Earnings call transcript Q1 2023

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Operator

Ladies and gentlemen, welcome to the FCPT First Quarter 2023 Financial Results Conference Call. My name is Glenn. I'll be the moderator for today's call. [Operator Instructions]

I will now hand you over to your host, Gerald Morgan, CFO of FCPT. ahead. go please Gerald,

Gerald Morgan

Glenn. you, Thank

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

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

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

our which can be a description some of filings, For potential risks, at SEC fcpt.com. more detailed please refer to found

May this on call current X, presented XXXX. today, information the All as is of

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

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

Bill Lenehan

make Thank I'm raising acquisitions and further first for you Gerry to us the quarter pipeline, morning. and going discuss discuss capital introductory results. make and then the financial our will comments Good to will results. on joining Patrick remarks.

tenant going and down definitely to what perform year estate to the transaction The more, at XX.X%. favor. usual. existing collections XX.X% well predicted and be continue out sector portfolio for our is like be contrast sectors REIT capital continued some from with or that I rent We raise to occupancy coverage be mean accretively commercial to high real also with well volume for the exceptionally low to that, an By quarter sectors specific year XX% of and with our perform unable This expect overall interesting FCPT, to portfolio office, will believe, levels as we of a business that allow. the we benefit

our deal overall which lower, timing. market was volumes slowdown acquisition with quarter First the in were typical in line

in in many growth working a past. deals interesting the very be investment which our way healthy We have not we are are on come that believe will very our However, XXXX pipeline, currently that may year. of opportunities

cost $XX.XX, quarter average against began our to forwards an of at the of locked at to on we second capital million combined we costs and and on we price the locks vigilant equity acquisitions. remain In rates. treasury yields pricing acquisitions too, of course, fund investment fund Of those up, and of accretive the comparing quarter, over capital $XXX equity $XX have million gone with raised used

reported both and year-over-year cost share. We year-over-year. $X.XX AFFO first-quarter of per of higher grew to EBITDA of our on AFFO debt due of the is prior cost flat and rates X% equity. effects on quarter This interest a was basis.

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

at in environment investment attractive reflected current speaking see QX just the with XX of and discuss more Signature year. will high dynamic, basis points Patrick detail. X.X% pricing the X.X% to historical The Bank acquisition acquisitions versus XX above level, Silicon quarter especially and that rate Valley cap average in Bank after a the levels, first improving the and QX collapses. rates But to continued QX cap last

investment First by Bank of being We emerge is news market. lending the the FCPT Republic tightening the the course, standards. still continued anticipate will Of of processed for from opportunities

of April expecting but survey first XXX% continue are according to approximately at levels are Baird have some Moving restaurants to in food are on sales with in operators of pressure. and to XXXX weekly Restaurant our tenants' on quarter the strong seeing increases estimating performance. labor, their results sales still Restaurant moderation XX. operators of margin levels operating cost

volumes. strong tenants, recent want for this XX% We point, helpful quarter. but -- also saw XX% most brand are our Darden the sales Olive and the recent same-store and we of largest Darden, of rise LongHorn, data XXX to company we a the basis trend as and parent performance Garden Garden's Olive also Brinker. very margins rose X continue the view to call industry sales points out quarter by significant the points to company costs XX.X%. showed benefiting and X% of to points improvement, while by parent rising brands also XXX rise to Brinker, continuing labor sales X of saw anchor from prior LongHorn rising are from and to restaurant the basis commodity moderating Chili's basis margins same-store improved XX.X%. from All leverage brand the XX.X%. quarter our XXX sales prior

reported last for quarter. margins coverage consumer that the estimated our impacts among XX% This input statistic, cushion a the inflationary X.X% demand. prices by of versus moderating rent lease Our improvements industry within mainly the net and remains the coverage driven portfolio and large in provides EBITDA was Darden's on in strongest

and One XX%, LongHorn and XX% the item since the same-store spin-off past risen how risen that have is X risen much rent brand how Garden FCPT Olive sales we've has respectively, much XX%. risen. years, XXXX been Darden have sales rents have tracking while over in versus only

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

Patrick Wernig

pick cap less to operators. of The comments lending of a cap standards. in seller's being real to result After tighter the is you market, we're and rates. investors to rate acquire improvement strong like high-quality up estate opportunities direct net around on well-capitalized significantly a years I'd the Bill. for seeing made Thanks, competition leased shift more in

Specifically, another. factors, we current attribute buyers circularly which market are impacted one the by X somewhat to

institutional pursuing fewer retail private net equity First, sponsors lease. with less competition

raised lower as borrowing Second, percentage lending value. have a leverage tighter loan of property standards rates bank and

the following mentioned, recent Bill in banking been particularly As this shift acute, sector. has turmoil

transactions. exchange XXXX reduced Third,

subsequent attractive options operators and recent leaseback And financing basis on into the net today. even example, motivation more rates into lease in apartment The down, a finally, cap is net driven have valuations relative recent rise. valuation and buildings multifamily XXXX for the there's retail sales lease property exchanges For exchange to for less lease. of net in as transactions evaluating than are owners years, tight years, sale

pipeline. Shifting to the

QX have more developers. have been acquisitions successful in engaging expect in largely of the in We newly for rest the But We've more properties prior in projects for year. with been developer new and or outpriced They XXXX, our constructed inventory be to years. we properties inside to completed to forward purchase points our Those to a yet were year or eager XXX properties been basis commitment pricing same arrange selling of sell completed. that developers their are ago. more

service Regarding leased acquisitions our retail to of X% were medical our tenants, QX typical. XX% the to casual property heavily property mix, dining. XX% anchored to auto more to is than and medical

than year, We've on been forward core and a the year in portfolio to sector in of building that our even expect pipeline medical prior very retail mix out of and the a part Looking we'd higher in comprise out at years. the it future. to focused be course pipeline, of full the our volume the may the expect over capabilities percentage

the we quarter As in stated past, deal lowest the for year. is volume QX typically our

XXXX, all to $XX volume This of We which picked of example, said, and slow XXXX of acquisition million For volatility. market sourcing after the QX the volume XX% in we of and February, year, we January QX. a saw is speed. month closed outpacing for in over up in our April, have February, That attribute year. start to closings

have a Looking we robust QX expect pipeline, to at and QX. our

properties particularly X candidates we Burger representing brands. and Red sold and into million. a previously $XX.X new specifically recycling of disposition versus selected These Lobsters gain for $X.X These X respective disclosed. the relative on were stores were underperformance King were sales as based their also sales opportunistically quality. acquisitions, the quarter, million, portfolio of improve expect can a In combined We to where X capital price continue we

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

Gerald Morgan

the quarter first credit We There of to no million for quarter. generated material for straight adjustments. collectibility excluding $XX.X XX.X% nor million in base cash were changes the of our and noncash after We rent other the in rental sheet line any impairments income collected balance or reserves rental quarter. $X.X

cash annual rate the the X.X%. of for March as a representing weighted basis, in was million, average at is cash cash for remained annual million, leases rental place quarter. On G&A rent XX of run escalator X.X% quarter our for Cash income base rent expense our $X.X and $XXX.X X-year current

be the G&A in of year, year we to stock million cash due January. expect vested for that $XX grants to continue slightly trended approximately timing the We quarter prior higher given will taxes higher in although the payroll

the to sheet. Turning balance

As agreements start with available sales to $XX growth. held fund of undrawn we March under million capitalized with of liquidity. net million million, well shares we of of we million $XXX Bill XX, proceeds forward On million anticipated revolver $XXX are cash the quarter Including highlighted, $XXX and our settlement. X.X upon

impacted of is debt results currently by X.XX%. $X our at rate of quarter rates. billion were this higher of XX% borrowing a Our fixed, short-term

A rate average and reminder by the a for However, X% remaining and the XX% quarters, in is is debt increased the us fourth investors appropriate versus some XX% interest quarter. basis of variable we on pricing that XX mix points others. benefits fixed, approximately on us think variable impacts our to rate our business, debt

all-in current X.XX%. rate at quarter interest Our is end cash

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

Pro we Our of our settling and remaining is the target X.Xx. leverage. a fixed Xx estimate below X.Xx, healthy approximately forma for ratio charge is coverage equity, deploying leverage well our

$XX this place, have swaps next starting long-term for effectively year. at rate March, note issuance of As in of the treasury forward later X.X% base million private also fixing we our XX-year

open up back Glenn Q&A. I'll And to it that, with turn over to for investor

Operator

Wes from first Golladay from Our Baird. Instructions] [Operator comes question

Wes Golladay

just finished forwards should Maybe there? up. just the with settling issuing I'll he we How debt, or Gerry, since about the any priority start think

Gerald Morgan

issued. forwards Yes. are already The

with priority. the news revolver notes our markets, at between. both to So the But is private we the this as and to capital look I also funding we'll acquisitions. meet the point of access needed to they time forwards some in issuance debt options, obviously, to with think equity smooth on great markets out capital year use and delayed The have as current get mentioned, the

Wes Golladay

the talking are leasebacks made more the then the as seeing of about Was this comment of developments the about turmoil. sale deals And to bank you more part -- Or other or to Bill, in highlighted Okay. this prepared specific due you types well? deals remarks? you types of

Bill Lenehan

buy net relative versus versus to board. versus equity is look I board, net opportunities capital properties market, really inception. us the at to pipeline think developers the preferred other basis the high it's properties, selling lease been versus across exchange that attractiveness one And you been and historically attractive. by to restaurant sheets a would shrinking who high our We've one for look seen debt, We've versus seen XXXX liquidity. owned lease since It's Wes. if now of relative bank of are the their on think prices I net very from banks they're properties, kinds lease forward regional JV yield have balance across their the at most looking

Wes Golladay

Yes.

more bit on little am portfolios, portfolios? So a get chunky that read may I a correctly, you you that? discount would maybe to small have And

Bill Lenehan

Yes, and is a I factors. Pricing the certainly, Other better pricing. terms, feel think having read. like one getting it, that's not properties. lease pricing many investment-grade we be premium there are fair getting such factors might longer where of one part of high is But we're circumstances

Operator

question We have Cambridge our next comes [Jim Epical]. from from

Unidentified Analyst

developer still too early sort towards programmatic more the a looking or off of these acquisition you pipeline for type that? building commentary, Or Building relationship with are of folks?

Bill Lenehan

good just avenue ICSC evolving a And is strong turn their more from who and what's we've it's such for say other has this value, buy cap made for developers I sold their of you willing in effort is towards local weighted property situation. of at any today, our didn't even high-quality explore very that far to any apartment they think a real acquisitions. responsibilities. banks there around willing, the credit, And a if And and and to is a X net a properties bid such really down that proxy, it And year. concerted they banks, the to especially in lease, advantaged folks to yesterday building historically, a wanted schedule, willing capital was their real in that landlord not the up apartments buy. markets. sold for we extend happening we down It look for are net But so than with pay and time are very would if kind high lease so were because were tax really I not have and that sales proceeds substantially leg

Unidentified Analyst

on environment. for their appreciate hard competitive Terrific. regarding have sense institutional they of do, today. capital, And PE? as X-point I institutional -- power, you periods? on funds not been thoughts Do but business were what in your the cost of and sort your mind really volume your think maybe they'll any Again, staying -- and come you've less I years commentary just it's this future -- just Or in unfortunately, the are less they're of in just sort in competitive to the tourists industry? the in capital tenacity on curious I'm back like

Bill Lenehan

Yes.

question just me take more maybe Let broadly. the

the They an on buying, on You buying buyer, XXXX now other we often behalf $X buyer was But in a had, buildings, on used influx captives, you more many insurance the exited that they And it's the wasn't private largely on $X focused are equity to one market. places. company, billion but locally. $X funds less million we hand, individuals. pricing, buying we were funds unusual leverage provided they they other hand, against, exchange have interested sophisticated, million had private And of liquidity then of were a equity competing and who in buildings that literally less than use. super cases, were willing as were in

So funds. individual the the both it's equity private and

think when net to X% be X%, funds other yield I seemed bank in attractive. at percent the or moment lease really of had a more equity a high few couple and private were alternatives time only was loans

So the competition we board. less that there's across think

now, buy it's while estate I'd that that and like particular, real Blackstone, very active. and office, very have with of less they dislocation of cash that would a are in times for those of now, of sort make comment that active investable Carlyle, right in be kinds And flush funds particularly are unusual funds, very TPG, KKR, in quick they in typical we're liquidity other to often thing, opportunity also buildings favor. out than environments the been it's

Operator

comes next Thalmann. We have our question Massocca from Ladenburg John from

John Massocca

the is at continuing it the expansion trends? particularly pace? near last look rate you what couple rate seeing cap starting terms the to of in quarters you XQ over and kind term pipeline, for of cap of as we've Or maybe are kind The So of seen of XQ, rest moderate? at

Bill Lenehan

to we think talking than earlier early in were peers certainly basis cap a point XX I XX of a or little our increase. some rate about

that's individual wide. high to certainly X just the probably variables. But real and is has one grade, That willing of days competitively. portfolios. the a be banks' waiting that. market pay for we'll remind to us at that investment credit look of we But properties, more active today. can focus we're long-term regional find the I we estate, see think we think I not for or pricing cap in I turmoil lot We for because that been well sheets the And only the and people quite quality also of -- portfolios, bodes are on a would above on pricing at that the over lending balance last couple extent

John Massocca

maybe that for versus how differ it how made portion properties? the underwriting property thinking big then such acquisition are XQ given specialty And your traditional underwriting And investments? properties, about does restaurant the care of urgent Okay. up a activity, of medical you some

Bill Lenehan

Sure.

how sinks water to whether that's HVAC specialty that's the it's medical remember think uses the room. specialty other the just in is investment and is space, significant with thing in whether units, I that's each important

a tenants. a that So things with But creditworthy you're like underwriting also what growth sure all the term, you're that leverage, is and it's -- is rent lease broad basis matter, making space location making your sure aligning but medical thoughtful similar about it's it's one.

couple we XX% of We the I years. bit lease on it's research think other in a overlap But to kinds have the net buy. probably an quite something that done like it of last of

John Massocca

to fungibility the how or be credits to restaurant of space, tend credit any either view in operations? you that of the versus there types backing in because the Is these have difference

Bill Lenehan

Not which equity the and of the really. what there's dynamics, bottoms obviously, sheet that's are is their scale, a and at But funds, top they then lease, down, the very I demographics; are mean industry, the how is up, benefits every the balance level. are how private strategies, do what's what guarantor performing. people some underwriting credit the sources of similar of very involvement, we component executing dynamics roll-up has high similar

So America. care, the there's we're relatively aging would and are happen feel subsector pretty hospital. going components. both long-term a the of to the curve cost And the to strongly bend that's I I say, with overall, pretty in that extent similar trends But positive is to going health outside

Operator

[Operator Instructions] from Baird. We have a Wes follow-up question Golladay from

Wes Golladay

than I as bit little go guys weaker normally see You after. credit you more have which Hawk, with a active Cooper's been being

are how getting So you these with comfortable deals?

Bill Lenehan

Yes. probably high. below would and little pretty we look can is bit cost build-out what Hawk be the Cooper's median for at, a

So And its in but a we're would we've typically We was one from We've strong, in interesting club, have -- an markets. a them, rocks, done at we the bunch brand. turning build got them. of at But from looking below that's one stayed we buy, build brands actually looked very an one. a revenue well, one. submarket the lot have Cooper's that of with ancillary It's despite out, think we -- what comfortable we've quite of we're brand-new we've for done has where that pretty we got it's looked a popular Midwest a lot much significant largely I example So average I quite the done. elevated that, away basis of It that say that wine the and Hawk. and right? over comfortable

Operator

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

Bill Lenehan

interesting much for to joining of buyer be Okay. Great. the thank you, real Well, a estate. a everyone, environment Again, call. more

ample to plan. our execute have business capital We

few next is quarters. forward really ever, as as strong the team we're Our looking to and

New But at look please to would With Drake NAREIT, to forward in out adjourn Thanks. reach to we'll and meet seeing that, you who York. anyone like the call.

Operator

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

your may You now disconnect lines.

Four Corners Property Trust (FCPT) 2 May 232023 Q1 Earnings call transcript