Four Corners Property Trust (FCPT) 2 Aug 202020 Q2 Earnings call transcript

Good day, and welcome to the Four Corners Property Trust Second Quarter 2020 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Gerry Morgan, Chief Financial Officer. ahead. go Please

Alison. Thank you,

course statements of made will the call, us. this are based forward-looking which assumptions make on During we beliefs by and

Our or duration of and COVID-XX pandemic by related be beyond the predict. the actual our are including control to and factors, to uncertainty known severity scope, that results will ability unknown affected

future prove to will assumptions Our and performance, are not a some incorrect. guarantee of be

can of our be description of some risk, SEC For the filings, to presented is which XX, at a this detailed more information found please potential All today, fcpt.com. call refer XXXX. on current July as

on to In website. I’ll that, the be reconciliation such in And as call presented and turn Bill. over non-GAAP addition, also on found this report, call, our financial measures supplemental the with can AFFO Company’s to FFO available also

for families you, joining Good you quarter and for I Thank hope our were the our plainest and collections would that of investors second we’re -- your as staying and everyone. you of over reporting second collections morning, results that to the the discuss very of pleased results, were are quarter, clarify number for to in Gerry. all today, July. with healthy. We strong like terms XX% I Thank possible. us and for quarter our level

of For all July. leases base cash the XX% payments already portfolio, rent the we over in of our received for month have

our current of properties $XX,XXX of we team in for the and to given our to approximately any and and strength agreed our operating in only a the to the for agreed COVID we’ve tenacity both ongoing testament portfolio abate is environment. is pandemic. the in shareholders their our remarkable believe to deferrals their low July, tenants during that month rent to Given models of rents and adjusting This the not a this the achievement July

on additional collections. Let with comments few a start me

to collected effort, tenants payments. operations abreast creatively stay second on this rent of with to work XX% has applicable, team our when we’ve and business over of Through Our tirelessly worked quarter their modifications. lease

In quarter rent this of for until shortly an approximately rents. rents agreed incremental This addition, of have or year we approximately to X% agree later X% to leaves second of expect agreed X% defer have second abate QX to payments quarter and unresolved. only our

where annual term tenants -- importantly, tenants most favorable their incremental where requesting period, increased modifications for agreements financial In is strengthened and concessions we believe is in rush provided we to pandemic, days few any Free we years. coping always the document. and was listen through shareholders we going we all rent, to that, investment difficulties of the negotiations occasion, working few is tenants. properties percentage difficult focus extensions, in relief these abatement abatements. efforts a contractual to this the Despite release longer over model cases stable and the This past our only careful scored have ongoing number While higher willing agreed we in pandemic not as were FCPT wanted lease from reporting, determining taken our very we’ve into FCPT where the discussions. that helpful operators market proved include last tenant landlords It with the these adjustments acquired many but guarantor fearful swapping have were or other July of part open those something exchanged second deferral in and in the not XX% fair in with FCPT the have retail of step-up over has select our and to when to quarter, of to modification with and essence, observed These concessions resulted lease make the which stance of months the rent in of rent, terms. deferment to that to over deferments rent and these growth early in most for we environment. Nearly contracts relief improvement, our rent deferment within than and of sure for lease any had this, tenants, for are to collections relationships bumps, lease we’ve contained work value capturing our and was rental our negotiations, abatement duration need among rent all payments. important we our

for credit reach collection deferral established We a and and do reserve balances abatement entitled rents. quarterly Rent included slide quarter a note a our that outstanding we’ve in tabular in expect the rent that which of Please that in will April to COVID-XX Update, minimal note second new for we���ve very summarizes Collections supplemental the form. remaining rent disclosed collection numbers the we number June for We very going resolution forward the tenants through small continue trend near-term.

think very restaurant reopening The of on course, be fluid and, country will to and situation impact I the is it you’ll the a of to hard find continue helpful. traffic predict.

in in off-premise the As their in with to-go returns an FCPT out strong and and the the rent from on capabilities. in calling like quarter, believe and the despite long however, our sales The exceeded quick at we’ve conservative on continue levels we healthy. dining operators once shift believe the but FCPT balance to like and we’ll XXXX fortified consumer us properties our turbulence the portfolio coming mix that one and case months to some continue of levels. distinguishes quick periods sheets. is through rent well exactly of near market we history. coverage in and focused run many operators, near operating in challenging Brands, and has times environment the in this Darden, here is we restaurant strong specifically from have even observed And is portfolio by to tenants again, behavior portfolio that technology, will service despite undoubtedly challenges, should remains worth pandemic. sales low service June. sectors XXXX We Bloomin’ the to why It serve casual that yet, our preach term said last late these others the we In continue sales RBI believe most This scale, investment very benefit of and Brinker, volatility underwriting in

team Dilts. over in Our Antonio the quarterly circumstances. COVID, in you by Steakhouses $XXX,XXX Kerrow the which results of first ably remind given their of positive her operate an were extraordinary job Carol quarter. Because managed versus a is LongHorn $XXX,XXX I’ll the we subsidiary, is San Carol contribution six negative very did a and

of a how In and them our provided they’re understanding what Kerrow quickly the going later real-time recovered were addition, of well doing tenants in first anticipate Kerrow year. phase through from adapting. this I COVID and very

achieved of Now, quarter. $X.XX, year-over-year flat which per turning to share the in represents results. our We AFFO second reported results

As is Gerry detail, more will of outline -- in from approximately COVID-related included this items. this share $X.XX dilution per

with quarter deferred by end believe conjunction we above, excludes this we’ll in of rent to which the AFFO the outlined the receive rents expect abate modifications. Our includes but lease second year quarter

and million In yield purchase cash quarter at properties an second five price combined of price that even X.X%. the in stable the acquisitions, to X.X%. greater activities we additional pipeline, of the applying new average stringent in and of investments. second we an same a within to Turning most our on have filter focus June yield $XX.X initial only with of acquired a properties an weighted combined cash $XX.X average of half million July XX for any properties acquiring creditworthy with purchase resumed for acquired We initial

quality guaranteed typically entity of leases building, constructed ground XX Speaking owns by rents. land are the and corporate corporate the low these the and the the leases to at acquisitions, are or recent properties of where tenants XX to these are operator brands the equates leases, which with FCPT XX the --

pricing acquisition further more of brand we in are and the stayed and line tenant these with months. yield believe the overall credit the of of real strong, the range, the portfolio. improved in our quality expect We of would historical estate same the the quality coming While

I stand office of one any a financial a forward to area in before we to into space moved Finally, the in some and results we of Valley Mill hosting we operations, update of building office recap discuss in our current resumes. the it On over larger Gerry turn today. look new where you to travel operational and once

working the strongest expect of is Our that posted net rent remains currently forward. hope lease the remotely at we we we which sector, in team collections high-level are rent among summary, to and for effective. going for In July, and collections have continue a are but QX highly

excited are and again We growth to portfolio. return are and building to once the acquiring properties

financial results. our through will Gerry take Now, you Gerry?

Thanks.

mentioned, rental straight-line first quarter, a points in after outline in generated results. of revenue second of and in rental AFFO revenue accounting receivables our As $X.X $XX.X variances on the quarter. We of abate. after $X.X recognition on adjustments, related Bill want excluding Two comments million expect income non-cash to million impact million we of highlight rental cash the quarter the we backing this also QX out and to the of COVID-XX couple

year. deferrals, have by rent of far, receivable in expect a recognizing payment includes agreed of On we are so AFFO and which rent to we end on QX million deferrals, First, $X.X booking this rent, for. we deferred the

believe abatements, the where Secondly amendments, tenants period lease GAAP the and part after to of on despite with lease appropriate discussions agreements. of the anticipates revenue due the abated GAAP the amendment for the we as guidance rent the requires our us ongoing Company recognize current the cases auditors, non-payment expectation revenue to abating in rent rent for certain in discussion that

and our incentive life second this recorded over then part rent, arrive the the a straight-line deducted against rental the with GAAP QX NAREIT rental million as QX be from receivable. We the deduct million did amount abated rental not revenue. in adjustments in in revenue quarter the at treated We to-be-abated FFO. of revenue will of rent we remaining at is in to as lease rent FFO $X.X rent to of The and For definition expect XXXX, arriving abate lease amortized from of accounts the accordance AFFO. in $X.X

to collected. supplemental We revenues now statement disclosure disclosure disclosure investors feel June of matter warranted. was addition this in are that so result AFFO has base receivable our expected for XX second we you updated our deferred bottom or that collection of had the you to announcement statement have adjustments quarter, rent of uncollected that This provided any FFO, of rent aware FFO, in much and been also make included XX% million of be the on abated. With can in $X.X AFFO as the can shows the see supplemental the the of at

credit analysis, reserve for of the recorded receivable and second collectability in base in current the place quarterly addition, we a is million. On XX, In for as accounts basis, in performing a our quarter. annual approximately rent XXXX of $XXX,XXX June non-material rate run leases $XXX.X cash

Our second agreed to the going for of have weighted deferrals forward we approximately cash at X.X% cash that of fair average annual escalator rent the remains rent, million and the is and rent rent $XXX.X representation virtually we portfolio. all abatements believe XX-year cover quarter so a base

operations. be see not representative return historical levels present You that that includes pandemic, to as longer did will tenants rent the is financial to we of for disclose no our still our be our coverage coverage normalize, It wanted reporting expectation we not operations careful prior tenants that we tenant This will and EBITDAR estimate is a our periods quarter. to from COVID-XX because of this that to time. we for much current number rent get tenant over time may note the

partially the of variances, lease in AFFO abatement quarter as the $X.XX share by the XXXX. the was approximately benefit quarter of the first flat share results of impact impact $X.XX modifications second quarter or accretive Approximately per its share or And or and costs, was per costs, that loss operating the negatively mentioned rental with other above. by which to fund $X.XX in quarter. offset closed lease abandoned second May. small for the decline per to share held reserve or excess April including XX% the from much the per deal and outlined we’ve of the $X.X connection per share million $X.XX were COVID-related expense XX% Kerrow COVID-related cash $X.XX The I $X.XX impact and impacted to given impacted operations XX% of were per first acquisitions. of was the from due were Approximately year-over-year Results share represents due quarter credit modification negatively higher and interest reserves for we expenses, following

was sheet. revolver the million of the private of balance last notes our that on of our about we March revolving $X.X importantly, revolver million note the $XXX was funding June Since second nine-year $X final the offering update, line quarter balance, million cash availability of announced cash million million completed to $XX credit. Turning the with of of of $XXX balance in and X.Regarding And our on ended reserves. and

second reminder, which fully our a full quarter by recurring we paid dividend, As covered cash was flows.

our debt-to-adjusted metrics EBITDAR with times X.X leverage strong, XX. of charge X.X of net the Finally, as second quite fixed a remain in of quarter coverage and June

times a I’ll is X.X debt Bill our X million maturity that, XXXX first for of comments. it November revolver can to over also remain debt to net timing We maintaining Our closing $XXX back option, term turn at target maturity. With which leverage the the be below of extended times. to committed to

Thanks, staying nimble Gerry. environment. in current on remain the focused We

collection back our with pleased and the are We the strong on investment to results opportunities. ground new rent have year

We please are if reach the any out on available so portfolio, like speak. to quarter to you’d or answer the questions

this to of States. in worked acknowledgment colleague, immigrate to Gatti, has in born Colombia collections. tirelessly Laura a and is United was the Laura on our first to quarter special Finally, the note family her who

passed We it go, test back Laura. Way Q&A. citizenship she to are for the to operator happy I’d US report her to to that like turn yesterday.

you, Thank sir.

from question begin Berenberg. Nate question-and-answer Instructions] We go [Operator today Please will ahead. the Our now of Crossett session. is first

guys. Good morning, Hey.

Nate. morning, Good

if wondering just that today again. today of size acquiring of versus How it now guys would was the the kind you you was characterize are could flow I deal kind pre-COVID? what Hey. you pipeline

little we seen high-quality set, So, it rates deals I that come assets buy. that quite closed But stable. like seems some been remained are for tend by, though say, even we opportunity was cap the recently. it to would would on similar before, the easier I a haven’t They’ve higher say, what we’ve volume to to stuff

to So, we’re relative we feel grow good that our -- in peers positioned forward. to really well very going

get Biden guys? Okay. by have that Exchange. effect thoughts on any to you maybe the I on wanted guys XXXX proposal Would your eliminate this

can past. think, legislation it smaller how see that positive can I for quite But is XXXX Exchange I proposed often be these in seen pricing, quite deals one-off by set the market. as we’ve

cautiously I So, any jump to just I optimistic. I guess, don’t to want But, judgments. would say,

have Okay. of that finally left other how on, done? you this guys Seritage then and just you close to guys And portfolio much on these some sales strategic portfolio have

disclosed math. that. properties, new we’ve I you those we’ve can the think in of cases, we’ve in most say and into cases, dropped, the what but don’t replaced back deal is, some we increase. in properties of the think will some essentially But And in the would portfolios with them fact, sizes I

still it’s So, very substantive.

Okay.

Dunkin’ Just restaurants last their Because you X% own do any guys saw one quick one, of they’re closing today? I Donuts?

so. believe don’t I

Okay.

line. in typically They’re

Okay.

is from McGrath go today question ahead. Sheila Please next Our of Evercore.

us Bill, insight much morning. portfolio still of And you operating. is how wondering, if give in restaurants open on constraints capacity place? good I do could some was most and have the Yes,

XXX are lot think also on. and would time the I restaurants my in a are XX I seen would are I knowledge, see and states restaurant, something virtually to of speaking, then be to restaurants say which XX XX are than almost dining goes and is say, back or taking to-go I to to operating. and just we’ll Sure. and that casual of generally of all I What states diners we’ve extent, Almost the continued often curbside. is, many to go to it’s Yeah. Texas that had from situation operating XX open seeing into think most think initially on elevated predicted. to I fluid we’ll open, say But XX operating a curbside some stickier as are it properties would Florida. sales, very all be the our like those the of best all

could great. you Four changes agreed Corners? if but the lease like possible, clarify, you abatement were to a changes of it for I that gave most not, through typically be that part kind you the Okay, went number of to tenant then, rent just lease like And what extension? abatement mentioned, know And other good a if was that a amendment

more In income. which But is We cases, to XX% a properties Sure. about added and all renewal their that growth the We five included tenants the changed In as discussions, bit think balance attractive discussions deferment I of years. lease leases. and, purchasing master growth, Sheila, years makes abatement to of cases, XX almost term them more extensions extensions. said, all consistent with some had rent off favorable. big lease and five some terms was we in to be changed some you little every one having properties We annual sheet. between

to a or moderate of we we so, extensions And is number able very view meaningful abatement lease what deferral. for were rent quite significant negotiate

great. the… last one Okay, And one, on

just Sheila, way? can that in answer rephrase maybe one I my

Sure.

to way if extend that’s now fee tenant are lease, COVID, approached had this and not said, would we COVID, absent to is, of if us have the early. willing for think in that think were would Another If this sort normal to we’ll it. of done pay about about have These the exchanges something a money that’s lease environment. how absent modification that done we you

lease great. many they are one, recent one shorter of -- last them term. investments, Okay, And on the

to just you on what’s length? the the wondering, or appeal Do get lease there. Just understand better pricing want

Sure.

one Corners, the was long had as we of Four lease think created quite I it advantages of term. very

in layer the some sort portfolio average. to of us diversity term XX-year than So, of earlier it allows lease

can have of better you performance get favorably. very that’s thing first that next up that more the the of go we we environment very pretty that And have little And high-level so, we lease and selecting the to like better the years, something lease do were during get is current pricing, mentioned, for turn to we in given term. credit, open properties several it’s document something as you course, when

thank Great, Okay. you.

from Our ahead. Janney. next question go Stevenson today Rob of Please is

morning, guys. Good

Good morning.

earlier the of today? ABR what also million And is of that lease? ground of is about you that percentage percentage then talked What $XXX non-restaurant

a other couple lease. non-restaurant we ground that’s are disclose outparcel It’s lease this out. percentage, at don’t And doing the that entirely A say, But point. transactions is restaurant. something percent number ground of we’re to not of almost than we the break significant that

thinking Are for via Okay. ramp returning And Do to funding are up acquisition the finance liquidity makes once you How on you? want enough preferred? if the you guys equity looking sense trade to today, issue price? future sheet then $XX volume some equity side with level dispositions that financing are the that you to to and use returns deals about attractive you from the guys, current environment? how stock a out, in you with the in even of balance common

the it still But acquisitions that stock to accretive place. times Yeah. is still It’s X once with our was. levered Certainly, as it times balance we is in making sheet as accretive. $XX to are committed not price accretive and keeping X.X

Rob. a not So, change, really huge

exchanges the especially sell Okay. more? even assets, if And ramp up any plans starts the rhetoric to XXXX to more on

attractive the demand. pandemic to of of always coverage, are months our purchase received last Darden great strong performed corporate in really keeping had actually through very and the some some high offers that assets. have couple in We in credit Properties mind, we

of had So is interest. the interesting always but that’s inbound over we’ve some something attractive it really last consider, months couple we

Appreciate guys. Thanks, Okay. it.

course. Yeah, of

Please next Baird. ahead. from Our go today is Milligan of question R.J.

Good guys. Hey, morning.

R.J. morning, Good

extend you deferrals, came open were revenues them Still can versus form is into rent? credits bucket strong they closings not had drop? in the due those you on -- relief abatements pay quarter a that can their to to term that way there just and that -- just a guys second wanted and a to drop versus They

turn more tenants, can what or terms think spent the over don’t -- attractive to trying I a other. make the phone leases. It and was modifying lot lot time. ways getting but the our with to that organic particularly we’ll for, we get. to a we what one time evidence figure looking they out at really help and time, figure for we in out couple were that way with of conversations is them, we huge wanted We unusual I months, to And pretty tried had constructive a agree think on some when get a that sure the be of shareholders steam process modify. to there tenants we’re happened our and But able in that same just more a

in And July. then only $XX,XXX point one deferrals your abatements no made clarify you just remarks, in to opening of and

Correct.

longer-term... then And Okay.

new And I’d the to in really lays out you the out we’ve really encourage supplemental. clearly it progress we It check table put made. that

longer-term, the through move cap the through lower of then track rents rates And will as sort thanks. own the and move for ensuing we low guys that time? typically successful Okay, of record think you and you do a assets over recession, pandemic the this this types

Too be think think be I in some interesting cap good well I really said, I lower opportunities those pipeline performed with a that do industry know great tell. have our to seen being QSR seem can than That move really through it’s offering soon that this, that past. for the rates shape. me to in fast. carry XXXX to I memorandum capitalized. for us especially properties through some I But are the well there’ll think question. And

going there’s next you of be to a lot question. as your over year in infer change think coming I the

Great. Thanks, guys.

Thanks, R.J.

of Please Our ahead. Nikita next come Morgan. will question today from Bely go J.P.

talked the how already you are in agreements pipeline, have the about parcel mall of that acquisition those of past? deal you Good guys outside opportunities many at, looking the guys. Hi, morning. On that

well. we’re number of opportunities some looking non-restaurant And them as are. at A

to working outparcels of to shopping anchored, all mall grocery retail a ones. it. the on for landlords it’s of sorts ways center, So, to diverse strip some announced great Obviously, center, nice And are that group. do and and in the looking are we’re new we’ve a outparcels way access past, in liquidity, some addition

other So, non-announced deals, it’s we where net diverse, outparcel good owners, really from it’s lease both feel quite a stand. and deal-sourced mix we of about

rough to put Is malls? number way outside of in look of a to there terms percentage the a of terms, either percentage

guidance acquisition a provide in percentage. don’t We

Okay.

into allow would to you it back it. Obviously,

So, I as on. been simply we’re as execute would as and things we’ve say, far think really our of I good in a history as in place advantageous to pipeline

can little about that you restaurant What on portfolio the bit just expand in traffic, trends right a now? seeing kind of in the restaurants your you’re traffic the

Yeah. to daypart, we of I recover. breakfast back casual dining, say to would it was the that, QSR it, that’s quite XX. more you above typically, in slower that, XX the XXXX little or sort end of been than if focused were call by June, comparable were a Maybe at down worse on XXXX down -- to

back think traffic come So, we begin cases But slowed. see I last the wane felt weeks, cases again. in additional really few that quite has we’ll good if to with

in thing had think is notable the handful quite of any or of tenants sort sign. good I the which think accommodation, last I a So, relief haven’t is, requesting we weeks

a way a for feel revenue $X.XX sense you that before to what’s make the whether level, there now revenue that? Darden to approximately, pre-COVID there you do have get as of or making on are to they a like the making $X used a percentage level, COVID, versus way like the aggregate is restaurant the guys at for non-Darden it’s is And that the know

what tenants restaurants public -- and the with we operate It’s we’re follow six all in. San Obviously, you doing. daily And Antonio. on very companies, how Right. they’re lastly, on geography then dependent we in it’s highly our in discussions are

performing. case literally that they’re daily how So we have of study

said, and to are the contractual rents So, of fixed. directly being and are our performance tenants’ we tied track not the leases it They revenue. feverishly. or our That traffic

Thank Okay. much. very you

you. Thank

next Our today Please ahead. Thalmann. come Instructions] of Ladenburg Massocca from John will question go [Operator

morning. Good

John. Hey,

we any couple little kind your But of expanding and remarks. expect for rent on I just bit comments some missed more quarters apologies maybe prepared the kind or this of transaction next could in lease the if of which... modification earlier So, in of these

it’s would we it’s behind situation. feel I it’s largely as we behind now, say fluid Yeah. largely a of obviously that us. us. feel But But

Okay. those one-off kind seller those primarily kind those looking restaurant of on Are basis? a portfolio, are at, of deals, Understood. those in from properties transactions you’re are if terms you or And at kind where a I are that I coming sourcing also then, of sourcing of non-restaurant mean, sourcing how those are are put transactions couple guess, the a of really? kind maybe one-off recently. -- you’re are from deals a getting looking a basket of you these and into, not, of or

Most of now where deals the they looking But portfolio. them strategy. a properties outparcel of come also Sure. from broader at and have outside individual we’re part were small portfolios outparcel of the

C-stores, to or evidenced non-restaurants, portfolio, not that come bag. some to they’re we’re uses, seen as medical like at how transactions things the that. they’re looking us. perform but we’ve yeah, I Once on market the own, outparcel their to right? agnostic And transactions, perform but we’ve in the mixed -- we’re, buying So we’re it’s think frankly, a So going as

So you whether would favor as are or properties and restaurant to transaction transaction a agnostic you maybe non-restaurant is still? or -- restaurant restaurant

I think level level, we’re too looking to at on. the asset that’s decisions make high

set, asset, where are provides, the We’re at kind the attractiveness diversification its cetera. rents of worthiness, looking et location, the credit what of it the

come of as then of change leverage of even pandemic Okay. we on with maybe given the the in rental there the quarter? has kind stability And last out kind been any in the a or view leverage, regards maybe here to performance

move, financially chose five be the get when that allows. being level. aggressive conservative you to evidenced environments an appropriate I we set then years think pandemic ago And has think and this it I opportunity like and the allows the through is right

you much. me. from Okay. Thank That’s very it

Great.

to Congrats Laura -- or it Laurie? is

Laura.

Laura. to Congrats

Sure.

this conclude will gentlemen, time, this At for Bill any I’d to our and the like remarks. question-and-answer turn Ladies session. closing to back Lenehan over conference

Thanks, everyone. Great.

I feel and Thanks got couple here, And we’d have much. than any went Cheers. a please are typical. to questions, minutes lot to longer out, of We’ve call to reach Gerry so sorry about. love free chat. a you this if talk

is now presentation. disconnect you today’s conference The lines. thank for now concluded. your And We you attending may