Four Corners Property Trust (FCPT) 2 Aug 232023 Q2 Earnings call transcript

Good morning and welcome to the FCPT Second Quarter 2023 Financial Results Conference Call. My name is Carla, and I will be the operator for today's call. [Operator Instructions].

I would now like to pass the conference over to our host, Gerry, to begin. Please go ahead when you're ready.

Carla. you, Thank

that of which course Actual we make unknown will will ability control During predict. to based this on statements, factors and known are affected assumptions. beyond our forward-looking our be or the by call, are beliefs results and

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

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

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

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

our remarks, capital results. make then second going to Gerry. acquisitions, and details the Patrick am financial quarter and raising for you, Thank morning. discuss Thank I introductory Good will will discuss and you on results. give Josh Gerry more to joining us

specifically facing estate real commercial While FCPT as well whole is positioned. challenges, is a very

Our quarter the portfolio occupancy year. reported last $X.XX and with QX We XX.X% of at quarter per XX.X%. to quarter second well for from the collections of which is and $X.XX year share, up perform this first AFFO continues exceptionally

to Our us low which rent our dining ample growing perform levels, support quick-service casual tenants along and continue dividend. provides well, very with our to continue

the was the reports for X.Xx within in quarter industry. the of second strongest rent This figure. this that coverage is our lease majority Our portfolio EBITDAre amongst to net coverage significant the

improved X% all prominent rise Steakhouse labor of most saw brands, same-store X as and Chili's, inflation and respectively. X%, X eased. XX%, LongHorn Garden, commodity In and cases, margins Olive sales our

rents XX basis, yield the benefit at This revenues included an cash acquisition our last of a XX for June initial reflecting on rental and including of place the the $XXX second XX. as acquisitions cash in increases of QX, XX.X% grew million of $XXX X.XX%, quarter properties million For months. in the in of rental year-over-year

of portfolio the million $XX -- with busy We to developer quite credit. continued $XX Darden have million corporate announced be recently an previously with diversified closing acquisition constructed of high qualified transaction the and high-quality for in July and

closed XX $XXX year-to-date, a is for year XXXX more XXXX deals properties cap the our the months in matter. for rate, acquired X.X% or million full prior have of we Including than any at acquisitions for for that XX July, which

I'd their Officer, be been Brat; our and remiss led quarter. opportunities efforts, I and the Without seize past by dedicated Jim if accounting these Niccole would talented COO, Stewart. we not incredibly over Accounting acquisition Chief our acknowledge teams, didn't to have our legal and able

as invested energy and organization. more the larger out and build capable years a We time our to have over capabilities more

feedback that Now sometimes predictable the taking when we that back, they get as investors, with to we come step have -- stable know and story. FCPT have speaking a a

REIT, we take have that a conservative As to great compliment reputation.

in continue will of to for niche field our net lease. carve the quality We competitive out

to may that breakout for a differentiated year believe we However, company. has also acquisition and the continue XXXX been be

benefit acquisitions to focus accretive capital competition cost in reduced and continue overall, both FCPT saw from we on. for brands we higher-quality QX, In opportunities credit the an and particularly of

attractive continue pipeline. on we press working advantage, to are to planning our are We and an

With that, I'll Patrick. turn it over to

Thanks, Bill.

to lower market, a debt in borrowing tighter shifting seeing following proceeds. the its gained March lending During more costs aftereffects other XXXX of equity We're paired dynamics market Bank continued collapse increasing really challenges. competition, fewer private higher of reduced in Valley lender-stage buyers Silicon steam May, buyer-friendly discussed namely still our and and earnings call dynamic the pricing. QX the we This early the and receptivity cellar with

opportunities. are developers portfolio with FCPT parties operators, on more to For engage and willing both

at already XXXX, into months members FCPT year. We've record to a help effect showed with workflow. the new X manage Now increased acquisitions our hired team numbers that

members team acquisitions opportunities. new sourcing now full-time focused on has X Our

welcomed leading management is recently Peters, negotiations. We also our Justin who asset and extension lease

Shifting to the pipeline.

We with leaseback the closings. restaurant have barring and course split at pipeline acquisitions at our a XX%. large other line opportunity. sale balanced unforeseen opportunities medical at to expect sale XX% XX%, the recent over to or on set We'd service roughly been in of Year-to-date, an see continue year, retail remain among strong and mix the portfolio the auto based of

medical on to wanted investor retail, portfolio, our we posted our net now moment the of outpatient which Much new presentation meet Of X% to reference around included medical for particularly and to care. costs, spend those demand as and yesterday. several X operators lease opportunity of in represents overall medical comes core we've bring sectors, investment a slides website retail the consumer seek to down

care Street, urgent Oak was years XX enter sector many One of Medical, space acquisition corridors. the ago, retail those respectively. seen the nonexistent. fixture CVS, And today, a VillageMD primary facilities care Walgreens virtually of and with Amazon also are and the We've

Real these closer move health estate years office to trend services for to buildings the end areas, to still consumers up it's is impactful to net with lease from care operators corridors. of prime be out for demand This within going come. and to retail and catching and retail medical hospitals

the nursing, footprint pursuing for as traditional FCPT office, important been This utilize other these use. strategy, buildings, medical not smaller in lease years. similar hospitals acquiring investment properties net or is distinction properties specialty/large-box traditional we've FCPT for to is Importantly, fungible often currently

Josh. that, you, With over to turn I'll it

Patrick. Thanks,

on for In we've that too we on, purchase addition rate FCPT. to to been expensive and also historically basis brands touched environment buying tenants cap able the have a improving were properties,

closed three larger opportunities. examples highlight recently of these which transactions we types have We of

via is we X sale a of long-term of the portfolio to June, a $XX largest rent The increases properties across leaseback under with X one First, wash operators. car acquired and states in master diversified portfolio lease national for annual million. geographically

property, had industry While high properties million FCPT selling able X% to cap much the well in sale basis seen. were wash per has negotiate reasonable X% average previously wash We the an been at lower rate properties range. or and typically we car cost than years, other actively above rents, of have resulting for leasebacks underwriting replacement a low car $X.X several

Second, in million. of portfolio $XX on July, Olive comprised X of Darden Garden properties, for Cheddar's XX our closed we and

continues Bill and As Darden credits from and rent of years, an to is X.X%. annual average XX of a of an one The highlighted, had increase outperform lease. Darden properties the net corporate guarantee strongest term in

of markets are acquire these allowed similar to spin our attractive portfolio The to very quality pricing. and portfolio at us and original properties the

a matched such with credit, it X. rates was that lease accretive was pre-raised tighter bit and from cap structure, the due recent it more here funds than the deals strong was While markets day to

that X tranche example the The credit in Dental, X corporate we are Health strong. this last portfolio The Wellnow very first Starbucks, portfolio constructed Care. also is leases Street a closed and This X for July. in is properties leased different Urgent newly $XX Oak portfolio large million of included with Aspen developer to brands. of including X the operators,

high-quality challenging transaction our more execution renting is reputation of to environment. strategy and in for this surety developers part with deals The larger work handling of projects providing to actively a complex of utilize

the commitment construction For construction avoidance of takeout these complete. once of was instead provided did fund a FCPT not assets but doubt,

a X and prior opportunistic properties small rate, cap for years, gain. average Turning source option We X.X% us still. remains a selling for that representing a cap rates capital to at on In was viable new sold King underperforming we've been property as of dispositions. Burger acquisitions, a at funding low versus source brand it

Gerry. over back to now it I'll turn

straight-line generated We million our as cash base Josh. June million adjustments. XX, X.X%. of rental is in $XX.X million, On after Thanks, average quarter the rental in income of XXXX, of other rent $XXX.X leases rate a current run and is escalator second noncash cash excluding X-year for rent basis, annual and weighted $X.X cash place annual

rent base we $X.X stock-based income -- changes no Bill cash nor collected there representing or any excluding our impairments. for quarter, expense sheet of and the were As was Cash to material mentioned, G&A rental million, reserves compensation quarter. for the X.X XX.X% X.X% credit collectibility balance of

$XX for be cash will the expect in G&A year We continue total. approximately to million

equity capacity. acquisitions on $XXX On funded June of $XX we undrawn $XXX cash cash The we held hand the average execution and an the equity. $XXX quarter and second of share of $XX.XX quarters in quarter, per the million revolver In of of XX, million raised prior $X with million million consisted per $XX.XX and at at in price share. million equity of second forwards initiated

July we this in are XX-year to issued July, acquisitions. offering recent The termination credit million pre-occurrence of $X.X which story. used debt unsecured challenging million investor at the but support of the strong a on X.XX% yield fund in we treasury priced of to have X.XX% an notes the of benefit maturity, coupon more notes, In quality but received memory, than including a our markets hedges. given were gain The senior $XXX

quarter respect to to equity coverage adjusted With release in July third fixed Pro and offering, third debt our net was was earnings our healthy our charge a in October. for is any debt X.Xx, announce leverage EBITDAre X.Xx in very forma the activity, leverage, the our second overall will to X.Xx. approximately prior quarter which quarter we

remain on obligations. our repayment layering conservative and focused maturities and extending We debt a maintaining and sheet balance

Our only note November private year. a due next million in and is $XX before XXXX of debt maturity June

Q&A. the Carla turn investor I'll that, With to call over back for

Instructions]. [Operator

from Our question Anthony first from JPMorgan. comes Paolone

like the pipeline and whether July seeing can the what of rates out strong what in kind right of talk activity just First you're picture what now. looks level was you one of to there also pretty a relates cap about beyond yield terms in and

on what's to the at think say very spectrum in high that's moment team good risk-return cap. would And pipeline's that, comments, seen work as we I that, given opportunity sweet to spot sort consistent Xs is of is direction capital. Sure. of history. or us for X the my quality And to our be we've set Pat's with as the cost our the to available the robust, in

And I'm thus deal in costs that, of to look what debt you you kind the your high did are to like deals where if your trying understand here? to capital you hedges spread see incremental some had just do and but would the apply the Xs. from

Right.

cost really debt So or what's time, over of of capital our is now capital. our for first equity blended of cost advantaged interesting cost is capital the

debt the ago, job weeks I hedging ago. that terrific a Gerry we So from as mentioned, funded few a closed few think weeks a

year, -- And equity of source attractive debt deal speak. So we are funds. to more of a our for did sort the is so

equity I don't So a pretty the think markets debt to more funds. need that now, are and of markets favorable the source right straightforward we be in

question from next Rob from comes Our Janney. Stevenson

beyond investments beyond and significant targeting any -- auto the are what health any restaurants? for Bill, areas you're that care

great Yes, question.

retroactively we a all review new past. review then formal in We tenants have Board over process we've quarter, we where every the our with the rocks sectors, and turned

to So we thorough be it. about very try

And different when to answer didn't many a of times that very slightly really happy were enter the question, frothy. we sectors we're

the So are always ecosystem. trying to better understand medical we

So you'll white I us think over into service auto But time, sectors different really medical. there. space a with lot and of expand see

more environment the overall, acquisition just is then And much favorable.

So we that level up. And or more of years lease with obviously, from high-yield been much market properties wouldn't exchange market really sold would CMBS. that XXXX one or REIT high to net X, have one now at over a the relationships built have the debt X lot the folks shown attractive capital showing have to historically compared by the to banks even been a are loans is last understand

accordingly, to but loan-to-own these days? partner that capital guess, conditions of level desire opportunities guys b, given not access merchant do these a and, So developers and some have have I cost-effective to market next for go you to the the any

topic jour. been Yes. du the have Loans

For the at many was lot hot competitors, received of our topic we questions the of NAREIT. about meeting, at ICSC and it a spring's it

worked loans. I think we hedge loans at worked I a when on to fund the very do have I capability Jim substantially. and

just that middle that But never in we feel acquisitions really that the us say a and I evidenced would we but think And certainly say have busy. with is we'd I attractive very keeping like down we have that QX. set never, opportunity

me... Okay. then for one last And

have can deal know, X we months certificate dividend mismatches. setting you as typically, document-intensive. challenging all terms, within the loans be liability was being the be at challenging this occupancy. someone be announced, asset was you they're repaid. They And because developer can of who can Just policy they to that properties around They be can because short

able we were was pricing we so closed then that And up the with to And when are properties come open. fair.

one And for Okay. then me. last

relative I think is did like same-store. that? you mentioned X% How Kerrow LongHorn doing to

managed. well little they're Kerrow versus the the results. We XXX, size quarter, sure for Make the we good post for A opened. a yes, but property great. doing They But great. doing in. different market X is had they're seventh that Kerrow extremely doing terrific sample adjusting they're you're that yes,

Instructions]. [Operator

next from comes from Wes Golladay Our question Baird.

a about Can or you like will believe a the in deal? is having I maybe unique you a the this this wash guess, wash, past, go than I -- high be asset. big little talk for a I And not the basis did traditional car for. an still and one-off? part that space maybe car get higher in but low you'd it's a it's

lined looked deals Yes. with wash looked often, with million But the top operator. because really $X and have now is And we cover XX-plus you're deals. subscription. million, profitable. lower wash the $X one the you business so very with at can We've basis million, many we've revenue car seeing basis. wash car of down $X very said, turned up this recurring percent It's as business car They the at, a

So level these through-the-cycle performance specifically, with it's model of I'm what understand that growing, with level nothing of are rent. just against we're not we businesses basis. the companies really of typically in or car anyone pretty new These a understands and really are nervous sure washes that aggressively

we So one happy did. we're that with the

We but be us continue I to selective. would look at expect them, to

this that bit. you it then form up? rate but equity those your a dispositions. your pipeline, is? equity be still high, have Would conversely, your Okay. do cap will where come when it's relatively get where that of at from it's you at alternative And maybe all dial I you cost have little look in And low you constrained of

Yes, very we and sold the locations, in our receive They're properties X.X% past. in high-quality assets, typically, offers for long-term regularly. cap the leases. pricing great below Darden investment-grade properties very We've

small, have. always of you allows terrific we to cost sensitive But option to acquisitions our are capital it we've been said, when and us. As because make and a -- our it's acquisitions

very is evidenced, of to frankly, we've our August allows level that us a our And year that acquisitions But our is hope pipeline will beginning the of is already respond equity by modulate. that of elevated quite completed crystal advantageous clear. to with the valuation having It acquisitions full that.

from comes Jim Evercore. from Our next question Kammert

You developer. quarter could first tranche, to of the you've with that it's noted, Would you that the an dollars? be willing sort about $XX million ultimately you acquisition terms be takeout share, team, large the from got the said in in of how

Yes.

we're But get great to So going that has not with X things or It's Josh past. into relationship the to tranches developer relate could guidance. we've done a that in X nurtured. this

did we're at year, ICSC not generally more with in to But just developers Las every meet frankly, an X X developers, Vegas, to or give on maybe the going and, So lead meeting historically, rarely that guidance. we'd acquisition.

-- that year, dozens. with This we met

think high we're are And credit reputation I property our that And the don't that's perform is new. an newly so well with because someone constructed, who market, we leases can long-term in buy need buildings difficult think opportunity we financing, quality capitalized a advantage. a relatively fertile to tenants as

was How many cultivating, but my you that a it from it's XX sounds XX positions these Well, months ago. to second like Great. of question. proliferation are

a timing XXXX certainly Yes. business I one I almost exchange spread wasn't model would And XX much I'd because of months were was just selling widest by at developer XX of a borrowing mean the X%. the possible one. capture -- into the to ago, to they market concern frankly, say that

timing And shrink even to X%, balance now personally are with banks is and guaranteed an important. sheets. their start very loans so Well, might trying

sale can liquidity that that close, their they to something is partners even that's coming. agreement, our I financial value think purchase prior evidence of so and is to And

further this questions have time. We no at

hand So with back that, Bill I remarks. will to for final

FCPT, you, been the an excited as half Excellent. for of year it's for Carla. Thank we very the exciting Well, far so year second well. are and

we Gerry If any myself or or Drake can have follow-up. and to a you Cheers. Thanks set so please out reach much. questions,

for today's call. you participation. Thank concludes your This

now disconnect lines. may You your