FCPT - Earnings call transcript Q2 2024 | Four Corners Property Trust, Inc.

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Operator

Good morning, all, and thank you for joining us for the FCPT Second Quarter 2024 Financial Results Conference Call. My name is Carly, and I'll be the call coordinator for today. [Operator Instructions] I'll now hand over to Patrick Wernig to begin. Please go ahead.

Patrick Wernig

Thank you, Carly.

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

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

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

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

William Lenehan

remarks, you Good capital on our or us further of X.X% from quarter Patrick Josh the is for investment discuss last share, market introductory second $X.XX discuss reported to $X.XX and will joining results morning. per our financial which year. and comment results. Thank AFFO second quarter will position. We make I QX will up

existing well occupancy. continues higher rent collections and Our perform with to very portfolio

was EBITDAR quarter in strongest figure. within remains the rent for the portfolio coverage reports the This amongst second of this industry. to the coverage that majority Our our X.Xx

the positive to in casual national the sector industry X% restaurant restaurants generally and the year. we As on declines quarter. industry in local quarter second on note regional industry. view sector strong improved to that first an in last the chains. FCPT's Similar this the the update dining the as quarter, levels range Baird from sales but restaurant casual X% We leaders are dining the brands prior small of outperform performance. seeing saw for are improving includes performance, year-over-year and operators overall small According broad Research, a results whole after

level increase in of to 'XX, pricing X.X% For for a overall example, this fiscal year basis ending with same-store X.X% the and for quarter May for Darden margins a decline XX.X%, X% LongHorn, improvements. for reported modest brands, improved an XXXX. Darden commodity productivity Overall, EBITDA Garden XX restaurant sales reflecting increase and for Olive operated points

Our same-store basis XX.X% and latest 'XX. margin to Chili's for EBITDA reported X.X%, quarter tenant, second growth level restaurant XX points ended their their improved largest Brinker March of

We store under brand, announced imagine the external to Chuy's. note acquisition also Darden see the be count opportunities. XXX near in growth grow will the would company continues to I a umbrella. locations has dining Darden casual brand would be tenth term. The key this and brand Tex-Mex Chuy's the recently of the intent

we Importantly, remain disciplined allocators capital. of

stated in we've to of company's size the models value. earnings intrinsic have As just incentives discourage without per we quarters, capital team share and to mental grow deploying past or structured increasing our metrics the established also several

acquisition tied Our we environment. successfully mental and never compensation investment have to and we've goals that operated team nimble, team acquisitions guidance. These not through given volumes and allowed models are to or have today's remain us we believe structure earnings

and guidelines interesting seeing lot by that both FCPT, sense quality makes a that mean for are we I such, of priced are fit As our a accretive. in opportunities manner which

our to a the the in to in pipeline second We will quality way while half to continue look meaningful year the of maintaining add standards.

bankruptcy. Lobster, advisers external communication Red they fortress in since Regarding have and we management, the with been into entered

and store's after they the continue last are well covered reviewing latest stated of And XX our profitable. updated to May, financials as we As be. quarter, stores

confirmed that also with conversations are our well in Red belief our our have and performing stores strong locations. Lobster Importantly,

minimal is process there And That or this said, to of We other expect to from to quality we, process. remain with FCPT's think landlords, are very and While along underwriting official open speaks the asset awaiting negotiations our and bankruptcy note confirmation. ongoing. selection Red proceedings still be perspective. a the that locations our we are ongoing, of disruption all no for rent we Lobster

expect to We the them of end exit restructuring the QX. process before

to we medical of office remind that investors all On the avoids pharmacy wanted and portfolio FCPT's issue specifically credit retail buildings. medical potential issues,

that We was wash large phone, advent have theater a formed and stores, merchandise, shopping a great cell other advantage our trends. the online to the general We retail take gyms. including retail, box in dollar of and portfolio after and approach new car cautious

economy, portfolio turn to entire environment. a over positioned. With consumer investment is will well While discuss through in potential our it very rip that, the softening spending Josh we I'll the believe further to

Joshua Zhang

Thank you, Bill.

for from last properties XX% roughly acquired cap the volume, at this a restaurant. basis and XX The quarter acquisitions X.X% rate, a During casual service dining split roughly and quarter, auto XX the properties between our quarter. respectively, of $XX.X million XX% medical at being single improvement balance FCPT retail point were

weighted been with coming medical For our more to retail in the year, we've XX% that category. of volume

similar vary long opportunities have can but and close the even before, we the quarter-to-quarter. term. pricing that As expect be stated We from we these will quality, we sectors over categories all still roughly these between

properties case optionality to and transaction have was at sites also was for long-running sale $XX landlords a like large a Tire. with nationally. is Mavis direct selling pricing portfolio sales. Mavis but been million locations of a a our our this with thresholds. Mavis of sale-leaseback return at tenants brand single has meet but time, time in to We is X a from midsized first a leaseback this the consolidator some tighter the utilize them. in rates, to other to This over where largest provide Mavis X,XXX to Our one this Mavis had niche in acquired past, auto service program has FCPT of quarter for we interested properties with cap wait some space there's for

with we disciplined remaining for quality are established As pricing on acquisitions. consistent Bill thresholds new mentioned, and our

supply our quality is tenants estate. narrow. net positioned inventory for these we opportunities. to build and attractive of sellers seeing higher Increasingly, we with over rate are advantage opportunities continues a dynamic lease and buyers a X% take The As real of rate between well spread are finding team to bid-ask cap and longer continues, the up,

We also note with XX a of corporate were term tenants, or large this quarter years. lease all that weighted investment average and acquisitions grade

have will momentum now Overall, of non-restaurant XX% by pipeline XX%. is and continue into the our We XX%, and stands sector expect at Darden X%. today, at with as medical now we automotive annual at portfolio QX. rent X,XXX base in our Non-restaurant in retail largest XX% that followed now portfolio, our restaurants at building at leases of our

sell of QX we front, not properties this in disposition any the did On year.

both continue issue to strategic as portfolio our potential dispositions, on our capital alternative to active However, management consider as we a frequently receive and reverse inquiries new and of properties strategy. part

can and buyers when We our portfolio are capital needed fortunate capital markets when recycling utilize to accretive for continues attractive. dispositions that are or attract we less

underwriting December these to XX new turn you. These swapped the set at and due that confidence all right between Turning with and now January XXXX. We partnering I'll renewed with of result tenants Almost over come tenants, for back our leases or we brands. results a that being resulted portfolio. Patrick, very strong are for had appropriate leasing. to the of in are XX% it reinforce our levels rents are

Patrick Wernig

Josh. Thanks,

occupancy the on and the XXXX, XXXX rental of of million, basis, benefit cash of $XX.X XX, our For weighted positioned only other current place and a the annual in last respectively. revenues excluding in months. a basis, XXXX, income today is XX.X% grew stands in including after second and X-year and QX, million noncash base $XXX rent with reported $XXX.X $X.X of X.X%. and straight-line escalator rental rate rent XX.X%, X% as our XX to rental base rental increases cash Portfolio annual acquisitions million year-over-year quarter cash remains June X.X% for and cash at We rent in million the adjustments. On annual of at leases average maturing well remains run

XXXX lease changes confirmed reserves As mentioned most extension. our XX.X% collected or second to sheet collectibility their impairments. balance the have We no quarter, rent were there of earlier, material nor of already base and for credit maturities any these

to remain of tight and proactive Our asset with efforts resources maturities. the directly particular, we dedicated collection management on in has our our and tenants high and FCPT be so that teams. lease accounting upcoming can occupancy tied In communication is

Cash representing quarter cash to of X.X% income compares for compensation, rental stock-based excluding and the million, expense, XXXX. was $X.X X.X% G&A for QX

$XX continue G&A approximately will We XXXX million be [ for expect to ]. cash

a conservative compensation reminder, investment take the approach any As a we and not of our do costs to capitalize team. related

at of quarter sources. in million second offering price $XX.XX. issued of an the capital to average Turning We $X.X equity

fixed charge in to quarter X.Xx. As a maturity. With existing credit our ratio of debt a million to was was to debt EBITDAre reminder, June $XX adjusted issued term overall a loans in second leverage, our our net XXXX and facility X.Xx under the respect refinance healthy we coverage March,

million liquidity, million undrawn of $XXX cash and $XX have comprised We of million capacity. $XXX of of revolver

maintaining sheet balance a and We maturity our are conservative committed laddering profile. to debt

Our remains that, new the a yields our and FCPTs. attractive balance to funding we've have debt it rates turn I'll said, issuance. relief capital, for improve, our not new Carly pleased shape good looking think see November Today, today back needs gives to We've new capital back in sheet cost also seen external than sector That us equity of next quarter, acquisitions. XXXX. Taking debt cost treasury last liquidity much Q&A. more match step of for great until our maturity capital. With optionality multiples our about is without been all-in scheduled overall capacity in for and with to which some some over to including meet we investor revolver

Operator

comes first Paolone. from [Operator Instructions] question Our Anthony

Anthony Paolone

have you one, on that, I put first bunch just guess point. confirm either. had just wanted guess didn't guess Red new I I list on And a guys of closures. So they Lobster just that to out anything the

William Lenehan

not And productive. stores with very are going been Yes, our of well. The to of aware any them close. stores our are have doing we're conversations

Anthony Paolone

is, guess, the we there Okay. be that bankrupt, went any has thinking of credit one exposure I all do you the franchisees larger And about? other And Hut think. have EYM, come that up should Pizza I then

William Lenehan

Yes.

We company. from we of they're personal have of my paying, a a guarantee founder knowledge, couple the the and stores. That's have

Anthony Paolone

then And last for me. just one Okay.

In Do pipeline of we've have starting should how some rates steady in we rates anything, expectations been the today? of about there's like down. the are here and rates terms the sort And looks like, cap of of if seen think the stabilizing Or backing interest up? come cap pretty rates think you where end to Xs. it seems low

William Lenehan

to There was X- tell. X-month obviously know to happen what to going forward. delay going substantial Hard cap rates in a Hard will up.

focus sure we properties that high-grading our been on. high-quality really closing has we're to very have Our pipeline make

Operator

Kilichowski from Our John Wells next question of comes Fargo.

William John Kilichowski

willingness? increased you the cost seller improving Was I about capital drove a acquisitions that talk what just guess, first, or an of quarter-over-quarter? result could of greater

William Lenehan

Yes.

half be second the for of the really will think of both. year, combination I it a

improved. have Our credit of have equity down, capital Rates cost has come spreads narrowed.

So which our attractive, in much supply buildup market, are advantage take still sources and can we of there's of. more funds a in the

we so we thoughtfully when the wasn't cost been are have to green looking zone grow. And now of our and in much very And conservative there. capital

William John Kilichowski

interesting an then And it. question Got here.

forward, reprice? looking see with from those it those an of lease that about tenants kind on amending maturity and do any obviously, there through to Is desire schedule, look Just 'XX flattening at Or you leases conversations as your that inflects role? part to 'XX. opportunity maybe as I your have

William Lenehan

their expect are the Xx to leases, Darden will those Spin contractual covered which that terms. leases of the those from extended X.X, that would be are vast according I majority vast, predominantly

not covered, So a us well at very, that's concern very all. something for big

Operator

JMP. comes Difficulty] question Mitch next Citizens Germain [Technical of Our from

question. if We'll you great. be to again question ask move the on that see Mitch, a that line, could to raise improves next to the would I if

of comes Feygin next from Baird. question Our Alec

Alec Feygin

percentage restaurant back health portfolio go the versus large going as bankrupt, about exposure from the provide well of on maybe franchises the the details Four as franchises is with To the corporates. franchises, in franchises some some Corners of

William Lenehan

Yes.

We is have exposure overall, portfolio occupied. franchise little XX.X% and very the

And terrific property of in portfolio. we're there. on So we're talking again, couple properties X,XXX shape about a

Alec Feygin

changes? you're that watch list that looking You Red it. of, else the Lobster. any about And Anything we how should overall, talked aware is -- like? Got

William Lenehan

No.

Alec Feygin

their Got me at a grow you talked and/or Chuy's with looked And last about store have it. targeting up leaseback to Darden one count? a sale or potentially different is, for for way

William Lenehan

a have strong Darden conversation time don't books. white and of supporting on about owned But constant tenants I and their of proposition has the really other growth. lot that a to real brand of a space But grow. think in They estate a with all we're number their lot brand

properties think in the you are other If today. that so that Darden's a properties, several the about would brand brands hundred or Chuy's multiple XXX be of

Operator

Jim of from comes Evercore. Kammert Our next question

James Kammert

Both But Josh can rates, and Patrick option you you sure I'm on were share of exposure guess, I'm economics? if rents sort curious, about whatnot. fair anything of and a bit or sort re-leasing that you for what of market, the strong touched will? the on get XXXX. fixed did all move addressing exercise maybe I more recapture to these

William Lenehan

Yes, options, that the every small it per Occasionally, caution it's which really it's But was X.X% contractual positive, a years. X but majority year. because were a I the the extensions. year, sample think as about would size their took per typically XX% down vast contractual is economically, but majority X.X% vast very

very Just a positive small at sale very a were look sample number but you to that size, if small size.

James Kammert

most years, build but the builds of expiring we the deals rent it that rent? from talked But of type thinking increment have Darden representative out fixed in that it's your pretty most prior about, -- Okay. and the X.X% is lease in new about as then obviously,

William Lenehan

Yes. There's maturity. half a branch

Operator

R.J. James. Our next of question Instructions] [Operator comes Milligan from Raymond

R.J. Milligan

numbers, Bill, restaurant that sales of numbers reduce in to a or buyer you opportunity? pool for buying at those start the gave those assets? more downtrend create does types see same-store the beginning the see and that Does we just if some curious of do I'm call,

William Lenehan

on opportunity, think level provide don't would on, especially companies. don't I think restaurant a net of count at very be I I'd that guess. brands focus has will my the large that it performance high that. that, of we will kind the strong, lease happen public Hopefully, an been but The

Operator

question from comes of Mitch next Citizens JMP. Germain Our

Mitch Germain

portfolio? a How the pricing math look know was a that I Josh of tighter. one-off the does versus bit indicated Mavis little

Patrick Wernig

point at last portfolio a the ourselves but a cap rates seeing like discount. are buyers that net this down say discount basis more Well, of there take months, portfolio is that time. the I'd XX be in XX Patrick. throughout one The have moved might lease a can return you for significantly than

William Lenehan

elaborate it. Yes, Mitch, to just

For a professional certainty a buyer a a back be if a wasn't fell number a XXXX cap that it assets. a providing ton understood in in out, of able there no of under sort at -- they'd being tighter to years, of put value rate. time, exchange there contract of wasn't of Folks potentially

deals Now a large buyer capital little closed markets we're in because seeing the perhaps trend election, a of to uncertainty, buildings. before more is that bit the professional the of trying value being people get established

Mitch Germain

rate though, super the not changes you're any sellers that But to seeing helpful. to -- see wait That's that sorry, point pricing back buyers to pulled cut for the dynamic? if potential

William Lenehan

seen that We year, transact. not last early year, been on the late had portfolios this it, some have market, call

months, lot for data indicates prepayment. that, that elevated for a And rates the read as forward be so but flexible rate that's will debt be the XX curve that's always that that next of rate borrowing SOFR relatively for of was have look XX, a minds to floating reference would I sellers place more think But the a dynamic. sellers, the I hard would a

Mitch Germain

Obviously, for centered the was was Last choice? quarter. function the this that deal underwriting helpful. met your were of Or from restaurant by super that flow Was one away available assets sector criteria? that just that me. That's a

William Lenehan

sector. be and But in our at latter sure. are time to conclusions too XX latter. for looking we other restaurants, service we're excited any the weeks medical The draw there's in The auto a assets short is buying plenty always of to pipeline. than

percentage You'll by down up see go that quarter. and

Operator

currently have further no We questions.

hand Lenehan. Bill back So I to

William Lenehan

bodes combination the year. costs, and months. quarter. price borrowing of well acquisition Terrific. an market Thanks, next higher excited a attractive the X the for for lower Well, We're everyone. second Again, the very of exciting half stock

Operator

to everyone Thank you call. today's joining. for concludes This

You your disconnect lines. may

Four Corners Property Trust (FCPT) 1 Aug 242024 Q2 Earnings call transcript