Four Corners Property Trust, Inc.

Ladies and gentlemen, welcome to the FCTT Fourth Quarter 2022 Financial Results Conference Call. My name is Glenn and I'll be the moderator for today's call. If you would like to ask a question during the presentation, you may do so by pressing smile, 1 or tap on keypad. I'll now hand you over to host Jerry to begin. Jerry, please go ahead.

Thank you, Glenn. 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 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 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, February 16, 2023. Reconciliation and non-GAAP financial measures presented on this call, such as FFO and AFFO, can be found in the company's supplemental report, also on the website. With that, I'll turn the call over to Bill.

Thank you, Jerry. Good morning. Thank you for joining us to discuss our fourth quarter results. I'm going to make introductory remarks. Patrick will review some details around acquisitions and the pipeline, and then Jerry will discuss the financial and capital raising results. The existing portfolio continued to perform exceptionally well with 99.9% collections for the year ended December 31st, and occupancy remaining at 99.9%. We reported fourth quarter AFFO $0.41 per share and $1.64 per share for the full year, which represents 5% growth for 2022 over 2021. We grew cash rental revenues 11.4% on a year-over-year basis, including the benefit of rental increases and $286 million of acquisitions in 2022. This included the acquisition of 42 properties in the fourth quarter for $120 million at an initial cash yield of 6.6%, reflecting rents in place as of December 31st. Thirty-three of the 42 acquired properties are corporate operated, and we remain highly confident we are aligning our portfolio with best-in-class operators at attractive rent levels. Patrick will discuss the current investment environment in more detail. But in the fourth quarter, we continued to see acquisition pricing improve in response to the higher cost of capital environment. The Q4 acquisitions average cap rate reflected that dynamic at 6.6% versus 6.3% in Q3. The blended Q4 figure included deals priced earlier in the year prior to the shift in cap rates, with more recently priced deals above the average for the quarter. We note that sale leaseback transactions have more appeal now to operators versus other forms of financing in recent years. Equity capital, term loans, CMBS, all have become more expensive in the last six months. And this has led us to more opportunities in discussions with tenants looking to expand operations or monetize their real estate. I wanted to note two very specific but very minor headwinds we experienced in the quarter in regards to FFO. First, our restaurant subsidiary, Carrow, experienced a much lower EBITDA margin in the quarter. Sales remained strong and in line with prior quarters, but Carrow experienced higher food and beverage, labor, utility, and other services costs impacted by inflation. Carrow has already started to see some relief in the increase in beef and other costs, so we expect this impact to moderate in the first quarter of this year. The second minor headwind was higher interest expense. 90% of our Just over a billion of debt is fixed currently at a rate of 3.39%. However, interest rates on the remaining 10% of our debt are variable, and pricing increased an average by over 145 basis versus the third quarter. A reminder to our investors that we think 90% fixed, 10% variable rate debt is appropriate for our business, and we've benefited some quarters, but unfortunately we're impacted in quarters like last quarter. Our current all-in rate as of the quarter end is 3.6%. In the quarter, we sold one property for a sales price of $4.9 million, representing a gain of $600,000. For the full year 2022, we sold eight properties for $26 million. The strong demand for our properties provides us an attractive alternative source of capital while also improving the overall quality of the portfolio. Moving to our tenants' performance. Restaurant operators continue to have strong sales results in the most recent quarter. although many are experiencing pressure on margins as cost increases in food and labor are not fully passed on to the end consumer. However, as I mentioned earlier while discussing CARO, it looks like restaurants are seeing a slowing of commodity cost increases, especially meat prices. Sales continue to hold up as restaurants are operating at approximately 120% of pre-COVID weekly sales levels and at approximately 109% of last year's weekly sales levels. according to Bayer's restaurant survey reported February 6th. Our estimated EBITDA to rent coverage stood at four times for the 72% of our portfolio that reports this statistic. This is among the strongest coverage within the net-lease industry. To reiterate a point we make almost every quarter, focusing on low rent provides a cushion when inflationary input prices impact store levels. Turning to the balance sheet. We raised 72 million of equity in the fourth quarter at an average price of $26.70 per share. We also raised 30 million of incremental debt proceeds as part of extending our credit facility in October. We would also expect to continue to utilize dispositions as another source of capital. Finally, one comment on the team. We were very excited to announce in January the promotion of Jim Bratt to serve as FCPT's Chief Operating Officer. Jim has been with us since inception, and during this time, FCBT has acquired 624 properties, grown its employee base from 6 to 35, and invested significantly in operations. Jim has been an integral part of all of this, and our efforts drive value for our shareholders, given his unique skill set in financing operations, real estate transactions, and legal judgment. Thank you, Jim. And with that, I'll turn it over to Pat.