Shares of STORE Capital (NYSE:STOR) are down roughly 13% this year with a month left to go. However, that still represents a massive rally from the worst of the pandemic lockdowns in March, when the commercial real estate investment trust (REIT) suffered a more than 60% plunge from its all-time highs.

The rebound is justified. STORE Capital remains one of the best-positioned companies in a bludgeoned commercial real estate industry, and the company is already back in growth mode. I remain a buyer before 2021 gets under way.

Question marks? Sure, there are some question marks...

Commercial real estate has been among the areas hardest hit by social distancing and remote work. And while STORE's portfolio is diversified, some of its tenants aren't exactly sitting on solid foundations -- including movie theaters, family entertainment, and health clubs. Others, like restaurants and retail stores, have managed to adapt and are doing OK.

Here's a breakdown of STORE's top customer industry groups as a percentage of base rent and interest collected:

Industry

Number of Properties

% of Total Base Rent and Interest as of Sept. 30, 2020

Restaurants (full- and limited-service)

777

13.5%

Early childhood education

240

5.9%

Health clubs

88

5.2%

Furniture

70

5%

Metal fabrication

88

4.8%

Automotive repair

172

4.7%

Farm and ranch supply

43

4.5%

Movie theaters

37

3.9%

Family entertainment

40

3.7%

Pet care

177

3.5%

Data source: STORE Capital.

There are some lingering questions here. Movie theater tenants (ahem, AMC Theaters) have an uncertain future, to say the least. STORE was back to collecting 90% of base rent and interest in October (compared to just 70% in May), but there are a significant number of businesses deferring payment and racking up interest. If you want to play it conservatively, assume there could be some bankruptcies that need to be worked through next year. 

People sitting in a movie theater.

Alas, a scene from a movie theater unlikely to return anytime soon. Image source: Getty Images.

Don't project the immediate past onto the immediate future

However, while spring 2020 was incredibly disruptive, STORE is in excellent shape overall. It's a well-diversified property owner that doesn't overly rely on any single customer or individual property. And if there are a few bankruptcies, it isn't like the company hasn't been here before. It had to work through just such an event at the onset of the crisis when Art Van Furniture went down. The point is, STORE can deal.

Additionally, CEO Christopher Volk pointed out that his company's resilience has also been a result of a "generally suburban investment profile, which is more conducive to the demands of social distancing." Put another way, don't associate floundering multi-tenant commercial properties in urban areas with STORE. This portfolio favors more rural and suburban communities, with single tenants that have signed very-long-term leases. The average across the nearly 2,600 properties was 14 years of non-cancellable terms at the end of this year's third quarter, with less than 4% of the portfolio's contracts due to expire in the next five years. As Volk stated on the last earnings call, that figure "is far and away the lowest I am aware of among our peer public net lease companies." 

Don't get myopic, this REIT is a long-term investment

Also a positive, STORE has been able to use some of its best-in-class financial positioning to purchase 130 properties for $650 million through the first nine months of 2020 (and sold 43 properties for a net gain of $6.8 million in the same period). The average lease rate for those purchased in Q3 was 8.3%. Paired with an average 1.9% annual lease escalation rate, gross rate of return on these properties was 10.2%. Not bad at all. 

As a result of its growing portfolio and some extra interest payments coming in from deferred rent, STORE is already back in growth mode, with respective Q3 year-over-year increases of 1.7% and 2.6% in revenue and adjusted funds from operations (AFFO, the equivalent to earnings for REITs). As a result, management also decided to increase its quarterly payout by $0.01 to $0.36 per share -- a dividend still handily covered by AFFO and good for an annual yield around 4.5%.

If you're looking for growth paired with a well-covered dividend payment, STORE fits the bill. Some uncertainty in parts of its portfolio might give some investors pause, but you'd be hard-pressed to find a perfect commercial REIT these days. STORE Capital is thus still my favored real estate buy for the long haul with a new year right around the corner. If you're comfortable with some volatility in the next couple of years, it's worthy of your consideration.