Four ners Property Trust(FCPT) - 2025 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In Q4 2025, the company reported an AFFO per share of $0.45, with a full-year AFFO of $1.78 per share, representing a 2.9% growth over 2024 [21] - Q4 cash rental income was $67.5 million, reflecting an 11.1% growth compared to the same quarter last year [22] - Annualized cash-based rent at the end of Q4 was $264.2 million, with a weighted average five-year annual cash rent escalator of 1.5% [22] Business Line Data and Key Metrics Changes - The company acquired 30 properties in Q4 for $95 million at a blended cap rate of 7%, marking a 20 basis point expansion over the previous quarter [11] - In 2025, the total acquisition volume reached $318 million, with a blended cap rate of 6.8% [11][12] - The portfolio maintained a strong rent coverage ratio of 5.1 times, one of the highest in the net lease industry [5] Market Data and Key Metrics Changes - The company has diversified its revenue sources, with 37% of rents coming from sectors outside casual dining, including automotive service (13%), quick service restaurants (11%), and medical retail (10%) [8] - The company reported no exposure to problematic retail sectors and maintained a portfolio occupancy rate of 99.6% [5][24] Company Strategy and Development Direction - The company aims to continue its conservative and thoughtful capital allocation strategy, focusing on high-quality acquisitions without sacrificing quality for volume [4] - The strategy includes expanding into new sectors such as grocery and equipment rental, while maintaining a focus on recession-resistant, essential service retailers [13][15] - The company plans to leverage favorable debt capital markets for acquisitions in 2026, with a focus on maintaining low leverage [10][19] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the quality of the portfolio and the ability to re-tenant properties, particularly in light of recent discussions with Darden regarding the conversion of Bahama Breeze locations [7][32] - The company anticipates a strong year in 2026, supported by ample liquidity and a favorable cost of debt capital [75] - Management highlighted the importance of disciplined capital allocation and the potential for continued growth despite market challenges [40] Other Important Information - The company has no debt maturities until December 2026, providing a stable financial outlook [21] - The company has maintained a healthy fixed charge coverage ratio of 4.8 times and 98% of its debt is fixed [20] Q&A Session Summary Question: Market outlook for United Rentals and industrial outdoor storage - Management noted the attractiveness of the sector, highlighting a large addressable market and the potential for creditworthy tenants [27][28] Question: Update on Bahama Breeze exposure - Management confirmed that several locations will be converted to other Darden brands, with strong interest from potential new tenants [30][32] Question: Comfort level with approaching leverage limits - Management expressed confidence in maintaining a disciplined approach to capital allocation, with ample acquisition opportunities before reaching leverage limits [39][49] Question: Red Lobster exposure and performance - Management indicated that Red Lobster is performing better under new ownership, with properties predominantly under master leases [43][44] Question: Diversification strategy and sectors to avoid - Management reiterated a focus on balanced real estate and credit approaches, avoiding sectors with high risk [45] Question: Direct deals with developers - Management stated that they do not see a significant difference in returns between direct deals and those involving brokers [69][70]