Four Corners Property Trust, Inc.

Good day and welcome to the Four Corners Property Trust Second Quarter 2020 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star and then one on your telephone keypad. To withdraw your question, please press star, then two. Please note this event is being recorded. I would now like to turn the conference over to Jerry Morgan, Chief Financial Officer. Please go ahead.

Thank you, Allison. During the course of this call, we will make forward-looking statements which are based on beliefs and assumptions made by us. Our actual results will be affected by known and unknown factors, including uncertainty related to the scope, severity and duration of the COVID-19 pandemic that are beyond our control or ability to predict. 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 fcpt.com. All the information presented on this call is current as of today, July 30, 2020. In addition, reconciliation to non-GAAP financial measures presented on this call, such as FFO and AFFO, can be found at in the company's supplemental report also available on our website. And with that, I'll turn the call over to Bill.

Thank you, Jerry. Good morning, everyone. Thank you for joining us. us to discuss our second quarter results, and I hope all of you and your families are staying healthy. We were very pleased with the second quarter results and the strong level of collections we were reporting for that quarter, and as of today, collections are over 99% for July. I'd like to clarify that number for our investors. In the plainest terms possible, for all leases in our portfolio, we have already received over 99% of the cash-based rent payments for the month of July. Given that we've only agreed to abate approximately $20,000 in rent due in July and not agreed to any deferrals for the month of July, we believe this is a remarkable achievement for our team and our shareholders given the ongoing pandemic. This is a testament to both the low rents of the properties in our portfolio and to the strength of our tenants and their tenacity in adjusting their operating models to the current COVID environment. Let me start with a few additional comments on collections. Our team has worked tirelessly with our tenants to save the rest of their business operations and to work creatively, when applicable, on lease modifications. Through this effort, we've collected over 92% of second quarter rent payments. In addition, we've agreed to defer approximately 3% of second quarter rent payments until later this year and agreed or expect to shortly agree to abate an incremental 4% of second quarter rents. This leaves only approximately 1% of our rents for Q2 unresolved. While most retail landlords have observed their tenants requesting relief over this period, FCBT only agreed to a select number of deferral and abatement agreements in cases where tenants exchanged favorable concessions and lease modifications for those deferments or abatements. Importantly, these concessions include lease term extensions, increased financial reporting, guarantor improvement, annual rent bumps, swapping fair market rent adjustments for stable contractual rent, and incremental percentage rent, amongst other terms. Despite the ongoing difficulties in coping with the pandemic, through these difficult negotiations, we have longer contractual lease duration and higher rent growth than we had going into this, and we believe we have strengthened our working relationships with many of our tenants. In essence, the stance we've taken over the last few months is that FCPT is always willing to listen to and work with our tenants, but we need to make sure that we are capturing value for our shareholders as part of any occasion where we open the lease document. Free rent relief and deferment is not something FCPT has provided to any tenant, and we were careful not to rush to negotiations in the early days of the pandemic when operators were most fearful of the environment. It was very helpful that we've acquired and scored in our investment model all of these properties within the past few years. This proved important in determining where we wanted to focus our efforts in lease modification discussions. Nearly all deferment and abatement was contained within the second quarter, which resulted in our step-up for July collections to over 99% of rental payments. We expect the collection trend to continue going forward, and that remaining outstanding rent balances for April through June will reach resolution in the very near term. We do note that for a very small number of tenants, we established a minimal credit reserve for the second quarter rents. Please note that we've included a new slide in our quarterly supplemental entitled COVID-19 Rent Collections Update, which summarizes the rent collection deferral and abatement numbers we've disclosed in tabular form. I think you'll find it very helpful. The reopening of the country and the impact on restaurant traffic will continue to be a fluid situation and, of course, is hard to predict. As we've said last quarter, however, we continue to believe that strong operators like Darden, Brinker, Bloomer Brands, RBI, and others in our portfolio should benefit in the long run from their scale and in the near term from their investment in technology, specifically off-premise and to-go capabilities. It's worth calling out that an environment like this is exactly why FCMPT has focused on low-rent properties with strong sales and rent coverage and on four to five balance sheets. We observed many tenants in the quick service and casual dining sectors return sales near 2019 levels by late June. In the case of quick service operators, some even exceeded 2019 sales levels. This is despite one of the most challenging operating periods in restaurant history. And yet, despite these challenges, we believe our portfolio remains very healthy. The coming months will undoubtedly continue to have market volatility and consumer behavior may shift once again, but we believe that our conservative underwriting we preach here at FCPT distinguishes in times of turbulence and will continue to serve the portfolio well through the pandemic. Our Carol subsidiary, which I'll remind you is the six Longhorn Steakhouses we operate in San Antonio, is very ably managed by Carol Diltz. Because of COVID, their quarterly results were a negative $415,000 versus a positive contribution of over $200,000 in the first quarter. Carol and her team did an extraordinary job given the circumstances. In addition, Carol provided a real-time understanding of what our tenants were going through and how they're adapting. are recovered very quickly from the first phase of COVID, and I anticipate them doing well later in this year. Now turning to our reported results in the second quarter. We achieved AFO per share of 34 cents, which represents flat year-over-year results. As Jerry will outline in more detail, this included approximately 4 cents per share of dilution from COVID-related items. Our AFFO this quarter includes the deferred rents outlined above, which we believe will be received by the end of the year, but excludes second quarter rent we expect to abate in conjunction with lease modifications. Turning to acquisitions, we resumed activities in the second half of June with an even greater focus on acquiring only the most stable and creditworthy properties within our pipeline and applying that same stringent filter to any new investments. We acquired 11 properties in the second quarter for a combined purchase price of $32.7 million at an initial weighted average cash yield of 6.3%. In July, we required an additional five properties for a combined purchase price of $10.3 million, with an initial average cash yield of 6.5%. Speaking to the quality of these recent acquisitions, 17 of the 18 leases at these properties are with the brand's corporate operator or guaranteed by the corporate entity, and 11 of the leases are ground leases where FCVT owns the land and attendants construct the building, which typically equates to low rents. While the pricing of these acquisitions stayed in line with our historic yield range, we believe the quality of the real estate and tenant credit are strong and further improve the quality brand of the overall portfolio. We would expect more of the same in the coming months. Finally, before I turn it over to Jerry to discuss some of the financial results, one operational update and a recap of where we stand today. On operations, we moved into a new, larger office space in our current office building in Mill Valley, and we look forward to hosting any of you in the area once travel resumes. Our team is currently working remotely but remains highly effective. In summary, we have posted rent collections for Q2 that are amongst the strongest in the net lease sector, and we are at a high level of rent collections for July, which we hope and expect to continue going forward. We are once again acquiring properties and are excited to return to growth and building the portfolio. Now Jerry will take you through our financial results. Jerry?