FCPT - Earnings call transcript Q2 2022 | Four Corners Property Trust, Inc.

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Operator

Hello everybody, and welcome to the FCPT Second Quarter 2022 Financial Results Conference Call. My name is Sam, and I'll be coordinating your call today. [Operator Instructions] I will now hand you over to your host Gerry to begin. Gerry, please go ahead.

Gerry Morgan

Thank you, Sam.

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

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

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

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

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

Bill Lenehan

representing well confident be inception stretch the Thank highly credit best-in-class rent and portfolio we Patrick rent Thank of you, acquired months. we since with improve us of XXX% a of X.X% XX are attractive rents quarter, increase the some aligning In investment second then increases of the response busy our trailing year. cash and second portfolio capital and rent which an we for rental sellers, we more collections The at and to yield grew We've review $X.XX or price environment operators a results. will million, and of underwriting. corporate-operated the will properties to remaining on half remain included not properties revenues sold the Pricing quarter share, at perform initial strong of an cost weighted to quarter higher benefit of XX.X%. of quarter cap over cash more capital on cash million near-term conservative to combined pipeline, source reflecting X.X% macro including of with validation and even to year-over-year. XX The the the average portfolio we detail, an will quality. introductory sales are $XX acquisitions as credit We the to existing our at some and $XX.X of rental We [indiscernible] environment discuss our discuss year-over-year in $XXX the X% joining which June properties continue levels. make at place Gerry. seeing in to execute AFFO over our lead of continues the results. X.X%, in XX.X% for basis, on I'm XX.X% properties acquisitions Patrick the a rate. closing acquisition demand provides of million in This for XX. believe our around has second for strategy. challenging with reported We also on at increases, a structural the will going but our and per are well second morning. quarter to remarks, built Gerry to you in are Good portfolio three exceptionally started change. represents positioned discuss alternative this and financial for a us details occupancy

survey weekly service Moving dining and the restaurants in operators levels weekly operating on XXX% in to according recent recent with XX. XXXX July casual operating strong Restaurant on most to most restaurant our results approximately tenants' sales have Baird's to is at continued reported performance. line are Quick quarter.

Baird months. input in Baird pressuring for We've in course, labor, outpaced trend. past at-home from of inflation margins. this the inflation this Research costs, is Of quarter's restaurant are highlight food, our inflation experiencing Interestingly, Investor has slide Presentation food other to to all operators on and in nine effects of inflation grocery to the the difficult prices added restaurant to behavior and a restaurant. X.X% faster operators in as at predict, We fifth compared increase is QX, marks but X% should grocery restaurant of prices well. flexibility consumer Consumer XX.X% increased of rise to spending. June's increase stores know estimates provide the in in in consecutive prices month restaurants grocery generally a spend which

this quarter a private of $XX We sheet, This settled capital next of Turning $XXX and our included equity at expect we over agreements. a to program. second forward million the December $XXX X.X% settle to coupon million funded $XX million the over the March, closing priced last acquisitions. in time but to the investment remaining to it via support million balance period and have forward note year-to-date that of $X.X sale fund was in of million of the raised

Additionally, the of fund rates. our pipeline at million accretive the $XX dispositions help in quarter

important the on few a Finally, comments team.

a property with support automation financial Over in an well hired management. making systems the Counsel, Operation the have portfolio new team, new in growth. turn continued last the Associate an rolls additional With and Manager, it and investments and us and months we efficiency, three General property to we improve additional to added investment HR Director, acquisition two up this over that our Along analysts Pat. that, have are to I'll staffing set

Patrick Wernig

mix the XXXX tightening by last start the in the Thanks, helped on our and had cap observed April in study We rates in environment four and of cap months acquisition call how that Bill. spoke QX. we trend about I'd for first discussing like 'XX. rate to the

slowing that rose. costs and also that borrowing would rates the were initial as moderate We stated expectation that seeing we cap of signs our momentum

discipline that several secure years has We're particular, grown coming more is pleased us the in in over debt acquired. where opportunities compression the transactions price in pipeline for three we've screening. rates. potential while any the pipeline, our our month. accretive past other asset past avoided with buyers the movement and in witnessed upward We're our also cap and come us cap Over rate the selective the cannot seeing back allowing of the increase decrease for financing to quarters, over we months, and to very FCPT the being us past maintained real assets state in competition

As result, be positive. investment a continue our to spreads

continue from We've big exercise in seen price will what announced and portfolio of The introduced this includes shopping center pipeline. the eight example mall with A property, engagement discipline that increased with on also transaction. transaction properties. the we PREIT. We restaurant XX outparcel to to June owners we is $XX million outparcel

announced restaurant properties. property We Texas includes earlier seven six million, portfolio in which also month the $XX outparcel for this

and other parties to the actively outparcels building engaging of We we are million out expect mainly $XX the quarter combined in outparcel continue pipeline. will the close third

the of retail quarter, investments, investment-grade XX% For dining the and auto XX% consisted of for branches. medical bank service well-located and remaining casual XX%, accounted our for

The to and pipeline with quarters. Turning well-located years properties line quarter retail to of service for auto service, high-quality more of second sector QX. in for number in transactions higher led shift restaurants, the of a the our the timing as be we rest tenants will past closing and auto with stable mix a year, out pipeline in to built medical deal

both cap quarter. at an Each these the These disposition compelling. so and Garden, Evans front, and as as the attractive three portfolio X.X% in underperformed of Bill Olive a are stores' of brand of removing sales well average completed we mentioned, sale the the from at volumes On rates franchisee-operated properties pricing as Bob the cap X% the was outback them rate. such at a particularly comprised

of acquisition half quarters the year. Just been have than the reminder, historically, second lower final one volume QX and QX

closings For example, in each months XXXX, that of XXXX year's total XXXX, first six and for XX% approximately year. represented

provide year the dynamic higher to do half continue. we guidance, pipeline, While volume acquisition the you looked the of if in don't of second to expect we the

to of a financial results. our for turning Gerry discussion Now, and portfolio

Gerry Morgan

and Thanks, Pat. million other $XX.X million quarter We adjustments. of excluding rental the straight of cash non-cash income rental after $X.X generated in second line

quarter million, for $XXX.X five-year X.XX%. G&A weighted of and cash collections escalator we leases cash rent the or mentioned, our quarter. run our basis, X.X% the base rental second as quarter average excluding impairments. to $X.X On for representing changes current XX no As expense, with annual Bill of for a rent was annual income material June Cash collectability rate compensation in reserves the credit stock-based place for is XX.X% sheet balance cash is or million, any reported

so quarter, For the tenant XX% which results, we of times, second financial tenants report estimate rents low the our that will highlight X.X FCPT maintained how was rent are. to at coverage continues

this in offerings. quarter and debt lead million XX settle forma flat. Net grade first in sheet, $XXX to a This rating deploying future price and times for our revolver in in cash liquidity, fund range of year about half we remain of half note times. for times initial expense interest annual and focused within the we'll the target. addition least and term for maintaining to EBITDA $XX expect balance the private $XX.XX Fitch to savings to us front, and the will use the $X.X the On on of We existing on the revolver and benefit equity of QX was the X.X our conservative and of estimate the second settled acquisitions. $X thoughtfully have and This forward loans agreements is we per as to availability the repayment second on a BaaX totaling equity second we in year million. our thinking entered million rating term X.X second times our by Moody's we the remaining investment with layering the leverage extending to savings BBB to on million In ended loan, our the second over million X.X May, remainder forwards, to share, comprising settling credit well upgrade $XXX the from of at of our obligations. forward maturities, capital received when quarter points. our $XX margin from allows X debt we decrease leverage revolver. on million Pro and average the full will in We our Based incremental Bill bond quarter into basis mentioned,

Our is with to until investor maturity November for next due of Q&A of XXXX. turn And $XX debt million Sam I'll back it not over that,

Operator

comes Instructions] question of first Sheila now [Operator go line Please is open. ahead. Sheila, from you. McGrath your Our Thank Evercore.

Sheila McGrath

you was us cap on years lease could wondering differential six I assets remaining is like the Bill, on sold. assets say help the in morning. sold that acquisitions if Would lease understand just Good by lot years. the see rates driven the differential the acquisitions and of I rate a XX the was cap term? versus under you was Yes. term

Bill Lenehan

are incoming is, inquiries, there we say And low. the but been I -- assets Sheila, many lease have purchasing is the relatively that strong and are don't only would they some the get moderate reactive, those then leases we they corporate rents we we've assets. properties think, well, sell many I But In what good cases, sold scored are of pricing. what they accept had ground holistically We credit. terms, we that. because quite and have very score at we

Sheila McGrath

PREIT that Okay, then And outparcel leases, great. those of mentioned. improvement? most ground the and you transaction the are Are they other on

Bill Lenehan

Yeah. They're mostly ground leases.

Sheila McGrath

-- last sorry. Okay. for Great. question guess ahead. I Go Okay,

Bill Lenehan

about much tenants. the these rents corporate-operated and is so they outparcel Sheila, low are transactions

favorably. So we very those look on

Sheila McGrath

And Gerry. one is great. on Okay, then this -- for

and any rating, I a XQ? maybe savings loan. of helps line credit, little term that of the bit On grade provide on get the that the the did in pricing more of you and interest benefit detail Can you believe, investment

Gerry Morgan

revolver. rating BBB our pricing margin on Great. Fitch, in flat XX with quarter. started we second get any on by Thanks, grid benefit the rating middle our also qualify and revolver in quarter we on all our loans second We've with the term We and Yes, points roughly usage of didn't from a that that basis the second -- loans. on the Sheila. term from to reduced of our have the the

that And of third continued of beyond. the on the for loans so, you'll benefit and term all quarter see $XXX million

Sheila McGrath

you. Thank Okay.

Bill Lenehan

Sheila. you, Thank

Operator

go ahead. Our Anthony Paolone next line now your open. is Morgan. from Please JP question from Anthony, comes

Anthony Paolone

some Great. think the to numbers, or go able put be rate -- magnitude of Would what the months. cap been? you and guess, you Patrick, you there? done last we're few And I movement Thanks. maybe mentioned some more has brackets if maybe in maybe type that's of there is order product by also, to or kind

Patrick Wernig

sure. Yeah,

that as points. Fed quality But be Bill it's think because more XX basis can us we could place to hard what XX I to versus from making comfortable our stringent basis taking be on points think a view incremental this earlier. come, in Certainly, for is XX what then in points. of just a basis the variables, we're do for would filtering to are to yes, waiting a there and exact And and Fed year, does second points, of does but portfolio is to there sure amount an introducing we're of more today, the the perspective more lot the the the be allows dynamic question, other there basis your what saying alluding environment. or even of maybe I many macro XX what so you was that factors rest

Bill Lenehan

very there The identifying agreement, under only several a purchase and due takes is thing and LOI due between is a diligence, sale easily property, that, getting delay I'd add months. diligence further closing doing it

but to that little filter into for selective, said, So us higher we will I take be to would that we're cap its results. seeing a do -- rates more exactly allows it months announced bit that what Patrick reiterate

Anthony Paolone

Bill, go do get sense shorter were return, Sheila's quarter the And you bit something past. these us wanted the deals shorter years revisit but or you've to where just you that to to either done you then, lease XX yields like IRRs, and of did mentioned little talked if the fairway down of versus some Anyway you to Okay. like your in kind had as that? a a doing to you or of duration this this give more lengths past some in like something think question, what that to by

Bill Lenehan

really it mortgage do level, their the past property very can which putting properties, focused mortgages having corporate we're on lease lenders you you is the think when not something at I finance individual maturity. duration on Well, well so are

is unusual credits having high it finance very would the don't very more be we higher tenants of good maybe far. careful had high. And very, other rents, tenant the -- hasn't so I much are so or renewal with at in in you're with in way. circumstance but annum, then, But selecting renewals that want one low very two per we've But we've backfilled So good and properties a results some very we've cases very probability that say good renewed, to you what that where rents. had is, success these

Anthony Paolone

two something what's feel six-year the a kind bump like Okay. there? if it opposed a with thing to it But that is to percent year, of sort every of doing out goes where as you or what -- you or kind confident for seven works do of playing

Bill Lenehan

time renewal look wouldn't Most very at the of have always, not I the tenants they do renewal options. have options, it five-year that but way. often

-- But with big that not better with can So reasonable. it's real pricing on doing get located a lease not tenants shorter to rents. you pretty it's low renewal, this still jump with find better term, estate is the we're

underwrite And ability so to in the be renewal you have your to confident probability.

Anthony Paolone

execution the stuff just you buying? to given the understand. it. question, Got relative dispositions showed you're I just then desire any And last increase to

Bill Lenehan

years, haven't anything. see sold last think of you'll I couple we --

this will do sales You've continue year very but half through couple that pruning us a very attractive is, rates. consistent, you'll and year, seen be second still cap portfolio, which the the see the of the getting theme of

Anthony Paolone

you. Thank Okay.

Operator

Our Please Raymond next James. line of is line RJ, ahead. question from comes Milligan open. go from now the your RJ

RJ Milligan

not or peers, net that just rates about? slower taking of guys retail, space, cap We've approach if near just is And on rise morning, a thinking half the term are acquisitions. of maybe expectation to at very lease considering the something elsewhere but in curious they little will in back Good in I'm are guys. hearing some that continue the to year, your been that, you that's from so Thanks. the least bit their short maybe

Bill Lenehan

as Yeah. the a of as we've thoughtful have the It's large history we great always company pipeline but could, of question. the In be tried a to about quality.

and year be would year, this into half offer the second pictures of fatter we the to us swing better Going felt at. like

little in were earlier a the we conservative spring. So

the and up then points, basis we month I at seen more we've acquisitions. aggressive XX on think, XX or And in mentioned, rates Pat as go last points have least. cap basis become so,

agree do the last than months be of that we maybe will first so, the better seven handful. And year the

to the the aggressive low and more and we and the be So, is we price, a it's Pat And it's with us. time is the are leverage we're this second that think just case it the -- half capitalized well as how with quality a to of build favorable said, dynamic is acquisition pipeline the pricing, cadence year. the into bit definitely portfolio, not of stock difficult because And source. do

RJ Milligan

Okay. That's the given there more restaurant in move out restaurant playing, Corners. slightly that small the what a there could interest on side. for different curious out helpful. And the at focused a [XXXX] it just are for competition competition competing all for out like they or has about price seeing guys I'm the does Obviously, the that look you market then points, And rates, of you're least maybe talk assets? sandbox at impact (ph) what does there given the

Bill Lenehan

Yeah.

I that hand, properties think to are highlight. rates. are given months I significantly on ago, going would On banks market, one-off more buyers what's in their happened and the individual six than expensive finding mortgages the one

costs their mid is is and equity borrowing attractive they high-Xs. arena. nearly business mortgage, X% was from the folks in of So, whose to we less buy bank entrants attractive. a then, that's not as business use private their using with concern lot the financings, to had a the tenure hand, Again, more at so in fall on the And are local the new when other

felt environment would year, they say the attractive. exactly price hold extreme another more So would into also And had They get financing was out sellers, want, next like and if the going would just they they feel this I confidence, week come we didn't right? meaningfully in buyer and like is favorable. their the competitive

be So flowing significantly. cash there will

has cash who financing their flow relying mortgage Now, rates, re-ratcheted so away. market had the on incremental to buyers are is lower. higher They've walk

at got of acquire we've properties and Whether call able pricing. of actually, a number RJ, with we've So, favorable else contract that we them out been to someone rebounds. fallen they're more

RJ Milligan

guys. Thank Great. you,

Operator

John John, go Our next open. Thalmann. question from comes Ladenburg now Please Massocca your is line ahead. from

John Massocca

Good morning.

cash at Just a still mark G&A from off, our is the full-year I of quick for me. couple $XX expectation 'XX? detailed first million questions guess around

Bill Lenehan

part the question. sorry. missed John, first the of I I'm

John Massocca

G&A Cash year, are $XX this still for Sorry. expectations they around at million?

Bill Lenehan

That's correct.

John Massocca

you then And the could differential when color rate of XX be cap the at just all and the not credits the but maybe into mean, just, Okay. are the broad factored details, provide what's going kinds strokes, between kind some rent escalations and X.X% I it’s going points? basis on in. of June X.X% XX exact that

Bill Lenehan

dynamic This and Yeah. it time, that you just higher well, unusual XX We It's say, quarter. the in in little -- in result basis a was is points been buy an let's all the XX% past. the there essentially bump happens it's much May, had a property, but August. rent happens this -- when was than higher a

the rent, If May use you X.X%. it's

And closing the often you it's rent, August differential. for If credited getting we're use the at very X.X%.

instances talk conservative the basically working credited where John, closing in think, were being X.X% most But bumps rent closely were would on very put it So, cap, difference. but I additional pointing we out for wanted sure near-term and about we a rent it's make statement. the to folks as --

John Massocca

acquisition your reported from strong the around impact if of in doesn't they've anything are at its as earnings, recessionary out Okay. names it concerns pretty will, about environment, like the public of of of of consumer credit kind and any conservatism, kind any terms the tenant know, tenants in seem portfolio the kind in it but tenants? these kind just about flow maybe of of and some concerns? seeing you're obviously, I And health from in-place through you seeing you the you even look some to then today, of there

Bill Lenehan

prices, not we portfolio. dollar it a management on mean, stores. We're on and just demand with C-store marketplace, look fluctuating immune going issues. business. gas obviously, credits. us seems not in the goods, I Yeah. on problem supply a stations our our working be position have if where very they quite has chain put from definitely that's you in of it has therefore, seeing at very impact like Other feel board, to We're the significantly focused and standpoint, portfolio it across we in out impact their inflation, and seeing Obviously, that to prices also fuel the can and but gas acquisitions retailers

John Massocca

sense. makes That you it me. And Okay. that's Thank for much. very

Bill Lenehan

Thanks, John.

Operator

Golladay now next Our question of line is go your from comes Instructions] Baird. Wes ahead. [Operator Please Wes, Thanks. open.

Wes Golladay

want lease Hey. that there at of deals options those a Good deals? with are tenant doing. I morning, you shorter-term guys. Are to lot look the

Bill Lenehan

options growth there Typically, on continuing rent Yeah. Usually, to with two options. tenant five-year multiple is three, option periods. the

Wes Golladay

And guess, you. Bill, a Got for quick you. I question maybe,

we more bit you get a are the case? it's how to in going X%, approach that, are you I sort be may the little say business the that more X% guess, plus environment. conviction if Just Fed of a get like environment, of more inflationary can’t

Bill Lenehan

And on it's it hangs we owners and are it in you retailers against think don't at us competes assertively. who the all it was pay is, When we found multiples, trading debt. historically, interesting -- as might a competes procure times our of really net it economy is, now it business XX to assets I equity We attractive price were think to It firms makes doing buy was stock what is, where really And a makes net right of equity much multiples. about you mortgage have to to if the leaseback. use less capital source still capital, lease versus If doesn't sale against private of challenged capital easier for high level very yield there as accretive finance it times lease your is as high X%, property acquisitions equity it, for much high-level -- us it effect will the yield dynamics think. things, the have one attractive, finance private capital competes in against high multiple. very It market. to very a XX the net lease at firm when because quite

get property on again, compared your to very a of attractive mortgage at a If X%, doing X.X%. sale-leaseback could you

So where I into we we're at half very more a think capital are high that relative period it quite has is excited lease basis a attractive net going on than level last decade a on crisis. much been in the post-financial

Wes Golladay

for Great. answer detailed Thanks the

Operator

back no would is I any questions. call further Bill like remarks. closing to There the hand to for

Bill Lenehan

more Thank and you, happy Gerry, second the excited Sam. can thank you, for do that quite reach Well, time. I half the and be you to Please tell any outreach. investor of to out everyone hope year we'd we're about their than

Operator

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

You may lines. your disconnect now

Four Corners Property Trust (FCPT) 27 Jul 222022 Q2 Earnings call transcript