Earnings call transcript: Four Corners Property Trust Q2 2025 sees rental income growth

In the second quarter of 2025, Four Corners Property Trust Inc. (FCPT) reported a robust financial performance, highlighted by a 2.8% year-over-year increase in adjusted funds from operations (AFFO) per share to $0.44. Rental income surged by 11% to $64.5 million, underscoring the company’s strategic expansion beyond casual dining into diverse sectors such as automotive and medical retail. The company’s stock showed a slight increase of 0.8% in regular trading hours, closing at $23.84, with a minor decline of 0.17% in premarket trading. According to InvestingPro data, FCPT maintains an attractive 6% dividend yield and has achieved a "GOOD" Financial Health score, supported by strong liquidity metrics.

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Key Takeaways

• AFFO per share increased by 2.8% year-over-year to $0.44.
• Rental income grew by 11% to $64.5 million.
• Portfolio occupancy remained high at 99.4%.
• The company expanded its portfolio to include 1,260 leases across 165 brands.
• FCPT has $500 million available for future acquisitions.

Company Performance

Four Corners Property Trust demonstrated a strong performance in Q2 2025, driven by strategic diversification and robust rental income growth. The company has effectively expanded its portfolio from 418 properties in 2015 to 1,260 leases across 165 brands, reducing its reliance on casual dining establishments. This diversification strategy has positioned FCPT well in the current market, with significant contributions from sectors like automotive services and medical retail. The company’s strong operational efficiency is reflected in its impressive 85.2% gross profit margin and 7% cash return on invested capital, as reported by InvestingPro.

Financial Highlights

• Rental income: $64.5 million, up 11% year-over-year
• AFFO per share: $0.44, a 2.8% increase year-over-year
• Portfolio occupancy: 99.4%
• Rent collection: 99.8%
• Cash G&A expense: $4.4 million, representing 6.9% of cash rental income

Outlook & Guidance

Looking ahead, FCPT is poised for continued growth, with $500 million in available capital for acquisitions and a $470 million capacity before reaching a 6x leverage ratio. The company expects cash general and administrative expenses to range between $18 million and $18.5 million for the full year 2025. FCPT’s focus remains on essential retail and services, with 95% of its term debt fixed through November 2027, providing stability in a volatile interest rate environment. Based on InvestingPro’s comprehensive analysis, FCPT appears slightly overvalued at current levels, though analysts maintain price targets suggesting potential upside.

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Executive Commentary

CEO Bill Lannahan emphasized the company’s strategic focus, stating, "We invest when it’s accretive for our shareholders." He also highlighted the resilience of FCPT’s portfolio, noting, "Our portfolio remains resilient. Small and fungible buildings leased to large national operators, which are resilient in uncertain times." Lannahan reiterated the company’s disciplined approach to capital management, saying, "We have a ten-year track record of being extra sensitive to our cost of capital by modulating capital raising and investment when necessary."

Risks and Challenges

• Potential economic downturns could impact tenant financial health.
• Rising interest rates may affect borrowing costs despite fixed-term debt.
• Market saturation in specific retail sectors could limit growth opportunities.
• Supply chain disruptions could affect tenant operations and rental income.
• Competition for acquisitions may drive up asset prices, impacting yield.

Q&A

During the earnings call, analysts inquired about FCPT’s acquisition strategy and market outlook. The management team indicated a consistent deal flow with a focus on pricing as a key filter. They also discussed potential growth in the veterinary retail sector and emphasized maintaining strong relationships with existing tenants like Darden. The company is exploring opportunities to increase acquisitions with cap rate improvements of 25-50 basis points.

Full transcript - Four Corners Property Trust Inc (FCPT) Q2 2025:

Drew, Call Operator: Hello, everyone, and thank you for your patience on today’s FCPT Second Quarter twenty twenty five Financial Results. During today’s call, there will be some prepared remarks followed by a Q and A session. We will start the call in approximately one minute time. Hello, everyone, and thank you for joining us on today’s FCPP Second Quarter twenty twenty five Financial Results. My name is Drew, and I’ll be the operator on today’s call.

During the call, we will have some prepared remarks, followed by a Q and A session. It’s now my pleasure to hand over to Patrick Wernie to begin. Please go ahead when you’re ready.

Patrick Wernie, Executive, FCPT: Thank you, Drew. During the course of this call, we will make 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 fcpp.com.

All the information presented on this call is current as of today, 07/30/2025. In addition, reconciliation to non GAAP financial measures presented on this call, such as FFO and AFFO, be found in the company’s supplemental report. With that, I’ll turn the call over to Bill.

Bill Lannahan, CEO, FCPT: Good morning. After my remarks, Josh will comment on the investment market, and Patrick will discuss financial results and capital position. The 2025 continued the momentum we had in the 2024. We acquired additional properties that fit our high quality standards while keeping our pricing consistent. We were able to fund these deals with our strong cost of capital, equity we raised on the ATM via forward issuance over the last year.

84,000,000 in acquisitions in q two at a 6.7 blended cap rate. Over the last twelve months, we’ve acquired 344,000,000 of properties, which is among our highest volumes across four consecutive quarters. We have momentum and are reaching these milestones in a uniquely FCPT way. One, we focus on real estate and creditworthy tenants, never sacrificing quality for volume or spread. And two, we remain committed to modulating acquisitions when our cost of capital weakened and then returned with vigor when when we reentered the green zone.

Our ability to fluctuate acquisitions to protect spread without weakening our portfolio quality is, in our view, a strong competitive advantage for FCPT. Our rent coverage in Q2 was five times for the majority of our portfolio that reports this figure. This remains amongst the strongest coverage within the net lease industry. Olive Garden, LongHorn, and Chili’s are industry leaders and generally outperform the national peers as well as fine dining or local brands. Most recently, Brinker reported Chili’s same store sales grew 32% for the quarter ended March 2025.

Olive Garden and LongHorn report same store sales growth of near 7% for the quarter ended May 2025. While casual dining is 66% of our rents, we also want to highlight the progress we’ve made on diversification. We’ve grown from 418 properties across five brands in 2015 at spin to 1,260 leases across a 165 brands ten years later. Olive

: Garden

Bill Lannahan, CEO, FCPT: and Longhorn are now 339% of our rent today versus a combined 94% at spin off. 34% of our portfolio rent is now outside of casual dining, including quick service at eleven, automotive service at twelve, and medical retail at nine. All of our chosen sectors are focused on essential retail and services, creating what we view as a very defensive portfolio and quite tariff resistant. While while we are still waiting for the tariff impact to completely settle, expect restaurants and the service industry to be less impacted due to their largely domestic supply chains. We would expect a pullback in consumer spending from any recession or high inflation environment, but we feel that we are well positioned with low rents to provide significant cushion.

Our portfolio remains in fantastic shape with no exposure to the problem retailers or sectors that have been recently struggling, such as theaters, pharmacy, high rent car washes, and experiential retail. We aim for best in class disclosure. In addition to our press release of every acquisition, we also now disclose our top 35 brands in the supplemental, which represents 83% of our rents. The net lease industry peer group typically discloses 20 to 50% of rents. While we have not provided information on bad debt expense historically because there hasn’t been much to report, going back to 02/2016, we’ve had a total of 1,760,000.00 in bad debt, excluding recoveries from releasing, versus 1,500,000,000.0 of rent collected over the same period.

I’ll repeat those figures. 1,760,000.00 of bad debt versus 1,500,000,000.0 in rent collected. That’s an average of 12 basis points or a $176,000 per year, including zero for in 2025. To put this in context, most of our peers have stated a track record or expectations of 25 to 75 basis points annually. I’d also like to note that in the lease bureau credit events, our recovery rates for new leases have been very high with an average above 90% of prior rent and are often above 100% of prior rent when we replace the tenant.

Over to you, Josh.

Josh, Investment Executive, FCPT: Thanks, Bill. During Q2, we acquired 24 properties for $84,000,000 at a blended 6.7% cap rate with a weighted average lease term of thirteen years. For the first half of the year now, we have acquired 47 properties for $141,000,000 at a blended 6.7% cap rate. Next, sharing some statistics for

Patrick Wernie, Executive, FCPT: the

Josh, Investment Executive, FCPT: quarter. First, 68 of our total volume was in the automotive sector, including established tenants such as Caliber Collision, Christian Brothers and Express Oil, brand owned by Mavis and Tires Plus, a subsidiary of Bridgestone. Second, onethree of our investment volume was from sale leasebacks with creditworthy operators looking to grow. Of note, we completed one with Christian Brothers Automotive and another with Vibe Collision. The Christian Brothers opportunity was a repeat relationship from Q4.

The team now operates over three ten locations across the country and notably has never closed a store due to poor business and forty three year operating history. Vibe, a Northeast based collision repair operator, is a new tenant for us, though we’ve been following their progress for several years. We acquired two locations via sale leaseback and are excited to continue assisting their growth. Overall, this quarter highlighted how automotive service remains one of our core targeted industries. Specifically, the sector is both e commerce and recession resistant while benefiting from tailwinds, especially as the average age of passenger vehicles in The U.

S. Is now at a record fourteen years. As demand for vehicle service continues to increase, we expect that operators of scale will continue to consolidate the market. Further, automotive service properties require special zoning and use permitting that is not always easily attainable from their respective municipalities. This creates a stickier tenant base that regularly renews versus relocating.

Moving on to dispositions. While we did not have any this quarter, our team continues to feel free for reverse inquiries and offers on our properties. Looking forward, the Boulder Group’s most recent report showed flattening cap rates and a flight to credit quality, which could indicate coming pressure on net lease cap rates. However, we are continuing to find attractive opportunities that are both consistent with our quality thresholds within pricing standards similar to what we have seen earlier in the year. Lastly, and as a reminder, we do not provide acquisitions guidance.

We will remain disciplined in our pricing as we continue to see the deals that meet our dual quality return thresholds. Patrick, back to you.

Patrick Wernie, Executive, FCPT: Thanks, Josh. I’ll start by talking about capital sourcing and the state of our balance sheet. In Q2, we raised $24,000,000 in equity. That is in addition to the $149,000,000 that we raised in Q1. Over the last twelve months, we’ve raised nearly $05,000,000,000 of equity, which has allowed us significant capacity to match fund our acquisitions.

As of yesterday, we have $146,000,000 of unsettled equity forward at a price of $28.3 We’ve become increasingly comfortable maintaining a forward equity balance as higher silver rates largely offset the carrying costs. With respect to overall leverage, our net debt to adjusted EBITDAre was 4.5x, inclusive of outstanding net equity forwards as of June 30. Excluding our forward equity balance, our leverage was 5.4x. This is our fourth consecutive quarter of leverage below our stated guidance of 5.5x to 6x and remains near a seven year low. We still have full capacity under our $350,000,000 revolver and have liquidity to continue executing our business plan this year without further accessing capital markets.

We layered in two additional hedges after June 30, which has further lowered our floating rate interest exposure. We now have 95% of our term debt fixed through November 2027 at 3% versus spot rates today near 4.35%. Including our fixed rate private notes, we are 97% hedged. Including extension options, we have near zero debt maturities for nearly two years, and our staggered maturity schedule will ensure we do not face a significant wall at any point thereafter. Additionally, our fixed charge cover ratio is a healthy 4.5 times.

Altogether, this puts us in a great liquidity position with approximately $500,000,000 of available capital for funding acquisitions as of today. Assuming no further equity issuance, we have an approximate $470,000,000 of capacity before reaching six times that leverage. Now turning to some of the financial highlights for Q2. We reported AFFO per share of $0.44 which is up 2.8% from Q2 last year. Rental income cash rental income was $64,500,000 representing growth of over 11% for the quarter compared to last year.

Annualized cash based rent for leases in place as of quarter end is $249,800,000 and our weighted average five year annual cash rent escalator remains 1.4%. Cash G and A expense, excluding stock based compensation, was $4,400,000 representing 6.9% of cash rental income for the quarter compared to 7.4% for the quarter last year. This improving operating leverage illustrates our continued efforts at efficient growth and the benefits of our improving scale. We are still expecting cash G and A will be in the range of 18,000,000 to $18,500,000 for 2025. As we’re managing our lease maturity profile, we have 41 leases expiring in 2025, and our team has made significant progress with more than 85% of this tenant already extending their lease or indicating intent to do so.

2025 remaining expirations now represent just 0.4% of ABR, and we are beginning work on next year’s expirations. For reference, we had 44 leases expire last year with 40 renewing. Two of those nonrenewals are already released, and the other two are in active negotiations. There were no material changes to our collectability or credit reserves nor any balance sheet impairments. Our portfolio occupancy today remains strong at 99.4%, we collected 99.8 of base rent for Q2.

With that, we’ll turn it back over to Drew for questions.

Drew, Call Operator: Thank you. We’ll now begin today’s Q and A We’ll now take our first question from John Kilchowski from Wells Fargo. Your line is now open. Please go ahead.

Patrick Wernie, Executive, FCPT: Good morning. Thank

John Kilchowski, Analyst, Wells Fargo: you. Bill, on previous calls, you’ve made mention about building out your acquisition team. I’m curious when you look at the volumes that you’ve done, is that a product of you know, we’ve we’re fully worked. This is the most that we could possibly do, and extending our team would allow us to do more volume? Or do you think that, at this point, your team is fully functioning, you don’t need to really add scale, and this is just the opportunity set that’s available that you’re you’re winning?

Bill Lannahan, CEO, FCPT: Yeah. It’s a terrific question. I mean, I I would reflect that we run the company pretty bootstrapped. So we we definitely don’t have excess capacity in in acquisitions or or other parts of the company, frankly. But, really, it’s a function of recruiting folks out of college, training them in the business or the way we see the business working.

And I would say we are appropriately staffed. We we definitely have the capacity to do more acquisitions to the extent that we find more favorable pricing. But, really, the the thing that is you know, sets where our our acquisition volume is today is is the availability of well priced assets in the marketplace. We’re finding things that score high enough. It’s just the pricing has not been terribly attractive.

It’s sufficient, but not terribly attractive.

John Kilchowski, Analyst, Wells Fargo: Understood. And I guess if I were doing a a sensitivity analysis and and cap rates were to move, let’s say, 10 or 20 bps in your direction, you kept your cost of capital where it is. How much do you think that that would move the opportunity set for you if you’re doing a couple $100,000,000 of investments in a quarter? You know, where do you think that that could move that needle to? I’m just I’m just trying to sort of sensitize this.

Bill Lannahan, CEO, FCPT: Yeah. I’d first look at the the forward that we have, which is already priced at north of $28, where we raised that capital. And so, to take your question, maybe 25 basis points would be substantial, would be 100,000,000 or $200,000,000

John Kilchowski, Analyst, Wells Fargo: Got it. Thank you.

Drew, Call Operator: Our next question today comes from Michael Goldsmith from UBS. Your line is now open. Please go ahead.

Michael Goldsmith, Analyst, UBS: Good morning. Thanks a lot for taking my question. You you acquired some Olive Gardens in the quarter, and and I know you’re also looking to diversify the portfolio. So does this imply that you’ve kind of reached the comfortable level of darn exposure that you’re interested in maintaining going forward?

Bill Lannahan, CEO, FCPT: You know, we’ve consistently diversified the Darden exposure down, but we haven’t hesitated to buy Darden related assets, when we found ones that we really liked and the pricing was was great. And and that, you know, played out in this this quarter. Very often, the ones that we’re buying are outparcels where the rents are really low. Garden is doing, you know, fantastic. It has an equity market cap over 25,000,000,000.

Its credit default swaps are in line with the US government’s CDS. So it it’s, it’s not something that we shy away from doing if we find buildings that we we think are well located and the pricing’s right.

Michael Goldsmith, Analyst, UBS: Got it. And thanks for that, Bill. And then as a follow-up, you’ve been an active acquirer in the first half of the year. Last year’s acquisition activity was pretty back weighted. So recognizing that you don’t provide guidance, should we expect a similar acceleration in acquisition activity in the back half of this year?

Bill Lannahan, CEO, FCPT: I think it really comes down to cost of capital and what the markets you know, brings us, but we’re certainly quite busy. Your your observation that q four tends to be our largest quarter, I think that has been true over over most of our tenure. But we’re too soon to see what would close in q four. Those would be assets that would typically be sourced and underwritten in the August, September, early October time frame. So a little too soon to tell.

I’ll have more detail on that next next call.

Michael Goldsmith, Analyst, UBS: Thanks again. Good luck in the back half.

Bill Lannahan, CEO, FCPT: Thank you.

Drew, Call Operator: Our next question comes from the line of Anthony Paolone from JPMorgan. Your line is now open. Please proceed.

: Yes. Thank you. You had a lot of transactions skewed to auto services in the quarter and was wondering if that was just where the deal flow happened to be or if that was a bit more intentional than usual?

Bill Lannahan, CEO, FCPT: Just where the deal flow happened to be precisely.

: Okay. And then going back to the earlier question in the math around maybe picking up 25 basis points, like if we kind of just do the math on our side, it seems like where you’ve raised capital and where your yields have been, it’s, I don’t know, fifty, seventy five basis points of blended spread. And so should we look at that as if you were to do something a little bit closer to a seven, given that you’ve locked a lot of your financing costs right now or your or your equity costs, like, that that would kind of open up the deal volume? Or I’m just trying to think about how, you know, how that would work.

Bill Lannahan, CEO, FCPT: Yeah. I was just trying to make a comment that if our historical acquisitions have been between 6.77, if you lowered that range by 25 or 50 basis points, there’s a lot there’s a lot more to do. But we wanna make sure that we, you know, are accretive when we acquire things and that we feel like we’re paying a fair price for the real estate. And and I think if you look at our history, we haven’t, on one hand, when rates were very low, we weren’t buying things in the mid fives. And when our peers had impaired stock prices, they were acquiring things at mid to high sevens, but they were dipping down in quality.

And the point that we’re trying to make is we try to stay very consistent on quality and price. And when the stock market gives us the opportunity to raise equity at favorable pricing, we’re bashful. Okay. Understood. Thanks, Bill.

Our

Drew, Call Operator: next question today comes from Kyle Katranasek from Janney. Your line is now open. Please go ahead.

Josh, Investment Executive, FCPT: Hey, good morning guys. Shares remaining to

: be settled under forward, you’re now at $150,000,000 down from $250,000,000 last quarter. Is this a reason for existing pipeline over the next sixty to ninety days that you’re seeing less opportunities in

Bill Lannahan, CEO, FCPT: your strike zone? Or is

: it more a function of where your stock price is currently?

Bill Lannahan, CEO, FCPT: It’s probably more of the latter.

Josh, Investment Executive, FCPT: All right. Thank you.

Drew, Call Operator: Our next question comes from Alex Bagan from Baird. Your line is now open. Please proceed.

Alex Bagan, Analyst, Baird: Hi. Thanks for taking our question. First one for me is, is deal flow picking up? And has the competitive landscape been changing at all?

Bill Lannahan, CEO, FCPT: I think the, the deal flow has been quite consistent, and, you we’re always looking at everything from very substantial portfolios down to $1,000,000 buildings. But I would say it’s been pretty consistent. The pricing’s been acceptable for what we’re buying. But, certainly, the pricing isn’t, you know, super attractive, so we’re we’re trying to pick our spots. And as mentioned, we have capital that was raised at at good prices on our ATM that provides, some runway.

Alex Bagan, Analyst, Baird: Alright. And and then between the credit and real estate criteria, what has been the stronger filter in not getting deals done so far in 2025?

Bill Lannahan, CEO, FCPT: I don’t really think there’s been much change in scoring. It’s really more to do with pricing. Like, we’re we’re certainly finding sufficient volume of things that meet our quality criteria. It’s just when you put that next filter on making sure the pricing is accretive for our shareholders, that becomes a governor on how much you can do.

Alex Bagan, Analyst, Baird: Alright. That’s it for me.

Josh, Investment Executive, FCPT: Thank you. I would I would

Bill Lannahan, CEO, FCPT: also point out that we’re you know, we are operating the business, at at record levels of acquisition, despite not having large portfolios in that mix, which is how in prior years we had elevated acquisition volume.

Patrick Wernie, Executive, FCPT: Got it. Our

Drew, Call Operator: next question today comes from Mitch Germain from Citizens Capital. Your line is now open. Please go ahead.

Mitch Germain, Analyst, Citizens Capital: Thanks. Bill, it looks like 2027, you start to get the, Darden spin assets beginning to roll. Obviously, you’re already working on ’26 roll now. So is there an anticipation to maybe start to pull some of that forward here?

Bill Lannahan, CEO, FCPT: The extension options are at Darden’s option, and they have a they have a notification of a year to to a lot to tell us what their intentions are. You know, we’re in constant dialogue with them. It’s a fantastic relationship. You know, we’ll see how that works as as time plays out. You know, frankly, they are very, very highly covered.

So it’s a bit of a different situation than in most net lease. These are properties that are highly productive with rents that are very reasonable.

Mitch Germain, Analyst, Citizens Capital: Great. That’s super helpful. And then you may have been asked this in the past. I apologize if if you were. But Bahama Breeze, obviously, facing some store closures.

Anything of note? I think you have 10 properties exposed to that tenant. Is there any sort of proact anything proactive that you

Patrick Wernie, Executive, FCPT: guys are doing on your end there?

Bill Lannahan, CEO, FCPT: We had one that, was closed one only one property on the closure list. They’re paying rent, for the next handful of years on that property. It’s located at Sawgrass Mills, which is a a mall I know really well. It was part of an acquisition that I did when I was at Farallon with with, Simon Property Group. It’s one the best malls in America.

So I think we’ve already had tenant interest, to to take over that property. It’s, again, you know, on a ring road of one of the best malls in the country. Other than that, we have pruned our Bahama Breeze exposure right after a spin, and what we’re left with are, you know, very strong properties with, you know, very reasonable rents. I don’t think there’s any there’s any there’s not any concern. In fact, there may be some opportunity there.

Patrick Wernie, Executive, FCPT: Great.

Josh, Investment Executive, FCPT: Thank you so much.

Bill Lannahan, CEO, FCPT: Thanks, Mitch.

Drew, Call Operator: As a final reminder, if you would like to ask a question today, it’s Our next question comes from Jason Wayne from Barclays. Your line is now open. Please go ahead.

Patrick Wernie, Executive, FCPT0: Hi. Yes. Most of my questions are asked, but I saw your recent acquisition announcement of a veterinarian retail property. So a pretty small deal, but the cap rate was above kind of recent levels. Can you just walk through your outlook for that industry and what makes you more comfortable with more deals there?

Bill Lannahan, CEO, FCPT: Yeah. You know, vet falls underneath our medical retail efforts. It’s a the vet industry is changing. It’s probably a longer subject than for this call, but, you know, we think it’s an interesting, space. We’re a little bit wary of private equity in in that industry, but overall, reasonable basis, decent returns, and, something you you should expect to see us do more of going forward.

: Got it. Thanks.

Drew, Call Operator: Thank you. We have no further questions in the queue at this time. So that does conclude the q and a portion of today’s call. I’ll hand back over to Bill Lannahan for some closing comments.

Bill Lannahan, CEO, FCPT: Great. Thank you, Drew. Just some final thoughts. The portfolio remains resilient. Small and fungible buildings leased to large national operators, which are resilient in uncertain times.

We evidenced a strong track record with an ultra low bad debt expense and strong releasing results. We have a ten year track record of being extra sensitive to our cost of capital by modulating capital raising and investment when necessary. We invest when it’s accretive for our shareholders. We believe that FCPT is in a strong position to continue to execute our strategy no matter the near term market conditions, having over 144,000,000 in unsettled forwards, full revolver capacity, and no near term debt maturities. Thank you for your time, everyone.

Drew, Call Operator: That concludes today’s call. You may now disconnect your line.

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