Four Corners Property Trust (FCPT) Q2 FY26 earnings call: guidance and Q&A

What are the plans for remaining debt maturities, and what is the outlook on pricing for these refinancings?

The company has a fully undrawn revolver as a backstop and strong support in the lending market, providing ample options for addressing maturities. They intend to utilize the attractive rates and tenor of existing debt rather than refinancing prematurely.

“So we have the fully undrawn revolver, and that's always kind of a backstop if we wanted to take out any of those maturities with that. But then again, I'd also point out that the remarkable support we had in the lending market, having completed $600 million of term loans in the last couple of months. The support for our name and the credit in our portfolio is just really strong.”

asked by John Kilichowski · answered by Patrick Wernig

How does FCPT calculate its cost of capital, considering current stock trading versus long-term debt rates?

The company maintains its consistent approach to calculating WACC, focusing on long-term rates. Acquisitions are not heavily debt-driven, and the cost of equity is the primary driver. They previously raised substantial equity on a forward basis.

“I don't see any change in the way we think about calculating WACC. We've always looked at long-term rates. Frankly, we don't use much debt in acquisitions. So -- and the difference between a private note and the term loan is not very substantial under 100 basis points. So it's much more driven by the cost of equity.”

asked by John Kilichowski · answered by William Lenehan

With 6x rent coverage, does FCPT have an opportunity to push rents higher on 2027 Darden expirations, or are they governed by renewal options?

The leases are entirely governed by renewal extension options for 5 years at 1.5% annual growth. Management expects a very high renewal percentage.

“Yes. They are entirely governed by renewal extension options for 5 years at 1.5% growth over the prior year. So we would expect, as I said in the prepared remarks, a very, very high level of renewals.”

asked by Eric Borden · answered by William Lenehan

What makes grocery and industrial outdoor storage attractive subsectors for FCPT to explore?

These subsectors match FCPT's preferred dynamics: mission-critical, reasonable basis, large tenants, and accretive pricing. Grocery pricing can be tighter, and the CEO has prior familiarity with industrial outdoor storage.

“It's a great question, Anna. We've been working on both for many years, and they match many of the dynamics that we like of restaurant, auto service and medical retail. They're mission-critical, basis is reasonable. They are our large tenants and the pricing works is consistent with the other sectors that we look at.”

asked by Anna O'Neil · answered by William Lenehan

Can you provide more details on the Mission Pet Health acquisition, including business performance, underwriting, capital structure, and how the sale-leaseback fits?

The properties were already under sale-leaseback, and FCPT acquired the entirety of Shore Capital's Real Estate Fund I. The portfolio is 6x covered with a strong entity guarantee, and Silver Lake recently co-invested in the business. It's a high-quality, accretive portfolio.

“So these properties were already under a sale leaseback, 2 large master leases make up 100 of the 102 properties, and then there's 2 individual properties. Shore had capitalized a real estate fund, Shore Real Estate Fund I that when Shore, the private equity firm was buying businesses, if real estate was available for sale, the real estate fund would buy that real estate. So we bought the entirety of that fund.”

asked by Richard Hightower · answered by William Lenehan

Has FCPT considered paring down its Darden exposure through asset sales?

Darden assets are high-quality and in-demand, attracting unsolicited interest. The company is confident in renewals, so there's little motivation to sell unless an offer is exceptionally attractive.

“As far as selling Darden assets, we've done it occasionally. These are very, very high-quality, very in-demand properties. We get unsolicited interest all the time, and we feel very confident that they're going to renew. So there's not a ton of motivation to sell them.”

asked by Mitch Germain · answered by William Lenehan

Is it safe to assume a deceleration in acquisition activity for the next couple of months?

The pace of acquisitions depends on the equity cost of capital, which is currently not where the company wants it to be. While debt cost is attractive and there's leverage capacity, management believes the market is underpricing their growth, influencing their capital allocation decisions.

“I think it really depends on our equity cost of capital. Our debt cost of capital is very attractive. We have some leverage capacity to grow into. And I think it really comes to our equity cost of capital, which isn't where we want it to be. And we think that the market is missing our growth.”

asked by Mitch Germain · answered by William Lenehan