Q4 2024 Four Corners Property Trust Inc Earnings Call
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Colin: Good morning, and thank you for joining us for the F. C. P T fourth quarter trends since the full financial results Conference call. My name is calling and I'll be coordinating the call today, if you'd like to register a question. During the call you can do so by pressing stuff up by one on your telephone keypad and submit yourself that question will be stuffed flip I T.
When I turned over to your host Patrick one CSI the floor is yours.
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Patrick: Thank you Charlie during.
Patrick: During the course of this call we will make forward looking statements, which are based on our beliefs and assumptions actual results will be affected by known and unknown factors that are beyond our control or ability to predict.
Patrick: Our assumptions are not a guarantee of future performance and some will prove to be incorrect for a more detailed description of some potential risks. Please refer to our SEC filings, which can be found at <unk> dot com.
Patrick: The information presented on this call is current as of today February 13th 2025. In addition, reconciliations of non-GAAP financial measures presented on this call such as <unk> can be found in the company's supplemental report with that I will turn the call over to bill.
Bill: Good morning, following our typical cadence I will make introductory remarks, Josh will comment further on the investment market and Patrick will discuss our financial results and capital position.
Speaker Change: In its totality 2024 was a strong year for us the first half of the year was very similar to the second half of 2023 rising interest rates created a challenging backdrop for net lease companies and acquisition volume was down for the sector as a whole.
Speaker Change: F CPT largely paused incremental acquisitions.
Speaker Change: <unk> for improved investment spreads.
Speaker Change: We refuse to loosen our credit underwriting criteria.
Speaker Change: We.
Speaker Change: Remain committed toward Striked, some small box net lease with strong brands quality credit and attractive real estate.
Speaker Change: Fortunately by early Q3, our cost of capital has improved and we found more seller willingness to transact at appropriate pricing.
Speaker Change: As we return to the Green Zone, we immediately turned the acquisition machine back on with vigor.
Speaker Change: Ended the year with $265 million of acquisitions at a blended seven one cap rate.
Speaker Change: As we look forward to the new year, we built up significant liquidity to fund new growth, while we do not give guidance, we're continuing to see opportunities that are consistent with our quality thresholds, we expect to add to our pipeline the same steady and sustainable manner. It is the core of our investment approach as far as cap rate volatility, we have not seen much movement.
Speaker Change: And deals we've priced recently, while it's earlier in the early in the year, we expect to be at or near the same cap rate we captured in 2024.
Speaker Change: To that end, we will also be continuing to build our investment team in 2025 and look forward to increasing our capabilities with some fantastic new hires that are starting in the coming months.
Speaker Change: Shifting to our in place portfolio, we continue to perform very well with high collections in occupancy or rent coverage in the fourth quarter was four nine times for the majority of our portfolio that reports. This figure this remains amongst the strongest coverage in the net lease industry.
Speaker Change: As a reminder, cpt's core tenants of our nationally branded casual dining operators and sector leaders that generally outperformed the industry. For example, Brinker recently reported Chili's same store sales growth grew astounding, 31% for the quarter ended December 2024, Similarly, olive garden Longhorn.
Speaker Change: Same store sales growth of 2% and 70, 575% for the three months ended November 2024.
Speaker Change: Consistent with past performance F. Cpt's casual dining tenants have proven to be stronger than high end fine dining or local mom and pop run restaurants, our tenants are well capitalized high performing operators servicing a wide variety of consumers and price points.
Speaker Change: As for portfolio management, we're not yet experiencing any material tenancy issues in the portfolio or signs of inflation or labor issues will impact our rent payments, we want to remind investors that our portfolio has zero or near zero exposure to problem that lease sub sectors, such as theaters pharmacy hiring car washes in big box retail.
Speaker Change: On the very very very few occasions, where we have bought properties in these sectors. It is because they pass very strict underwriting criteria to balance out the risk.
Speaker Change: We also have no exposure to the string of recent high profile retail bankruptcies, including bps Carwash Big lots Joanne Party City, TGI Fridays <unk> Com's home plus.
Speaker Change: For the avoidance of doubt we also don't have any properties leased to government agencies.
Speaker Change: Further I would note that our business model is not directly rely on new construction, if tariffs were to cause inflation of business Thats building materials, such as steel we do not anticipate that would have a direct negative negative impact if anything higher replacement costs should benefit tenant renewal rates.
Speaker Change: We would also like to continue to highlight our diversification efforts, our three largest brands of olive garden, Longhorn and Chili's now make up 34%, 10% and 7% of our base rent respectively.
Speaker Change: <unk> is now 40%, 48% of our portfolio on a combined basis across all its brands over to you Josh.
Josh: Thanks, Bill during the fourth quarter <unk> acquired 45 properties for $133 million at a 7% cap rate.
Josh: While we are pleased in 2024 is $265 million acquisition volume, we are especially proud of the momentum we achieved in the second half of the year as our cost of capital improved.
Josh: In the second half of 2024 of our team acquired $203 million across 66 properties, representing over 75% of our annual volume.
Josh: In Q4, we acquired over 50% of our annual volume, including $87 million invested in the last few weeks of December alone.
Josh: We are not compromising on the quality of our assets to meet yoga reach volume targets as you can see in our press releases for each investment that many are with brands and operators. We have worked with in the past.
Josh: Conversely, we are being patient and organized while seeking to offer sellers a superior execution.
Josh: The investment this quarter were pretty evenly split between restaurant medical retail and auto service sectors.
Josh: As for the full year 2024, restaurants made up approximately 42% of our acquisitions with medical retail at 30% and auto service at 28%.
Josh: We do not plan our investments to have any specific thresholds are quota is across the three sectors. So the investment volume may vary from quarter to quarter based on opportunities we find attractive.
Josh: We expect the new investments will be roughly even split between these categories over the long term.
Josh: As such we are seeing success compound and our newer automotive and medical retail sectors. As we continue to develop relationships here Ed for example in Q4, we executed a $25 million sale leaseback of the top automobile service operator for six newly built sites. We also completed a portfolio acquisition of nine primary urgent care.
Josh: For $21 million as well as a $14 million sale leaseback with a leading investment grade healthcare system for two of their retail outpatient centers.
Josh: Quiet properties, all scored highly on our underwriting scorecard and released the top corporate operators in their respective industries.
Josh: These investments were all with new tenant relationships for <unk> as our team continues to establish our reputation in both sectors as a reliable real estate partners.
Josh: On the disposition front, we did not sell any properties in 2024. However, we are still receiving increase on our properties on a weekly basis and continuing to contemplate strategic dispositions.
Josh: As an alternative to issuing new capital and as part of our active portfolio management strategy.
Josh: For our portfolio as a whole at year end, we have 220 leases was 68% of our annual base rent coming from casual dining operators and 9% quick service restaurants outside of restaurants automotive is our largest sector at 11% of ABR, followed by medical retail at 9% of ABR.
Josh: We expect to continue our steady approach to diversifying over time.
Josh: Looking forward, we can continue to see an expanding opportunity set for further investments.
Josh: For the both of the groups net lease market report.
Josh: <unk> 3929 single tenant retail properties on the market overall in Q4, representing a 26, 6% increase year over year with.
Josh: With transaction volumes still recovering across the industry, we anticipate the pool of opportunities will expand accordingly in 2025.
Josh: Although Q1 is typically our slowest quarter historically, we're expecting momentum poor fourth quarter continuing to encourage everyone to follow our press releases as we disclose every acquisition David close.
Josh: Back over to you.
Josh: SaaS.
Josh: I'll start by talking about capital sourcing and instead of our balance sheet.
Josh: <unk>, we are highly focused on efficient capitalizing the second half of the year. We are very active on our aftermarket equity program in total we raised over $318 million of equity during the year and $102 million in Q4 alone.
Josh: That activity was heavily weighted to a few months, which demonstrates our ability to utilize the product at scale today, we still have $110 million of unsettled equity for us.
Josh: Our fixed charge coverage ratio was a healthy four five times with respect to overall leverage our net debt to adjusted EBITDA. In Q4 remained four nine times inclusive of outstanding equity forwards as of December 31.
Josh: Additionally, as announced two weeks ago, we extended and Upsized our credit facility in January.
Josh: <unk> increased our revolver capacity.
Josh: $35 million of incremental term loan, which is fully hedged at a four 6% all in interest rate.
Fortunately, we also added a one year extension option to our November 2026 term loan taking care of all debt maturities for nearly two years.
Josh: This facility recast provides <unk> with more liquidity for future acquisition.
Josh: While maintaining conservative pro forma net leverage of five one times, including unsettled equity for us.
Josh: Following the facility refinancing, we now have approximately $500 million in liquidity between cash settled equity forwards and undrawn revolver capacity.
Having no further equity issuance, we have an approximate $370 million available capital before reaching six times net leverage.
Josh: While markets remain volatile and treasury rates are elevated we continue to diversify our capital sources and be thoughtful around when and how we raise capital you can expect that to continue that disciplined approach.
Josh: Now turning to some of our financial highlights for Q4 and here we.
Josh: We reported Q4, and <unk> 44 per share, which is up two 3% from Q4 last year, our full year 2024 per share of $1 73.
Josh: Three 6% from 2023.
Josh: Q4, cash rental income was $68 million representing growth of six 6% for the quarter compared to last year.
Josh: Full year 2024 cash rent of $235 $4 million increased eight 8% versus 2023.
Josh: On a run rate basis current annual cash base rent for leases in place as of quarter end is $242 million and our weighted average five year annual cash rent escalator remains one 4%.
Josh: Cash G&A expense, excluding stock based compensation was $3 $9 million.
Josh: Representing six 5% of cash rental income for the quarter.
Josh: The full year cash G&A was $16 8 million or seven 1% of cash rental income versus seven 6% in 2023, 8% in 2020 tail. This progress illustrates our continued efforts at a fishing grounds and the benefits of our improving scale.
Josh: We are expecting cash G&A will be in the range of 18% to $18 5 million for 2025.
Josh: As a reminder, we take conservative approach and do not capitalize any of the compensation costs related to our investment team.
Josh: As for managing our lease maturity profile, our team successfully renewed or re tenanted, 95% of that Cpg's properties that had 2024 lease expirations. We have also made significant progress on 2025 lease renewals, a 62% of those tenants already extending their lease or indicating attempt to do so.
Josh: At the start of 2020 for 2025 lease maturities represented two 2% of our annual base rent, but as of year end 2024 is down to just one point to one 1% ADR.
Josh: Our portfolio occupancy today is 99, 6% and we collected 99, 4% of base rent in the fourth quarter. There were no material changes to our collectability of credit reserves, nor any balance sheet impairments.
Carlos: With that I will turn it back over to Carlos <unk> questions.
Carlos: Thank you very much we thought let's open the lines for Q&A.
Carlos: A question. Please press star followed by one on your telephone keypad and so my.
Speaker Change: Questions will be stuff slipped by two <unk>.
Speaker Change: First question comes from Anthony <unk> of Jpmorgan. Your line is now open.
Speaker Change: Great. Thank you and good morning.
Speaker Change: I appreciate the comments about the coverage and the credit quality in the portfolio and it sounds like rents arent, particularly at risk here, but even if they aren't just curious if you can talk a bit more about which areas.
Speaker Change: Underlying are just seeing better or worse trends at the margin, even if rents aren't necessarily at risk.
Speaker Change: I don't think that Theres a notable standout in what we have in our portfolio, Chile as being the obvious exception, but thats pretty particular to that brands, but.
Speaker Change: Our casual dining brands are growing our <unk> exposure is predominantly to Burger King which is doing well.
Speaker Change: And the other sectors that we're in are pretty defensive.
Speaker Change: And we've avoided.
Speaker Change: Number of the places where our competitors are having to turn their attention to play defense. So we feel.
Speaker Change: Got it.
Speaker Change: Allows us to be very offensive oriented.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: I just had caught crowded one are there any from for example.
Speaker Change: The Covid period, where.
Speaker Change: Quick service would drive throughs was dramatically outperforming restaurants that you had to go inside and sit down all those trends have normalized so it's very consistent across all our different exposures.
Speaker Change: Okay.
Speaker Change: And then just the only other item I had was you did.
Work on the balance sheet with the facility and so forth. So youre in good shape, there, but just how should we think about how far off you might be from being like a public bond issue at this point.
Speaker Change: Well, so I think we're going to spend a lot of time working on.
The.
Speaker Change: Upsize of our revolver was anticipation of having that as an option.
Speaker Change: <unk> borrowed in the private note market is historically, that's been very supportive of us but at the moment.
Speaker Change: Bonds have more attractive pricing.
Speaker Change: As.
Speaker Change: Patrick evidenced we also have capacity to raise term loans at very attractive pricing as well. So we feel like we have.
Speaker Change: Buffet of options on the debt side.
Speaker Change: But it's something that we'll be spending a lot of time on in 2025 in anticipation of being ready.
Speaker Change: Okay. Thank you.
Speaker Change: Thank you very much.
Nick: Our next question comes from Coca It's Nick of Janney Montgomery.
Speaker Change: No.
Speaker Change: Hey, good morning, guys exposure of non restaurant retail segment grew roughly 4% to 5% a year over the last few years as a percent of the overall portfolio and I think you mentioned around 60% of acquisitions last year was split between medical retail and auto service roughly should we expect a similar cadence going forward and is this more a function of current cap rates.
Speaker Change: Thanks.
Yes.
As Josh says, we don't plan it out that way, but I wouldn't be surprised if the trend that we've established.
Speaker Change: Established continues.
Speaker Change: <unk> is very competitive and the price points are a lot of.
Speaker Change: A bit smaller.
Speaker Change: Casual dining we have exposures with the exact brands that you'd want to have exposure to.
Speaker Change: And then medical retail the buildings tend to be a little bit bigger so it's a little bit easier to get capital deployed into that sector. So.
I don't think we are trying to fill up buckets per se or hit.
Speaker Change: Thresholds that we preordained, but I could imagine it being similar to in the past and obviously, we're always looking for new sectors that.
Speaker Change: We find interesting so we're constantly doing a lot of research on that.
Speaker Change: Okay. Thank you and then from at least from our perspective 25, and 26 are pretty light with Saudi and 27, you have significant rollover from initial darden transaction.
Speaker Change: Today, whereas the escalated pricing on those leases versus the market do you expect to get any locations back and any other changes to the lease structures anticipated.
Speaker Change: Yes, the tenant has multiple extension options to their benefit typically four or five five year extension options with one 5% rent growth.
Speaker Change: So I would anticipate.
Speaker Change: And this is in anticipation.
Speaker Change: Uh huh.
Speaker Change: Given but I would anticipate the vast vast majority of those will renew because the tenant has coverage thats approaching six times.
Okay. Thanks, guys appreciate it.
Speaker Change: Of course, thank you.
Thank you very much.
Speaker Change: As a reminder, if you'd like to raise a question. Please press star one type of thing keep that though and familiar stuff at the end of the question could be stuff, let's see our next question comes from Michael Goldsmith with UBS, Michael Your line is now.
Michael Goldsmith: Good morning, Thanks, a lot for taking my question.
Speaker Change: You talked about returning to the Green zone in the third quarter of last year and the acquisitions that followed given the movement in interest rates do you still feel good about being in.
Speaker Change: In the Green zone and feeling good about.
Speaker Change: The acquisition outlook for 2025.
Speaker Change: Yes, I think we are in the Green zone, now, but perhaps even more importantly, we have substantial capital that we raise when we were well in the Green zone.
Speaker Change: To use for acquisitions.
Speaker Change: Call it.
Speaker Change: $250 million of capital to be at the low end of our.
Speaker Change: Range.
Speaker Change: 350 to be at the high end of our leverage range. So.
Speaker Change: Given what we've done in the last couple of years.
Speaker Change: We are in really good shape for having funded 25 acquisitions.
Speaker Change: And I think that that it puts us in a pretty rare category competitors compared to our peers.
Speaker Change: I appreciate that and then just in the presentation. It looks like rent collected declined sequentially.
Speaker Change: Decelerate sequentially by 40 basis points can you talk a little bit about what's driving that.
Speaker Change: I don't think Theres anything material some of that is just timing on.
Speaker Change: We've acquired a lot of assets in December in the last couple of weeks and so sometimes it takes a month to get rents shifted over to a new address but theres no theres no big read through there.
Speaker Change: Thank you very much good luck in 2025.
Speaker Change: Thank you.
Speaker Change: Thank you very much.
Speaker Change: Our next question comes from John Kozlowski.
Speaker Change: Your line is now open for most of them.
John Kozlowski: Thank you good morning.
John Kozlowski: Maybe just a follow up on that last question on the acquisition pipeline and just the market in general.
John Kozlowski: I want to make sure I'm getting the right read through from your comments, but it sounds very positive like youre seeing heightened deal flow youre expanding your team underwritings and great I'm just kind of curious here coverage is picking up.
John Kozlowski: We're hearing anecdotally that that competition is really coming back to the market on the private side, what's allowing you to source. So many deals and maybe keep this acquisition cadence elevated from last quarter.
John Kozlowski: Given the influx of capital Thats coming in and competing on deals or maybe are you competing in a different environment youre not really seen as much.
John Kozlowski: Yes, there certainly has been a lot of talk about a handful of very large transactions, where there was a lot of attention.
John Kozlowski: No.
John Kozlowski: Deals that were north of a few hundred million dollars. So it's a very sizable.
John Kozlowski: We certainly look at all of those.
John Kozlowski: But we are.
John Kozlowski: We are heads down on <unk>.
John Kozlowski: One.
John Kozlowski: Individual property and small portfolios.
John Kozlowski: I think people understand that we have capital that was raised where we can buy things that are accretive.
John Kozlowski: And we don't use leverage when we buy things so the movements in the tenure.
John Kozlowski: The levered buyers less reliable.
John Kozlowski: We're not using leverage when we acquire things we borrow at the corporate level.
John Kozlowski: And then I would say Josh has done a fantastic job of being Super organized and as this market has sort of whipsaw around.
John Kozlowski: Being in constant contact even when we have.
John Kozlowski: No disagreement with the seller on price and hanging around the hoop has really paid off.
John Kozlowski: The acquisitions, we closed in Q4 some of them we've been working on for two years and we just couldn't get there on price.
John Kozlowski: <unk>.
John Kozlowski: The conditions were such that we could lean in a little bit and ask for them to give up 15 20 basis points on cap rates and we got a lot of deals done so I think it's.
John Kozlowski: We're accessing more.
John Kozlowski: But more broad environment for for acquisition transactions than simply waiting for very very large sale leasebacks to happen.
John Kozlowski: And that's proven very valuable.
John Kozlowski: Okay.
Speaker Change: Thanks, and then maybe just jumping to a different area here and I'm sure a bit early for this but have you seen or heard anything from your tenants that they've been impacted at all on the labor side by any of the policies by the New administration.
Speaker Change: We haven't but it was interesting question, we operate seven steakhouses in San Antonio.
Speaker Change: And we've been in constant contact with the woman, who runs that business, except in exceptional business leader.
Speaker Change: We have not yet seen impact there.
Speaker Change: And more broadly we are monitoring all sorts of things that could be impacting the economy or our businesses because of.
Speaker Change: The changes in.
Speaker Change: Political strategy in the country and we haven't really found anything that's particularly.
Speaker Change: <unk> will be a particularly standout to mentioned in the call.
Speaker Change: Got it thank you.
Speaker Change: Thank you very much as I said the reminder question two more questions.
Speaker Change: Yes, there is.
Rich Hightower: As a further I'm wondering if that phrase a question. Please press star followed by one on your telephone keypad and semi UNICEF Atlanta questioning will be flipped lets see next question comes from rich Hightower of Barclays Rich. Your line is now open.
Speaker Change: Yeah.
Rich Hightower: Hey, good morning, guys, Youre, making me sweat a little bit thinking I didn't hit star one, but I think we're good.
Speaker Change: I think.
Bill: Bill just to just to flesh out maybe the last question. There you did mentioned also that you are constantly exploring.
Bill: New industry verticals for investment and I guess, just to just to be clear as far as that goes would you say that any policy changes that have been announced in the last few months or prospectively.
Bill: In the future how is that affecting underwriting how is that affecting risk assessment or would you sort of reiterate that at.
At least in the way you think about it currently not much has changed.
Yeah.
Bill: Yes, we haven't seen a ton change yet.
Bill: <unk>.
Bill: The pace of change in Washington is obviously far greater than most people have been used to so we're monitoring it closely but I don't see.
Bill: Any particular.
Bill: And are you seeing particularly in the last few months change our acquisition scorecard, what we're trying to source et cetera.
Bill: I can give you many examples of real estate.
Bill: Subsectors that.
Bill: Might be significant significantly impacted there.
Bill: Theyre not part of our historical strategy, So I don't.
Bill: Don't see them impacting F CPT, but we're keeping our ears to the.
Bill: So the ground for sure.
Bill: Got it okay.
Bill: And then for <unk>.
Speaker Change: Give me if you guys have spelled this out on prior calls.
Speaker Change: But as far as the decision maybe not to give forward guidance I mean would you say that's more contingent on the sourcing of capital side of the uses of capital side or what maybe informs that philosophy at this point in the companies.
Speaker Change: History.
Speaker Change: Sure well I would say I think our company is very very simple.
Speaker Change: Purpose built to be simple so modeling out the earnings of the company is.
Speaker Change: Its not an onerous task.
Speaker Change: Certainly not a black box.
Speaker Change: And the street has done a very good job of being relatively accurate.
Speaker Change: Because we've announced our acquisitions and dispositions when they close it gives the street the ability and our investors the ability to forecast our cash flows, but I think.
Speaker Change: The bigger reason is perhaps.
Speaker Change: Core to our strategy and what I think differentiates four corners in most of our peers, which is our intention is to modulate our acquisition volume with our cost of capital.
Speaker Change: And because our business is essentially issuing equity.
Speaker Change: Turning it into cash for a short period of time, and then buying buildings, it's quite important whether our stock is.
Speaker Change: 22 or 20.
Speaker Change: 28, when we do that and so because I can't forecast what.
Speaker Change: My stock price is going to be throughout a year.
Speaker Change: Sure.
Speaker Change: Individual stocks, hence traded wide bands.
Speaker Change: Very difficult for me to both stick to that policy of modulating our acquisition volume.
Speaker Change: And provided meaningful.
Speaker Change: Understood. Thanks, Bob.
Speaker Change: Yes.
Speaker Change: Thank you very much.
Speaker Change: Next question cosmetics agents that Alex your line is not likely.
Speaker Change: Hi, good morning, and thank you for taking our questions. So the first one for me would be on G&A should we expect the platform to continue to scale in 2025 as you ramp up.
Speaker Change: New employees.
Speaker Change: Maybe any other puts and takes on the G&A side.
Speaker Change: Sure.
Speaker Change: I think one thing.
Speaker Change: We probably don't get.
Speaker Change: As much attention as we should as just the absolute low dollar amount of G&A that this company has.
Speaker Change: And it's been the case for 10 years, but given the size of our company. The dollar amount of our G&A is very low.
And we continue to increase capacity, we started with six people were now at 40, we have the largest incoming acquisition class that we've ever had and they are incredibly impressive young people, but because we grow by hiring and developing young people.
Speaker Change: And not typically doing much lateral hiring and because were very lean at this C suite level.
Speaker Change: Our overall cash overhead is quite moderate but yes. Our intention is if we have the cost of capital to grow Accretively that we will continue to grow the business as we have in the last several years.
Speaker Change: Alright, and speaking on the pipeline you mentioned that some negotiations have gone your way with sellers and.
Speaker Change: Can you maybe.
Speaker Change: Speak about how large of a pipeline of deals that you've been hanging around the hoop with and.
Speaker Change: And the sellers are not capitulated yet on price.
Speaker Change: Yes, we don't typically give guidance on pipeline Q.
Speaker Change: Q1 is typically a slower quarter Q4 is typically the busiest quarter I think Q1 is shaping up.
Speaker Change: So there is a good one this year, but but again, usually Q1 is a little shorter.
Speaker Change:
Speaker Change: And I don't know.
Speaker Change: There is a vast amount of acquisitions that we could do.
Speaker Change: If we were simply to drop our price 50, or 100 basis points an enormous amount.
Speaker Change: But but that delta is what.
Speaker Change: Changes acquisitions from being accretive to our to the owners of the business to simply growing to grow without any per share accretion. So.
Speaker Change: I'm not sure if that's something that we focus on because we are not going to do it.
Speaker Change: Alright, thank you.
Speaker Change: Yes.
Speaker Change: Okay. Thank you very much as a reminder, if you would like to raise a question. Please press star followed by one Stefan Keypad and tell me. If this does that line of questioning Gobi staff by two.
Speaker Change: Our next question comes from Mitch Germain of JMP Mitch Your line is now.
Mitch Germain: Thanks for taking my question.
Speaker Change: Bill you just talked about or as Josh mentioned in his comments the underwriting scorecard and I'm curious about the inputs and how often you look at them you ordered them and you modify or change the different variables you're considering over time.
Speaker Change: So we've changed the scorecard.
Speaker Change: Minimally.
Speaker Change: The sport relatively balanced so you could change individual components slightly I'm not sure you'd get.
Speaker Change: Different answers.
Speaker Change: The language that surrounds the scorecard is culturally ingrained in the company. So we know as a team.
Speaker Change: What it means when we say this burger King is a 78 or this tire stores of 63.
Speaker Change: And having some consistency around that really helps.
Speaker Change: So there isn't a ton of change.
Speaker Change: Obviously, the scorecard is not the end all be all of our acquisition effort, it's a way to get aligned and communicate efficiently on what we're spending our time on.
And we found that.
Speaker Change: It's pretty darn accurate as far as.
Speaker Change: We've had very very very little credit issues in this portfolio.
Speaker Change: But when we go back and look at deals that scored poorly and we didnt buy them.
Speaker Change: There tends to be a negative.
Speaker Change: The results as we survey things that we passed on.
Speaker Change: Okay.
That doesn't mean that every once in a blue moon something doesn't come out that the scorecard wouldn't capture.
Speaker Change: But that's one property with a reason of acts in another property of a weird reason why and you can't have a scorecard that captures every possible outcome, but it's a grounding exercise that keeps us organized and in it.
Speaker Change: It helps us avoid a lot of.
Speaker Change: Sort of sloppy decision, making and I think modestly helps in making sure that we're pricing things appropriately because you have a standard of quality that you can put against the standard of value.
Speaker Change: Great. That's super helpful. Good luck in 2025.
Speaker Change: Thank you.
Speaker Change: Thank you very much. Our next question comes from Jim Kennedy of ethical.
Speaker Change: Jim Your line is now.
Jim Kennedy: Good morning, Thank you.
Speaker Change: Realize that the vast preponderance of your leasing renewals is coming from the extension options.
Speaker Change: Do you think about 24 can you share with maybe where the representatives, who have recovery rates, where you did actually have a replacement tenant.
Jim Kennedy: Yeah, it's been it's been really positive Jim and we basically.
Speaker Change: <unk> covered the rents that.
Jim Kennedy: When we had to replace a tenant I think that thats largely due to.
Jim Kennedy: Titan replacement costs, and the fact that we focused on low rents.
Jim Kennedy: But I wouldn't get over your skus on that.
Jim Kennedy: The historical.
Jim Kennedy: The historical dynamic in net leases if you lose a tenant you've struggled to replace the rents and so I think we've done.
Jim Kennedy: A great job of replacing the Rins, we brought more resources into the company to get ahead of these things.
Jim Kennedy: But.
Jim Kennedy: I wouldnt low yourself to sleep to think that.
Jim Kennedy: You lose the net lease tenant and it's no big deal you have to spend another one at the same rent we've been fortunate that that's been the case.
Speaker Change: But the sample size is really small and we're in a very favorable market environment for leasing.
Jim Kennedy: Alright fair enough.
Jim Kennedy: Yes.
Speaker Change: Do you have visibility of the transaction our investment pipeline.
Jim Kennedy: If you think about 'twenty four.
Jim Kennedy: Proportion of the deals that you closed would you say were widely marketed lets say six or 10 competitors in their bidding.
Jim Kennedy: Corners versus.
Jim Kennedy: Maybe more relationship where you're one or two years, two or three folks inside the tent.
Jim Kennedy: Yes, it's interesting there isn't a dynamic that we see very often on the size of deals that we're working on like.
Jim Kennedy: You might see with a multiple $100 million deal, where there's a dynamic where on the 10th of the month. There is call for offers on the 12 month or the month. There is best in final on the 14th of the month, there is best and final again.
Jim Kennedy: And 15 bidders becomes five becomes three becomes one.
Jim Kennedy: Very often for us it's here.
Jim Kennedy: Here's a property.
Jim Kennedy: There may or may not be a broker involved but there may not even be marketing materials.
Jim Kennedy: No the kinds of things, we like to buy or the seller directly may know, what we like to buy.
Jim Kennedy: And.
Jim Kennedy: It's sort of a look we'll take this out to market and fully flog it but if you can get to this price which is.
Slightly more attractive than what a marketed price would be.
Jim Kennedy: We will just cut to the chase and deal with you.
Jim Kennedy: That's the typical flavor that doesn't mean that every once in a while we will have a larger portfolio, where there was a more formal process but.
Jim Kennedy: A lot of them are.
Jim Kennedy: Price agreed and transact before formal marketing materials have been.
Jim Kennedy: Been put together.
Jim Kennedy: That's interesting I appreciate the color. Thank you.
Speaker Change: Thank you very much. We currently have no further questions. So I'd like to hand back to Bill Lenehan for any closing remarks.
Speaker Change: Well. Thank you everyone I'll note that this 13 minutes of prepared remarks was overwhelmed by the subset of Q&A session. Thank you for the interest.
Speaker Change: Just bottom line, we're in a great position to start off 25, very strong Q4.
Speaker Change: Below target leverage we have substantial capital that was raised at very attractive pricing and a pipeline that will keep us very busy and the team that is growing with the exceptional young talent. So we're really excited about 25 and please reach out if you have any questions.
Speaker Change: As we conclude today's call we'd like to thank everyone for joining even at disconnect your lines.