FrontView REIT, Inc.

This call is being recorded on Thursday, May 15th of 2025. I would now like to turn the conference over to Randy Starr. Randy, please go ahead.

Good morning, everyone, and welcome to our first quarter 2025 earnings call. I'm joined today by Steven Preston, Chairman and Co-CEO. Before I turn it over to Steve, please note that we will be making certain statements that may be considered forward-looking statements under federal securities laws. The company's actual results may differ significantly from the matters discussed in these forward-looking statements, and we may not release revisions to these forward-looking statements in the future. Factors and risks that could also cause actual results that differ materially from expectations are disclosed from time to time in greater detail in the company's filings of the SEC and yesterday's press release. Steve?

Great. Thank you, Randy. Good morning, everyone. Welcome to Frontview's Q1 2025 earnings call. As a reminder, Frontview is an internally managed net lease REIT that acquires, owns, and manages primarily properties with frontage on high-traffic roads that are highly visible to consumers. Since entering the public markets in October of 2024, we have demonstrated our ability to source accretive acquisitions. The first quarter of 2025 was no exception, and we acquired approximately 49.2 million of properties and an average cap rate of 7.9%. exceeding our pricing guidance by about 40 basis points and having a weighted average lease term of approximately 12 years. The acquisitions are diversified across nine industries, 13 tenants and 13 states, including eight new tenants and two new states. Investment grade tenants accounted for approximately 29% of the annualized base rent from these acquisitions. Subsequent to the close of the quarter, we have closed on one additional property for an additional 3.6 million at an initial cash capitalization rate of 8.1% and a lease term of seven years. We also have five properties under contract for an additional $15.7 million at a weighted average initial cash capitalization rate of 8% and a weighted average lease term of approximately eight years. The properties under contract are diversified across five industries, six tenants, and four states, with the investment-grade tenants representing approximately 20% of the ABR. We have the ability to grow quickly and accretively with our existing team, provided that we have an appropriate cost of capital. Since February, we have seen our share price decline. Given our current share price and cost of our capital, we have slowed the pace of our acquisition activity in order to prudently allocate capital. At this time, we are now planning to acquire between 125 million and 145 million of acquisitions during 2025. Though our pipeline of opportunities remains robust, and we believe we will be able to immediately recommence acquisition activity at our prior pace as our cost of capital improves. We still believe we will acquire above the 7.5% cap rate mark through Q2 and into early Q3, and although our current cost of capital is challenging, we believe we are acquiring frontage assets at historically elevated cap rates and accordingly believe it is in the best interest of the company to continue to acquire assets at these pricing levels albeit at a slower pace. As of March 31st, 2025, we had approximately $141 million of liquidity comprised of availability under Align and our existing cash balance. We anticipate having sufficient borrowing capacity under our facility to fund our investment activity for the year, coupled with our ability to reinvest surplus cash flow and generate funds from the sale of properties. We sold one operating Freddy's Steakburgers during Q1 at a sales price of $2.05 million at a cap rate of 6.9%. We plan to increase the level of property sales during 2025 to between $20 million and $40 million as we see opportunities to sell off non-core assets and assets with shorter lease term durations, replacing them with longer term duration leases that fit our acquisition model. In addition, re-tenanting properties can give us the opportunity to create meaningful value for our shareholders. For example, as highlighted in our investor presentation, we proactively re-tenanted a Miller's Ale House with a new Raising Cane's Absolute Triple Net Ground Lease at a substantially similar rent. We have recently listed the asset for sale at a 4.7% cap rate compared to our prior basis of approximately 7.2%. Notwithstanding our currently planned acquisition slowdown, we reaffirm our prior 2025 AFFO per share guidance within $1.20 to $1.26. Our per share results are sensitive to both the timing and amount of real estate investments, property dispositions, and capital markets activities that occur throughout the year. Drivers that could increase our AFFO per share include quickly ramping up our acquisition activity to prior levels, income from tenant replacements coming back online earlier than expected, and the accretive sale of certain properties throughout the year. Switching gears to the team front, as previously reported, in late April, Tim Dieffenbacher transitioned to the private sector and left Frontview earlier this month. Tim has been nothing but a supporter of Frontview, and we wish Tim all the best in his new role and thank him for his work and efforts throughout our IPO process. The board has appointed Randall Starr as CFO, and he will continue to serve as co-CEO. Randy is a key company executive with a strong financial background and is a natural fit for this role. Randy has financial analyst and investment banking experience and has been involved in our portfolio since its inception in 2016. Prior to that, Randy attended NYU's Real Estate Finance graduate program while working for C.B. Richard Ellis and was more recently overseeing top calls as COO and Chief Development Officer including liaisoning with their accounting and finance departments. Both Randy and I have been very involved in CFO functions from the founding of our business, through the IPO, and throughout our duration as a public company. Randy is a natural fit for the position, and I look forward to continuing to work closely with Randy as we operate and grow the business. Although Randy will still stay involved in the acquisitions process, his involvement will move to more of an oversight role. Our dedicated, established acquisitions team, which has been responsible for almost 160 million of acquisitions since becoming a public company, is a well-oiled machine and more than capable, requiring no additional hires to execute on our projected acquisition volume. The board has also appointed Sean Kukumaro to become our chief accounting officer. Sean is exceptionally capable and seasoned with Big Four public accounting firm experience, almost 19 years in the space, and has been integrally involved in overseeing Frontview's accounting since 2018. On the portfolio management front, we previously reported 12 properties in which the tenants were either bankrupt or not paying rent. These 12 properties represented approximately 4% of year-end 2024 ABR, and the tenants were predominantly in the casual dining restaurant space. As we will be describing in a few moments, We have demonstrated that the assets we acquire with Frontage are desirable to a variety of different users, and that our top-notch experience management team is capable of retenanting, repurposing, or otherwise selling off assets to maximize value in a time-efficient manner. Of the 12 assets, we have sold one asset. We are under firm contract to sell a second asset. We are under conditional contract to sell two additional assets. We have leased one asset. We are under active lease negotiations on two assets with both undersigned LOIs. Two of our Hooters are currently open and rent paying, though we are also negotiating with other major tenants interested to lease the properties, demonstrating the strong real estate fundamentals of these properties. And our Joann's is currently rent paying, but we are actively marketing to be proactive. We now have parallel lease and sale activity on the 11th asset and expect to be in receipt of LOIs shortly. and we are actively marketing the one remaining asset and anticipate having activity shortly. We are proud of our team and our team's ability to quickly, efficiently, and proactively repurpose these assets. Based upon our efforts to date and subject to customary due diligence and closing conditions, we expect the equivalent return of between approximately 3% and 4% of the approximately 4% year-end AVR previously noted with respect to these 12 properties. Given the projected timing of the aforementioned sales and rent commencements and new leases, equivalent rental replacement income is expected to come back online in Q4 25 or in early 26. At that time, we expect bad debt expenses should run at more normal levels in the 1% to 2% range. And based upon prior historical outcomes, we believe we should see similar recovery rates. With respect to our watch list, we were hit with a perfect storm earlier this year. As those tenants roll off the watch list, We do not see any major additions at this time. Burger King has been in the news recently as a large franchisee for Burger King filed for bankruptcy. However, we do not have any properties leased to this operator. We own three freestanding Burger King restaurants and two gas convenience stations with operating Burger Kings as part. All have low rents and all of our Burger King restaurants are open, operating, and current on rent. Additionally, although Applebee's has reported recent store closings, our three Applebee's are open, operating, and current on rent. We have very good clarity into 2025 renewals. At this time, we expect three tenants not to renew this year, one of which is a Walgreens that we previously mentioned that now has leasing and purchase interest. The other two are leases for small properties that have not yet expired. We are already negotiating a contract to sell one of the assets and are in active negotiations to lease the other asset, so we do not expect any meaningful downtime for these two assets. Moving now to the portfolio highlights. Our portfolio continues to perform well. As of March 31st, 2025, our portfolio consisted of 323 freestanding properties with an average remaining lease term of over seven years. We are heavily diversified across 37 states and 117 metro areas. We are pleased to keep a very diversified portfolio with limited exposure to any one tenant. At quarter end, our largest tenant exposure was about 3.1% of AVR. While our occupancy rate at the end of Q1 2025 ticked down slightly to over 96%, it is expected to return to more normalized levels once the replacements have taken occupancy. Rental collections on contractual rent were strong at approximately 99.5% for the period. Our tenants are predominantly service in nature, and we do not have a large exposure to general retailers that could be impacted more so from prolonged or higher tariffs. We continue to monitor our tenants in this regard. On a go-forward basis, beginning with the release of our first quarter financials, we will be expanding the detailed disclosure of our tenancies from top 20 to top 40 in our investor presentation. Thank you, and let me turn it over to Randy for more details on the quarterly numbers and guidance. Thanks, Steve.