Four ners Property Trust(FCPT) - 2024 Q4 - Annual Results

Acquisition and Investment Strategy - In Q4 2024, FCPT acquired 45 properties for $133 million at a 7.0% cap rate, marking one of the busiest investment quarters in the company's history[13] - The company has maintained a selective acquisition strategy, focusing on properties with low rent and strong credit profiles[60] - FCPT has avoided sectors with zero ABR exposure, including pharmacies, entertainment, and gyms, ensuring a focused investment approach[63] - FCPT targets auto service centers and has made select investments in gas stations and convenience stores, focusing on properties that remain relevant with higher electric vehicle utilization[77] Financial Performance - Net income for Q4 2024 was $26,207,000, an increase from $24,459,000 in Q4 2023, representing a growth of 7.1%[127] - Total rental revenue for Q4 2024 reached $60,734,000, up from $57,614,000 in Q4 2023, indicating a year-over-year increase of 3.7%[128] - Funds From Operations (FFO) for Q4 2024 was $40,267,000, compared to $37,455,000 in Q4 2023, reflecting a growth of 4.8%[130] - Adjusted Funds From Operations (AFFO) for Q4 2024 amounted to $42,752,000, an increase from $38,915,000 in Q4 2023, showing a rise of 9.5%[130] - Annualized Adjusted EBITDAre for 2024 was $211,118,000, compared to $199,938,000 in 2023, marking an increase of 5.6%[127] - The company reported a total rental revenue of $237,134,000 for the full year 2024, compared to $219,881,000 in 2023, reflecting an increase of 7.8%[128] Portfolio Composition and Tenant Quality - FCPT's portfolio consists of 1,220 leases across 163 brands, achieving a 99.6% occupancy rate and a 4.9x tenant EBITDAR coverage[14] - The average annual escalator for leases is 1.4%, with a 7.3-year average lease term[14] - The company has diversified its portfolio, reducing Darden concentration to 48% from 100% at inception, with Olive Garden and LongHorn representing 34% and 10% of the portfolio, respectively[13] - 56% of the portfolio is investment grade by Annual Base Rent (ABR)[41] - Olive Garden represents 34.2% of the total ABR, with 314 locations contributing to a significant portion of revenue[42] - Darden Restaurants account for approximately 48% of the rent roll by ABR, showcasing strong tenant credit with $11 billion in revenue[51] - The median brand sales volume of the top 25 brands in the portfolio is $2.9 billion, indicating robust performance across the board[45] - FCPT's restaurant exposure is concentrated in large brands, with a focus on sustainable tenant rents and superior EBITDAR/rent coverage[66] Financial Stability and Liquidity - FCPT's total liquidity exceeds $345 million, with 100% of assets unencumbered[14] - The company has maintained a conservative leverage ratio of 4.9x net debt to adjusted EBITDAre, inclusive of undrawn equity forwards[14] - 93% of FCPT's debt is fixed rate, minimizing floating rate exposure and enhancing financial stability[98] - The company has a significant liquidity profile, including a $350 million revolver availability and a conservative dividend payout ratio of approximately 80% of AFFO[100] - FCPT's leverage target is between 5.5x and 6.0x, with historical leverage consistently below this range, demonstrating disciplined financial management[101] Rent Collection and Performance Metrics - Rent collections have consistently remained high, with Q4 2024 at 99.8%[35] - Tenant EBITDAR coverage ratio is calculated by dividing the most recently reported EBITDAR by annual in-place cash base rent, providing insight into tenant performance[121] - The occupancy rate is based on portfolio square footage, indicating a historically tight leasing market keeping vacancy low[142] - The company achieved a 92% rent collection rate in Q2 2020, with 4% abated and 3% deferred, leading to a total collection of 98.8% including deferred rent[144] Strategic Focus and Sector Avoidance - FCPT has avoided problem net lease subsectors, including theaters and pharmacies, focusing on e-commerce resistant tenants[13] - The company does not pursue high-acuity care facilities such as hospitals or skilled nursing facilities, maintaining a focus on lower-cost, retail-centric care centers[89] - FCPT focuses on mature, national brands with significant scale, avoiding high-yield dining concepts that do not match its core portfolio[69] - The company has 168 leases, accounting for 11% of annual base rent, primarily in casual dining and quick service sectors[74] - FCPT's medical retail exposure is concentrated on outpatient services, which are e-commerce and recession resistant, with a focus on urgent care and primary care[86]