Q3 2024 Four Corners Property Trust Inc Earnings Call

and the world.

Good morning. Oh and thank you for joining us for the SCP-T-Cerc, or so 24 for our short results conference. My name is Carly and I'll be coordinating your call today.

If you'd like to register a question during the call, you can do so by pressing star full up by one on your telephone keypad and to bridge yourself no line of questioning it will be star full up by two and I'd like to hand over to your host, Patrick Wernig to begin the floor rituals.

Thank you, Carly.

Patrick Wernig: During the course of this call, we will make forward looking statements which are based on our police assumptions. Actual results will be affected by known and unknown doctors that are beyond our control or ability to protect. Our assumptions are not again to use future performance and some will prove to be incorrect.

from more detailed description of some potential risks. Please refer to our FTC filings, which can be found at fct.com.

All the information presented on this call is current as of today October 31, 2024. An addition, like in the story, is to know and doubt, find the information presented on this call, such as FFO and AFFO, can you found in the company's supplemental report? It's not, I will turn the call over to Bill.

I'd like to start today's call on a theme which we've spent a lot of time interlingered over the past year. Investment Discipline.

Well, in that recent history, St. Costa capital rise in 2023, we pause that external growth. We focus on a creation and the client to go out on the risk spectrum to make the math pencil at the cost of building our portfolio quality. We were patient.

Patrick Wernig: We didn't cut team resources and we were confident when the market shifted back, we'd be ready to return to growth

and the last one.

Patrick Wernig: This past four are cost to cap long both the debt and equity side drop, and so we turn the acquisition machine back on with as much vigor as we turn it off.

We raised over $224 million in equity and today we have 100 million in equity for all of our folks to pass the other revolver and the lowest leverage we've had in nearly five years.

We are excited about the outlook for Q4 and next year.

Now, shifting to our end-place portfolio, we continue to perform very well with high-written collections in acting.

are my coverage in the third quarter was five times for the majority of our portfolio that reports this figure. This sort of remains the most strongest coverage in the industry.

as a reminder of SCP-T's casual dining operators for national brands and sector leaders.

and the General Adele performed the industry. For example, drink or recently reported a truly same start sales growth at plus 14% of the quarter ended in September.

Patrick Wernig: Simularily, Olive Garden in the longhorn recorded the same sort of sales growth of plus 1.6 and plus 4.7 for the full year ended May 2024.

Patrick Wernig: In the most recent quarter at August 2024, those figures moderators play late.

Patrick Wernig: to a plus 3.7 increase for long-horn and a 2.9% decline for all of Gordon.

As it looked forward to us the rest of the year, we know that Q4 is typically our busiest order for acquisitions and we believe that time will continue in 2024.

It will be a busy quarter. The team is seeing real success in sourcing high quality deals consistent with our quality thresholds. We do not get guidance on the pipeline and our or our position volume, but we do expect the kind of a month to be very active.

So please watch our for-out for press releases as we look on our typical cadence of announcing each deal the day they close.

and that's for portfolio management. We want to remind investors that a portfolio has near zero exposure to problems, problems, sub sectors such as theaters, foreign receipts, big botto retail, jim, dollar stores, car wash or general merchandise.

So while potential stopping and consumer spending may ripple through our retail operators, we believe our portfolio is very well positioned.

We'd like to provide a final update on Red Lobster. The company exited in bankruptcy in early September. All 18 of our stores were affirmed and remained open without any rent cuts or destruction of payment. In fact, most of our stores had written increases over the past few months, and others continued to pay for selling rent.

Well, if I'll note, while we continue to recognize the darkness of strong foundation to our portfolio, we have reached a new milestone in our diversification efforts. We now have 156 brands in the portfolio with the depth of data and now making up a slightly less than half of our portfolio. With that, I'll turn it over to Joshua.

to further discuss the investment environment. Thank you, Bill.

During the quarter we acquired 21 properties for $71 million at a $7.2% cap rate in line with last quarter. The acquisitions this quarter were 100% restaurant with the majority coming from the blue and blue transaction and the remainder from one off acquisitions. A Buffalo law wins and we talk about it.

for the year our acquisitions have been pretty evenly split between restaurant auto service and medical retail.

As we stated before, restaurant, auto service, medical retail, are all sectors that are attracted to us, but the actual opportunity to receive a very recorded order. We still expect that new acquisitions will be roughly due to misdeployed between these categories over the long term.

As mentioned, the largest single transaction this quarter was a $66 million portfolio of 20 human brands restaurants, provides up 10 out of x-day houses and 10 corroborate the Italian grills.

Boomin Brandt is a strong public operator with over 1,400 restaurants and 4,5 billion in sales.

The year now, our third largest tenant at 3.3% behind only Darden and Brinker.

The acquired properties scored very high in our scorecard, are under two long-term masterpieces and we've to corporate Blue and Brains entities.

Patrick Wernig: and Frank Hoverch is similar to our original spin portfolio and fits in well with our approach to see some high quality net peace.

As Bill mentioned, we have turned our acquisition machine back on and have been very active pursuing new opportunities, we're remaining disciplines on our pricing and quality thresholds for new acquisitions.

Patrick Wernig: 1.9 emphasis is that we did not spend the first half of the year until volume was muted in idle.

Patrick Wernig: Artime has built an extensive network of internal systems to track opportunities, leverage data in analytics for adaptive underwriting, and process transactions in an efficient and organized manner.

The systems have interned augmented or source-intensive abilities. Coupled with our established reputation as an intensive and credible buyer, we have signed up several deals in just the past month as we continue to take full advantage of our improved cost capital.

and John Lenehan. Our outlook on the future additional opportunities also remain positive.

For the Boulder Groups NetLise Market Report, the supply of single-tenered retail properties has to be on the market, increased to 3,975 overall in Q3, and 8.1% increase over the supply.

As Transaction Volume is still rebounding across the industry, we expect our opportunity to set to continue to grow in the near term. We're getting traction on very attractive deals that were outside of our price range for the past several years, but now in this landscape can be purchased accretively.

Patrick Wernig: Overall, our portfolio has now stands at 1,176 resources, but the rest runs at 79%. Automotive is a largest non-restrun sector at 10%, followed by medical retail at 8%.

We will continue our study approach to diversifying over time.

On the disposition front, we did not sell any properties in Q3 of this year. However, we are still frequently receiving reverse increase on our properties and continue to consider strategic dispositions.

Patrick Wernig: and those as an attractive alternative to issuing new capital and as a part of our active portfolio management strategy.

I'll turn it back over to you

Speaker Change: and Joshua, we'll start by going through some of our financial highlights for the quarter.

We reported Q3AFFO for share 43 cents, which is up to 24% from last year.

Speaker Change: 2.3 cash rental income was 58.7 million, representing growth of 4.8% for the quarter compared to last year. The Speaker benefited from both inflation rental growth and $145 million of acquisition in the last 12 months.

Speaker Change: on a run rate basis, current annual cash base rent for a week's inflase of quarter and $229 million, and are weighted average by your annual cash rent escalator remains at 1.4%.

Speaker Change: Cast DNA Expensive Exploding Stockplace Competition was $4 million representing 6.9% of cash until income for the quarter, and consider its 7.2% for the same period last year.

We can continue to expect Cache and Hayne will be approximately $17 million for 2024.

Speaker Change: As a reminder, we take a conservative approach and do not capitalize any of the compensation cost really to survive investment team.

Support for low occupancy today is 99.6%. And we have just 0.1% and 1.6% of annual base rent, maturing in 2024 and 2025 respectively. We've already made great progress on 2025 least extensions.

Speaker Change: We collected 99.8% of base reference to third quarter and there were no material changes to a collectability or credit reserves or were there any balancing impairments.

Our Hi-occupity and Collections is directly tied to the efforts of our asset management and accounting teams. In particular, our company has dedicated resources so that we can remain in tight communications with our tenants and be proactive on future research materials.

and John Cappell and State of Belgium.

We've been pleased to see the sector equity multiple improvements significantly including ours. We've also seen some release and the all-in rates from new data ships. So today, our cost of capital is looking much more attractive than the last quarter, which supports our new efforts to build on our acquisition pipeline.

and the American BVM, and had great success in raising equity via our app market program in the squater. So, I raised over $224 million of equity and weighted average gross price of $27.30 in 30 assets. Today, we have $100 million of equity for adopt ending at a price of $28.23.

is capital which equates to roughly a percent of our market cap. It was raised in just a few months and demonstrates how the ATM is not only efficient from a deep perspective, but also increasingly viable for raising significant proceeds.

We're starting our outstanding debt. We have awaited average maturity of four years. We have $150 million term loan and are under on $250 million of all that are both coming due in November 2025.

Speaker Change: and William Lenehan. We will come out to the city of tiny and strategy. We are committed to maintaining a conservative balance sheet and louder than our get matured profile.

Speaker Change: [inaudible]

with respect to overall average are not getting the ed. Adjusting the territory in Q3 ticked down to 4.9 times, inclusive of outstanding net equity towards other September 30th.

is the lowest level which has been since 2019 in comparison to 5.7 times at the end of Q2.

Speaker Change: are fixed charge coverage ratio is out to 4.4 times. We have $390, $193 million of liquidity comprised of $44 million cash as a 930, our fully undron revolver, as well as unsettle equity boards as October 3rd.

Speaker Change: with that little turn it back over to Carly for Ambassador Q&A.

Thank you very much. We'd not let go of the lights, Q&A.

If you would like to raise a question, please press star, flip by one on your telephone keypad and if you'd like to remember yourself, I'd like to have a line of questioning, it will be star, flip by two Our first question comes from Anthony Blime, of JP Morgan, Anthony Aline is now open

Anthony Blime: and John Lenehan.

Anthony Blime: Great, thanks for the morning. First question is, you talked about your cost, the capital being key to just getting back into the acquisition business and more vigor.

Anthony Blime: What about just in terms of are you seeing more things come to market as well? Or is it just purely you all engaging more because of your capital costs?

I think it's both. We had a number of transactions that we've worked on for quite some time, where we just couldn't.

Brits that last 10-15 basis points of acquisition cap rate that we were able to move into the pipeline in the last couple months.

We're also seeing more liquidity in the market generally.

Speaker Change: is the pipeline and what sounds like it's going to keep you busy the next few months. Just typical one-off transactions or there are some larger portfolios in the mix or how do we think about that?

Speaker Change: in the next.

Speaker Change: I don't think it's much different than what you've seen over the last number years. Individual property, small portfolios, the gamut.

Speaker Change: Jesus.

and then this last one.

Just can you talk about, is you think about the restaurant?

Space just broadly where you're seeing growth or where you're seeing contraction or you know credit risk either in concepts or size attendance or whatnot.

Well, I think our strategy of focusing on Lord's.

Speaker Change: you know.

Speaker Change: Public Companies, very creditworthy entities, just really paid off. We're seeing some credit systems that sort of bottom end of the range. And then I would say, I love all the brands that have been able to provide value to the consumer, because they're full of economics are very strong. Have really been successful.

with the chilies as a great example of that. That garden is a great example of that. Our tenants are large, they have proven full of economics, and they haven't had to raise prices as much as overall inflation, so they provide a great value to the consumer.

Speaker Change: Thank you.

Speaker Change: Thank you very much. Our next question comes from John Kinauski, a well-sforger. John, the line is now open.

Thank you. Maybe you just still on a comment you made last quarter. You had made mentioned that there was a premium the market was putting on certain T of clothes, given the capital market's uncertainty. And kind of people trying to push the yield to get done before the election.

Speaker Change: How much do you see the election continuing to be sort of a catalyst for tap rate, you know, the volatility? And then maybe that kind of persists into...

and I'm sweating to see how the candidates policies actually impact or excuse me, impact in place in their four rates.

Speaker Change: Um...

there's a lot of that question. I would say we saw a...

Concerted Period where we were signing up new deals where they wanted to get under person's salagryment.

and we took advantage of that. What happens for the remainder of the year, frankly, remains to be seen? I think that that's too difficult to call, obviously, the election is very close for race.

We watched with interest, but honestly I'd say we have very little competitive advantage in assessing the probability of different outcomes and then obviously very little competitive advantage in assessing the second order effects.

Speaker Change: OK, and then maybe just jumping to kind of the consumer. I think the last quarter, a lot of the focus is on the lower end consumer and then some data on USRs coming in next. That doesn't seem to be very much in the conversation today. I mean, what has changed on the ground level in terms of consumer behavior that you notice?

I would say that the brands that we have.

Speaker Change: of attendance.

and the law. We have very little exposure to.

You know, the inflation in pricing of consumer goods is finding a consumer that's in a last-tick which...

Speaker Change: shouldn't be a surprise as luxury, good pricing, in many cases has gone up 50% in the last five years, but in the...

War, your normal way segment of the economy that we play in all of Garden, Chilies.

Speaker Change: and Medical Retail, Car Wash, his tire source that's much more necessity-based.

the part of every ever person in everyday life, we're seeing pretty decent stability. I will say that the election seems to be distracting consumers over the last couple weeks, but I think that that's a temporary effect.

Speaker Change: Thank you.

Speaker Change: Thank you very much.

and next question, come from Mitch Jameh, of Sissin's JKJMP. Mitch Jameh, I'm sorry.

Thank you. It's fairly active in the capital racing front through August, obviously funding.

Mitch Jameh: and William Brands' deal. I'm just curious, you know, obviously the cab noise and continued. Since then, what happened to the pipeline over the course of that time? Did you see like a real sharp acceleration in deal volumes coming to you?

Speaker Change: So, Mitch, I think the answer is in your question, right? We met fond and we were opportunity to raise equity at the same time. We found a lot of really interesting acquisitions that were high scoring that were priced creatively. So, we didn't sit on our hands.

You mentioned investing with the Lord's Public Companies. Is that kind of takes some of the franchise deals out of your pipeline at this point?

We don't, you know, we don't, um...

Speaker Change: All Remphasized.

Public Forces French IZ. We focused on whether the tenant has strong credit. So there's some small public companies that we've avoided. There's some very large franchisees that we would welcome in the portfolio. So we really look to what's the underlying credit of the tenant.

and we've found in the last few months that not only have we been able to get pricing that works well for us, but we've been able to buy some very high scoring assets.

and then more liquidity in the acquisition markets, does that equate to more competition as well?

Speaker Change: Yero.

It's always competitive, mentioned, unfortunately, but I would say that, you know

and Joshua.

you know, at very accurately stated we stayed really busy in working on deals cultivating these relationships.

being active and when our cost of capital change we changed with it. And a number of the transactions that you'll see close over the next few months were things that we started working on very early in the year, we just couldn't get to agree to pricing.

Speaker Change: and the, you know.

September October time-finding we were able to.

Speaker Change: Thank you, good quarter.

Speaker Change: Great thanks, Richard.

Speaker Change: Thank you very much. That's a reminder, if you would like to raise a question please press staff, by one on the telephone keypad and to remove yourself in a line questioning it is staff followed by two. Our next question comes from Westgladeh, a bed. Where's your line is not open?

Speaker Change: Hey, good morning everyone. Just looking at a potential debt raise with the long end running a bit. Would you prefer a term loan at the moment, over a secure note or private placement?

I think we are.

Speaker Change: Assessing.

Termalones, private notes, public bonds.

Speaker Change: and...

Speaker Change: Old Recorded I think the balance sheet on a daily basis.

and maybe a quick follow-up on that. The capital markets have been volatile and you've got a good cost of equity now. And so it gets through the historical volatility, I guess, change your view on maybe just taking advantage of this window right now and just kind of building up for a little bit longer runaway.

I think you've seen that sort of what we've done as a leveraged, has done below five.

and we're really active in raising equity when our price of stock was attracted to do so. So I think we've been definitive in how we've acted and market dependent.

and then looking at that blueman brand's acquisition, you said it had really strong coverage. How is the quality of the after-digit like they're up or up or up or up or up, or just get performers?

and the fairy tipi top of

Squares of all the acquisitions we've done today.

Speaker Change: and Captain, one last one. Look at your top 20 tenants. There was a little bit of a shut plane where, you know, well now is now going from 10 to 19. Did anything change there?

Speaker Change: and the way we define tenant is...

sort of consumer-facing what would the consumer view as that tenant and some of their

and the eight of their properties in Ohio and Indiana and one in Illinois were rebranded from well now to another.

Speaker Change: and Metafer retail tenant. We still have well now as the Garen Toro in those leads. So, in many ways, that's almost as high you define what a tenant is as anything else but nothing change.

Bench has it, Bench is the time.

Speaker Change: [inaudible]

Thank you. As of one reminder, if you would like to raise a question, please press staff, or by one on your staff, and keep that and to remember yourself that I have a question and it will be staff for the bite too.

I next question comes from Jim Cameron of ethical. Jim your line is not open.

Good morning, thank you. Bill, you found loves you more optimistic and...

and the Aquisitions and you've got to cut the cap, we'll do it. I'm just curious in your negotiations.

are you so the annual escalators come into the negotiation and your ambitions. You said the cap rates, you know, 15 base point improvement, just enough to get over the line, but here is how much you think about escalators in the overall car or when you look into transactions. Thank you.

The escalators both the God.

Wade struck her, which is, as our mind are almost always one and a half percent per year, very occasionally, ten percent of very five years.

Speaker Change: and the other.

Speaker Change: here, fruit

Speaker Change: Barry very few examples other than those two.

Speaker Change: and also very often three to five five-year extensions at the end of the least.

So those terms of net least have remained very, very consistent.

I would say the combination of those two terms exists in well more than 90% of what we look at, maybe 95% of what we look at with.

and John Williams, only exception being Walgreens, which we don't buy, which had...

You know, more tenent favorable terms of flat rant and you know, sometimes 51 year extensions.

Speaker Change: but we've avoided that as it's tiring. So it's interesting, it's a great question. It's something that we were wondering whether would come into the negotiation really hasn't to be, to be honest.

is very helpful. I just did not look at it again. The incremental leverage if there was any to particularly with some of the private sponsored private tasks. I understand. Thank you.

Yeah, it's just one final point where we see more landlord favorable terms. Very often it's maxed with credit that we don't want to touch.

Hi, hi, hi.

Speaker Change: Thank you very much.

Speaker Change: Thank you very much. I'm asking questions from Sean Hoster of Netless.

and Julian Lenehan.

Hey, thanks for taking my call. Bill, you guys have always been very long-term thinking when it comes to investing.

Speaker Change: Both on the capital side, grazing money, but also where you deploy it.

Curious as you think about the garden, at least, masterly, is over time.

and sort of the 2026, I think, is there 27 as those start to roll? Are those all enough to renew? Is there anything you can talk about, which relates to...

and how you think about the performance, obviously the company is doing well, but just how that plays out over the next five to ten years. Now that the least of their starting to enter potentially extension periods, thanks.

Those are individual leases. The least form you can find is public and are original spin documents. But those are individual leases. They cover six times at this point.

Speaker Change: Howard Gordon's long horns, you know, are almost all profitable.

Robust sales, we do 50% higher AUVs than the average cattle dining restaurants. So individual leads to his subject to multiple five-year extensions, I would anticipate a very, very high renewal rate.

but it's not all or nothing and they're not masterpieces, they're individual pieces.

Good day, thank you.

Speaker Change: Thank you very much. We can't leave any further questions, so I'd like to hand back to Bill Venerhan for using the closing remarks.

Great, thank you everybody and we will forward to the best of the next few weeks at A-Reed and we just great again at Gary very busy and of this year. Thanks everyone.

as we conclude today's board with us and thank everyone for joining us. You may not disconnect your lines.

and the