Four Corners Property Trust, Inc. Q3 FY2024 earnings call

• Investment discipline: Paused external growth in 2023 due to rising cost of capital, focused on accretion, and returned to acquisition activity as cost of capital dropped. Raised over $224 million in equity, has $100 million in equity forward, full revolver capacity, and lowest leverage in nearly 5 years. • In-place portfolio: Performed well with high rent collections and occupancy; rent coverage in Q3 was 5x for most portfolio. Portfolio has near-zero exposure to problem subsectors. • Red Lobster: Exited bankruptcy in early September, all 18 stores affirmed and open, most with rent increases. • Diversification: Now has 156 brands in portfolio, with Darden making up slightly less than half. • Acquisitions: Acquired 21 properties for $71 million this quarter, largest transaction was $66 million portfolio of 20 Bloomin' Brands restaurants. • Financial highlights: Q3 AFFO per share $0.43, up 2.4% y-o-y; cash rental income $58.7 million, up 4.8% y-o-y; cash G&A expense $4 million, 6.9% of cash rental income; portfolio occupancy 99.6%; net debt to adjusted EBITDAre 4.9x in Q3, lowest since 2019.

In the third quarter, FCPT acquired 21 properties for $71 million at a 7.2% cap rate. Acquisitions were 100% restaurant this quarter, with the majority from the Bloomin' transaction and others from one-off acquisitions. For the year, acquisitions have been evenly split between restaurant, auto service, and medical retail. The portfolio now stands at 1,176 leases, with restaurants making up 79% of the portfolio, automotive at 10%, and medical retail at 8%.

• Expect Q4 and 2024 to be busy for acquisitions, with team seeing success in sourcing high-quality deals. • Do not give guidance on pipeline or acquisition volume, but expect coming months to be very active, with deals announced upon closing. • New acquisitions expected to be roughly evenly split between restaurant, auto service, and medical retail over the long term.

• Actual results may be affected by known and unknown factors beyond control or prediction. • Market volatility could impact cost of capital and acquisition activity. • Election could cause cap rate volatility and uncertainty in second-order effects like inflation and rates.

Q: You talked about cost of capital being key to getting back into acquisition business, is there more things coming to market?

A: It's both, had transactions worked on for some time that could now be moved into pipeline as cap rate improved and more liquidity in market.

Q: Is pipeline mix of one-off transactions or larger portfolios?

A: Mix of individual property and small portfolios.

Q: Thoughts on restaurant space credit risk?

A: Focus on large public companies with strong credit, some credit issues at bottom end, but high-level brands with strong 4-wall economics are successful.

Q: Impact of election on cap rate volatility?

A: Difficult to call, election is close race, little competitive advantage in assessing outcomes and second-order effects.

Q: Consumer behavior change noticed?

A: Brands in portfolio performing well, luxury exposure limited, more necessity-based segments like Olive Garden, Chili's have stability, election distraction temporary.

Q: Pipeline acceleration with capital raising?

A: Matched funding, found interesting acquisitions priced accretively, didn't sit on hands.

Q: Public vs franchisee in pipeline?

A: Focus on tenant credit, not overemphasize public vs franchisee, look at underlying credit of tenant.

Q: More liquidity in acquisition markets mean more competition?

A: Always competitive, but stayed busy working on deals, cultivated relationships, and adjusted with cost of capital changes.

Q: Debt raise strategy?

A: Assessing term loans, private notes, public bonds, and equity on daily basis, acted market dependent.

Q: Quality of Bloomin' Brands acquisition assets?

A: Very tippy top of scores of all acquisitions to date.

Q: Top 20 tenants shuffling with WellNow?

A: No change, WellNow still guarantor on rebranded leases, just rebranding of properties.

Q: Escalators in negotiations?

A: Escalators usually 1.5% per year or 5-year extensions, terms consistent in over 90% of deals, exception being Walgreens not bought due to tenant-favorable terms.

Q: Lease renewals for Garden net lease?

A: Individual leases, subject to multiple 5-year extensions, anticipate very high renewal rate, not all or nothing.