FrontView REIT, Inc. (FVR)·Q3 2024 Earnings Summary

Executive Summary

• FrontView REIT printed a clean first quarter as a public company: Q3 2024 revenue of $14.5M, AFFO of $4.8M ($0.38/sh), FFO of $3.8M ($0.30/sh), and net loss of $3.3M ($0.26/sh), with 98.9% portfolio occupancy and broad tenant diversification .
• Capital position reset post-IPO: pro forma Net Debt of $160.2M and Net Debt/Annualized Adjusted EBITDAre of 3.9x; new $250M revolver and $200M delayed-draw term loan at Adjusted SOFR + 1.20% support growth .
• External growth is the near-term catalyst: $22.5M closed acquisitions and $81.4M under PSA at a blended ~7.9% cash cap rate; management expects >$75M to close in Q4 and indicated Q1 2025 cap rates likely in the mid-7s as markets tighten modestly .
• Q4 2024 guidance: AFFO of $0.32–$0.34 per diluted share and a $0.215 dividend (≈65% payout), with drivers including ~$75M+ of acquisitions and cash G&A ≈$2.1M; near-term rate headwinds expected as ABS notes at 3.4% roll to floating SOFR + 1.2% facilities in late December .

What Went Well and What Went Wrong

What Went Well

• Acquisition engine running at attractive pricing: $103.9M of properties closed or under PSA at ~7.9% blended cash cap rate; “we expect to close in excess of $75 million of acquisitions during Q4” .
• Strong balance sheet/liquidity post-IPO: pro forma Net Debt/Annualized Adj. EBITDAre 3.9x and ~$93M cash, plus undrawn $250M revolver, positioning FVR to fund growth “well into 2025” .
• Durable operating platform: 98.9% leased across 278 properties, no tenant >3.4% ABR, collections ~99%, WALT 6.7 years, and diversified across 31 states; management highlighted skill in re-tenanting as a differentiator .

What Went Wrong

• Sequential revenue slippage and continued GAAP loss: Q3 revenue fell to $14.5M from $15.3M in Q2; net loss was $(3.3)M, reflecting higher interest expense and operating costs .
• Credit watchlist and near-term vacancy drag: assets on watch (e.g., 1 TGI Fridays, 2 Hooters, a small auto dealer) and a Freddy’s closure (re-leasing underway) could pressure near-term NOI, though exposure is ~2% of ABR and management expects timely repurposing .
• Rate reset headwind into 1H25: ABS notes at 3.4% maturing in December will be refinanced with floating-rate debt (SOFR + 1.2%), creating a temporary AFFO headwind in early 2025 before growth from acquisitions offsets .

Financial Results

Non-GAAP adjustments (Q3 2024 historical): AFFO adds back $1.053M amortization of financing costs, $0.423M above/below-market lease amortization, excludes $0.747M lease termination fees, and includes $0.44M public company readiness costs; stock-based comp of $0 is historical, $0.986M is pro forma .

Portfolio/Operating KPIs

Capital & Leverage Snapshot (as of 9/30/24)

Tenant Industry Mix (selected)

Guidance Changes

Assumptions: >$75M acquisitions; no dispositions; ABS at 3.4% rolls late December to floating SOFR +1.2%; minor expense variability as a new public company .

Earnings Call Themes & Trends

Management Commentary

• “We have acquired $22.5 million thus far in the fourth quarter… under PSA approximately $81.4 million… totaling ~$103.9 million… at a blended cash cap rate of approximately 7.9%.”
• “Following the shoe being exercised, we were sitting with approximately $93 million of cash on the balance sheet, along with a $250 million revolving line of credit that has 0 drawn…”
• “On our noted watch list, we expect to be taking back 1 TGI Fridays, 2 Hooters and a small car dealership… In the aggregate, these assets only account for about 2% of ABR, and we fully expect to repurpose these assets…”
• “We expect to report AFFO per share of between $0.32 and $0.34 per share for the fourth quarter… Our Board declared its first quarterly dividend of $0.215… payout ratio of approximately 65%...”

Q&A Highlights

• Pipeline composition and rent bumps: Highly diversified (medical, dental, automotive, education, cellular, finance), largely sourced one to three assets at a time via repeat sellers; ~1.7% annual rent bumps consistent with portfolio .
• Exposure management: Pharmacy and fast casual exposures being reduced; current $100M+ pipeline has zero pharmacy and zero fast casual .
• Guidance sensitivities: With Q4 partly elapsed, AFFO range swing factors are mainly G&A and portfolio costs, not acquisition volumes or cap rates .
• 2025 cadence: Refinancing ABS to floating rates creates a dip in Q1, then recovery through Q2–Q3 as acquisition earnings ramp .
• Market dynamics: Smaller private buyers constrained by less aggressive community bank lending; environment favorable for institutional buyers with surety of close .

Estimates Context

• Wall Street consensus (S&P Global) for Q3 2024 and Q4 2024 was unavailable at the time of analysis due to data retrieval limits. As a result, we cannot assess beats/misses versus S&P Global consensus for revenue/EPS/EBITDA. We will update when S&P Global consensus becomes available.

Key Takeaways for Investors

• External growth is the near-term stock driver: a visible, accretive pipeline at ~7.9% cash cap rates with >$75M expected to close in Q4 should expand AFFO as assets season, offsetting a temporary 1H25 rate headwind from ABS refinancing .
• Balance sheet reset provides ample capacity: ~$93M cash and an undrawn $250M revolver support accelerated acquisition pacing into 2025; pro forma leverage is conservative at 3.9x ND/Adj. EBITDAre .
• Operating platform is stable: 98.9% leased, no tenant >3.4% ABR, collections ~99%, and WALT 6.7 years provide durability while management leans into re-tenanting competencies for watchlist assets (~2% ABR) .
• Income + growth: Initiated dividend at $0.215 with a ~65% AFFO payout target range of 65–75%, balancing reinvestment with shareholder returns .
• Watchlist/vacancy risk looks manageable: Credit items are concentrated and actionable, with re-leasing underway; management expects long-term value creation from re-tenanting .
• Trading setup: Near-term headline risk from the ABS refi and any timing slip of PSAs; on-time Q4 closings and early-2025 execution on pipeline should be positive catalysts given attractive spreads and available capital .

Appendix: Additional Reference Data

Selected income statement details (Q3 2024 historical vs. YoY)

• Interest expense: $6.463M (Q3’24) vs. $4.611M (Q3’23) .
• Depreciation & amortization: $7.119M (Q3’24) vs. $6.159M (Q3’23) .
• Lease revenues detail (Q3’24 vs Q2’24): total rental revenues $14.534M vs. $15.259M; variable rent $0.798M vs. $0.443M; recovery income $1.293M vs. $1.907M .

Capital markets/IPO updates

• IPO priced at $19.00; total 14.29M shares sold including shoe; gross proceeds ≈$271.5M .
• IPO closing net proceeds ≈$231.9M (initial tranche), used to repay revolver/term loan; stock listed NYSE: FVR .

Dividend

• $0.215 per share and OP unit; record 12/31/24; payable on/before 1/15/25 .