STORE Capital Corporation

Good day, and welcome to the Store Capital's third quarter 2021 earnings conference call and webcast. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touchtone phone. And to withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Ms. Megan McGrath. Investor Relations for Store Capital. Please go ahead, ma'am.

Thank you, Operator, and thank you all for joining us today to discuss Store Capital's third quarter 2021 financial results. This morning, we issued our earnings release and quarterly investor presentation, which includes supplemental information for today's call. These documents are available in the Investor Relations section of our website at ir.storecapital.com under News Results, Quarterly Results. I'm here today with Mary Fedewa, President and Chief Executive Officer of Store, Kathy Long, Chief Financial Officer, Sherry Rexrode, who will become our CFO on November 8th, Craig Barnett, EVP of Underwriting and Portfolio Management, and Tyler Mertz, EVP of Acquisitions. On today's call, management will provide prepared remarks, and then we will open up the call for your questions. In order to maximize participation while keeping our call to an hour, We will be observing a two-question limit during the Q&A portion of the call. Participants can then re-enter the queue if you have follow-up questions. Before we begin, I would like to remind you that today's comments will include forward-looking statements under federal securities laws. Forward-looking statements are identified by words such as will, be, intend, believe, expect, anticipate, or other comparable words and phrases. Statements that are not historical facts, such as statements about our expected acquisition, dispositions or our AFFO per share guidance for 2021 are also forward-looking statements. Our actual financial condition and results of operations may vary materially from those contemplated by such forward-looking statements. Discussion of the factors that could cause our results to differ materially from these forward-looking statements are contained in our SEC filings, including our reports on Form 10-K and Form 10-Q. With that, I would now like to turn the call over to Mary Fedewa, STOR's Chief Executive Officer. Mary, please go ahead.

Thank you, Megan. Good morning, everyone, and thank you for joining us today. I'll begin the call with an overview of our third quarter performance. Craig will provide an update on what we added to the portfolio and our portfolio management activities. And Kathy, who is retiring after this, her 28th quarterly call, will review our third quarter financial results. Following our prepared remarks, we will open the call to questions. As you all know, Kathy and I have worked closely together for many years, so this conference call feels a bit like the end of an era. I want to thank Kathy for her wise counsel and many contributions to STOR, and especially for building an outstanding finance department. On behalf of everyone at STOR, we wish Kathy all the best in her well-deserved retirement. An ending can also signal a new beginning, and I am very excited to introduce you to Sherry Rexrode, who will assume the role of CFO on November 8th. Many of you know Sherry from her successful career at BlackRock, and with her strong background in finance and capital markets, she will be a great asset to our team. Sherry was also one of BlackRock's top ambassadors in promoting sustainable business practices, and we look forward to her help in advancing the ESG program at STOR. As you saw in our press release, we had a very busy and productive third quarter. Business is back in full swing. We reopened our office in October, and I'm very proud of our team's outstanding execution that resulted in robust acquisition volume and strong growth in our pipeline of new opportunities. We saw a significant pickup in demand for our customized net lease financing solutions as our customers and prospects resumed growth both organically and through M&A activity. During the quarter, we acquired more than $410 million in profit center real estate at a weighted average cap rate of 7.44%, bringing our year-to-date weighted average cap rate to 7.7%. We also delivered AFFO of 52 cents per share, reflecting our strong revenue growth and healthy portfolio operations. We also had strong prospecting activity, and our pipeline grew to $13 billion since the end of last quarter. We believe this is a direct reflection of a healthy operating environment, our unique customer value proposition, and the results of our direct relationship approach. The net lease space has continued to attract new market participants, so we are not surprised that we saw some cap rate compression in the quarter. That said, having been in the net lease financing business for several decades, I've had the benefit of operating across many economic cycles and interest rate environments. This gives me confidence that our business model positions store to continue to deliver above market cap rates and, importantly, to continue to deliver attractive returns in today's operating environment. For example, our most recent master funding debt issuance had a weighted average coupon of 2.8%. resulting in a healthy third quarter investment spread of over 4%. Now I'd like to touch on inflation, which is the current headline macroeconomic topic. For a few key reasons, we believe STOR is well positioned to deliver strong AFFO growth even in an inflationary environment. First, as a triple net lease REIT, STOR does not incur property-related operating expenses. Second, We have average annual contractual rent escalators of nearly 2% built into our leases, which provides a natural hedge against inflation. Third, we have flexible financing options, and our existing portfolio is financed with well-laddered fixed-rate debt and no significant maturities until 2024. Finally, we have a strong pipeline of new opportunities, and given our direct approach to acquisitions, we have the flexibility to structure new lease contracts based on the current operating environment. Now turning to our recent dividend increase. On our last earnings call, I mentioned that our Board would be evaluating our dividend and that a meaningful increase was likely based on our strong operational performance and positive outlook. As expected, in September, our Board approved a quarterly dividend increase of 2.5 cents per share. which brings our annual dividend to $1.54 per share. This represents a 6.9% increase and is the highest per share dividend increase in our history as a public company. Even with this significant increase, our dividend payout ratio remains conservative at 74% of AFFO for the quarter. Before I turn the call over to Craig, as you may have seen, S&P recently raised its outlook on store from stable to positive and affirmed their BBB rating. Their report underscored the resilience of our portfolio during the pandemic and our healthy operating performance, credit metrics, and prudent financial policies. This rating validation is especially significant on the heels of a global pandemic that stress tested our portfolio. S&P also cited other factors for raising their outlook, including stores' high occupancy and above average embedded rent growth. As we have said before, we attribute our outstanding portfolio performance during the pandemic to the strength of our customers who operate in vital industries, the size and diversity of our portfolio, and our portfolio management expertise. With that, I'll turn the call over to Craig.