Four Corners Property Trust, Inc. (NYSE:FCPT) is a real estate investment trust (REIT) primarily engaged in the ownership, acquisition, and leasing of restaurant and retail properties. The company has established itself as a leading player in the net lease industry, delivering consistent financial performance and strategic growth.

Financial Highlights

For the fiscal year ended December 31, 2023, FCPT reported annual net income of $95,340,000 and annual revenue of $250,606,000. The company's annual operating cash flow and free cash flow both stood at $165,105,000, showcasing its strong cash generation capabilities.

In the first quarter of 2024, FCPT continued its solid financial performance. The company reported quarterly net income of $24,074,000 and quarterly revenue of $66,467,000. FCPT's quarterly operating cash flow and free cash flow were both $27,625,000 during this period.

Diversified Portfolio and Acquisition Strategy FCPT's portfolio is well-diversified, with 1,137 leases across 47 states. The company's tenant base is anchored by strong brands, with Darden Restaurants (Olive Garden, LongHorn Steakhouse) accounting for 51% of annual base rents. FCPT has also strategically expanded its portfolio beyond the restaurant sector, with non-restaurant properties now comprising 20% of the total, including automotive and medical retail.

During the first quarter of 2024, FCPT acquired 4 properties for a total investment of $16.7 million, with a weighted average remaining lease term of 9.9 years. The company's disciplined approach to acquisitions has allowed it to maintain a high-quality portfolio with an average occupancy rate of 99.6%.

Operational Highlights and Tenant Performance FCPT's portfolio continues to demonstrate strong operational performance, with 99.7% of base rent collected in the first quarter of 2024. The company's weighted average remaining lease term stands at 7.6 years, and the average annual rent escalation is 1.4% through 2029.

The company's tenants have also shown resilience, with Darden reporting a 1.8% decline in same-store sales for Olive Garden and a 2.3% increase for LongHorn Steakhouse in the quarter ending February 25, 2024. Brinker International, FCPT's second-largest tenant, also announced positive results, with Chili's same-store sales growing 3.5% and restaurant-level EBITDA margin improving 90 basis points to 14.1%.

Liquidity and Capital Structure FCPT maintains a strong balance sheet, with $26.1 million in cash and cash equivalents and $250 million of available borrowing capacity under its revolving credit facility as of March 31, 2024. The company's net debt to adjusted EBITDAR ratio was 5.6x in the first quarter, and its fixed charge coverage ratio was a healthy 4.3x.

In March 2024, FCPT issued $85 million of new term loans, utilizing the accordion feature of its credit facility. This transaction addressed the company's only debt maturity before November 2025, further strengthening its liquidity position.

Outlook and Growth Strategies While the current market environment has presented some challenges in terms of acquisition pricing, FCPT remains disciplined in its capital allocation. The company is focused on maintaining its high-quality portfolio and exploring strategic dispositions to recycle capital when market conditions are favorable.

FCPT is also actively pursuing growth opportunities in non-restaurant sectors, such as automotive and medical retail, to further diversify its portfolio and reduce its reliance on Darden. The company's experienced management team and strong balance sheet position it well to capitalize on attractive investment opportunities as they arise.

Risks and Considerations FCPT's concentration in the restaurant industry, particularly its exposure to Darden, represents a potential risk. However, the company's proactive portfolio management, including the strategic sale of underperforming Red Lobster locations, has helped mitigate this risk.

Additionally, the potential restructuring of the Red Lobster brand could present challenges, but FCPT believes it is well-positioned to manage this process due to its selective acquisition strategy and favorable rent coverage on the remaining properties.

Conclusion

Four Corners Property Trust, Inc. is a well-diversified REIT that has demonstrated its ability to deliver consistent financial performance and strategic growth. The company's disciplined approach to acquisitions, strong tenant relationships, and prudent capital management have positioned it for continued success in the net lease industry. As FCPT navigates the current market environment, its experienced management team and diversified portfolio provide a solid foundation for long-term value creation.