Four Corners Property Trust, Inc.

Hello, everyone. Thank you for joining us and welcome to Four Corners Property Trust's second quarter 2026 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. Please go ahead.

Thank you, Aiden. 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 FCC filings which can be found at fcpt.com. All the information presented on this call is current as of today, July 30, 2026. Reconciliation to non-GAAP financial measures presented on this call, such as FFO and AFFO, can be found in the company supplemental report. With that, I will turn the call over to Bill.

Good morning. Following my initial remarks, Josh will comment on our investment activity and Patrick will discuss financial results and capital position. It has been a remarkable time for FCPT. First, We are only through the first seven months and we've already exceeded our prior record annual investment volume. Year to date, we've acquired 382 million of properties at a blended 6.6 cash cap rate. This investment activity has pushed us past an important diversification milestone as FCPT has now acquired over a thousand properties since inception. Our original spinoff portfolio is now just 29% of the properties we own today. Since April, we have also completed two large financings with very low coupons for a total proceeds of $600 million. Not only do these refinancings push our maturity schedule meaningfully, but also provide us with sufficient dry powder for our investments in 2026. It is also worth noting that the coupons represent approximately a 200 basis point spread to our historical investment yields. We encourage our analysts and investors to revisit their models given the major developments at FCPT including those that occurred in July closing after Q2. These major developments aren't yet reflected in our Q2 financials and have not been realized in our reported AFFO. For ease of reference, we have included a number of slides in our latest investor presentation with pro forma figures. Lastly, we also recently announced switching to a monthly dividend with the first monthly payment scheduled for August. This move aligns timing of rent payments from our tenants with distributions to our shareholders. We believe a monthly dividend is consistent with our long-standing focus on shareholder alignment, transparency, and predictable cash flow generation. Moreover, this reflects our confidence in stable rent receipts from our Fortress portfolio, and we believe the change will better match the income preferences of many retail investors. Switching over to an update on portfolio performance, occupancy remains above 99% and our rent coverage for Q2 was 5.2 times for the majority of our portfolio that reports this figure. This is amongst the best coverage within the net lease industry and what we believe is reflection of our conservative underwriting. The rent coverage figure for our Darden property specifically is 6.0 times and has improved over time remaining above five times for the past three years. Our three largest restaurant brands Olive Gordon, Longhorn, and Chili's continue to outperform their peers and grow sales quarter after quarter, most recently 2.4 times, 9.5% and 4% respectively. As such, we note that we have avoided some of the most problematic net lease sectors experienced headwinds in recent years, including pharmacies, experiential retail. By scoring every property and targeting low basis, fungible properties, with skilled operators, we have built a recession and e-commerce resistant portfolio. As a reminder, to date, we have had no major tenant credit issues, limited vacancy, and very, very low bad debt expense. We continue to significantly diversify. Pro forma for the Mission Pet Health portfolio, approximately 41% of our rent now comes from outside the casual dining tenants, including medical retail at 16%, auto service at 13%, and Crick Service Restaurants at 10%. Darden now represents just 41% of cash rent, approximately. We note that the first tranche of the original Darden spin properties is due to send us extension notices by no later than October of this year for leases maturing the following year in Q4, 2027. We are expecting a very, very high renewal percentage given the strong performance of the stores and six times coverage overall in our Darden properties. So I'll leave you with this before turning it over to Josh. ABR has grown by 11% annually since inception, and we have meaningfully diversified results on a very granular, safe portfolio. FCPT has matured a great deal over the past decade, and as we look forward, we believe we are uniquely positioned within the net lease universe. We are clearly able to execute on large transactions while also maintaining a strong regular way pipeline as a baseline for sustained, attractive, risk-adjusted growth. We believe we've built a very strong credit-focused portfolio all the way, staying within our stated leverage metrics. The world has a lot of volatility, especially today, but FCPT has been remarkably stable. Over to you, Josh.

Thanks, Bill. I'll start with a review of Q2 activity, walk through the Mission Pet Health portfolio, and then touch on our investment pipelines. In Q2, we acquired 23 properties with a weighted average lease term of 10 years for $57 million and a blended 6.8% cash cap rate for a 7.5% gap cap rate. Our investment activity in the quarter was heavily weighted towards automotive at 64% of volume and anchored by a $26 million acquisition of 14 properties leased to Sun Auto Tire and Service, a leading operator in the automotive service and repair sector. The remainder were restaurant and medical retail investments at 22% and 14% of volume respectively. As a reminder, we do not maintain sector quotas or pipeline targets to allocate capital purely on the opportunity set, finding the best risk adjuster returns with what we see as the strongest spread generation. Subsequent to quarter end, we completed the acquisition of a 102 property portfolio leased to Mission Pet Health for $268 million. The seller was Shore Capital Partners, and the portfolio represented the entirety of Shore Capital's Real Estate Fund One. The portfolio closed very early in Q3, so we will have the benefit of nearly all of the annualized cash rent of $17.4 million in our Q3 results and further gain from its approximately 2% annual rent growth on a go-forward basis. While it was the largest acquisition in our 10-year history, it was also highly consistent with the characteristics that have defined FCPT since Low Basis Properties, Conservative Friends, Strong Unit Level Economics, and a leading operator as our tenants. We've historically preferred to build our portfolio granularly, as large portfolios on the market often come with properties that may not fit our selection criteria. This was not the case here, and it was clear that Shore constructed this high-quality platform with a buyer like us in mind. First, the portfolio is largely structured across two absolute triple-net master leases of high institutional quality. The master leases have approximately 10 years of term remaining, approximately 2% annual rent escalations, and strong financial reporting requirements. Next, the rents were set conservatively and aligned with our net lease philosophy. Unit level coverage is over six times, and an average basis per property at $2.6 million compares well with our Q2 rent coverage of 5.2 times an average basis of approximately $3 million. Lastly, and similar to many of our favorite investment sectors, veterinary real estate is mission critical and their services are often non-discretionary. Additionally, Mission is one of the largest veterinary operators with over 900 locations across the country. The recent investment from Silverlake valued the company at $8.6 billion. We were already familiar with the credit and team as they are an existing tenant of ours, which makes us even more excited to welcome them as our number three brand across the portfolio. We'd like to thank Shore, Mission, and Eastdale teams as well as everyone at FCPT involved in executing this transaction. Completing diligence on 102 properties with the same rigor as our usual process while still closing less than 49 days from announcement is a strong testament to the talented and motivated team we've assembled and the strength of our platform. Moving on to our pipeline, we've also continued to source and execute our regular away investments as well, spanning restaurants, automotive service, and other medical retail investments across 10 distinct transactions in Q2. I'd like to commend our investment team and the entire platform for their ability to diligently execute both large and small transactions in an extremely organized and efficient manner. Looking forward, We're continuing to explore potential investments in new subsectors, such as grocery and industrial outdoor storage, as evidenced by our July investment activity. We remain active in evaluating opportunities across these two sectors, among others, as we actively expand our opportunity set and build domain expertise. Whether it's a grocery store in Florida or a restaurant in Texas, we remain committed to acquiring low-basis properties that are reached at best-in-class operators at pricing accretive to our cost of capital. Patrick, back to you. Thanks, Josh.

I'll start by talking about our recently closed debt deals and updated balance sheet, and I'll provide some commentary on the quarterly results. Since April, we have closed a total of $600 million in new debt capital while adding Citi and RBC to our already strong lending syndicates. provide further borrowing support. This $600 million represents over a third of our total in-place debt, creating meaningful improvement for our balance sheet while avoiding diluted refinancings. This included closing both the $200 million terminal facility with seven-year tenor at silver plus 125 basis points and a $400 million terminal with a five-year tenor at silver plus 90 basis points just a few days ago. I'd call out that at current silver levels, this debt has all-in rates of approximately 4.5% to 4.9%. The use of proceeds for the new five-year term loan will be, one, repaying $190 million of term loans coming during the next six months, and two, the remaining amounts will be used to fund the investment pipeline, as well as for general corporate purposes. I'd also like to highlight the positive interest savings we were able to achieve in our most recent refinancings. Our lenders agreed to refresh the credit spread pricing on our facility to save 5 to 10 basis points annually versus prior levels of $450,000 in annual interest expense, across the total $800 million in this facility. So in this demonstration of FCBT's steady pace and improving our cost of capital through scale and conservative balance sheet management. Importantly, pro forma for this debt transaction and closing on the mission portfolio, we are now fully undrawn on our $350 million revolver and on a run rate leverage remaining below the six times upper bound of our stated range of five to six times. From a maturity schedule perspective, these deals have pushed out our maturity profile. Our pro forma weighted average debt tenor is now 4.3 years. We've removed all near-term maturities aside from a small $50 million private note coming due in December. As noted previously, we expect to handle that private note maturity in due course closer to the maturity date, but believe we have ample options at our disposal. Our staggered maturity schedule ensures we will not face a significant maturity wall in any year thereafter. Now turning to some of our earnings highlights for Q2. Q2 AFFO per share was $0.45, representing 1.4% growth versus prior year. Q2 cash rental income was $70 million, representing 8.7% growth versus prior year. Annualized cash-based rent for leases in place as of quarter end was $270.5 million, and our weighted average five-year annual cash rent escalator is 1.5%. Our cash G&A expense was $4.8 million for the quarter, representing 6.8% of cash rental income compared to 6.9% for the prior year.

This improvement in operating leverage illustrates our continued efforts at achieving efficient growth and the benefits of our rising scale. Our fixed charge coverage ratio remains a very healthy 4.6 times as of quarter end. Following our Q2 results, we are affirming our guidance range for 2026 cash G&A remains $19.2 to $19.7 million. As a brief update on Bahama Breeze, we learned earlier this year that Darden would be closing four of our 10 Bahama Breeze properties, with the other six being renovated and converted to other Darden brands. The four DARD properties represent about half a percent of ABR and are supported by leases expiring one to four years from now. and benefit from Darden entities committed to rent payments through expiration. While we have that multi-year cushion, we've also had strong backfill demand, so we are deep in LOI and lease negotiations to re-tenant the properties with strong grants. Based on the rents being negotiated and the small scale of the exposure, we expect to have little to no ASFO disruption. Remarkable results to be sure, but again, just worth noting the risk in quantum here was never significant to begin with, and so we don't expect to continue detailed updates on this topic going forward. Our portfolio occupancy remains strong at 99.5% today. We collected 99.7% of base rent for Q2. Finally, last quarter did not see any material changes to our collectability or credit reserves. With that, we'll turn the call back over to Aiden for questions.

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 1 to raise your hand. To withdraw your question, press star 1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. 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 the line of John Kilichowski with Wells Fargo. John, your line is open. Please go ahead.

Hi, good morning. Thanks for taking my question. Pat, maybe just to circle back on what you were talking about on the balance sheet, you know, some of the activity you had in the quarter is handling some maturities coming up, but you still have a few maturities that aren't spoken for yet. I guess, could you just talk about your plans for those and what you're seeing on pricing?

Yeah, sir. Thanks for the question. So we have the fully undrawn revolver. That's always kind of a backstop if we wanted to take out any of those maturities with that. But then again, I'd also point out that the remarkable support we've had in the lending market, having completed $600 million of term loans in the last couple of months, the support for our name and the credit in our portfolio is just really strong. So there's a lot of opportunities to address it. We could have addressed them sooner now, but those rates are really attractive rates and we want to enjoy them and utilize the tenor that we paid for at the beginning of putting those issuance out there.

Got it. And then, you know, Bill, maybe just on the back of that, could you talk about given where Your stock is trading today, and as you think about your cost of capital, are you imputing that based off of where you're seeing the pricing of maybe some of these term loans, or are you still thinking about it in terms of where your longer-term 10-year unsecured cost of debt may be and where that blends relative to where your equity trades?

Sure. I don't see any change in the way we think about calculating WAC. We've always looked at long-term rates. Frankly, we don't use much debt in acquisitions. and the difference between a private note and a term loan is not very substantial under 100 basis points. So it's much more driven by the cost of equity. And we have raised a very substantial amount of equity on a forward, which we've used for two years to make acquisitions all with equity. So the way I would think about up until this point this year is using attractively priced debt to get our leverage metrics back to where they typically were.

Got it. Thank you.

Yep.

Your next question comes from the line of Eric Borden with BMO Capital Markets. Eric, your line is open. Please go ahead.

Great. Thanks for taking my question. As you begin discussions around the 2027 Darden expirations, what's your latest thinking on overall renewal economics? With a coverage, healthy coverage of six times, does that create an opportunity to push rents higher or most of those leases governed by renewal extension options?

They're entirely governed by renewal extension options for five years at one and a half percent growth over the prior year. So we would expect, as I've said in the prepared remarks, Very, very high level of renewals. And again, these are for 27 maturities. We have a favorable 12-month notification period. So those will start coming in towards the end of October.

Okay, great. and then just one on the monthly dividend, you know, in a world where short term cash yields are relatively attractive. You know, can you talk about the give and takes around moving to a monthly dividend and effectively accelerating the timing of those cash outflows to shareholders versus keeping the cash on balance sheet and earning interest income for a little bit longer?

Yeah, it wasn't really a corporate financed decision. It's, you know, that cash flows are shareholders cash flow and we're returning it to them. as quickly as we can. It was more getting the logistics right because it increases the number of payments. And so we wanted to feel comfortable that that wasn't a cost burden or an operational burden. And I think we're very comfortable that it'll be neither. And it just is, again, more aligns with how we receive our shareholders' capital and getting it back to them in the form of dividends quickly.

I appreciate it. Thank you, guys.

Your next question comes from the line of Michael Goldsmith with UBS. Michael, your line is open. Please go ahead.

Hi, this is Anna O'Neill. I'm from Michael Goldsmith. You talked about grocery and industrial outdoor storage as subsectors you're exploring. What are some of the things that are making those subsectors more attractive to you?

Great question, Anna. We've been working on both for many years, and they match many of the dynamics that we like of restaurant, auto service, and medical retail. Their mission-critical basis is reasonable. There are large tenants, and the pricing works consistent with the other sectors that we look at. I will say on grocery, some grocery is prices tighter, so we have to pick our spots. But then I would say with the storage, something that I've done a lot of when I was on the board of Gramercy, that was one of the investments we regularly made. So I have a lot of familiarity with it.

Great, thank you. And then given the elevated acquisition volume might not be fully appreciated by the market, would you explore the idea of providing guidance in some form or how are you thinking about that?

Yeah, I would say that we've added a bunch of new disclosure that should help people get there. I would agree that it seems like analysts have been slow to update their numbers and in my prepared remarks, I think I alluded to that. But for now, I think we're going to be consistent with how we've done it over the last decade since inception and not provide acquisition or earnings guidance.

Got it. Thanks so much. Your next question comes from the line of Alec Fagan with Baird. Alec, your line is open. Please go ahead.

Hey, thanks for taking my question. First one for me would be, you know, the recent reduction in the debt spreads have they benefited from that incremental diversification and the big portfolios that you closed? Or is that a future opportunity where you can see further benefit?

Yeah, I think it's just consistent with, as Pat mentioned, a consistent grinding down our cost of capital as we get larger and the portfolio matures. And as we mentioned, the original Spin Portfolios, you know, 30% of where we are today. So we've gotten a lot bigger. It's a lot more diverse. It's a much more seasoned company. You know, our acquisition team at inception was just a handful of folks. Now it's 10 and growing. So I think we just have a lot more capability, and that's reflected in the stability of our balance sheet and improved pricing.

Got it. And the second one for me, kind of on the theme of new sectors, Could you provide any additional details about the drilling tools international property you acquired? Should we expect that industrial type properties may become part of the sandbox going forward?

Yeah, sure. It's just one property out of a number, but just off the top of my head, DTI manufacturers drilling equipment, it's got over 50% North American rig penetration. This is like a 10-acre parcel. It's one of only a handful of properties where they manufacture. I think it's actually on their cover of their annual report. So, Josh, anything you want to add to that?

Just that, you know, Bill, exactly what you stated. It's just an extension of our IOS, Industrial Outdoor Storage, strategy that Bill mentioned. We do it very similar to the United Rentals property we acquired in Q4 of 25. and we're just constantly evaluating new opportunities in this space and just dipping our toes in.

Got it. Thanks. That's it for me.

Your next question comes from the line of Rich Hightower with Barclays. Rich, your line is open. Please go ahead.

Hey, good morning out there, guys. I want to talk about Mission Pet Health I know we I know we talked about the deal when it was first announced a little bit, but just to go a little deeper. So tell me about how the business is performing and what the underwriting assumptions were, you know, in the context of really very high, you know, six times rent coverage, you know, and how's the business growing? What's the capital structure with the private equity firm and kind of where the sale these back financing here fits into that? And then I've got one follow up.

Yeah, so these properties were already under a sale-leaseback. Two large master leases make up 100 of the 102 properties, and then there's two individual properties. Shor had capitalized a real estate fund, Shor Real Estate Fund 1, that when Shor, the private equity firm, was buying vet businesses, if real estate was available for sale, The real estate fund would buy that real estate. So we bought the entirety of that fund. As Josh mentioned, six times covered, a very strong entity providing a guarantee. Silver Lake recently co-invested into the business along with Shore. It is a company that I would guess might go public in the next couple of years, but just a very large, stable company. High Scoring Portfolio. Out of the 102 properties, the vast, vast majority we would have been interested in on a one-off basis, but to get them together in a master lease with 2% rent growth is very favorable. So we leaned in a little bit on pricing. I think it also was strategic in getting... are under levered balance sheets back in line and should provide growth that we think folks are missing in the second half of the year and in 2027.

Okay, that's helpful. And then I guess just to follow up on maybe that last point, Bill, or even for Patrick, granting you're towards the low end of the comfort range leverage-wise, I presume you wouldn't want to sort of bump up against the high end if you didn't need to. And so What do you think your comfortable investment capacity is from here without really thinking you would need to raise new equity?

Yeah, I'm not going to answer that because it gets really close to providing acquisition guidance, which for us is basically the same as FFO guidance. But we put a bunch of pro forma numbers in the book. You can see where we stand. We are committed to that five to six times leverage. Okay, thanks.

Your next question comes from the line of Mitch Germain with Citizen Bank. Mitch, your line is open. Please go ahead.

Thank you. Bill, as some of this leasing gets done over the next couple of, or I guess the validation of maybe some of this leasing, has there been any consideration to maybe consider continuing to pare down your Darden exposure with some assets else?

Yeah, so the leasing that's been done, just to make sure everyone's clear, there will be no interruption of payments from the Bahama Breeze leases. So those 10 buildings, six of them will become other brands within the Darden portfolio. The others we will release quite likely before any of those leases come to maturity. So that will be uninterrupted. Justin has done a terrific job addressing The small number of properties that have become vacant at maturity and we've picked up rent. As far as selling Darden assets, we've done it occasionally. These are very, very high quality, very in demand properties. We get unsolicited interest all the time and we feel very confident that they're going to renew. So there's not a ton of motivation to sell them. Every once in a while we get an offer that's too good to refuse, but We typically want to hold those assets.

Great. And I hate asking this question because I know that you don't give guidance, but is it safe to think that we'll at least see a little bit of a deceleration in acquisition activity for the next couple of months? Or is it still all systems go?

I think it really depends on our equity cost of capital. Our debt cost of capital is very attractive. We had some leverage capacity to grow into, and I think it really comes to our equity cost of capital, which isn't where we want it to be. And we think that the market's missing our growth, so we're really trying to double underline that on this call. You've seen that I've bought a bunch of stock. I think that speaks volumes to where I think we're trading versus the value of the company.

Thanks. Congrats to you and the team. Thanks, Mitchell.

Your next question comes from the line of Jim Kammer with Evercore. Jim, your line is open. Please go ahead.

Thank you. Good morning for you. Following a couple of themes in the call, are you in the red, green, or yellow zone on the equity bill? I guess that last topic you're just touching on.

Yeah, I think we're in the yellow zone. And we've been very disciplined about that since inception. I think it's one of the things that makes us stand out is how disciplined we are on capital allocation. My background is I spent the formative part of my career as an equity investor. and, you know, my fundamentally belief that companies that are disciplined about capital allocation are worth more. So we feel like it's not being reflected in our stock right now and we're putting up the results that should change that.

Fair enough. Thank you. And second question, obviously it's brand new with the Mission Pet and a very large new exposure. It sounds very constructive. Would you do other veterinary activity at this point or do you think that this was more of a Such a standout portfolio, construction, all that, that you're kind of full up on that particular line of exposure.

No, I think we would still seek out very high-scoring assets, but keep in mind, Jim, we've been working on this Mission Health portfolio probably for five-plus years, and we're very close with the... The seller on a personal basis and their advisors are folks that we've worked with a lot. This was in some ways put together with a strong sense that we might be the likely buyer. So we're happy that after all the time that we put into it that the portfolio was at such a high quality and was available at a price that was accretive. But we would certainly as we grow, if we find things that we think score highly, We would add to it irregardless of what sector it's in. Fair enough.

Thank you.

A reminder, if you would like to ask a question, please press star 1 on your telephone keypad. Your next question comes from the line of Anthony Paolone with JP Morgan. Anthony, your line is open. Please go ahead.

Thanks. I think I just have one left here. You expressed your confidence in just the renewals or just leases getting extended over the next few years. Bill, maybe if we were to think about anything that doesn't get renewed, even if you feel good about just getting these things backfilled because you own good assets, what's typical downtime for us to think about if you have to switch tenants?

Sure. So we would have 12 months with Darden operating and paying rent. in any event. And so historically for assets like this, it's been less than 12 months, but we have a long runway that's supported by Darden Rents. And again, these properties have long operating histories, very high coverage, and they're in great locations. So I think there'd be a pretty good line waiting to get access to them, to be honest. And that's been our experience with Bahama Breeze as a recent test case.

Got it. So looking at the 27, 28 expirations, or at least maturities, they have to let you know 12 months in advance of the maturity, whether they're staying or going. And so that gives you the time to market it and find a backup tenant. Yep. Okay. Exactly. Thank you.

We have reached the end of the Q&A session. I will now turn the call back to Bill Lenehan for closing remarks.

Thank you. Ultimately, the first seven months of 2026 have been a defining period for FCBT. We have already exceeded our prior record annual investment volume, completed the largest acquisition in our history with the Mission Pet Health portfolio, and continue to demonstrate the consistency and durability of the portfolio we have built over the past decade. Our occupancy, rent collections, and tenant coverage outcomes remain amongst the strongest in our sector and on the back of some of our largest and most creative capital raising. We believe that we are well positioned to execute with the same underwriting discipline that has defined FCPT since inception. Our team will be at the Wells Fargo and Bank of America conferences in September, and we would welcome the opportunity to meet in person. Please reach out to Patrick or me to coordinate schedules. With that, thank you.

Thank you for attending. You may now disconnect.