Q1 2026 Four Corners Property Trust Inc Earnings Call

April 30, 2026

Speaker #1: Hello everyone. Thank you for joining us, and welcome to Four Corners Property Trust's first quarter 2026 financial results conference call. After today's prepared remarks, we will host a question-and-answer session. If you would like to ask a question, please press star one to raise your hand.

Operator: Hello, everyone. Thank you for joining us. Welcome to Four Corners Property Trust Q1 2026 Financial Results Conference Call. After today's prepared remarks, we will host a question-and-answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I will now hand the conference over to Patrick Wernig, CFO. Patrick, please go ahead.

Speaker #1: To withdraw your question, press star one again. I will now hand the conference over to Patrick Wernig, CFO. Patrick, please go ahead.

Speaker #2: Thank you. 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 Wernig: Thank you. 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.

Speaker #2: Our assumptions are not a guarantee of future performance, and some will prove to be incorrect. For more detailed description of some potential risks, please refer to our FCC filings, which can be found at fcpt.com.

Patrick Wernig: Our assumptions are not a guarantee of future performance. 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 fcpt.com. All the information presented on this call is current as of today, 30 April 2026. In addition, reconciliation to non-GAAP financial measures presented on this call, such as FFO and AFFO, can be found in the company's supplemental report. With that, I'll turn the call over to Bill.

Speaker #2: All the information presented on this call is current as of today, April 30th, 2026. In addition, reconciliation to non-GAAP financial measures presented on this call, such as FFO and AFFO, can be found in the company's supplemental report.

Speaker #2: Please note that if you are a research analyst, you have been emailed a meeting ID, which is 865-913-566. We'll repeat that at the end of our prepared remarks.

Speaker #2: That PIN will allow you to ask questions during the Q&A session. With that, I'll turn the call over to Bill.

Speaker #3: Good morning. Following my initial remarks, Joshua will comment on our investment activity and Patrick will discuss financial results and capital position. Q1 marked a continuation of the momentum from 2025 and a strong start to 2026.

Bill Lenehan: Good morning. Following my initial remarks, Josh will comment on our investment activity, and Patrick will discuss financial results and capital decisions. Q1 marked a continuation of the momentum from 2025 and a strong start to 2026. AFFO per share grew by 3.4% versus the prior year period, continuing our focus on steady risk-adjusted growth. During Q1, we acquired $26 million of net lease properties at a 6.8 blended cash cap rate, equivalent to a 7.3 GAAP cap rate. This is marginally lower volume versus the start of 2025, but I'd emphasize we're seeing a lot of attractive opportunities and feel good about the strength of our pipeline. Seasonally, we tend to see fewer deals close in Q1 versus later in the year, and Q2 is shaping out that way so far.

Speaker #3: AFFO per share grew by 3.4% versus the prior year period, continuing our focus on steady, risk-adjusted growth. During Q1, we acquired $26 million of Natalie’s properties at a 6.8% blended cash cap rate, equivalent to a 7.3% GAAP cap rate.

Speaker #3: This is marginally lower volume versus the start of 2025, but I'd emphasize we're seeing a lot of attractive opportunities and feel good about the strength of our deals close in Q1 versus later in the year, and Q2 is shaping out that way so far.

Speaker #3: Over the last 12 months, we've acquired 288 million of properties. We are also excited to have closed on a new $200 million term loan with 7-year tenor earlier this month.

Bill Lenehan: Over the last 12 months, we've acquired $288 million of properties. We're also excited to have closed on a new $200 million term loan with 7-year tenor earlier this month. The term loan all-in rate is 4.9%, which represents 200 basis points of spread to historical acquisition yields. We will be able to invest that money creatively. Our rent coverage in Q1 was 5.1 times for the majority of our portfolio that reports this figure. This remains amongst the strongest coverage within the net lease industry. The rent coverage figure for our garden properties specifically is 5.8 times, which has been very consistent, remaining above a very lofty 5 times for the past 3 years. As a reminder, the first tranche of lease maturities is due to send us extension notices by October of this year.

Speaker #3: The term loan all-in rate is 4.9%, which represents 200 basis points of spread to historical acquisition yields. We will be able to invest that money accretively.

Speaker #3: Our rent coverage in Q1. Was 5.1 times for the majority of our portfolio that reports this figure. This remains amongst the strongest coverage within the net lease industry.

Speaker #3: The rent coverage figure for our garden properties specifically is 5.8 times, which has been very consistent, remaining above a very lofty five times for the past three years.

Speaker #3: As a reminder, the first tranche of lease maturities is due to send us this year. While we can't know the outcome with certainty, barring a material change in the operating performance of Lease Source, we would expect a very high renewal percentage for the spin-off portfolio in the coming years.

Bill Lenehan: While we can't know the outcome with certainty, barring a material change in the operating performance of these stores, we would expect a very high renewal percentage for the spin-off portfolio in the coming years. To that end, our largest brands, Olive Garden, LongHorn, and Chili's, continue to be leaders within the net lease tenant universe. Most recently, Brinker reported Chili's same-store growth of 4% for the quarter ended March 2026 after a 31% increase a year ago. Olive Garden and LongHorn reported same-store sales growth of 3% and 7% respectively for the quarter. Remarkable results for the three brands that represent 47% of our portfolio rent combined.

Speaker #3: To that end, our largest brands, Olive Garden, Longhorn, and Chili's, continue to be leaders within the net lease tenant universe. Most recently, Brinker reported Chili's Same Store growth of 4% for the quarter ended March 2026, after a 31% increase a year ago.

Speaker #3: Olive Garden and Longhorn reported Same Store sales growth of 3% and 7% respectively for the quarter. Remarkable results for the three brands that represent 40%, 47% of our portfolio rent combined.

Bill Lenehan: To bring that point home, I pulled a new slide on page 7 of our investor deck that shows the strong outperformance of our publicly traded tenants versus the generic all restaurant index. The key takeaway is portfolio construction is extremely important, and by being selective with our tenant partners, we are building what we believe is a fortress portfolio brick by brick. Our lead restaurant tenants appear to be taking market share and have not shown signs of slowing down. To that end, our portfolio has avoided some of the more problematic lease sectors experiencing long-term macro headwinds. This includes theaters, pharmacies, and experiential retail more generally. We benefit from our strong portfolio construction with low basis, fungible buildings operated by tenants in sectors that are e-commerce and recession-resistant.

Speaker #3: Bring that point home—I'll call it a new slide on page seven of our investor deck that shows the strong outperformance of our publicly traded tenants versus the generic all-restaurant index.

Speaker #3: The key takeaway is portfolio construction is extremely important, and by being selective with our tenant partners, we are building what we believe is a fortress portfolio, brick by brick.

Speaker #3: Our lead restaurant tenants appear to be taking market share and have not shown signs of slowing down. To that end, our portfolio has avoided some of the more problematic lease sectors experiencing long-term macro headwinds.

Speaker #3: This includes theaters, pharmacies, and exponential retail more generally. We benefit from our strong portfolio construction, including low basis, fungible buildings, operated by tenants in sectors that are e-commerce and recession resistant.

Bill Lenehan: We have had no major tenant credit issues, leading to very low bad debt expense and very little vacancy in our portfolio. On this topic, we would like to provide a brief update on our Bahama Breeze properties. As a point of clarification, we own 10 Bahama Breeze properties, which is 1.3% of our ABR. That said, Darden's planning to convert 6 of these locations to other brands they operate, Yard House, Olive Garden, LongHorn, Chili's, et cetera. They'd like to convert more, but they are limited by already having nearby existing locations and in some cases, co-tenancy restrictions. The remaining 4 properties are 50 basis points of ABR, and we already have actively negotiating letters of intent with new tenants to backfill these locations.

Speaker #3: We have had no major tenant credit issues, leading to very low bad debt expense and very little vacancy in our portfolio. On this topic, we would like to provide a brief update on our Bahama Breeze properties.

Speaker #3: As a point of clarification, we own 10 Bahama Breeze properties, which is 1.3% of our ABR. That said, Dart is planning to convert six of these locations to other brands they operate.

Speaker #3: Yard House, Olive Garden, Longhorn, Chili's, etc. They'd like to convert more, but there are limited by already having nearby existing locations and in some cases co-tenancy restrictions.

Speaker #3: So the remaining four properties are 50 basis points of ABR, and we already have actively negotiating letters of intent with new tenants to backfill these locations.

Bill Lenehan: Based on the figures we're negotiating, we expect to recover or possibly even exceed the prior rent paid by Darden. Although the timing and final economics will ultimately depend on the outcome of these negotiations. It takes a few months to negotiate a lease, and we should have further updates on timing at the Q2 earnings call. Overall, very good shape. Remarkably, I'd like to point out that it's been less than three months since Darden announced the brand closure. For us to have potential solutions across the board for all 10 locations so quickly just highlights how our focused strategy and strong underlying real estate and irreplaceable rent levels will benefit us long term.

Speaker #3: Based on the figures we're negotiating, we expect to recover or possibly even exceed the prior rent paid by Dart. Although the timing and final economics will ultimately depend on the outcome of these negotiations.

Speaker #3: It takes a few months to negotiate a lease, and we should have further updates on timing at the Q2 earnings call. But overall, very good shape.

Speaker #3: Remarkably, I'd like to point out that it's been less than three months since Dart announced the brand closure. For us to have have potential solutions across the board for all 10 locations so quickly just highlights how our focus strategy of strong underlying real estate and replaceable rent levels will benefit us long term.

Bill Lenehan: In any case, we'll continue to collect rent throughout the backfill process, as Darden is still obligated to make rent payments on these leases for all 10 locations for at least 1 and a half years, and in some cases, up to 4. That provides us flexibility as we work through the preferred backfill tenant options. Shifting gears, we continue to diversify our portfolio. 37% of our rent now comes from tenants outside the casual dining sub-sector, including automotive service at 13%, medical retail 11%, and QSR restaurants at 11%. We are actively exploring new retail categories and property types as we look to expand the top of our funnel for investments.

Speaker #3: In any case, we'll continue to collect rent throughout the backfill process, as Dart is still obligated to make rent payments on these leases for all 10 locations for at least one and a half years, and in some cases, up to four.

Speaker #3: That provides us flexibility as we work through the preferred backfill tenant options. Shifting gears, we continue to diversify our portfolio. 37% of our rent now comes from tenants outside the casual dining subsector, including automotive service at 13%, medical retail at 11%, and QSR restaurants at 11%.

Speaker #3: We are actively exploring new retail categories and property types as we look to expand the top of our funnel for investments. As when we developed our automotive service and medical retail property strategies, prior to investing in a new sector, we evaluated the business resiliency and AI disruption risk.

Bill Lenehan: As when we developed our automotive service and medical retail property strategies, prior to investing in a new sector, we evaluate the business resiliency and AI disruption risk, availability of credit-worthy tenants, real estate quality, and pricing attractiveness. That said, for us, the limiting factor on new sectors and deals is typically sellers' lofty pricing expectations. Finally, this is a very exciting point, I'd like to mention that Michael Freeland has joined our board. Michael recently retired from JP Morgan and brings 30 years of Wall Street experience in real estate finance and corporate credit to FCPT. We've known Michael a long time, and we're really impressed and glad he's joined our board. Welcome, Michael. Over to you, Josh.

Speaker #3: Availability of credit-worthy tenants, real estate quality, and pricing attractiveness. That said, for us, the limiting factor on these sectors and deals is typically sellers' lofty pricing expectations.

Speaker #3: Finally, and this is a very exciting point, I'd like to mention that Michael Friedland has joined our Board. Michael recently retired from JPMorgan and brings 30 years of Wall Street experience in real estate finance and corporate credit to FCPT.

Speaker #3: We've known Michael a long time, and we're really impressed and glad he's joined our board. Welcome, Michael. Over to you, Josh.

Joshua Zhang: Thanks, Bill. I'll start with a review of Q1 activity and then touch on our investment pipeline. In Q1, we acquired 10 properties with a weighted average lease term of 10 years for $26 million at a blended 6.8% cash cap rate or a 7.3% GAAP cap rate. This represents an average basis of $2.6 million per property, extending our strategy of partnering with credit-worthy operators while focusing on fungible, low-cost basis assets to help mitigate downside risk. We are really happy with the asset selection this quarter, and as Bill noted, Q1 is typically a lower volume period for us, and the ending volume for the period lined up well with our internal expectations. That said, Q2 is shaping up to be consistent with a typical seasonal volume ramp.

Josh Zhang: Thanks, Bill. I'll start with a review of Q1 activity and then touch on our investment pipeline. In Q1, we acquired 10 properties with a weighted average lease term of 10 years for $26 million at a blended 6.8% cash cap rate or a 7.3% GAAP cap rate. This represents an average basis of $2.6 million per property, extending our strategy of partnering with credit-worthy operators while focusing on fungible, low-cost basis assets to help mitigate downside risk. We are really happy with the asset selection this quarter, and as Bill noted, Q1 is typically a lower volume period for us, and the ending volume for the period lined up well with our internal expectations. That said, Q2 is shaping up to be consistent with a typical seasonal volume ramp.

Speaker #4: Thanks, Bill. I'll start with a review of Q1 activity and then touch on our investment pipeline. In Q1, we acquired 10 properties with a weighted average lease term of 10 years for 26 million dollars at a blended 6.8% cash cap rate or a 7.3% gap cap rate.

Speaker #4: This represents an average basis of $2.6 million per property, extending our strategy of partnering with credit-worthy operators while focusing on fungible, low-cost basis assets to help mitigate downside risk.

Speaker #4: We were really happy with the asset selection this quarter and, as Bill noted, Q1 is a typically a lower volume period for us. And the ending volume for the period lined up well with our internal expectations.

Speaker #4: That said, Q2 is shaping up to be consistent with our typical seasonal volume ramp. Our Q1 acquisitions were composed of 46% restaurant, 28% out-of-service, and 26% medical retail properties.

Joshua Zhang: Our Q1 acquisitions were composed of 46% restaurant, 28% auto service, and 26% medical regional properties. On the credit side, all of our properties acquired in Q1 were leased to corporate operators. The only exception being our McAlister's Deli in Michigan, which is leased to Southern Rock, the largest McAlister's franchisee with 178 locations across 13 states. Our team continues to partner with leading operators in each of our chosen retail subsectors. Coupled with our low basis rent filtering, we have a proven track record of building a resilient and long-standing portfolio. In the meantime, our team continues to actively explore all avenues for investment, both large portfolios and small granular deals, in addition to assets in new subsectors as evidenced in Q4 2025.

Josh Zhang: Our Q1 acquisitions were composed of 46% restaurant, 28% auto service, and 26% medical regional properties. On the credit side, all of our properties acquired in Q1 were leased to corporate operators. The only exception being our McAlister's Deli in Michigan, which is leased to Southern Rock, the largest McAlister's franchisee with 178 locations across 13 states. Our team continues to partner with leading operators in each of our chosen retail subsectors. Coupled with our low basis rent filtering, we have a proven track record of building a resilient and long-standing portfolio. In the meantime, our team continues to actively explore all avenues for investment, both large portfolios and small granular deals, in addition to assets in new subsectors as evidenced in Q4 2025.

Speaker #4: On the credit side, all of our properties acquired in Q1 released a corporate operators the only exception being our McAllister's Deli in Michigan, which is leased to Southern Rock, the largest McAllister's franchisee with 178 locations across 13 states.

Speaker #4: Our team continues to partner with leading operators in each of our chosen retail subsectors. Coupled with our low basis rent filtering, we have a proven track record of building a resilient and long-standing portfolio.

Speaker #4: In the meantime, our team continues to actively explore all avenues for investment, both large portfolios and small granular deals, in addition to assets and new subsectors as evidenced in Q4-25.

Joshua Zhang: While we are expanding the top of our investment funnel, we will continue to maintain our discipline in acquiring low basis investments leased to best-in-class operators at pricing accretive to our cost of capital. Patrick, back to you.

Josh Zhang: While we are expanding the top of our investment funnel, we will continue to maintain our discipline in acquiring low basis investments leased to best-in-class operators at pricing accretive to our cost of capital. Patrick, back to you.

Speaker #4: While we are expanding the top of our investment funnel, we will continue to maintain our discipline in acquiring low basis investments leased to best-in-class operators at pricing accretive to our cost of capital.

Speaker #4: Patrick, best to you.

Patrick Wernig: Thanks, Josh. I'll start by talking about the state of our balance sheet and an update on our capital sourcing, including our recently closed term loan. We funded $50 million of new incremental of the new incremental $200 million term loan in April, and the balance will be used to fund acquisitions in Q2 and Q3. The term loan credit margin is 125 basis points over SOFR for an all-in rate of approximately 4.9%. We have fully hedged our current outstanding term loan balance of $640 million as of 30 April at a blended SOFR rate of 3.1% or approximately 4% all-in, with that rate steady through November 2027. Our supplemental disclosure includes a detailed pro forma hedge schedule.

Speaker #3: Thanks, Josh. I'll start by talking about the state of our balance sheet and an update on our capital sourcing, including our recently closed term loan.

Speaker #3: We funded $50 million of new incremental of the new incremental $200 million term loan in April, and the balance will be used to fund acquisitions in Q2 and Q3.

Speaker #3: The term loan credit margin is 125 basis points over silver or an all-in rate of approximately 4.9%. We have fully hedged our current outstanding term loan balance of $640 million as of April 30th at a blended silver rate of 3.1% or approximately 4% all-in with that rate steady through November 2027.

Speaker #3: Our supplemental disclosure includes a detailed pro forma hedge schedule. We also continue to benefit from full capacity under our $350 million revolver. With respect to leverage, at the end of Q1, our net debt to adjusted EBITDA rate was just 5 times.

Patrick Wernig: We also continue to benefit from full capacity under our $350 million revolver. With respect to leverage at the end of Q1, our net debt to adjusted EBITDAre was just 5 times. It was our 7th consecutive quarter of leverage below 5.5 times and at the bottom end of our stated leverage range of 5 to 6 times. Noting that our term loan closed after quarter end, but after fully funding and investing the proceeds, estimated run rate leverage will be 5.4 times. Our fixed charge coverage ratio remains a very healthy 4.8 times as of quarter end. Turning to debt maturities. Once factoring in the extension options for our existing term loan, we have no debt maturities until December, when just $50 million of private notes come due.

Speaker #3: This is our seventh consecutive quarter of leverage below 5.5 times, and at the bottom end of our stated leverage range of five to six times.

Speaker #3: Noting that our term loan closed after quarter end, but after fully funding and investing the proceeds, estimated run-rate leverage will be 5.4 times.

Speaker #3: Our fixed charge coverage ratio remains a very healthy 4.8 times as of quarter end. Funding to debt maturities, once factoring in the extension options for our existing term loan, we have no debt maturities until December, when just $50 million of private notes come due.

Patrick Wernig: We plan to address this in due course closer to the maturity date. Our staggered maturity schedule will ensure we do not face a significant maturity wall at any point thereafter. Turning to some of our earnings highlights for Q1. AFFO per share was $0.45, representing 3.4% growth versus prior year. Cash rental income was $70 million, representing 10% growth versus prior year. Annualized cash-based rent for leases in place as of quarter end was $266 million, and our weighted average 5-year annual cash rent escalator is 1.5%. Cash G&A expense was $4.9 million for the quarter, representing 7% of cash rental income, compared to 7.7% for the prior year.

Speaker #3: We plan to address this in due course, closer to the maturity date. Our staggered maturity schedule will ensure we do not face a significant maturity wall at any point thereafter.

Speaker #3: Returning to some of our earnings highlights for Q1, FFO per share was $0.45, representing 3.4% growth versus the prior year. Cash rental income was $70 million, representing 10% growth versus the prior year.

Speaker #3: Annualized cash-based rent for leases in place as of quarter end was $266 million, and our weighted average five-year annual cash rent escalator is 1.5%.

Speaker #3: Cash GNA expense was 4.9 million dollars for the quarter, representing 7% of cash rental income compared to 7.7% for the prior year. The 70 basis point improvement in operating leverage and flat cash GNA compared to the prior year illustrates our continued efforts at achieving efficient growth and the benefits of our rising scale.

Patrick Wernig: A 70 basis point improvement in operating leverage and flat cash G&A compared to the prior year illustrates our continued efforts at achieving efficient growth and the benefits of our rising scale. Following our Q1 results, we are reaffirming our guidance range for 2026 cash G&A of $19.2 to $19.7 million. We've also continued to make progress with 27 of the 42 leases originally expiring in 2026 extended. Recapture rate on these locations is 6% above prior year rent. We are currently negotiating to re-tenant 2 of those properties, and the remaining 13 now represent just 1% of ABR, down from 2.6% at the beginning of 2025. Our portfolio occupancy remains very strong at 99.6% today, which benefits from re-leasing some of our very limited number of vacant sites.

Speaker #3: Following our Q1 results, we are reaffirming our guidance range for 2026 cash G&A of $19.2 to $19.7 million. We've also continued to make progress, with 27 of the 42 leases originally expiring in 2026 extended.

Speaker #3: Recapture rate on these locations is 6% above prior year rent. We are currently negotiating to retain two of those properties, and the remaining 13 now represent just 1% of ABR, down from 2.6% at the beginning of 2025.

Speaker #3: Our portfolio occupancy remains very strong at 99.6% today, which benefits from releasing some of our very limited number of vacant sites. We collected 99.7% of base rent in Q1.

Patrick Wernig: We collected 99.7% of base rent in Q1. Last quarter did not see any material changes to our collectibility or credit reserves. As an aside, during this call, we've referenced two of our new disclosure updates, which I'll highlight again now. First, going forward, we plan to disclose GAAP cap rates along with the cash cap rate figure we've always done. We have very low default rates historically, and our intention is to hold our properties long term. Therefore, the data related to those expected long-term returns is another helpful metric for our investors. Our presentation includes a new slide on page 8 that has GAAP cap rates going back to 2023, which shows that historically they have averaged about 70 basis points higher than our initial cash cap rates.

Speaker #3: Last quarter did not see any material changes to our collectibility or credit reserves. As an aside, during this call, we've referenced two of our new disclosure updates, which I'll highlight again now.

Speaker #3: First, going forward, we plan to disclose gap cap rates along with the cash cap very low default rates historically, and our indigenous to hold our properties long-term.

Speaker #3: Therefore, the data related to those expected long-term returns is another helpful metric for our investors. Our presentation includes a new slide on page eight that has gap cap rates going back to 2023 and shows that historically they have averaged about 70 basis points higher than our initial cash cap rates.

Patrick Wernig: Second, we are updating the way we disclose AFFO per share growth by calculating without the impact of 2 decimal rounding. Based on our share count, rounding can be impactful on this figure, particularly for quarterly comparisons. Our updated approach will allow us to quote a more accurate growth figure. We continue to aim for ways to improve transparency with the investor community and believe that these changes are aligned with that use.

Speaker #3: Second, we are updating the way we disclose FFO per share growth by calculating without the impact of two-decimal rounding. Based on our share count, rounding can be impactful in this figure, particularly for quarterly comparisons.

Speaker #3: Our updated approach will allow us to quote a more accurate growth figure. We continue to aim for ways to improve transparency with the investor community, and believe that these changes are aligned with our ethos.

Patrick Wernig: With that, we'll turn over to questions for the Q&A session. Thank you.

Speaker #3: With that, we'll turn over to questions for the Q&A session. And just a reminder, the meeting ID is 865-913-566 if you would like to ask a question.

Speaker #3: Thank you.

Operator: Your first question comes from Michael Goldsmith from the line of UBS. Michael, go ahead.

Speaker #1: We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star one to raise your hand.

Speaker #1: To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality.

Speaker #1: If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from Michael Goodsmith from the line of UVS.

Operator: Your first question comes from Michael Goldsmith from the line of UBS. Michael, go ahead.

Speaker #1: Michael, go ahead.

Michael Goldsmith: Thank you. It's Michael Goldsmith from UBS. Thanks for taking the question. First question is, I know you guys don't provide discrete guidance, but maybe this $200 million term loan is shadow guidance in that you've talked about fully drawing that down to Q2 and Q3. Is that, you know, as we think about just acquisition activity, you've got the $200 million there, you know, consensus at $275 million in acquisitions for the year, and that's stepping down to $250 million next year. Just trying to get a sense of, you know, your liquidity, the acquisition market, and now, you know, you kind of have clear line of sight into acquisitions of, let's say, $200 million through Q3.

Speaker #4: Thank you. It's Michael Goldsmith from UVS. Thanks for taking the question. First question is, I know you guys don't provide discrete guidance, but maybe this $200 million term loan is shadow guidance in that you've talked about fully drawing that down in the second and the third quarter.

Speaker #4: So, as we think about just the acquisition activity, you've got the $200 million there, consensus at $275 million on acquisitions for the year, and that's stepping down to $250 million next year.

Speaker #4: So just trying to get a sense of your liquidity, the acquisition market, and now you kind of have clear line of sight into acquisitions of, let's say, $200 million through the third quarter.

Michael Goldsmith: You know, should you be able to exceed that and continue to acquire healthily into next year? Thanks.

Speaker #4: Should you be able to exceed that and continue to acquire healthily into next year?

Speaker #1: Thanks. So Michael, you know our business well. I think the answer might be hidden in your question. But yeah, we are very particular about how our press releases are drafted, and I think we gave more specific timing guidance than we have in the past. I would say it's always curious that analysts seem to have declining acquisitions for us, which is unusual in the space.

Bill Lenehan: Michael, you know our business well. I think the answer might be hidden in your question. Yeah, we, you know, are particular about how our press releases are drafted, and I think we gave more specific timing guidance than we have in the past. I would say it's always curious that analysts seem to have declining acquisitions for us, which is unusual in the space. I don't think there are other companies that's the case. I'm not sure why. It's not what has been the historical record.

Speaker #1: I don't think there are other companies that that's the case. I'm not sure why. It's not what has been the historical record.

Michael Goldsmith: Got it. Then as a follow-up, appreciate the new slides in the presentation, I think pages 7 and 8. Can you just kind of walk through what you're trying to show here? I think you're indicating that the Four Corners portfolio or how your tenants are outperforming maybe the general overall restaurant industry. Then separately, right, like your GAAP cash or GAAP cap rates are exceeding your cash, but maybe you could just provide a little bit more detail about what the point that you're trying to make with both of these things.

Speaker #4: Got it. And then, as a follow-up, I appreciate the new slides and the presentation. I think pages seven and eight—can you just kind of walk through what you're trying to show here?

Speaker #4: I think you're indicating that the four-quarters portfolio or the tenants in the the tenants that you guys are the tenants are outperforming maybe the general overall restaurant industry and then separately your gap capture.

Speaker #4: Gap cap rates are exceeding your cash flow. Maybe you could just provide a little bit more detail about what the point is that you're trying to make with both of these things.

Bill Lenehan: Yeah, absolutely. Great question. We had an investor show us our stock price versus, like, some generic index. I think it might have been MSCI or Morgan Stanley, some generic restaurant index. You had to be a little cute with the start date to get it to line up. There was a pretty high correlation. They were sort of making the point, do you trade like a restaurant index? We think that that's a silly concept on its face. If we were gonna trade like in a restaurant index, at a minimum, you should weight the index by our rent and look at the stock performance of our tenants weighted by our rent.

Speaker #1: Yeah, absolutely. Great question. We had an investor show us our stock price versus some generic index. I think it might have been MSCI or Morgan Stanley.

Speaker #1: Some generic restaurant index. And you had to be a little cute with the start date to get it to line up. But there was a pretty high correlation and so they were sort of making the point, do you trade like a restaurant index and we think that that's a silly concept on its face, but if we were going to trade like in a restaurant index, at a minimum, you should wait the index by our rent.

Speaker #1: And look at the stock performance of our tenants, weighted by our rent. And if you do that, you get the yellow line, which shows how strong Darden and Chili's have been and that we don't have, because we weighted it down as far as we could with public companies.

Bill Lenehan: If you do that, you get the yellow line, which is, you know, shows how strong Darden Restaurants and Chili's Grill & Bar has been, and that we don't have, you know, because we weighted it basically down as far as we could with public companies. We don't have, you know, companies that have fallen into distress. Our tenant roster is really strong. The GAAP cap rate, we have a competitor, AGRI, that we admire. It's a great company. They have historically used GAAP cap rates. We have gotten questions about where our cap rates are versus theirs, and there seems to be some investor confusion that they're quoting two different things. Both numbers are perfectly legitimate ways of looking at it. Sometimes we felt our cash cap rates were being compared against their GAAP cap rates.

Speaker #1: We don't have companies that have fallen into distress. Our tenant roster is really strong. The gap cap rate we have a competitor, Aegree, that we admire.

Speaker #1: It's a great company. They have historically used gap cap rates. We have gotten questions about where our cap rates are versus theirs. There seemed to be some investor confusion.

Speaker #1: That they're quoting two different things. Both numbers are perfectly legitimate ways of looking at it. But sometimes we felt our cash cap rates were being compared against their gap cap rates.

Bill Lenehan: We just did the math and showed you the data so you can pick and choose the way you wanna do it. I'll handle the last new disclosure. You didn't ask about it, Michael, but I'll just handle it now, about rounding, which is, you know, we just thought this is a more accurate way of doing it. We went back, you know, not surprisingly, some of the times the rounding would, comparing rounded to rounded versus more closely actual to actual, would, you know, have a higher growth rate some of the time, a lower growth rate some of the time. We just thought this was a better way of showing it. There seems to be a lot of focus on growth today, and we wanted to give you the most accurate number you can.

Speaker #1: And so we just did the math and showed you the data, so you can pick and choose the way you want to do it.

Speaker #1: I'll handle the last new disclosure. You didn't ask about it, Michael, but I'll just handle it now—about rounding. Which is, we just thought this is a more accurate way of doing it.

Speaker #1: We went back, not surprisingly, some of the times, the rounding would comparing rounded to rounded versus more closely actual to actual would have a higher growth rate some of the time, a lower growth rate some of the time.

Speaker #1: We just thought this was a better way of showing it. There seems to be a lot of focus on growth today, and we wanted to give you the most accurate number we can.

Bill Lenehan: If you have more questions about that, it's a pretty, technical, calculation. I'd probably recommend you reach back out to Pat after the call on the rounding issue.

Speaker #1: If you have more questions about that, it's a pretty technical calculation. I'd probably recommend you reach back out to Pat after the call on the rounding issue.

Michael Goldsmith: Thanks so much, guys. Good luck in Q2.

Speaker #4: Thanks so much, guys. Good luck in the second quarter.

Bill Lenehan: Appreciate it.

Patrick Wernig: Thanks, Michael.

Speaker #1: Appreciate it.

Speaker #3: Thanks, Michael.

Operator: Your next question comes from the line of Eric Borden from BMO Capital Markets. Eric, go ahead.

Speaker #1: Your next question comes from the line of Eric Borden from BMO Capital Markets. Eric, go ahead.

Eric Borden: Hey, good morning. Thanks for taking my question. Just given your strong relationship with Yum and Brinker, you know, are there any identical acquisition opportunities as Yum expands on its Taco Bell platform and Brinker expands on its Chili platform, just given the strength in same store sales there, whether it's, you know, on the acquisition front or potentially, you know, a development opportunity? Thank you.

Speaker #5: Hey, good morning. Thanks for taking my question. Just given your strong relationship with Yum and Brinker, are there any identifiable acquisition opportunities as Yum expands on its Taco Bell platform and Brinker expands on its Chili platform, just given the strength and same source sales there, whether it's on the acquisition front or potentially a development opportunity?

Bill Lenehan: Thank you. Yeah, we're always working on those. You know, the one comment I'd make is Taco Bell tends to trade some very tight cap rates. We're always working on things like that, being aligned with strong brands where we can play offense and not have to be licking the wounds of prior investment mistakes is a huge advantage. I would say that both of the brands you mentioned, they traded very competitive cap rates on the secondary market.

Speaker #5: Thank you.

Speaker #4: Thank you. Yeah, we're always working on those. We the one comment I'd make is Taco Bell's tend to trade for very, very tight cap rates.

Speaker #4: But we're always working on things like that, being aligned with strong brands where we can play offense and not have to be looking the wounds of prior investment mistakes.

Speaker #4: Is a huge advantage. But I would say that both of the brands you mentioned, they traded very, very competitive cap rates on the secondary market.

Eric Borden: Okay, that's helpful. Then just on the bad debt side of things, could you just talk about anything that's been realized year to date and, you know, how are you thinking about bad debt for the remainder of 2026? Thank you.

Speaker #1: Okay, that's helpful. And then just on the bad debt side of things, could you just talk about anything that's been realized year-to-date, and how are you thinking about bad debt for the remainder of 2026?

Bill Lenehan: Sure.

Patrick Wernig: Yeah. The number is 0 for the year to date. You know, we have over 1,300 leases, so we're always kind of monitoring, you know, something in the portfolio. We have not had any bad debt this year. The portfolio continues to perform really strong. Say like, you know, you probably saw Brinker's results yesterday, recent prints by Darden as well. You know, the brands we've aligned with are weathering any sort of macro headwinds very well. There's gonna be some brands that don't. You know, we try to pick our horses very carefully so that we avoid that.

Speaker #1: Thank you.

Speaker #3: Yeah. So the number is zero for the year to date. We have over 1,300 leases, so we're always kind of monitoring something in the portfolio.

Speaker #3: But we have not had any bad debt this year. And the portfolio continues to perform really strong. Say like you probably saw Brinker's results yesterday.

Speaker #3: Recent prints by Darden as well. The brands we've aligned with are weathering any sort of macro headwinds very well. There's going to be some brands that don't.

Speaker #3: But we've tried to pick our horses very carefully so that we avoid that.

Eric Borden: All right. Thank you for the time. Appreciate it.

Bill Lenehan: Yeah, of course.

Speaker #1: All right. Thank you for the time. Appreciate it.

Speaker #4: Yeah, of course.

Operator: Your next question comes from the line of Wes Golladay with Baird. Wes, please go ahead.

Speaker #1: Your next question comes from the line of Wes Golliday with Baird. Wes, please go ahead.

Wes Golladay: Thank you. Good morning to everyone. Can you go back to that comment on the expirations? I think you said 27 of 42 have been renewed. I believe you said 6%, I would've thought maybe it would've been a little bit lower with the contractual rent extension. Maybe how should we think about that going forward?

Speaker #5: Thank you. Hey, good morning, everyone. Can you go back to that comment on the expirations? I think you said 27 of 42 had been renewed.

Speaker #5: I believe you said 6%, so I would have thought maybe it had been a little bit lower with the contractual rent extensions. But maybe, how should we think about that going forward?

Bill Lenehan: I wouldn't overemphasize it. I think we had a positive quarter. You know, our typical rent growth is 1.5%. If you're modeling our company, I think that's a good place to go. Other quarters were better. There might be a quarter where it isn't as good, but 1.5 I think is a good place to start and finish.

Speaker #4: I wouldn't overemphasize it. I think we've had a positive quarter. Our typical rent growth is one and a half percent if you're modeling our company.

Speaker #4: I think that's a good place to go. But the quarters were better. There might be a quarter where it isn't as good. But one and a half, I think, is a good place to start and finish.

Wes Golladay: Okay. Thanks for that.

Bill Lenehan: And I would also-

Wes Golladay: And then when we look at-

Bill Lenehan: I would also just real quick, Wes, I would just like to, you know, emphasize that Justin and his team have done a terrific job on property management, asset management, and re-leasing. That's a new, you know, capability for us, frankly. In the last couple of years, Justin has really aggressively restructured his team and has done a terrific job. We are more on top of that as a company than we've ever been by far.

Speaker #4: And I would also say I would also just real quick, Wes. I would just like to emphasize that Justin and his team have done just a terrific job on property management and asset management and releasing.

Speaker #4: And that's a new capability for us, frankly, in the last couple of years. Justin has really aggressively restructured his team. And has done a terrific job.

Speaker #4: We are more on top of that as a company than we've ever been by far.

Wes Golladay: Okay. Thanks for the additional color there. When we look at the pipeline going forward, is there a bigger percentage of that in the new categories that you're evaluating or are you looking to enter those new categories a little bit more methodically?

Speaker #1: Okay, thanks for the additional color there. When we look at the pipeline going forward, is there a bigger percentage of that in the new categories that you're evaluating, or are you looking to enter those new categories a little bit more methodically?

Bill Lenehan: Yeah, we're really score-focused, so we're not really putting emphasis on one category over the other. We're trying to find the assets that score the best and make sure that those rise to the top with appropriate pricing.

Speaker #4: Yeah, we're really score-focused, so we're not really putting emphasis on one category over the other. We're trying to find the assets that score the best and make sure that those rise to the top with appropriate pricing.

Wes Golladay: Okay. Thanks a lot.

Bill Lenehan: We are looking at some new sectors as we talked about last quarter, and really leading into building relationships, finding what tenants we wanna emphasize, et cetera. The aperture is bigger than it's ever been.

Speaker #4: But we are looking at some new sectors, as we talked about last quarter, and really leaning into building relationships, finding what tenants we want to emphasize, etc.

Speaker #4: So the aperture is bigger than it’s ever been.

Wes Golladay: Okay. I appreciate the color.

Speaker #1: Okay. I appreciate the color. Your next question comes from the line of John Kilichowski. With Wells Fargo. John, please go ahead.

Operator: Your next question comes from the line of John Kilichowski with Wells Fargo. John, please go ahead.

John Kilichowski: Hi. Good morning. Thanks for taking my question. First one for me, Bill, thanks for the color on Bahama Breeze. I guess just to expand on that, you know, you mentioned the positive mark on the other assets that weren't being converted. Is there gonna be downtime there? Will there be rent loss before the mark or do you think there'll be no net credit loss there?

Speaker #5: Hi, good morning. Thanks for taking my question. First one for me, Bill—thanks for the color on Bahama Breeze. I guess, just to expand on that, you mentioned the positive mark on the other assets that weren't being converted.

Speaker #5: Is there going to be downtime there? Will there be rent loss before the mark? Or do you think there'll be no net credit loss there?

Bill Lenehan: No, I don't think there'll be downtime. Darden is responsible for a year and a half up, at the minimum, up to four years for the handful that we're converting to other tenants. you know, but to the extent that there's rent growth or capital provided, you know, all that's baked into our comments. We feel really good about being able to re-lease these to strong tenants. Darden's taking, you know, a lot of them too. a good diversification move. I think it shines a light on the Bahama Breeze that we sold a number of years ago for really, really high prices, that we did a good job managing our value at risk with any one particular tenant. could be a good result.

Speaker #4: No, I don't think there'll be downtime. The Darden is responsible for a year and a half at the minimum, up to four years for the handful that we're converting to other tenants.

Speaker #4: But to the extent that there's rent growth or capital provided, all that's in baked into our comments. We feel really good about being able to release these to strong tenants and Darden's taking a lot of them too.

Speaker #4: So a good diversification move I think it shines a light on the Bahama Breezes that we sold a number of years ago. For really, really high prices that we did a good job managing our value at risk with any one particular tenant.

Speaker #4: But it could be a good result.

Patrick Wernig: I would just add to that. I mean, Bill said in his comments that we're talking about four stores and 50 basis points of ABR. It's a small amount.

Speaker #3: I would just add to that. I mean, Bill said it in his comments, but we're talking about forced stores and 50 basis points of ABR.

John Kilichowski: Yeah. Understood. Just quarter to date, if we kind of run the numbers here, it looks like the average blend is about 20 basis points higher than what you closed in Q1. I know that's early based on what you've released. Is there any sort of upward creep in yields that you're seeing, anything driving that or is that just, you know, small sample size there that's driving that move?

Speaker #3: It's a small amount.

Speaker #5: Yeah. Understood. And then just quarter to date, if we kind of run the numbers here, it looks like the average blend is about 20 bids higher than what you close in one queue.

Speaker #5: I know that's early based on what you've released. Is there any sort of upward creep in yields that you're seeing? What's driving that, or is that just small sample size there that's driving that move?

Bill Lenehan: Small sample size.

John Kilichowski: Okay. Got it. Thank you.

Speaker #4: Small sample size.

Speaker #5: Okay. Got it. Thank you.

Bill Lenehan: Yep.

Speaker #4: Yep.

Operator: Your next question comes from the line of Mitch Germain from Citizens JMP Securities. Mitch, please go ahead.

Operator: Your next question comes from the line of Mitch Germain from Citizens Bank. Mitch, please go ahead.

Speaker #1: Your next question comes from the line of Mitch Germain from Citizens Bank. Mitch, please go ahead.

Mitch Germain: Yeah, thank you. Bill, just you mentioned just a second ago, you know, obviously looking at a couple new industries, I think it was capital that you allocated to a rental company and so a rental operator and a grocer. How do you know, what sort of education do you and your team take in reviewing the sector? You know, kind of what are the attributes that made those sort of assets or sectors interesting for you? Does that really, obviously, it clearly changes the TAM in terms of how you're allocating capital. Is that the way we should be thinking about this now?

Speaker #3: Yeah, thank you. Bill, you mentioned just a second ago obviously looking at a couple of new industries. I think it was capital that you allocated to a rental company and so rental operator and a grocer.

Speaker #3: How do you what sort of education do you and your team take in reviewing the sector? Kind of what are the attributes that may those sort of assets or sectors interesting for you?

Speaker #3: And does that really obviously, it clearly changes at TAM in terms of how you're allocating capital. Is that the way we should be thinking about this now?

Bill Lenehan: Yeah, I think that's a good way of thinking about it. You know, I guess we use what we call the triple filter, which is this something that we know enough to buy? I'll talk a little bit more about that in a second. Do we have our permission from our investors to buy it? Would we buy it with our own money? While those sound very high level, that is a very challenging gauntlet for an asset class to get through. You know, I personally wouldn't buy a pickleball facility with my own money, so that makes it pretty easy to, you know, not buy pickleball facilities. I wouldn't buy a Carvana with my own money, so that makes it pretty easy. Do we have permission from our investors? That's a harder one.

Speaker #4: Yeah, I think that's a good way of thinking about it. I guess we use what we call the triple filter, which is, is this something that we know enough to buy?

Speaker #4: And I'll talk a little bit more about that in a second. Do we have our permission from our investors to buy it? And would we buy it with our own money?

Speaker #4: And so, while those sound very high level, that is a very challenging gauntlet for an asset class to get through. So, I personally wouldn't buy a pickleball facility with my own money.

Speaker #4: So that makes it pretty easy to not buy pickleball facilities. I wouldn't buy a caravana with my own money. So that makes it pretty easy.

Bill Lenehan: I think we tend to take it pretty gradually to make sure that we're bringing our investors along with us. Pretty clearly, you know, our investors don't need Four Corners to buy a Class A office in New York City. They have other ways to get that exposure. Do we know enough to know is manifest in writing white papers for our board, going to conferences, meeting and talking with tenants, walking the floors. I would say humbly that a lot of these sectors are things that I have experience with in the past, it just preceded Four Corners. When I was at Torchlight Investors, when I was at Graham, on Graham Realty's investment committee, you know, in other things I worked on, you know, we bought outdoor industrial storage. We bought grocery.

Speaker #4: Do we have permission from our investors? That's a harder one. And I think we tend to take it pretty gradually to make sure that we're bringing our investors along with us.

Speaker #4: But pretty clearly, our investors don't need Four Corners to buy Class A office in New York City. They have other ways to get that exposure.

Speaker #4: Do we know enough to know—is it manifest in writing white papers for our Board? Going to conferences? Meeting and talking with tenants? Walking the floors?

Speaker #4: And then I would say, humbly, that a lot of these sectors are things that I have experience in within the past. It just preceded Four Corners.

Speaker #4: So, when I was at Ferrall, when I was at Gramercy's investment committee, and in other things I worked on, we bought outdoor industrial storage, we bought grocery, so I have a familiarity with it.

Bill Lenehan: I have a familiarity with this, making sure we bring the team along with me.

Speaker #4: It's making sure we bring the team along with me.

Mitch Germain: Great. Last one from me. I asked this a couple times this quarter, but I'm just curious, are you seeing any real changes in the competitive landscape within the investment sales market? You know, I mean, obviously for quite some time there was a lot of competition that was sitting on the sidelines, and some of that appears to be back. Is that, you know, shifting, you know, kind of any way that you're approaching underwriting and bidding on properties?

Speaker #3: Great. And last one from me. Asked this a couple of times this quarter, but I'm just curious. Are you seeing any real changes in the competitive landscape within the investment sales market?

Speaker #3: I mean, obviously, for quite some time, there was a lot of competition that was sitting on the sidelines. And some of that appears to be back, but is that shifting kind of any way that you're approaching underwriting and bidding on properties?

Bill Lenehan: You know, where we are buying these onesies and twosies, you know, we obviously look at portfolios, and have closed on several in our existence. I think we're really well competitively positioned, and we can build a portfolio throughout a year that we're proud of doing onesies and twosies, but we have the scale to do bigger things as well. You know, you read a lot in the news about private credit and the private credit firms, you know, trading at discounts to NAV, questioning of their marks. You know, will that cause them to pull back? I don't think we have evidence of that yet. Certainly there's been recently, you know, there's been a lot of corporate M&A activity. I think there's a lot of shadow corporate M&A activity. There's a lot of things to work on now.

Speaker #4: Where we are buying these onesies and twosies, we obviously look at portfolios and have closed on several in our existence. I think we're really well competitively positioned.

Speaker #4: We can build a portfolio throughout a year that we're proud of doing onesies and twosies. But we have the scale to do bigger things as well.

Speaker #4: You read a lot in the news about private credit and the private credit firms. Creating a discount SNAB, questioning of their marks. Will that cause them to pull back?

Speaker #4: I don't think we have evidence of that yet. And certainly, recently there's been a lot of corporate M&A activity. I think there's a lot of shadow corporate M&A activity.

Speaker #4: So, there's a lot of things to work on now.

Mitch Germain: Thank you.

Speaker #3: Thank you.

Operator: There are no further questions at this time. I will now turn the call over to Bill Lenehan, CEO, for closing remarks. Bill, go ahead.

Speaker #1: There are no further questions at this time. I will now turn the call over to Bill Lenehan, CEO for closing remarks. Bill, go ahead.

Bill Lenehan: Great. Terrific, glad to land the plane on the 30-minute mark. Ultimately, our existing portfolio strength is compelling for us to focus on offense, where many of our peers are playing defense. Our $200 million term loan gives us a direct line of sight for funding between now and Q3. The attractive pricing we're seeing in the debt markets should give us even more access to low-cost funding later this year at scale. The acquisition market is stable, with a bit larger aperture for our property types, we expect another successful year of building our portfolio brick by brick. Our team will be at ICSC the week of May 18 and Nareit in New York the week of June 1. As many of you know, we host a cocktail party in conjunction with ICSC.

Speaker #4: Great. Terrific. And glad to land the plane on the 30-minute mark. Ultimately, our existing portfolio strength is compelling. For us to focus on offense, where many of our peers are playing defense.

Speaker #4: Our $200 million term loan gives us a direct line of sight for funding between now and Q3. The attractive pricing we're seeing in the debt markets should give us even more access to low-cost funding later this year at scale.

Speaker #4: The acquisition market is stable, and with a bit larger aperture for our property types, we expect another successful year of building our portfolio brick by brick.

Speaker #4: Our team will be at ICSC the week of May 18th in Erie in New York the week of June 1st. As many of you know, we've posted cocktail party in conjunction with ICSC.

Bill Lenehan: We'd love to meet with you in person at either of these events, please reach out to Patrick or myself to coordinate schedules. Thank you all, look forward to continuing to see many of you in person this year.

Speaker #4: We'd love to meet with you in person at either of these events. So please reach out Patrick or myself to coordinate schedules. Thank you.

Speaker #4: All, and look forward to continuing to see many of you in person this year.

Operator: This concludes today's call. Thank you for attending. You may now disconnect.

Q1 2026 Four Corners Property Trust Inc Earnings Call

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