Four Corners Property Trust, Inc. (FCPT)·Q1 2024 Earnings Summary

Executive Summary

• Q1 2024 was steady operationally with 99.6% occupancy and 99.7% rent collections; AFFO per diluted share was $0.43, up 4.9% YoY, supported by rental revenue growth and disciplined capital deployment .
• Total revenues rose to $66.47M (+10.9% YoY); GAAP diluted EPS was $0.26; AFFO per diluted share was $0.43; the dividend remained $0.345 per share .
• Management slowed acquisitions given cost of capital vs market cap rates; 4 properties were acquired for $15.9M at a 6.9% cap rate, all in medical retail, reflecting continued portfolio diversification and pricing discipline .
• Capital position strengthened with $85M term loans and interest rate swaps, fixing an effective rate of 4.89%; liquidity stood at $277M at quarter end—a key buffer to pursue selective deals or manage tenant events such as Red Lobster .

What Went Well and What Went Wrong

• What Went Well

  • AFFO per diluted share increased to $0.43, up $0.02 YoY, underpinned by solid collections and occupancy: “We reported first quarter AFFO of $0.43 per share, which is $0.02 or 4.9% up from Q1 last year” .
  • Lease renewals were strong: 13 expirations with 11 renewals at positive 12.5% spreads; occupancy remains 99.6% with limited 2024/2025 maturities (0.9% and 2.2% of ABR) .
  • Portfolio risk management: proactive culling and selective Red Lobster exposure—15 of 18 sites below brand median rent; “We sold some of our highest rent and lower performing stores... dropped exposure from 2.9% ABR to 1.7% today” .

• What Went Wrong

  • External growth muted: only 4 acquisitions in Q1 as bid-ask spreads and seller reticence constrained accretive deployment at current cost of capital .
  • Capital markets backdrop still challenging: need slightly higher stock price, lower rates, or higher cap rates for robust accretive activity; “It’s darn close... slightly higher stock price, slightly lower 10-year or slightly higher cap rates, it begins to really work” .
  • Tenant-specific uncertainty: Red Lobster restructuring headlines created risk overhang; management views rejection unlikely, but acknowledged uncertainty and potential TIs if needed in a worst-case scenario .

Financial Results

Segment and portfolio composition (Q1 2024):

• Portfolio: 1,115 properties, 47 states, 99.6% occupied, WALT ~7.6 years .
• ABR mix: restaurants ~80%; non-restaurant 20% (auto ~9%, medical retail ~8%); Darden ~51% of ABR; 1,137 leases total .

KPIs:

• Rent collections 99.7% (Q1 2024); occupancy 99.6% (Q1 2024); renewal spread +12.5%; average annual escalator 1.4%; EBITDAR-to-rent coverage 4.9x .

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “We reported first quarter AFFO of $0.43 per share, which is $0.02 or 4.9% up from Q1 last year... our existing portfolio continues to perform very well with 99.7% rent collections... 99.6% occupancy” .
• “Similar to the fourth quarter of 2023, we slowed down acquisition activity... current capital markets backdrop and seller reticence to accept higher cap rates has made it challenging to deploy capital accretively” .
• On Red Lobster: “We own a group of stores with below average brand rents and above average brand EBITDAR to rent coverage... 15 of our 18 restaurants have rents below the brand median” .
• “We issued $85 million of term loans... entered into $85 million of interest rate swaps... effective interest rate is 4.89%... we have $277 million of liquidity” .

Q&A Highlights

• Cost of capital vs yields: “It’s darn close... with slightly higher stock price, slightly lower 10-year or slightly higher cap rates, it begins to really work” (patient posture) .
• Pipeline and pace: “There’s a buildup in the market... could deploy capital accretively if the numbers were slightly different” .
• Red Lobster re-leasing scenario: Rejection unlikely; ground leases healthy; TIs would be immaterial at company scale and negotiated as needed .
• Dispositions: Frequent reverse inquiries, often mid-5% caps; disciplined, given math and closing risk; escalators in new deals not lower than sold assets .
• Large portfolio transactions: Preference depends on concentration; diversified pools efficient, single-tenant sale-leasebacks require premium cap rates; capital raise hesitancy industry-wide .

Estimates Context

• S&P Global consensus data unavailable for Q1 2024 during this session; cannot present SPGI figures.
• Public sources indicate FCPT’s Q1 2024 revenue of $66.47M beat consensus by ~$1.02M, and GAAP EPS of $0.26 was effectively in-line (“miss by $0.00”) . SPGI consensus unavailable; anchor comparisons should be updated when SPGI access is restored.

Key Takeaways for Investors

• Near-term: External growth remains constrained by cost of capital; watch for catalysts—lower rates, higher cap rates, or stock price recovery—to unlock accretive deployment; expect muted acquisition volumes until conditions improve .
• Portfolio strength: High occupancy/collections and positive renewal spreads underpin cash flows; limited near-term maturities reduce vacancy risk .
• Tenant risk management: Red Lobster exposure is small, well-covered, and managed; potential restructuring unlikely to materially impact FCPT given leases and ground rent structure .
• Balance sheet: Added $85M term debt at sub-5% effective rate and $277M liquidity supports selective acquisitions, refinancing flexibility, and potential opportunistic dispositions .
• Diversification: Medical retail acquisitions at ~6.9% cap and non-restaurant ABR at ~20% improve resilience without sacrificing lease quality; continue to avoid higher-risk “novel” net-lease formats .
• Dividend durability: $0.345/share quarterly dividend maintained; AFFO supports payout while preserving balance sheet flexibility .
• Monitoring points: Watch bid-ask movement in net-lease markets, larger portfolio opportunities, and tenant developments (Darden/Brinker performance; Red Lobster headlines) that could influence sentiment and deployment pace .

Notes:
- All quantitative results are sourced from FCPT’s Q1 2024 press release and Q4/Q3 press releases and the Q1/Q4/Q3 earnings call transcripts as cited above.
- SPGI consensus estimates were not retrievable during this session; update comparisons when SPGI access is available.