Four Corners Property Trust (FCPT) 27 Oct 212021 Q3 Earnings call transcript

Hello and welcome to the FCPT Third Quarter 2021 Financial Results Conference Call. My name is Charlie and I will be coordinating your call today. [Operator Instructions] I will now hand you over to your host Gerry Morgan, Chief Financial Officer to begin. Gerry, please go ahead.

Thank you Charlie.

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

factors incorrect. to of future will COVID-XX Our known that guarantee are the be of will control pandemic assumptions scope, including or prove are our unknown a ability remaining duration actual some to our uncertainty to performance and affected severity and beyond be related predict, results and by not

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

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

discuss discuss going Patrick Good the Director details to us joining quarter back well. quarter collections review occupancy of to morning. around then XX.X% the and remarks; third results. In introductory some acquisitions I'm you Thank Wernig, to then Acquisitions industry to at make will for our results. Gerry of we for our leading XX.X% to pipeline; as improved and have summary, in continue financial to

other tenants levels. and performance pre-pandemic are retail XXXX restaurant often Our experiencing top above line

quarter quarter this properties tenants. increase. $X.XX low of third by year-over-year great share, reported a XX characterized which rents acquired also AFFO $X.XX We We per high-quality represents and

XXXX XXX% weekly Baird's levels and dining recent strong to restaurant We XXX% restaurants the operating third levels are in most survey. quarter. casual performance of service operator’s at are according of restaurant operating see Quick at is XXXX pleased to weekly

The initial with leases XX acquired tenant XX profiles. yield corporate for in strong cash includes million the Turning of an and a XX two are combined of to tenant properties quarter The credit X.X%. and price group represents dual of $XXX.X acquisition investments. the operators. We properties

the The total include portfolio. bringing new to brands six investments quarter's brands us a third in of XXX

closed fourth and that quarter to $X same we in put total of it million compares the far back step new closed investments to million XXXX addition, to of incremental XXXX. $XX in a in properties figure have so million $XXX Taking In $XXX an in date us to million million XXXX. XX-month in $XXX bringing perspective, period in the for

with heading we're and last two of very So months the a the pipeline. into year robust well-positioned

retail volume represented auto restaurants medical and quarter, each other the the balance. XX% and and XX% made For total -- the approximately up investment service of

medical set volume. and advantage primary focus the we're comprised to of other flexibility approximately For with year well. overall for XX% we other and the pleased been are opportunity restaurants while remain total -- in the sectors retail invest acquisitions, seeing as have taking our new We've of

on mentioned With turn for Pat I'd we said what the investment Pat? acquisitions I it of some environment. in to year. pipeline pipeline remainder the that comments the the and I As our reiterate for recent quarter pleased with that, continues be are to very additional over I'll second strong. overall

Bill. Thanks

was our mentioned quarter worth As fourth six-year is going broader of has of and of acquisitions strong in the pipeline. volume after recent expanding. deal on the since in third right success we believe our the company's quarter that We building volume, and of terms out quite noting new Reflecting in the been one note volume this XXXX investment we're biggest also before history. was It's highest it's quarterly our properties The past. much due maturing our to that pandemic. than universe the quarters

Despite less other there Case one than can given our we find any noted three-month in was headwind, us earnings net choppy opportunities mid-six are environment against the in volume restaurants very to shifts cap tenants pricing and period. now general. real in with fewer in lease We that retail in the high-quality and on pricing last and rate we've for our pricing area opportunities so sector And build still estate. the out that quarter-to-quarter. competitive pipeline call point, been where restaurant able make sectors

for Our pipeline far sector similar services to is year. mix seen restaurants, and auto we've this so medical what

towards the you XXXX, and to same new with As formula into a we look that stick QX expect opportunities success. us QX can made for

back existing operators our restaurant from of deals. sale-leaseback engaging QX actively and direct we're others Chili's to out these new deeper came these of fact Four repeat the deal In our pandemic. several demonstrates Corners we for $XX sellers the Corners. to that that including million positive The during tenant interaction ties have tenant benefited First, that transactions, coming with been Four and operators roster are relationship a

to deal it the on and that merits and to and own still its medical stand continue convenience finally, second, may future. to And we for We economics. And needs in the for we year. diversify new services Second, quarter and on operators a flexible at expand average and for X.X% principally a yield still stand just brands profiles. repair, strong There's quality services. cash achieved adjacent credit we're explore on to for X.X% but believe every fight and stores and and subsectors further focused retail and being the retail, auto lean

added a back great So it's it the turn outcome now particularly And we given over to I'll the asset think to portfolio. Gerry. quality we've

Pat. Thanks,

changes for credit run adjustments. million reported. a no Bill collections recap we rental end of quarter XX.X% of of On and rate cash is We collectibility million reported sheet And material highlighted, million. our a or the base the third financials cash Just balance income quarter the generated as reserves impairments. of a annual for to excluding lease quarter, the of third in the $XX.X of in the we no straight-line of current as basis, $XXX.X couple after $X.X quarter rent

levels properties levels. includes we the XXXX so estimated for quarter brand escalator quarter cash for coverage To X.X We number $XX progress. rent annual additionally, XX-year non-Darden started note to report our estimated lower levels X values of are average sales operations approximately million also for of that these X% late is everybody of us to the or pre-pandemic shows is portfolio times to of operators We from portfolio, remind than pre-pandemic financials weighted times for Darden the in X.X restaurant in using rental X.X%. the all nice the strength on par tenants' rent Darden coverage average levels. in ending coverage some Our results coverage when tenants third their August XXXX. often times and while and That And margins the with both low is portfolio place. in latest cases rent typical not sales at reported passing rents restaurant that the the and at our which X% which to our is on translate would approximately approaching that was

In credit. availability issued to quarter liquidity, the on on weighted quarter stock $XXX.X at line the we Turning common of million million of which of our million included third $XX.XX We a with program sheet. of the $XXX ended average ATM XX.X per of the balance revolving share. price

is quarter fixed end debt-to-EBITDA coverage our was Our charge times the for times. and X.X net quarter X.X

turn a closing to comments. Finally quarter dividend it Bill back the per that of we paid I'll for for With $X.XXXX share.

with We very forward at upcoming third happy it we're In many of speaking to up look NAREIT. now results with the our for we'll quarter. to questions. the And you open conclusion,

[Operator Raymond of Instructions] comes James. from question Our first R.J. Milligan

ahead. Please open. go is line Your

it that terms capital pauses out XXXX percentage if sort continue pipeline and secondly, curious continue? rate into that view move lot to expect And out a as the if to that Hey. are of I'm you of guys. restaurants as greater rate like just between fundamentals versus seems compression seeing curious improving that you to similar see that, mentioned anything expect And there you out do Bill non-restaurants compress. is non-restaurants. cap if Good XXXX? and of, there's trending pointed to you morning, cap rates mix restaurants. We're of I'm a in how guys we going pretty there or you compression Pat then just cap chasing you

worth restaurants. billion To compression over own your first on point about $X.X cap we restaurants. of rate

for a continue I R.J. our specific change other portfolio rates the on cap than do that's dynamic thing it's brands to continue overall. to callouts don't what obviously and bad well strong but stronger. around, have brands any a would the So not moving rates where get

leading So portfolio beneficial is brands and existing is since our of higher on to credit spectrum. industry end with tend the we focus our that the portfolios strategy to

the as relatively consistent closed to think far remained Pat will pipeline mentioned it I the have what we with as date. of As mix

announced. what I'm out did the portfolio one-off what assets? curious, in either or for pricing question outparcel second my versus terms is closings for there's a of left the already assets seeing some you any still there Okay. strategy have And opportunities better transactions outparcel individual if off-market maybe if slightly is, or similar to you're of with opportunity just

lot number have with the advantage. is the of we in work. portfolios a R.J. outparcel a a pricing because We and come do becomes of that's outparcels think But Yes. pipeline little do often

getting again and are vast some in leases. in they're strong rents operators with very for the once typically portfolio the so paid And corporate But labor. ground ways it's low properties

half volume to year. obviously And of first relative is, quarter third my final question pretty big this the

of activity of look we of think you as another I end quite the as year. the rush we've into bit to anticipate sellers just the traditionally a before I'm the curious end if seen year? sell head

Yes.

particular would our being note. we busy, going said in would it's as be remarks sure. R.J. for prepared fourth there's think think really the I to in But that busy I I anything I don't quarter anticipate

Thanks guys.

Thanks R.J..

McGrath of is from Evercore. question next Our Sheila

go Please is ahead. line Your open.

team And Yes, And in I good acquisition point does that future? how plan big growing could currently? has volume. set helped wondered on ago? you broadening remind mentioned to your you you compare Bill, a in is at any if year the acquisition do just the morning. that us team how opportunity

a it's question. Sheila, Yes great

we've I much the it's see belt. you're Pat of under last nice now acquisition myself Josh, on team and to In their line to members pension. there's some Pat Balji the significant reps believe And addition now in of hearing number -- with calls, real that's six have year had

stable team is now has $X acquired the and really of billion worth properties. over so, And

the recruit the in done past. I question the on to acquisition for lack And about well no talented market. very join always I of would we driven we've and to can have consistent them we the your confidence in more answer think we looking we've focused to process in earlier they're talented and competition So, recruiting through And the think it to that for team. people their people train career with as acquisition market. people are that to But larger, gotten accustomed add how

And on how Great. just lower the also than million Okay. when on mentioned. transactions guarantee? noncorporate Are pricing Just guarantee portfolio? or are those does deals bigger on targeting initial then you the curious -- portfolio $XX for you and the that pricing that yield the

discount. there's guarantee in you question them. is know Sure. time as we premium QX, -- if in -- portfolios were compressed the there a And corporate had Corporate into credit portfolio estate. premium component line the we view a at them of But or would about an guarantee both of And tenants. chunkier being I two But look had half having cases, repeat maybe say, what a is important the anything they both real to we other of that is time underwriting. your a -- did today. half we portfolio part credit in

So we a negotiated lease. had already

premium So portfolio was that would than transaction. fully-marketed it be perhaps less

Give on curious industry. thoughts given restaurants. big Okay. your just and insights, Great. some challenges on current picture that your food the restaurant you cost And question, labor last to channels owned

steakhouses Yes. benefit Longhorn question. Carrols our that to that to Darden. a We We we that our Antonio, subsidiary -- the franchisee is in people operate in San superb. that business runs in as remind which Sheila, management team benefit great We subsidiary seven that

And extremely very factor that if many business that in business for much leader say on very she curtailing Sheila. there on day-to-day Carol, just Carol, business and from the people the the restaurant that consumer. is say labor I of an But is is who you exceptional would that say shortage. availability I think driven. and now is the understands is were basis call not subsector, in well would demand could the a leader And the a labor retail the and of fact that So

lack a but far very food the it's chain factor. As It's of costs, seeing less subsectors, retail you're the as a of perhaps other factor is of real. labor supply than

you. Thank Okay.

Sheila. Thanks,

Nate from comes question Crossett of next Berenberg. Our

Your line is open. Please go ahead.

just of Hey, could of is Lubert-Adler could the guys. that, size you out what then, just come you're maybe the was the give I now? what update to And good some wondering, pipeline And actual right far? an us put on if on morning you that potentially so figures seeing if related JV?

don't provide on acquisition volumes. We or Sure. guidance certain pipeline

hand, announced other the they transactions the we On closed. day

as referenced in price and we Lee have them speculation just the could activity seen I find you The to and able at redevelop call think As reasonable Lubert-Adler, been far We -- properties the a much Gene not conference vacant have on that unbuilt profit. Darden's of earn there. sites. level right not point, such properties

been these to supply-demand speaks dynamic find that and able bargain we at growing, it the to are properties have So, brands vacant not but prices.

not outparcel there's a of kind to And strategy, disclosing obviously, left it Okay. what you're that. lot relates on as the

about we there relationships, addressable those outparcel I should those of of guess 'XX like going to note total into relationships? Is how think the terms market So, there? in anything

Yes.

in see QX. You'll some close QX

We pipeline. our some have in

We that set. think continue aggressive. is to an We've been opportunity

think, of outparcels. performed bought $XXX well worth million through I COVID. exceptionally They we've nearly

that set addressing who to would in over. good there are acquiring opportunity we've that unique is avenue trying thus that But imitate So, made now for that folks certainly not far would I that, very strategy. I obviously, properties. say also are progress, say

very I and many you it think figured idea as things, they're good have. finding to a But out implement like it. have begin when labor-intensive we

follow people Sometimes footsteps. your in

be you'd grow, should to we is watch or Is be last one just anything that of? there there that on Maybe on the dispose anything looking the side. Okay. list aware one

lines watch We list. the nothing about for selling regularly the properties. of properties, notable. inquiries think occasionally We inbound get nothing disposition but And along

Okay. Thanks.

any Operator, Nate. more Thanks, questions?

Yes. comes The Wes next of Baird. question from Golladay

open. Your ahead. Please go line is

it on right now? the closing Hey. the flow acquisition I deal this just primarily are close a of the quick Good Is you a having question or guys. morning, had drivers quarter. higher

flow. deal Its

that at Okay. [Indiscernible] And those in you would verticals? total look as a

some Yes, is change selectivity it’s no just in of things I it, when timing have to notable describe would how occur. happens

Okay. guess that And And year? I you deal throughout the flow been over the the out team has year. ramping built have last

year-over-year; that, dynamic certainly, members there is senior think is but of I team the a of the team. stable the relatively

think are Wes. just, I it's acquisition lumpy,

I be of future pipeline? then Okay. And we leverage? would targeted look guess, fund you mix? how us when your at the you can leverage, of the And dispositions part remind Would

Gerry. Wes. is, Thanks, This

through everybody to remind those in markets is interim. to leverage to pull, X.X net equity EBITDAR. our great But our and a We'll of and We're one both Just it now. times X continue always targeted always cooperating. hasn't now as to to is combination private debt investments could our and at X.X using right of a revolver fund to card we Dispositions really if other the been date. have notes weren't

guys. Thanks, Okay.

Thanks.

from of John is Thalmann. next question Our Massocca Ladenburg

is line ahead. Please Your open. go

Good everyone. morning,

morning. Good

that maybe be being et out of in in auto on is Is estate industries? flow today? real home kind that et Just why XX is retail, trying of cetera. undervalued, is off-price Is to maybe the underwriting? health, driven you service, kind XQ that how So tire, non-restaurant And potentially view cetera. industries washes, seemed mix to there think focus where versus the that just car veterinary those acquisitions, with regards by décor, on to being of it or deal those

Yes.

and auto is pet. dollar be than much lease much defined favorable about stores. think the as or -- pricing restaurants, those We But home retail good sectors at and different you when that broadly said is, retail services subsectors, uses haven't we look done the tend restaurants, we human as decor medical as I think like as off-price to where or when or you net more

mean, mean, driven going any those I invested kind size larger Is on I of obviously, a haven't the that forward? a that is of just in focus some the your thoughts of categories by of you footprint. footprint?

area? footprint, mean property you Do leasable

footage. square Total yes. Yes,

I driver. driver. as focus real a the an a restaurant, don't They're often very the same think we Wes. Yes. square that's think And that's I don't don't low think rent. I that's on example. footage casual dining driver, a as

been our consistent. purchase average price So has highly

maybe how XQ for the versus look one-off is And pricing I transaction Okay. trending at portfolios activity. then, If transactions?

You rates, the lower also on the sonic did it was end QSR. cap a was that portfolio but

pricing there So, I X, discount mean, maybe if of assets is midsized there or you these either are that? that premium larger any do kind than even X, XX ones or

well-marketed spoke we I timing we're them. for as that, premium, a say East what especially component I portfolio larger both that transaction the is market, if two a had, to Yes. Those would in anything. mentioned, the earlier, portfolios, to Middle seeing

we So volume our competitors market’s is really But, prices. to quite yes, view. get strong at pretty good if the were anything, them able our are and focused

bid. portfolios And be tend so, well to

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

much. so Thanks

Thanks.

question is Paolone from JPMorgan. of next The Anthony

Your line is open. ahead. Please go

Not much Thanks. back that the cap but in year, outset the Okay. across to it just particularly like board restaurants, seem yields of compressed rates we on like on left here. to be But seemed go lease. the if

So they're say kind is last or all, or where so, or the rates -- things moved they do they've up of of have have because now settled? you over this interest say think quarter at

great a question. It's

we've be of low think continued compression. rates increased to to not able. the means, anything sort a what consistent because bit at interest would They little pretty as If a stabilization. mid-Xs by been we've been of I I but looking But of have anticipate we today, of any seem have as to compression, in acquire.

like fair? you handle the were here earlier flow, six maybe that the terms your think like head with it we of hold in Xs you the but could sounds seems as in Yes, year it going into to Okay. deal it if

that range. high lots fair. that cap in Certainly, we're seeing mid-Xs that's Xs, properties rate think are of I

gone competitors of into that area, we've but aggressively to flow, tried X% low rate. have cap our but strong have sufficient to a deal flows, And some deal mid

I into product then to box think plans other just things Any you're or or a or where Okay. up size service? go about retail prior areas. like on question looking go look meaningfully following And average a type at from could type the of industrial just restaurant auto smaller like at as things the up just you ticket

migrating we're testing something with allow I perhaps in Board. feel acquisition constantly and thus will think more deploy versus acquiring we're just of to has far what types it been very asset But capital It's that regret to us our comfortable the to later.

testing you always think minded. we're But of of see So, far that a continuation I kinds open we thus expect should bought historically. the to properties

Great. Thanks.

Thanks.

[Operator follow-up question Instructions] a We Sheila from have McGrath.

Please ahead. line open. go Your is

I of you policy. announced us in your could payout you just remind AFFO last Bill, years -- if wondering was guess, dividend to Are ratio? dividend you've at I us certain looking increase the couple the November. give a managing

Board the we to It's it's changed Sheila, late think in it in winter. any bring with the November of overall, and a Board Yes. decision annually. XX%. said we a that's that been our around don't We've I always the address but we fall, wanted in ratio early payout meeting.

Okay. Thank you.

Thanks, Sheila.

no at are There line time. questions on the further this

great and thank you Thank pipeline set of robust a Thank quarter you, like you the the And talk. feel year. the about again, everybody. here, would We're if the Thank you. anyone to of for for remainder We Charlie. questions.

joining. for call. you This concludes today's Thank

now You lines. may your disconnect