Four Corners Property Trust, Inc. Q4 FY2024 earnings call

Introductory Remarks

• 2024 was a strong year; acquisition volume was down in the first half due to rising interest rates, but by Q3, improved cost of capital allowed resumption of acquisitions.

Acquisition Activity

• Ended 2024 with $265 million of acquisitions at a 7.1% cap rate, with $203 million in the second half, including $87 million in Q4. Acquisitions were evenly split between restaurant, medical retail, and auto service sectors.

Portfolio Performance

• Portfolio occupancy was 99.6% at year-end, and 99.4% of base rent was collected in Q4. Rent coverage in Q4 was 4.9 times for most of the portfolio. Core tenants are strong, with casual dining brands like Chili's, Olive Garden, and LongHorn performing well.

Balance Sheet

• Raised over $318 million of equity in 2024, $102 million in Q4, with $102 million of unfettered equity forwards. Fixed charge coverage ratio is 4.5 times. Extended and upsized credit facility in January, increasing revolver capacity by $35 million and extending term loan maturity.

Financial Highlights

• Q4 FFO was $0.44 per share, up 2.3% from Q4 2023. Full-year 2024 FFO per share was $1.73, up 3.6% from 2023. Cash rental income in Q4 was $60.8 million, up 6.6% year-over-year. Full-year cash rent was $235.4 million, up 8.8% from 2023.

In 2024, Four Corners Property Trust, Inc. had acquisitions broken down by sector: restaurants made up approximately 42% of acquisitions, medical retail at 30%, and auto service at 28%. For the portfolio, at year-end, 68% of annual base rent came from casual dining operators, 9% from quick-service restaurants, 11% from automotive, and 9% from medical retail. The company acquired $265 million worth of properties in 2024 at a blended 7.1% cap rate, with $203 million acquired in the second half of the year, including $87 million in Q4.

• Built significant liquidity to fund new growth and expects to add to pipeline in a steady manner. Anticipates cap rate to be at or near 2024 levels. Continuing to build investment team in 2025. No formal guidance provided, but sees opportunities consistent with quality thresholds.

• Market volatility and interest rate changes could impact acquisitions and capital raising. Exposure to unforeseen changes in tenant performance or economic conditions not captured in underwriting. Competition in the market for acquisitions could affect deal sourcing.

Q: Talk about which areas underlying are seeing better or worse trends even if rents are not at risk A: Casual dining brands are growing, QSR exposure is to Burger King which is doing well, and other sectors are defensive. Avoided areas where competitors are playing defense Q: How should we think about being off from public bond issue A: Spending time on it, revolver upsized, have a buffet of debt options including private note market and term loans Q: Expectation on non-restaurant retail segment growth and acquisition cadence A: No set thresholds, but trends established may continue. Competing on small portfolios and individual properties, not large multi-hundred million dollar deals Q: Feeling good about acquisition outlook for 2025 given interest rate movement A: In green zone, have substantial capital raised to use for acquisitions, putting in rare category compared to peers Q: Rent collected deceleration sequentially A: Some timing issues, acquired assets in December last few weeks, takes time to shift rents Q: Sourcing deals with competition A: Focus on small portfolios and individual properties, not large multi-hundred million dollar deals. Have capital raised to buy accretive properties, and have been working on deals for years that now closed Q: Impact of policy changes on underwriting and risk assessment A: Not seen much change yet, monitoring closely but not changed acquisition scorecard significantly Q: G&A scaling in 2025 A: G&A dollar amount is low, growing capacity from 6 to 40 people, intention to grow business accretively if cost of capital allows Q: Pipeline of deals hanging around loop with sellers not capitulating on price A: Q1 typically slower, but Q1 2025 shaping up to be good. Not focusing on pipeline guidance as not going to drop price to grow without per-share accretion Q: Replacement tenant recovery rates A: Positive, but sample size small. Favorable market environment for leasing but losing a tenant is not no big deal Q: Proportion of deals widely marketed vs relationship-based A: Often properties are dealt with before formal marketing materials, price agreed and transacted directly with sellers or brokers