FCPT - Earnings call transcript Q2 2019 | Four Corners Property Trust, Inc.

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Operator

Good day, and welcome to the FCPT Second Quarter 2019 Earnings Conference Call and Webcast. All participants will be in a listen-only mode. [Operator Instructions]. After today's presentation, there will be an opportunity to ask questions. [Operator Instructions]. is event this note being recorded. Please

now Mr. Gerry would floor yours, like Mr. to to over is conference the sir. Morgan, the turn Morgan, I Chief Officer. Financial

Gerry Morgan

Mike. Thank you,

Bill on Lenehan. call me Joining today the is

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

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

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

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

non-GAAP presented such measures addition, And Company's on can found to website. in FFO as report in reconciliation our call, supplemental on be the AFFO and available this also financial

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

Bill Lenehan

discuss joining Good Gerry. morning. you, to Thank quarter everyone Thank for results. us our you second

FCPT's tenants The acquisitions XX our large and Olive Lobster. the LongHorn, to second points properties price million including leased reached entry of corporate for with Garden, XX reflecting acquisitions basis quarter low strong Arby's, Texas was point the brands Red Wendy's, Roadhouse, a $XX for $X representing average operating volume million low rents.

low results. Our average and EBITDA remains FCPT. focus rents on The properties financial operator rent times tenant store reported X.X coverage performance, in-place was paramount that credit, level for at

been first partner us XX signing forward properties from will available Washington these properties tranches properties approximately and We look conveyed. as WPG in $XX rolling for Closings an to to the outparcel an become from for remaining properties last additional Prime also agreement excellent announced the occur the we be to closing week transaction. has purchase and the Group XX million.

XX lease of purchase which rents. price brands low in-place of The averaged important ground I are a this and primarily reflects leases group with high nationally the represents want characteristics of transaction. million brands XX $X.X to the quality couple of and The entities. note transaction per property corporate recognized

the transaction marking In population favorably The out restaurant non-restaurant strong in traffic retail into doing includes portfolio. to we by this six mentioned non-restaurant demographics eight lease first net compares adjacent that eight structures, so; original net locations branch the eight facilitated grade and represent investments properties the especially outside in tenants. spin will over properties sizes addition, past that retail with if We've qualities our our lease. the acquiring of with year properties similar of great and locations. share our are it building restaurants as restaurant These sectors properties comparable investment transaction

our in Olive same-store a sourcing restaurant existing lease non-restaurant look well has includes the to be brands and The We of perform the industry restaurant EBITDA in most forward respectively and continued deal leveraging X.X% which sectors. to This looks closing the coverage as May. whole both and was reporting the fiscal results. LongHorn net and quarter in growth in solid its led by evidenced sales QX closed X.X% as recent year by grow to to Garden Darden, times infrastructure and portfolio X.X

in tenant sales fourth represents expanding We at same-store Brinker operating which at quarter the most also second company of reported X.X% quarter growth same-store the positive brand. which trends our the of note the largest straight locations the positive Chili's recent International, at parent company-owned

impacted focused FCPT eye on do to operators align operators continue will we challenges. Overall, and best-in-class perform ourselves delivery largely well and by on these loyalty others industry increased brands some as with and highlighted initiatives the competition. rising trends and from costs, and an note keep addressing a such have headwinds but economy to being restaurant slowing but labor continues technological are these

We the hut largest downgraded and pizza International a agencies. have any large has questions to recently MPC rating we second on been the domestic whether by franchisee franchisee exposure received investor overall which

We their properties. of have none

the been Perkins. situation any own about We there Also at of those financial don't have rumors either.

on our to new in funding of our strategies. associate professional will news associate. set good These well continue new continue additions have our along the a up with and development We out we weeks, us team current efforts our investment have coming and building finance to the executing a continued team acquisition corporate

to with some the XX also is capital observe over a tightening to respect a in This XXXX several raised dropping last net lot of of the recently. first rates reaction interest investment rates by And half did the seen we repeaters. Finally, potentially the equity transactions of we've environment, our cap overall on days.

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

Gerry Morgan

Thanks, Bill.

rent million XX, for June of rental adjustments. quarter rental just leases under as on line excluding $XX.X place generated $XXX of We in base And cash the in XXXX, cash annual million. run second straight income non-cash rate basis, current after is the a

Our weighted rent Bill cash remains our portfolio. but of and was approximately X.X%, worthy for mentioned, annual EBITDA as escalator the average repeat, coverage XX-year rate at X.X times

FFO share results. quarter-over-quarter flat per reported We

yet As in per the invested balance effect short-term impacted a by dilutive were due of the we $X.XX quarter sheet share approximately to not cash.

due we interest loans bonds rate to hedges as interest longer the higher invest also our impacted on G&A our average team. higher greater and our build duration and by a and of rolling mix in cash of were results debt on Our rate a term

of cash of million and after of G&A guidance an In stock-based $X.X our rate the excluding expenses we administrative million. XXXX compensation $XX and quarter, cash, reported annual approximately general, for remains

support sheet, our second EBITDA of balance We to net $XX start the XXXX million quarter investment times, we activity. full X.X ended cash, debt revolver. available to and the availability over quarter second sheet second with capitalized on well half $XXX of balance the to million Turning

of initial last million. a of average In an share proceeds our addition, April, at $XX.XX approximately on through price into $XX call, sales program quarter's as discussed per agreement entered in we gross for forward-sell ATM

settled the to XXXX but yet do of dates meet on the needs. forward acquisition expect to funding not so of have prior any one end to portion more or continue We to

to With that, back turn Mike we'll for Q&A. it over

Operator

Thank you, sir.

will begin now Instructions]. [Operator session. question-and-answer the We

first come Please of The Collin we James. from Raymond ahead. Mings go question have will

Collin Mings

Just for that you've direction. a a prepared while as remarks, to marks you noted this are communicated with investing Clearly tenants. now in in associated non-restaurant open you WPG the properties deal potentially formal move in the

to call part larger way about a can a be deal? the portfolio the these approach on brought moving just you a As brands you forward non-restaurant to or one-off we in to additional discuss pursue will similar think expect well into transaction how Do opportunities? basis plan you of WPG only as them

Bill Lenehan

Collin, announcement. you well we've over a this and been our first studying year as non-restaurant is heard properties for have

will in properties we more transactions feel next our looking over I non-restaurant other remain see the think fit in months announcements this at as and few outparcels opportunistic are like that you old parcel larger portfolio. included we

So properties the you'll think I I see way was continue and think see near-term. organic start a that to a this But non-restaurant an us you'll to off for way it mix. do

Collin Mings

Got it.

focus just away there non-restaurant sizes That's you this as to box that on stay think particularly or specific from? are to any And about you want Okay. that ones you sectors, move properties, want into helpful. then

Bill Lenehan

Yes.

our just I tenants, exist killer that with adjacent other historically to properties. on focused naturally restaurant category think concepts, branches properties bank premium we've and investment grade,

from. behind stay be would good is I estate leases think credit we and we can generic we retail if to likely something low with away with opportunistic. real rents, find long-term But good it want

Collin Mings

Got it.

like open to you to be retail? get clarify would an that or that with really associated the be outparcel or you point, things on want maybe building do Just may it if to office

Bill Lenehan

I think mostly retail, Collin.

Collin Mings

there then of ground second a fair fact WPG leases remarks prepared And maybe all? can that alluded in enough. to mix associated with again number the deal, Fair you you at quantify was that the

Bill Lenehan

this outparcels; we're I'm of haven't would lease since we I to we higher But on specifically XX% looked corporate percentage And corporately I the deals that not both basis. the to think outparcel WPG say provide roughly but that at ground we it's XX% on Yes. operated are when properties lease. and referring similar look ground historically historically the at that break-up. relatively in tenant at looking case,

Collin Mings

here, process some you have diligence changing comprehensive into then, as guys on and put from place pretty think the just All one non-restaurant margin again due historically that about are just branded standpoint underwriting underwriting you on what focused you And right. again process recognizing a things an properties? of last restaurants, as these

Bill Lenehan

question, Great Collin.

we're overlap what's location, them that I the fundamentally reuse, a lot net as you run underwriting a rent it process of guarantor through at you buying properties credit, look it on is and in deposits underwriting. that variables lease, think let's they we're minor there's bank sales are the is growth really margin out et for a the to cetera the what say of finding the case our and really tweaks we're branch, rent swapping of that our

Operator

The will of next from Stevenson today question Janney. Rob come

Rob Stevenson

anybody's within Good bank about the going starting and could XX a repurposed assuming years asked great sparks cetera Millennials to there. Obviously that the not to branches this couple not morning to today, I phone tomorrow, detail, but but like next piece generally branches be but less like the in it you're deposits of for out maybe questions not guys. choice. wanted land at of especially one guys need talk maybe Collin that on bank do that's point first my what with you a et greater use

you've when the been So branches about doing in bank particular? you what has excited underwriting,

Bill Lenehan

think that were particular less we about that that people closure on specific I any would up branch don't I call them But focused bank us of are with there's the far expect. in anything have actually rates were Well restaurant sort branches properties These properties than way. purchased. intermingled bank in

in very tenants. than we'd basis term. attractive repurpose large that the and are very then primarily repurposable economic in restaurants proposition And got Second buildings, We've we'd they're grade them. these more good have a to boxes with be investment lease the

on But bank Prime to think buildings. with it but large tenants -- the first solely rents it's be branches not focused very I in things, just and announcement by happened. couple different so case grade looking of low any at in branches investment So we're bank lot means, repurposable a we're Washington happen this this

Rob Stevenson

Okay. are the the restaurant on versus guys on the where And where today? portfolio assets you coverage is non-restaurant EBITDAR

Bill Lenehan

measure. key Typically them bit branch as properties, to use I disclosed that for we but they of deposits a don't small yet. a the number think the little it's don't metric EBITDAR we such bank difficult coverage own is

don't any think like that. made disclosures I So we've

Rob Stevenson

in like the there's difference aware? But typical something you're that versus restaurant or coverage like material quality of Okay. sort no of jareds asset the

Bill Lenehan

relevant performance. I took we benchmarks them, in these As a those comfortable this to stores I operate don't how in. so and financial feel that But careful were industries about very obviously assets, talking at underwriting they the mentioned we own compare don't we yet perform as them look

Operator

And Nate of Crossett next, have we Berenberg.

Nate Crossett

been guys. good Hi, that morning Certainly Washington have there's of acquisitions come a Prime. from lot

wondering us deals transactions that I new has with? do if do them. there opportunity give similar how so or that other to of you property in are type just active with remaining types a open could sense much And more REITs And discussions could was REITs the are could left you do you with these you and door potentially

Bill Lenehan

Sure.

sell think with we way I are a do I buying them. we look them with a we on to well think will additional to a management and buy. bit the they have to done we've outparcels their willing that sort with frankly continue willing we're from great our Washington quite to team, of But and relationship are Prime to

peers, conversation are We a in from looking to other purchase them. number outparcels we of are with

and should cost you of we've increased to does And, think we remainder our expect the through theme. the announcements the can attractive. I have It be yes, buy. number our what lead more aperture find to a of we very acquisitions make for there been kind of capital, that that year obviously to opportunity along that of properties given

Operator

Mr. Crossett questions, sir. any further

the we go ahead proceed John and Thalmann. Massocca So to Ladenburg and question from next will of that'll come

John Massocca

versus credit like credit on Are of you maybe emphasis the what portfolio is a versus percentage more restaurant XX versus things. placing the greater of value on of touching today franchisees seeing And corporate roughly? say corporate ago? months side today So franchisee

Bill Lenehan

high. if transactions have The they're because outparcel fingertips still we percentage but very, at credit attractive credit. very is don't publicly large is We I think changed. know vast it's don't corporate is different and sort these majority Darden, corporate league. but Brinker, my the been would think emphasis I of most our traded large see especially rated has a in clearly franchise corporations that highly of exact

like about it's and feel the we things primary advantage an strategy. outparcel like credit this So is do one obviously corporate we of

John Massocca

of think a of Okay. move that fact obviously which you given target a you kind leverage And up or sheet do kind you kind even because that well then to from perspective range maybe leverage expect would offering forward of more but of below quicker? have in some have you forward its target a bit crept put maybe balance you a you up pocket little levels if that out flexibility your towards there your gives back the

Bill Lenehan

just we capacity. targets to that our the think any of to we rush a leverage towards low a but are in don't naturally. your overall sheet with financial I will increase happen tremendous point leverage forward flexibility not But have balance amount with

lowers have REITs I long real balance over in feel a we found of long over sheet like our advantage in So is business and but place quarter-by-quarter place the terrific levered to advance be earnings what period time create and good is model a conservatively a growth capitalized to really forward. earnings over like being a Obviously we our going growth we're feel able haul.

John Massocca

swapped Okay. we're in especially what XX% the interest side, outstanding aren't loans of the now? on thoughts the environment for currently given that today term And plan of right are kind the then on rate the long-term low debt your maybe

Gerry Morgan

grab I Bill will that.

Bill Lenehan

Okay.

Gerry Morgan

debt is some strategy in typical is XX% Our I unfixed to think XX% our in to range sector. which have the

But we'll think remain our monitor we're that. with unhedged. portion I having a term So today facility comfortable of

Gerry Morgan

additional questions? Mike, any

Operator

Yes, have This Linda is another Barclays. Tsai sir. We question. do from of

Bill Lenehan

Linda. morning, Good

Linda Tsai

Washington for may transactions consistent towards be going in Good of the recent pretty low the the yields and end your morning. I been Prime know range. have acquisitions you're cash

eight carry a the non-restaurant versus Just brands, in cap the lower retail those of terms did components rate restaurants?

Bill Lenehan

in very No, they're much line.

Linda Tsai

of certain size is the there box boxes. smaller attractiveness as generic view sweet Okay. non-restaurant and reuse function that potential? And of potential for then and is retail you a guess the a of sized alluded I reuse to build-outs the spot range more you Is

Bill Lenehan

Yes.

building boxes of sort I or gyms there's department cut into. because have demise think large like some up others would away it size sort uses the really depends we But on boxes from have naturally. that how buildings some stayed the historically really of that gone larger store

and other tenants, granular, of that they're So buildings keep risks long you very operating and performance it is term, we keep have of for our and small, with But lot to branch to lease our preference these have be positive long optionality. given clearly rents a going deposits low bank think here the in a the the we time.

Linda Tsai

from it That's Thanks. me.

Bill Lenehan

you, Great, thank Linda. Mike any additional questions.

Operator

do have from of follow-up Yes, sir. a We Nate Crossett Berenberg.

Nate Crossett

hear you dropped. did guys, Hey question, first my line my

sure So or I wasn't you answered it if not.

Bill Lenehan

Would you I it? did. think mind we repeating

Nate Crossett

about of you if lost us with you remaining was and sense a kind Washington of opportunity Prime the It give them?

Bill Lenehan

Nate. Yes, we that, did cover

Nate Crossett

mentioned know of the hired But you then about sourcing don’t I you can maybe you at size talk back I of okay, me deals associate? team Okay. will And can look you go the remind how transcript. and you're sales outside larger new the transactions; these in

Bill Lenehan

Right.

a our the team in properties. would of It's years. we that three very say been myself been focused restaurants sourcing more more last I couple investment have have comprised people adding a September. our bought others, on we're that consistent and that we've two and fourth experienced that hundred now now for is has So and just

now is more evidencing is investment these like perhaps on a Our to out differentiator. there ability bit more similar, we feel just team real outparcel a sourcing our very and experienced transactions bit little execute name but is is a our

upfront personalization kudos General purchase I an our becoming of especially it's still Jim these a to and really in work not lot and for how Counsel, require selection to expert easy. in think They Brat, brands lot really of tenants, a the work about percentage of we're demographics transactions we're complicated are the low getting, but the very rents. excited that the long-term and corporate course that of

Nate Crossett

guys AFFO then that? And was I about dividend just kind dividend what Okay, should should the growth. on ratio that's one we about of think just What's you -- how we helpful. the think maybe or and target wondering

Bill Lenehan

typically factors a the course once We've of do timeframe. at board dividend an with by every year AFFO typically board ratio of end but but a lot December November, it of XX% historically our payout addressed the targeted year. we the considered our are around in We've

Nate Crossett

Okay. Thanks guys.

Bill Lenehan

Thanks. questions. any Mike, additional

Operator

No, this questions further any sir. We at time. not do have

Bill Lenehan

Thank up team thanking the We're growing. and just we're team's I'll transaction, today. call growing Well the for on excited you Great. in most excited us everyone. wrap this by everyone and it non-restaurants the Washington Prime excited about about really joining importantly how about we're

If you please or hesitate have questions follow-up you. Thank to reach myself. Gerry to don't out

Operator

Again, now rest a for have time the care sir we and your team. may Thank the today lines. everyone. the day time of and At you has also conference you And you. management your this thank disconnect call ended. Take great to

Four Corners Property Trust (FCPT) 31 Jul 192019 Q2 Earnings call transcript