Four Corners Property Trust Inc (FCPT) 2025 Q4 法說會逐字稿

Welcome everyone. The FCPT 4th quarter 2025 financial results conference call will begin shortly.

(Operator Instructions)

Thank you.

Hello everyone and thank you for joining the FCPT 4th quarter 2025 financial results conference call. My name is Claire and I will be coordinating your call today.

(Operator Instructions)

I will now hand over to Patrick Wernig, Chief Financial Officer, to begin. Please go ahead.

Thank you, Claire.

During the course of this call, we will move 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 SEC filings, which can be found at FCPT.com.

All the information presented on this call is current as of today, February 12, 2026. In addition, reconciliation to non-GAAP financial lenders presented on this call, such as FFO and AFFO can be found in the company's supplemental report. That, I will turn the call over to Bill.

Good morning. Following my initial remarks, Joshua will comment on our investment activity, and Patrick will discuss financial results and capital position.

This past November marked our 10-year anniversary as a public company. Over the past decade, we've grown from just 4 employees with 418 properties leased to a single tenant into a platform with 44 team members and 1,325 leases. We've acquired 2.3 billion of properties and paid out over a billion of dividends to our shareholders. We are proud of the portfolio and company and we have built.

And look forward to continuing our mission to drive shareholder value by a conservative and thoughtful capital allocation.

During Q4, we acquired 95 million of net lease properties at a 7% blended cap rate. In total during 2025, we acquired 318 million of net lease properties.

We largely funded these acquisitions with equity we raised on the ATM via forward issuance.

One important note on our acquisition volume is we accomplished this without the benefit of any large portfolio transactions. Most of the deals in 2025 were mid-size transactions between 5 million and 20 million, furthering our extremely granular and selective portfolio construction via high-quality acquisition.

We did this by staying the course on what has become core to FCPT's brand, a focus on attractive real estate occupied by credit-worthy tenants without sacrificing quality for volume or padding investment spread. Even in an era of increased competition for larger net lease portfolios, we believe that we have a business model that can scale and source attractive opportunities for growth.

Our in-place portfolio retains its fortress quality with zero exposure to problematic retail sectors such as theaters, pharmacies, high rent car washes, and experiential retail. We've sidestepped major tenant credit issues including zero bad debt expense in 2025 and have very little vacancy in the portfolio.

Our rent coverage in Q4 was 5.1 times the majority of our portfolio that reports this figure. This remains amongst the strongest coverage within the net lease industry.

To that end, our core anchor tenants of Olive Garden, Longhorn, and Chili's continue to be leaders within the net lease tenant universe. Most recently, Brinker reported Chili's same store sales growth of 9% for the quarter end of December 2025, which represents a two-year sales growth comp of 43%. Olive Garden and Longhorn reported the same store sales growth of near 5% and 6% respectively for the quarter ended in November 2025.

Truly amazing results from our largest tenants would represent over 51% of our portfolio rent on a combined basis. This improves our portfolio metrics and further demonstrates the benefits of thoughtful asset selection in alignment with best in class tenants.

On the topic of our Darden assets, Darden announced last week that they are shutting down the Bahama Breeze brand and are converting many of these locations to other Darden brands. Our current Bahama Breeze exposure is just 1.3% of base rent across 10 properties, which equates to an average rent of $341,000 per property, which is very reasonable. While it's early, we are in discussions with Darden about these properties, and as of now, we do expect several of these stores to be converted to other Darden concepts.

Further, these properties are all subject to leases with a minimum of 1.7 years of term remaining, during which time Darden will continue paying rent, taxes, insurance, and all other costs at these locations while we seek new tenants. In the event that they do become permanent closures, we have already received significant impound inquiries about backfilling locations over the past week. We have lots of confidence in the quality of the real estate at these properties and expect they could be retenanted at similar rents.

It's worth noting the impact of our proactive approach to portfolio management here. We sold two high rent Bahama Breeze locations back in 2016 and 2018 in the 4.75% to 5% cap rate range. This reduced our exposure to the brand by $2 million in rent, or roughly 35% of where it would otherwise be today.

We continue to make meaningful progress in the area of diversification. Olive Garden and Longhorn are 32% and 9% of our rent today versus a combined 94% of the spinoff.

While 37% of our rents come from outside of casual dining. This includes automotive service at 13%, quick service restaurants at 11%, and medical retail at 10%.

Our deal sourcing remains focused on essential retail and services. In our view, creating a prudently positioned portfolio with limited exposure to tariff sensitive sectors and a strategy centered on everyday consumer demand.

We are constantly evaluating new retail categories as we look to expand the top of our funnel for investments.

Similar to our decision to expand into automotive service and medical retail properties, we consider business and AI resilience, availability of creditworthy tenants, real estate quality, and pricing relevant attractiveness.

Patrick is going to discuss this in more detail, but a key takeaway is that since Q3 2024, our last circuit 520 million of acquisitions, essentially all of the 171 buildings purchased over the last 18 months have been funded 85% with equity only, raised at attractive pricing and the balance funded with low rate term loans. So today our balance sheet is over equitized. I'll repeat that. Today our balance sheet is over equitized with net leverage near 5 times. Further, we didn't raise debt when we would have required a 7% plus coupon. Now we can access much more favorable debt capital markets with a coupon rate in the 4.5% to 5.5% range, depending on the structure and term, whether term loans or notes.

This is much more attractive given we're seeing caprates today.

We are proud of the year that we put together for both the capital raising and acquisition funds. The team has shown great growth over the last 10 years since inception, and we feel that we are well positioned heading into 2026. We enter the year with low leverage and ample dry powder for opportunities that may arise. Over to you, Josh.

Thanks, Bill. I'll start with a review of this quarter's activity, more details on 2025 investments. In Q4, we acquired 30 properties with a weighted average lease term of 10 years for $95 million at a blended 7% cap rate. This was a 20 basis point expansion over the previous quarter and our highest blended cap rate in 2025.

We finished the year with 105 properties acquired for $318 million at a 6.8% bleed cap rate.

This represents an average basis of $3 million per property and continues her strategy of partnering with credit worthy operators and selecting fungible low basis properties to further protect against any downside.

Looking back, 2025 was one of our busiest years to date. Our total investment volume increased 20% from 2024, and we had 53 unique transactions. Said another way, our team was able to post stellar results without reliance on large portfolio transactions.

This is important to note because 1, these large deals often command pricing premiums for the ease of putting a greater amount of capital to work, and 2, they often require buyers to accept all or nothing where a good chunk of properties may not fit our underwriting thresholds.

That said, our team remains capable and ready to execute on these larger opportunities when the right deal comes around, but we are encouraged our platform can still post significant volume in years, but we do not anchor a large portfolio deals hitting the market.

In Q4 we also expanded the team's capabilities outside of our main three categories restaurants, automotive service, and medical retail with our acquisition of a Sprouts grocery store and our first equipment rental acquisition of the United Rentals property.

As Bill mentioned, our team is constantly evaluating new opportunities in adjacent sectors to understand the resilience of the business and the way the attractiveness of their credit and real estate locations versus our existing portfolio.

We feel that both the grocery and equipment rental sectors fit our existing underwriting approach of focusing on recession resistant essential service retailers with high-quality and fungible real estate.

Similar to how we approach our entrance into the automotive service and medical retail sectors, that is by dipping our toes and building extensive knowledge and expertise before launching an official strategy, we will follow the same pattern here.

While grocery and equipment rental are newer categories for us, we chose these specific properties because of their similarities to the assets we regularly purchase in our existing portfolio.

For example, both are at least the best-in-class credit worthy operators in the respective subcategories. Sprout is a publicly traded grocer with more than 410 locations across the US, no debt. Our $8.6 million basis in this location is also much lower than the 10 to $15 million we typically see for the brand in the market.

United Rentals is also a publicly traded company with over 1,600 locations across the US and is rated DB by S&P.

They're the largest equipment rental provider in the nation and have a demonstrated track record of strong operations.

We'll continue to evaluate similar opportunities in these sectors, but only so long as they match our existing underwriting thresholds and investment criteria.

Now reflecting on our strategy going forward for 2026, 2025 evidence substantial repeat counterparty transactions, a trend we expect to continue.

Coupled with the expanding top of our funnel, we expect 26 to be another strong year of increased diversification and expanded platform capabilities. Patrick back to you

Thanks Joshua.

I'll start by talking about capital sourcing and the state of our balance sheet.

We have full capacity on our $350 million revolver and feel that we have the liquidity to continue executing our business plan in Q1 and into 2026 with respect to leverage at the end of Q4. Our net debt to adjusted EBITDA is just 4.9 times inclusive of outstanding net equity port.

Excluding our forward equity balance. Our leverage is 5.1 times. This is our sixth consecutive quarter of leverage below 5.5 at the very bottom of our stated leverage range of 5 to 6 times.

We've not fully settled our forward equity balance in 2025, but with the fully available revolver, we feel we still have ample capacity on the debt side. After including debt capacity and free cash flow, we have over $220 million in liquidity before reaching 5 times leverage and substantially more than that before approaching 6 times.

Then another way, we believe we could utilize low-interest rate debt for all acquisitions in 2026 and still remain under our self-imposed leverage. As always, we aim to be opportunistic to achieve the best cost of capital on our funding decisions based on market.

We are encouraged by the current state of the term loan market, which was much more constrained just a few years ago. As a reminder, 5-year term loans have historically been priced at 95 basis points over Silver, or an all-in rate today of approximately 4.6% after loss and before fees. Private placement notes would be higher than that, but also created to current market cap rates while offering longer-term antenna.

We have 95% of our floating rate debt fixed through November 2027 at 3% versus spot rates today at 4%. Overall, 98% of our debt staff is fully fixed and our blended cash interest rate is 4%.

We maintain a very healthy fixed charge coverage ratio of 4.8 times.

I'd also like to remind everyone that in season 3 of last year we removed the Silver credit score adjustment of 10 basis points to our interest expense on the revolver and term loans. Our new borrowing rate on term loans is silver plus 95 basis points, and the revolver is silver plus 85 basis points. It set a positive flow through to AFFO of approximately $600,000 per year.

Turning to debt maturities, including extension options, we have no debt maturities until December 2026 when $50 million in private notes come due. Our staggered maturity schedule will ensure we do not face a significant maturity wall at any point thereafter.

That said, we are focused on the small and coming maturities in 26 and 27 and have been very encouraged by the liquidity in the bank market today, as well as the very track credit spread being achieved in the private placement and public bond sector.

Then another way, we believe we have numerous avenues to address these minor maturities that attracted rates.

After some of the earning salary for Q4, we reported Q4 AFOO per share of $0.45, and our full year AFFO was $1.78 per share, representing 2.9% growth over 2024. Q4 house rental income was $67.5 million representing growth of 11.1% for the quarter compared to last year.

Annualized cash-based grant the leases in place as of quarter end is $264.2 million and our weighted average five-year annual cash grant escalator is 1.5%. Cash G&A expense was $18 million for the year, at the very bottom of our guidance range and representing 6.9% of cash rental income for the year compared to 7.1% for the prior year.

This improved operating leverage illustrates our continued efforts at efficient growth and the benefits of our improving scale.

Our new guidance range for Cash G&A in 2026 $19.2 million to $19.7 million.

As for managing our lease maturity profile, 95% of the 41 leases expiring in 2025 remain occupied today. This includes a high renewal rate and two properties that were quickly released to new tenants.

Additionally, we've started to make progress on our 42 leases expiring in 2026, which now represents just 1.5% of ADR, down from 2.6% at the start of 2025.

Our portfolio occupancy remains very strong today at 99.6%, benefiting from efforts to release our very limited number of insects. We collected 99.5% of base rent for Q4 and 99.8% for the year. Last quarter did not see any material changes to our collectibility or credit reserves.

We want to call out one new slide we introduced the presentation on page 11. We regularly see private market cap rate drops for properties similar to the properties owned in our own portfolio, but our public valuation has lingered lower in recent months. We thought it would be helpful to compare our current implied cap rate to the blended cap rate that recently sold our leased properties. It demonstrates a sizable GAAP between the higher value of our underlying assets and where the stocks actually trading that.

That we'll turn it back over to clinical questions.

Thank you.

(Operator Instructions)

Michael Goldsmith, UBS.

Good morning. Thanks a lot for taking my question. First question is on the move into United Rentals and industrial outdoor storage. Can you just talk a little bit about the market you see there, maybe the total addressable size. It feels like some of your NetLease peers have been moving into that space. So, like, what do you see from like a competition perspective there? And then if you could talk a little bit about how the cap rates in that space compared to the rest of your portfolio, that would be helpful.

Thanks.

Thanks, Michael. Well, I, I'd say I've been following the sector for a long time.

I was chair of the investment committee at Gramercy, 15 years ago when we were doing, quite a bit of this. It's attractive, it's. A lot of the value is in the land residual, if you're careful you can get in at a good basis there's credit worthy tenants. You know it's hard to get new sites entitled so there's some entrenchment if you can find an existing site, a very large addressable market.

Very defensive, and cap rates that makes sense, so we've looked at a lot of them, we'll continue to pursue that strategy, and it's, there are players who focus on it, now. One of them was just taken private by Brookfield, but it's a, it's an attractive, space, as is grocery, by the way, but we found that, very often high credit grocers have. A much chunkier, purchase price than we typically plan, but we're looking at both of those sectors and others on a continuous basis. But, to answer your question on TAM we can get back to you, but it's enormous compared to the size of our company.

Got it. Thanks for that. And then, second question, just following up on the Bahama Breeze. It sounds like you got ahead of this, in, a little bit in the prior years, so you still have a little bit of exposure here, I guess, but Can you just kind of, I guess the question is just it sounds like rents are about the same, of where like the level of interest is is high but rents are about the same, is that the right, is that the case? And then also like if you compare them. Publicized list. I think you've got like 4 or 5 locations remaining, so can you just kind of confirm that, just talk a little bit more about that. Thanks. Yeah.

I think that's right. There will be a handful that get converted to other Darden brands. They'll be, there may be one that we swap out with Darden for another property, and there'll be a couple that, in a year and a half plus. We have to release, we've been inundated with, people interested in these sites. They're very well located, and I think we're being pretty conservative on the rents, but, it's, we've sort of been working on this for a week and we're sorting through a lot of people who are interested in taking the sites.

Thank you very much. Good luck in 2026.

Thanks, Michael.

John Kukowski, Wells Fargo.

Good morning.

Thank you for taking my question. Maybe just stay on Bahama Breeze here. Bill, forgive me if I missing the opening remarks. You talked about the rents there. Are you able to talk about the performance at these assets? I'm just if they're getting converted, would that be at the same rent and then for the assets that would be to turn in a year and a half, I mean, if you're getting substantial interest at this point, is there the potential for even a positive mark to market? I'm curious like what the total losses that you're kind of making into internal estimates.

Yeah, I don't think we're baking in losses, at all. These brands are Bahama Breeze a brand, had limited market expansion, simply, I don't think a lot of the US has a view on what Bahamian cuisine is, so it worked in the Southeast, and it just wasn't relevant to the total size of Darden. And so, they'll convert some of these they have existing leases, so there won't be a change in the rental rate would be my assumption.

But we'll have, brand new stores, with higher AUV brands, and then for the couple that will get back and we will get back, I feel good that we'll be able to release them, although it's early days, so, and you know we're talking about a couple of stores on a portfolio of 1,325.

And yeah, and I, this is Patrick. I would just add that, when you look at that press released and put out and the list of sites that they want to convert, there's still some moving pieces there, and you know you have to factor in that some of those stores, that have really high-quality real estate, are restricted, by covenants by other tenants nearby or by the shopping center itself. So, Darden's interest in converting a lot of these sites was clear, and it's just a matter of what they can do within the restrictions that are on those properties. But the demand in the last week has been, I'd say tremendous from all the tenants that want to back all these locations.

Okay, that's helpful. Thanks, Pat. Then maybe another one for you just on the balance sheet, you've called the forwards. I think in the opening remarks you said 220 of look what he gets you to do 55. I'm just curious how you think about managing the balance sheet. I know Bill, you kept saying over equitize.

At what point the high end is 6, but maybe as you get to 5.5 in an effort to not necessarily reach the high end, do you start to maybe pull on thinner spreads on equity at a certain point, or do you kind of stick to your guns and you'll ride, that number up to 6, and then at that point if the equity is not, cooperating, then you start to pull back on the acquisition cadence. I'm just curious how you think about all scenarios and obviously. If the risk of trade works, then great we get a cost of equity we keep moving but just it trying to think about all scenarios here.

Yeah, I think we've evidenced that we're disciplined in our capital allocation that we don't go out the risk spectrum on acquisitions.

We don't provide guidance for a reason, but that said, we have lots of runway with very a creative acquisitions funded with low leverage inexpensive financing that's readily available today in a way that it wasn't readily available a couple of years ago so I think we feel like we're in great shape and we have minimal maturities.

To address, so, I think we have a long runway of acquisitions, and our stock has been, soft, and I think we.

As Pat mentioned, added some detail in our presentation of how well supported by NAB we feel our stock price is, but I think it offers, real value today.

Got it.

Thank you.

Thank you. (Operator Instructions)

Anthony Palone, JPMorgan

Great, thanks. Can you talk about just Red Lobster exposure because I think that's another one that's been out there talking about perhaps more store closures.

Yeah, I don't think there's much to say the brand is doing much better than it was under prior ownership.

Our stores are predominantly in a master lease. It was affirmed when they restructured, at the same rent. I think we feel quite good about that.

Okay. And then on the diversification strategy, can you maybe just talk about anything that you don't want to get into or other areas of interest that that you haven't quite tapped yet?

Yeah, I think we've been very clear we have a page in our presentation of sectors that we've avoided. I would double down on what's on that page, we try to focus on a balanced real estate and credit approach, and we try to stay within sectors that have been through cycles, and so, we don't own pickleball facilities that cost $20 million. We don't own $9 million car washes. We don't own.

Corporate headquarters in the middle of nowhere where you can get more spread and it works typically for a while, but on lease renewal, you'd have a lot of risk so I think we take a much more balanced approach than our peers and it's shown in the last decade that our credit.

Performance has been best in class.

Okay, thanks.

Thank you. (Operator Instructions)

Rich Hightower, Barclays.

Hey guys, I just wanted, follow-up on, one of the earlier questions, but what, what's the real comfort level, with approaching that sort of 6 times upper limit on leverage if that's the only option the market gives you, as far as executing the sort of plan for 26 on growth.

But I think that's a quite a bit of a ways off, so, hard to make predictions. That many months in the future, so I think we feel very good that we have, a couple $100 million of acquisitions before we even have to be thinking about that. And honestly, we've had the same. Leverage ceiling for since inception we've essentially never been. Close to it, so I think that that track record speaks volumes.

All right, fair enough. I mean, as far as the, I guess that sort of early vintage of Darden leases coming due in 207, and I wonder if I've asked this before, but where do you guys sort of peg the mark to market or the recapture rate potentially on those, upon renewal, that sort of thing.

They have multiple 5 year extension options at 1.5% growth, so the continuation of that 1.5% escalator, so I would say that our expectation is the vast majority of those will, renew at the at the 1.5% contractual option.

Got it. Thanks very much, Bill.

Yeah, of course

Thank you. (Operator Instructions)

Wesley Golladay, Baird.

Hey, good morning, guys. I'm just looking at your evaluation chart you put in the presentation. You have a lot of assets that we'll trade, call it mid, low fives and up to the low sixes. Would you have any apple tech to just start disposing of some of those assets and recycling into a little bit higher yielding, higher growth assets and get the diversification higher?

Yeah, it's always an option, Wes we've done very little of it, where we have done it, frankly, was a number of years ago and selling, Bahama Breeze assets at extraordinary pricing with very high rents.

We haven't had to do it in the past. We don't have to do it today. The Darden assets are very high-quality and very hard to, replace. They trade for, strong values, for a reason. Darden as a company has, $25 billion market cap. It's credit default swaps. Are like the G7 country.

So, they're hard to let go of, to be Honest. It's an option we know how that works, I would remind everyone that there are re rules, you can't just sell properties one by one, like some people assume you can, but it's an option we haven't had to do it yet.

Nothing wrong with it, but hasn't been primer.

Okay, and then you did have a a rare impairment in the quarter. What drove that?

It was a quick service restaurant that we purchased right at the beginning of our life. It was a Hardee's in Gladstone, Alabama. We've had a hard time releasing it. It's a tiny property. It's kind of hard to write down properties, to be honest. We found that the conditions were right to do it, but it's been vacant for a while. We've had a hard time releasing it, but, one property over 1,325.

Yeah, not bad. And one last one on the Red Lobster, I think you mentioned there were a ground leases. Is that for all of them? And can you, share the rent level?

They're mass released and again they were just reaffirmed so I would say there's been a tremendous emphasis on. Credit issues that aren't credit issues in the Q&A and I would ask listeners to sort of see the forest for the trees. The story here is that we have substantial growth in 2026. That'll be really a creative.

All right, thanks for the time.

Thank you. (Operator Instructions) Mitch Germaine from Citizens Bank.

Thank you.

I think Bill, you talked a little bit about, obviously bigger ticket, for a grocer. I, I'm curious how, do you potentially look to maybe scale up in that sort of, sector?

Yeah, I think it's very similar, Mitch, to how we looked at medical retail and auto service, we spend a lot of time doing research up front, we're conservative in what we purchase, and then as we are active in the market, it helps with seeing deals and you get more deal flow, so it's no different than what we've done in the past, to be honest, it's just that the attributes of different, property types you need to be, sensitive to.

And I think because we've been cautious, and you know you've seen the the positive results on our credit, results.

And and do you envision doing direct deals with with grocers or maybe leveraging some of your shopping center.

Contacts to possibly's.

All kind of scale it up.

It's all of the above, Mitch. We take a pretty agnostic view on sourcing, so we source things directly, an auto service we've had a number of brands that we've had repeat sell these back business, but we will look at, we'll look at everything that we can.

Got you. And last one for me is anything not hitting the strike zone today in terms of where you've been allocating capital? Like, are you pulling back in any way at all, or it's all, as long as it continues to meet your underwriting criteria, it's all systems go?

Yeah, I think it's the latter, we, we've been pretty. Thoughtful on what we've acquired and we don't tend to have a view of buy it and if the performance starts declining.

We'll be able to sell it at a great price, that that hasn't been the way we've looked at the world, we've proved things in the past, but it's been minimal and I think it reflects what we've purchased we feel really good about.

Thank you. Good luck this year

Yeah.

Thanks.

Thank you. (Operator Instructions)

Jim Kammert, Evercore ISI.

Thank you very much. Perhaps a derivative of where Mitch was heading, could you remind me what is the percentage, say, of dollars over the past couple of years that really were direct deals with developers and where you didn't have a broker involved, because I'm presuming, that the former gives you a better yield. I'm just curious how that's been playing out proportionately.

Yeah, I don't think I wouldn't look at it that way, James. I think that the returns are pretty similar, sophisticated large brands have access to information, they know what their properties trade for.

You know there's some ease of use when you do repeat transactions and the sale these back because often you have existing documents that you can replace or you know who the people are and and you know the sort of cadence of information flow can be better but I don't think that there's a you know some meaningful advantage of doing originated sales back.

Good.

I, not that we're against them in any way, but I don't think that there's a big difference.

Marcus figured it out. Fair enough, thanks.

Thank you. As a reminder to ask a question, please press star followed by one on your telephone keypad now.

We will now pause for any questions to be registered.

We currently have no further questions, so I'd like to hand back to Bill Linehan for any closing remarks.

Thank you, Claire.

For 2026, we're in the fortunate position of being able to use very economical long-term debt to fund new investments. We see ample external acquisition opportunities and based on cap rates today, we expect healthy investment spreads and growth for the year. I'd emphasize that in this environment we do not anticipate slowing down given our dry powder and where we are seeing our cost of debt capital.

Our team will be on the road for some non-deal roadshows in Los Angeles and Chicago, the weeks of March 10th and March 17, respectively.

We'd love to meet with you in person, so please reach out to Patrick or myself to coordinate.

Thank you all and look forward to seeing many of you in person this year.

Thank you. This now concludes today's call.

Thank you all for joining. You may now disconnect your lines.