Four Corners Property Trust (FCPT) 16 Feb 232022 Q4 Earnings call transcript

Ladies and gentlemen welcome to the FCPT Fourth Quarter 2022 Financial Results Conference Call. My name is Glen, and I’ll be the moderator for today’s call. [Operator Instructions]

I will now hand over to your host Gerry to begin. Gerry, please go ahead.

Glen. you Thank

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

unknown our results by predict. actual be factors and that Our are or control will beyond ability to known affected

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

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

In this our addition, the and be presented reconciliation to on non-GAAP in website. financial AFFO call, measures on company’s found Also FFO such report. supplemental as can

over with Bill. I’ll the And that, call to turn

quarter results. am make Gerry. will some financial remarks, Gerry to Good review I Patrick Thank raising introductory the discuss you, then around and pipeline, joining and morning. capital the fourth results. acquisitions us will in details for going Thank our you to discuss

the XX.X% over portfolio continued reported AFFO existing The and XXXX at $X.XX which XX.X%. for full represents per for occupancy $X.XX fourth year, for to December growth X% We quarter the share, exceptionally well XX and share remaining per XXXX. collections year perform ended

yield the investment a year-over-year to quarter to quarter the operators the for rental response Patrick portfolio but capital XXX detail, We grew XX we rental aligning at acquisitions environment. X.X% properties the of December the environment of with fourth class cost in including pricing included in remain rents in XX see of fourth in are highly current properties XX. cash more discuss improve confident our and revenues levels. reflecting continue acquired as XX.X% of attractive will higher rent we and the acquisition are operated, best corporate in we the million benefit This cash an of $XXX XXXX. basis, on in increases, in XX of million acquisition place initial of at

average in have sale earlier acquisitions cap rate QX to for that above financing at of We transactions expand versus has to this loans capital, in dynamic to other all more X.X% deals years. And QX priced us leaseback more recently monetize the their discussions operators with looking the months. versus rates, The real deals have the in appeal to opportunities in priced now X.X% forms prior Blended note quarter. estate. last more or with The included the cap the average QX. year that more tenants term recent become reflected figure in expensive in CMBS six led operations Equity shift

I quarter wanted very in headwinds but the to in experienced regards specific note, we minor very to FFO. two

Kerrow EBITDA restaurants utility prior subsidiary Kerrow labor, Kerrow by higher other but the and increase has inflation. already much sales beef other and line quarter, at experience margin are experienced quarters beverage, to in with relief the and costs. and strong in First see have some and food services remain lower impacted started costs

quarter the this this year. to expect we So in first impact moderate of

one, just our a rate is minor a currently higher fixed over at of interest X.XX%. expense. of second was billion The XX% headwind debt of

is A fixed interest XX% by that quarters, we’ve business, like However average versus rate and over an appropriate but XXX last benefited of remaining pricing and investors our our impacted third increased quarters the think XX% on debt some we for are rates quarter. we’re variable, the quarter. basis to unfortunately, XX% variable in reminder debt our

XXX,XXX. In end million the quarter Our sold a is property a X.X%. as of quarter, the for one representing we X.X of sales price run-rate current of gain

overall The eight source sold the an portfolio. quality our of capital also full attractive properties year strong for for million. while the alternative us improving XX demand properties of For we the XXXX, provides

Restaurant continue performance. most tenant’s sales our recent have Moving in to strong quarter. to results the operators

as to consumer. Although not on increases food and many labor passed fully in end are margins the cost experiencing are on pressure

However, commodity to as of year’s up operating bearish while like increases, I earlier, prices. COVID XXX% mentioned of According costs and levels. of pre a reported discussing, February are continue hold sales Sales meat as especially restaurants seeing survey it sales approximately approximately levels, restaurants restaurants looks are XXX% weekly weekly last slowing to X.

strongest net to that we make coverage industry. Our four their Three, This least quarter. reports of reorder amongst every portfolio corrects within rent XX% to almost our estimated is this the the times statistic. for point EBITDA the

prices Focusing on impact low rent provides when levels. input store inflationary cushion a

raised We an balance the quarter in sheet. share. fourth equity of Turning $XX.XX to XX per million and of the price average

XX also facility of part in of expect October. as continue our of capital. incremental another raise source credit proceeds to also would as utilize extending We solid We dispositions million to debt

with Finally, FCPT Jim. from value us time base this this one of promotion since transactions shareholders, XXX to of been legal Bratt invested properties during FCPT’s unique skill his real the given and for integral of comment and and Jim were our excited operations. grow announce on part very been and an effort operations, in our has set Jim has and inception, XX Chief has the his Thank six Jim serve estate team. all judgment. significantly to to you, January drive in Operating Officer. We employee acquired to as

to over it Pat. turn I’ll that, With

mix Thanks, investments to Like the sector by of QX. discussing in start the million of $XXX closed Bill.

Buffalo Illinois new for in retail X% cap in a a medical properties sale five Auto of at remaining was rate, the is cap portfolio quarter Wings for retail. leaseback Chicago and cap X.X% $XX Indiana XX% investments. in retail accounted [Indiscernible] XX%. A Wild and million for XX% a $XX million $X Amongst the others, included properties a Service rate. rate. at investments million for these for of of other portfolio Medical consisted For restaurants a X.X% at X.X%

We the of discuss generally back X.X% the Ultimately, that market quickly and Bill quarter. in latter As I’d the into rates trend cap impact of also for did allowed note XXXX. the rate interest in the go because mentioned, average how of moved to sellers part upward of above several XXXX half price higher QX been rates priced adjustments. last cap QX. now and deals second to have

highly focused our investment protecting remain on We positive spreads.

the half everyone the like active a we deals previously lease remain to at So volume they in basis direct and in several for had year. far of the priced XXXX the back a come gains of and XXXX of bid months the and QX lowest the back March said adjusted number XXXX continue properties quarter. We’ve us on for example, bit we XX% that first we We above look closing observed latter our expectations the also acquisition I’d give buyers pricing XX rates volume have believe XX market. last this was where ends We’ve cap are investors of XXXX. quarter in points as rates year. eight but net pipeline, and front QX to with a typically of our as busy QX we for to with expect interest to pricing reentering much. not qX That lower this We years. in remind is refused our sellers on in up year, a deal result that to some being of those enjoying in acquisition

able king remain XXXX versus so we in for quality, interesting properties has red eight very of on We’ve real and finding target and stories brands. continued. sold candidates specifically we’re for sale outparcel Bill leaseback million. selected to in sale yield the we’ve pipeline, fit underperformance the far at also opportunities, disposition seeing selective Regarding mentioned also respective XXXX deals our tenant two in another completed while one profile. efforts $XX Momentum some relative that on their and $XX on our been burger estate These million. based were lobsters dispositions

new into continue portfolio expect recycling can where we improve We quality. to acquisition, particularly capital opportunistically

to for discussion portfolio Ferry results. financial turning on our Now and

the We were quarter of balance rent of weighted million run the and leases at rental of X.X million of cash the in the reserves in and base cash end non straight XX.X% annual Pat. the million We There no year material for as full end year rate income basis generated other quarter is of the and current reported our Thanks, XX.X% collectability any average year. collections cash On changes line excluding for XX.X impairments nor annual to the place adjustments. of or a for in X.XX%. cash our XXX.X is credit sheet five the escalator quarter. year fourth rent after fourth rental

X.X G&A for income G&A XX.X compensation million. excluding cash expense the representing the of and million, stock Cash quarter for was quarter rental based cash the year for was X%

X% growth. team compensation to our focus increase of team, prowess. expect will principally we For our be XX XXXX tied approximately team million, retention members around G&A cash operating expenses. your for representing additional investment and purposes additional to is We on existing bolster modeling The

We six from on the with team to and continue complexity efficiency. us grown and help to of members systems today. the have portfolio focus increased inception, XX to Since we technology improve

sheet. Turning to the balance

capitalized growth. fund are to We well

remains As by with of of discussed that December of extended raise revolver of were million which agreements, the overall of October, proceeds maturities to an our million capacity share. million over million five sell the average fourth XXX and an and in loans had credit via we $XX.XX undrawn existing including million XX XX five Bill settlement, margins reduced SOFR. X.X remind capacity. net and shares converted announced everyone The proceeds. ATM million price start leverage per the quarter in from points, quarter, of upon cash anticipated mentioned, equity by XXX of to on XX, we years million our basis XXX held On facility, conservative. raised XX we We and Credit term XX our was to last forward year in but under pricing amendment additional program LIBOR with million we improved facility

with staggered fully are maturity of the maturities not debt due Our million, June XXXX. XX until first

hedging much ongoing the loans. on basis an to term interest regular fix of variable our on have rate we program extend rate where hedges We programmatic rate

X.XX% as over the a we private add at of on end at the the of loans X.XX%. rate. fixed you are currently hedged when an rate And As the hedged all are XXX a mentioned, Bill year, we million term million rate XX% notes, in XXX of average of

overall to respect leverage, net in fourth quarter the X.X EBITDA was adjusted to times. debt With our

Pro and coverage deploying a fixed healthy settling remains Our for equity. charge remaining X.X at ratio times. the forma

below is leverage well and target X.X approximately of Our X. times our

and the our As fixing long swaps for as million term of in XX, we next we that have at XX starting rate private forward in XX discussed note earnings December year of issuance. X.X% treasury base place, the press effectively release, portion

And with that, for Glen to I’ll turn it questions. over you back investor

Rob from comes Thank you. have question [Operator from your We Instructions] Janney. now open. Rob, is Stevenson first our line

the a specifically, to the Good you’ve gave months. last Bill. that relative morning, guys I color Red underperformers, but guys. anything number since the eight been appreciate selling Lobster, you on some being dispositions those six, of over the underperformance to

Yes.

they we bought Over And sold the them, lobsters red long them years, cap. of over X, at Rob, million. bought term. mentioned, X three just XX have We’ve we’ve for as XX a lease you XX.X million-ish, about

puts dollar Lobster So rent. under X.X% that gain that is a of our couple million at Red

We the that are five have market. on

those That and And times a not half that of sell and thus two lease coverage master had far. of properties, in they may XX leave term. may would, XX would years good but or so that has luck we’ve are

bought low are We rest coverage we Outparcels five times. in over And rent, those ground have think our leases that probably the strategy.

of have to also XX% next XX are well underwritten under which properties, a if eight get consider an red red would ground and them think two than XX they an just are is located. have leases remainder Longhorn have lobsters of we $XXX,XXX I sold just rents that we’ve like those important and important lower point, XX to over this things think be on X.X% rent. X% in the to those olive adjacent the date is to those universe of XX the over But rent. the I remaining we’d of That So very or lobsters garden have the

changing And pretty red owns are feel They comfortable. we management. So provided during out credit their call union and lobster discussed red who they’ve, lobster more support.

very feel our about there. we position So good

power whether long price we offset How or and having in it’s prices and category, entree that should unlimited you and not remain offering as costs? Okay, the fairly to of pricing able food struggling be certain high? higher QSR or in are by the board? the seeing and some is that food even And Anything where input people are across service. raise in the about full by restaurant input thinking as others point it between with costs order are more general, or to

Yes.

as raise prices, I’d now seeing we But share, were of not others, market bit. also and we’re attack some really commodity trying So costs seeing brands, recede and a prices these much. sort raise to say

think it’s say, in of outperformed and dramatically more than kind supermarket share. the the and branded been restaurants, own, also I’d dine gained I moderate the or out local So have across board restaurants and significant has dine restaurants chef inflation we inflation. owned

Okay, and then me. last for one

near costs You guys labor technology the the staffing how these breakdown, anything term the the, labor. coming may versus and input additional in needs down appear about some What much in reduce and owned combination to of able be the expenses to that of input do was costs, was labor mitigate the be the to don’t the talked sort days were costs? of portfolio, are how food tenants I wise, Longhorn and which food that of expenses abating the mean,

be really because Yes. billion generally. is $XXX,XXX, seems or business, a number. even a to we’re there noticeable, here I It’s predictable, on mean, so predictable small $X that our so business

Kerrow of where result year up Kerrow that was program than So little a business. well a for were thing. the struggling a we XX sort which This last then beef off was is we it We’ve the had is over first increased a Delta one We to the an in find was quarter, are prices, quarter on had expected. And that that moderating, had lower quarters. staffing specific hours labor. which exceptionally now it’s but training run

So it be. we mention would couple And than I lower would there’s even anything that. it don’t a it, we into thought because to was worth just think wouldn’t read most it probably calling but be folks thought $XXX,XXX out

reduce either side and guys apply then Okay, the that own your the staffing stuff, among technology tenants you you’re to widespread anything or on with seeing needs.

need helps acquisition in through one investors a to of we When taken our mean, number you that. we use quarter, find I old We it buy building did really a to efficiency like path last that us AI organized. days, the track process, actually the we’ve organized, We traffic. you and place every use helps keeps effort, us. to be manage half that for and very a

think It outs helpful. be business. I think that’s restaurant be our think level, in I would the call almost drive already directionally But big XXX% entirely but drive COVID. would imagine And I those thru out the the time, COVID for two majority I business. will an pre then settle thru of was a call thru business, at level COVID. near settle would QSR becoming And the entirely will it not it drive over at a drive during higher than peak But almost of thru business during

Rob. now open. your have [Indiscernible] is you question Thank from Instructions] [Operator comes our We line next

Red picture much distress guess little the maybe would you’re broader on question some where a you low back ideally, got have very I in follow JV still Adler, get do with Lobster. restaurant the want everyone there up ground a some could those rents this come Lupard I guess to and morning you now. are good all on seeing into Obviously play point? Hey you at on the that side

being Thankfully, not on of a luck in to rather favorable had and rents. got pickup. it we’ve there Ruby to not a But getting really to I’m But just sample Red I’m Yes very likely pretty to low specifically, into Maine can the garden rents, we put be be restructuring. discussions general, actually properties you’d our Lobster, are low going little is olive those and in size it speaking Tuesday’s It’s speaking bit else rents an reaffirmed small. distracting. very low with have strategy, very Darden released in back. back much be to more equal. All

repurposing buildings, space, are don’t expensive, ton of buildings. much of as existing has higher rent, a out We’re moderated. restaurant construction they not in people And and so as sales costs are to of percentage move seeing old want the that a distress are so sales

think that addresses the So I question.

think pipeline this visibility you ground you visibility work are that more it do curious just have half like stuff a you how I I’m on and be understanding kind of complex, Is then back you’ve So year? would much view of pipeline out? visibility some the to into of that how much loaded And curious, just curious that on the have? quarter where you the carbon but month end commented a the six have the on deals of leases have these lot just large

Yes.

visibility would that old We take there know the months, or going of and know say, substantial need But and them. parcels certain jurisdictions we steps I over the that are could the to next have sometimes more. purchase year, take we properties a some three at to then we’re place, that in

try pipeline buildings, fussed of live And quarter. decision the consequences quarter these buy to have not managing so you overly to to be own them. your with to with the we Once you

and the But do it it’s you to typically So year, in the the last busy Patrick softer, last order thing want and as out your lower at expectations end the even of then a mentioned, quality of end a was the quarter. as last is little year, to QX.

for the is, frankly, we’ve the dynamic three last So had years. same this

the certain debt deal we take you it, then think debt the maybe once get Just one just timing How down Got about line a to level? issuance? of for a should Gerry. to

of balance zero the on Yes, start line this I got the of forwards that credit, would give, at would the sometime We’ve year. year, answer be great end year. the was the at of question our obviously,

we market has margin that that. or will the of private opportunistic invest shape. forward be to we forward extended market, as That advantage willing insurance note and So we’re take when do the But negative curve can to is we’re more option in fund. rates. In also in companies great actually are funding see you now

do when have think I of around we we it. So optionality a lot

Thank you, Thalmann. Wes. Ladenburg now question [Operator comes Instructions] is Massocca our We open. line John of John your have next from

about as kind as faded set, be net I last and going over happening couple bit acquisition deals when buyer CDs and side are to deals buyer that closing XXXX buyers, that of individual things, Is the what’s been the the think tend the just you I into has we’re with of On the one buyers, and has little a months? strengthened of away ended, save etc. worth year high competitive

Sure.

So XXXX the where ones reinvested they’re what’s asset require then they and leg, the proceeds that selling, the gets called are assets in crowded down buying.

market down is which lease, typically. the so the leg, And not usually very transaction often for apartment an it’s net building, very

So buyers fallen. transaction the and those consequently, volume it’s amount the the gone of has of doesn’t one not competitive. still often XX, in of a have financing levered cost up. mean their with market and those But buyers three lag fallen has That are

as sold. market that the are properties So market there either actually over the were comments from redress Those properties to their to have pulled on dynamic were fall, his alluded were pricing. was or been a Patrick in the summer had and

new into properties large XXXX expectations. XXXX, as financing heading different has market net now equity, process attractive I in private cost And gone has we’re the their vehicles levered ability focused. that of also of declined. in we private add influx up, new of a entering to anticipating on more obviously create those And lease, yields with in equity much were pricing maybe would in the

equity we So experience. we we’re than from private seeing would funds thought competition less

potential terms wide? the the versus of kind maybe franchise mentioned That in of given input kind you on How makes thinking the kind of owned, You personally then business? in or your industry sense. side acquisition. are pressures of being are credit of pricing about corporate of that especially And credit some care seen Davidson,

the kind There very the thoughtful, roughly, underwriting Credit credit. corporate are is model, wouldn’t large real conservative small pretty we’ve draw of some versus half I around the franchise estate there Yes, matters. I of necessarily operated franchise and is roughly very, think are property. line and half very remaining corporate But literally. businesses, been some or to levered always our

the in game adjusted cap small of played what’s for very really have. that never peers we’ve financing rates you’ll our market. franchisee the our consistent, are happening And So see, relatively some in

going means. risks not out any we’re the by curve So

you either actually these terms pricing being of if Rather kind are just mean, financials of some responses pressures QSR transactions, than I at the some recorded, in on impacts space perfect. more in to versus the new Okay, are dining that of kind of pressures? responses, what casual or the those the and seeing of pricing look financials is you of

Kerrow the but the was in able many the couldn’t to Yes, consequence industry. sort cases, is what so to felt happening you XXXX, you abnormal at being we I what’s led it staffing serve think that in pretty get levels guest. at to profitability, the not consistent of In in wanted of what to the,

of So And you’re a again, you’re struggled seeing I sandbox. happened don’t weaker time. are over more of costs have is that both think But increased. in seeing real franchisees levered, we play the staffing, are and moderating what’s in factors brands those number commodity

now our [Indiscernible], Instructions] your open. line have from you, [Operator question comes is John. Thank Now next we

just Yes, happening generally retail. thank what’s kind happening Bill, with what’s your morning, of some restaurants getting of you. everyone. Good comments with and around,

If of world would you beyond any looking in consider retail point acquisition for guys at the opportunities.

we purchased in strategies past. Yes, that are always acquisitions at what have we were to adjacent the looking

We We our of we have and obviously review number a auto retail. We’ve bought, number annually. a now board with only. medical, formal service a adjacencies retail restaurant process of where started

expect wouldn’t hotels apartment office to expand We apparatus But that. like buildings or to continue buy anything or our or to of aperture thoughtfully. acquisition us I try the

some it’s more larger quite over time. for the look you that And path REITs, worked same of think net I if they natural them. a follow And of lease long and of at well a it’s older progression. period

line. on We have Instructions] you. Thank further the no questions [Operator

everyone joining is call. available the and management’s interested. again you Thanks anyone for if Q&A thank for Great,

for Thank concludes today’s you call. and gentlemen, you. Ladies Thank this joining.

disconnect now lines. may You your