Four Corners Property Trust, Inc.

Hello and welcome everyone to the FCPT first quarter 2025 financial results conference call. My name is Becky and I'll be your operator today. During the presentation, you can register a question by pressing star followed by one on your keypad. If you change your mind, please press star followed by two. I will now hand over to your host, Patrick Wernig, Chief Financial Officer, to begin. Please go ahead.

Thank you, Becky. 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. 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, May 1, 2025. In addition, reconciliation to non-GAAP financial measures presented on this call, such as FFO and APFO, can be found in the company's supplemental report. With that, I will turn the call over to Bill.

Good morning. Following our typical cadence, after my introductory remarks, Josh will comment further on the investment market and Patrick will discuss our financial results and capital position. The start of 2025 continued the momentum we had in the second half of 2024. We took advantage of our sustained strong cost of capital and added to the pipeline, finding deals that both met our quality standards and with pricing that made sense. This led to a Q1 being the highest acquisition volume for a first quarter in the company's history, which similarly followed our highest Q4 volume. So far this year, we've closed $70 million of acquisitions at a blended 6.7% cap rate. Looking back to when we fully turned the acquisition machine back on in late August, we have closed 269 million of acquisitions over the past eight months. While we do not give acquisition guidance, we are continuing to add toward the pipeline and are seeing opportunities that are consistent with our quality thresholds and within our pricing standards. We note that we have not seen much change in cap rates for recently priced deals. We've continued to build significant liquidity while de-levering to preserve optionality on funding new opportunities as they arise. This includes leaning in on the equity sales via our ATM program, which we have used to raise $475 million in equity since July of last year. Including our unsettled equity forwards, we now have our lowest leverage levels in the last seven years. Simply put, we are well positioned for uncertainty. Shifting to our in-place portfolio, we continue to perform well with high rent collections and occupancy. Our rent coverage in the first quarter was 4.9 times for the majority of our portfolio that reports this figure. This remains amongst the strongest coverage within our industry. FCPP's largest tenants are nationally branded restaurant operators, namely Olive Garden, Longhorn, and Chili's. They are leaders for their sectors and generally outperform the industry peers as well as fine dining or local mom and pop brands. Most recently Brinker reported chili same store sales grew 31.6% for the quarter ended March 25. Similarly Olive Garden and Longhorn reported same sales growth of just shy of 1% and 2.6% year over year for the three months ended February 2025 respectively. While these brands remain core to our portfolio and strategy, as we approach 10 years as a public company, we would also highlight our diversification progress over that period. We've grown from 418 properties at inception to 1,236 leases today. Darden has dropped from 100% of our rent roll to now 47% combined across all of their brands. This improvement is despite acquiring 47 Darden properties post-spend. Our top five brands make up 55% of our annual base revenue. On sector diversification, 67% of our annual base rent comes from casual dining and 11% from quick service. Outside of restaurants, automotive service is our largest sector at 11% of ABR, followed by medical retail at 9% of ABR. As for portfolio management, we are not yet experiencing any material tenancy issues in the portfolio and no current indicators that inflation or tariff issues will impact our rent payments. Further, while the current tariff environment remains uncertain, we expect restaurants to be one of the least tariff-affected sectors. Similarly, our other service-based tenants should fare better than average retail operators given their low exposure to imported goods as part of their operations. While we would expect in a recession that we would see some pullback in our tenant performance, we believe that we are well positioned with cushion on our rent coverage to weather any potential issues. Turning to the materials we published last night, we would like to highlight a few new slides in our investor presentation that point to what we believe is FCPT being a comport in the storm. Our portfolio was built brick by brick to be resilient, and we've paired that with a prudent capital management. We have significant liquidity, no near-term debt maturities, granular low-basis properties, high-rent collections, and low overhead. FCPT's portfolio is made up of well-capitalized, sophisticated operators who we believe will be able to navigate and gain share in this challenging macro environment. We pride ourselves on transparency and best-in-class disclosure. So in addition to our press release regime on new acquisitions, this quarter we decided to further break out our portfolio to the top 34 five brands, which make up more than 80% of our ABR. Our goal is for our investors to understand our tenant exposures and have confidence that we'll stay disciplined on meeting quality expectations for the properties we buy. To that end, you will see in our filings we have zero or near zero exposure to the problem net lease sector, such as theaters, pharmacy, high-rent car washes, and big box retail.