on Oct. 11, Fool.com contributor Matt Frankel explains why STORE Capital is one of the largest investments in his own retirement account.
Matt Frankel: STORE Capital is my second-largest real estate holding, in that I own quite a few REITs. It’s my favorite sector. It’s my second-largest holding, became my second-largest holding over the past year. The more they execute on their business, the more I like it. If you’re not familiar with STORE Capital, they are a real estate investment trust. They’re what’s called a net lease real estate investment trust, which basically means they own single-tenant properties. It’s a special type of leasing arrangement. I don’t want to get too much into the weeds on that.
But generally, it makes the most sense for when a company owns properties occupied by a single tenant, as opposed to like a mall or a shopping center, which are multitenant properties. For example, we’ll go into the tenants in a minute, but for example, Camping World (NYSE:CWH) is one of their big tenants. They are the only tenant that occupies a Camping World property. Right now they own a little over 2,700 properties. Pretty much all of them are single tenant in nature, 64% of the portfolio is occupied by service-based businesses. Think restaurants, think preschools are a big target of theirs, auto repair businesses are a big tenant of theirs. Theater businesses, unfortunately, in 2020 are a big tenant of theirs, AMC (NYSE:AMC) is among their top tenants.
They have 17% of their portfolio occupied by retail businesses that sell a product as opposed to a service, furniture stores, outdoor stores. Bass Pro Shops is one of their big tenants, just to name another example. The other 19% of their portfolio is operated by manufacturing businesses. Some nice little diversification from the retail. Another pretty big differentiator.
Another big differentiator, STORE Capital is not the only REIT that does what it does. Realty Income (NYSE:O) is probably the most popular net lease REIT — ticker symbol O — that invest in single-tenant properties. One of the big differentiators is STORE Capital requires property-level profitability from all of its tenants. In other words, it demands property-level financials. Let’s say Camping World leases 20 locations from them. They get the financials for each and every one of those 20 individual locations that …….