Executive Summary / Key Takeaways

• Quality-First Acquisition Strategy: FCPT's core investment thesis revolves around a highly disciplined, data-driven approach to acquiring small-box, net-lease properties in essential retail and service sectors, consistently avoiding problematic subsectors and prioritizing creditworthy tenants.
• Robust Financial Performance: The company demonstrates strong financial health, with Q3 2025 rental revenue up 12% year-over-year to $66.51 million and AFFO per share growing 3% to $0.45, supported by high occupancy (99.5%) and near-perfect rent collection (99.9%).
• Strategic Capital Management: FCPT maintains a strong balance sheet with low leverage (4.7x net debt to adjusted EBITDA, inclusive of forwards) and substantial dry powder of approximately $270 million, strategically utilizing forward equity and debt hedging to ensure accretive growth.
• Diversified and Resilient Portfolio: Since its 2015 spin-off, FCPT has significantly diversified its tenant base, reducing Darden's combined rent exposure from 94% to 41% and expanding into automotive service (13%), quick service (11%), and medical retail (10%), enhancing portfolio resilience.
• Operational Technology as a Moat: FCPT's proprietary underwriting scorecard and "Deal Path" technology provide a distinct competitive advantage, enabling consistent, high-quality asset selection, efficient deal execution, and superior risk management, contributing to exceptionally low bad debt.

The Disciplined Pursuit of Net-Lease Value

Four Corners Property Trust, Inc. (FCPT) stands as a testament to disciplined growth within the specialized real estate investment trust (REIT) landscape. Incorporated in 2015 as a spin-off from Darden Restaurants, Inc. (DRI), FCPT was purpose-built to own, acquire, and lease restaurant and retail properties on a triple-net basis. This foundational event, which saw Darden contribute 418 properties and FCPT issue its common stock and pay $315 million in cash, established the company's initial footprint and strategic direction. FCPT has since evolved from a nascent entity with just four employees and a single tenant to a robust organization boasting 44 team members, approximately 1,300 leases across 170 brands, and a portfolio of 1,273 properties spanning 48 states by Q3 2025.

The company's overarching strategy centers on acquiring well-located properties occupied by durable concepts with creditworthy tenants, ensuring that operating cash flows meaningfully exceed lease payments. This approach is particularly pertinent in the current market, where broad industry trends show casual dining leaders like Olive Garden, LongHorn, and Chili's (EAT) outperforming quick service and fast casual segments. For instance, Chili's reported an astounding 21% same-store sales growth for the quarter ended September 2025, while Olive Garden and LongHorn saw nearly 6% growth for the quarter ended August 2025. These strong performances from FCPT's largest tenants underscore the benefit of aligning with best-in-class operators.

Operational Technology: FCPT's Underwriting Edge

FCPT's competitive advantage is significantly bolstered by its sophisticated operational technology and data-driven methodology, which are foundational to its investment strategy. The company utilizes a proprietary "underwriting scorecard" as a systematic approach to evaluate potential properties and tenants. This internal tool is culturally ingrained within the organization, ensuring consistent quality and rigorous risk assessment across all acquisition opportunities.

The tangible benefits of this methodology are evident in FCPT's portfolio performance. The scorecard helps avoid "sloppy decision-making" and has contributed to "very, very, very little credit issues" within the portfolio. Management notes that historical reviews of deals passed on due to poor scorecard results frequently show less favorable outcomes. Complementing this, FCPT employs "Deal Path technology," an integrated platform that streamlines the acquisition process. This system enables the team to efficiently source and execute "granular investments at scale," from individual properties to smaller portfolios, which is a hallmark of FCPT's strategy. Furthermore, FCPT enhances transparency through its new public property list on its website, providing investors with detailed data on brand, location, purchase price, square footage, and acreage, a direct benefit of its robust data management. The company is also exploring how artificial intelligence can further enhance efficiency and is building out its asset management capabilities, signaling a continuous commitment to technological advancement in its operations. For investors, these operational technologies are critical; they form a core part of FCPT's competitive moat, ensuring a high-quality, resilient portfolio, enabling accretive growth, and effectively mitigating risk.

A Decade of Disciplined Growth and Strategic Diversification

FCPT's history since its 2015 spin-off is a narrative of deliberate expansion and strategic diversification. The company has executed approximately $2.2 billion in acquisitions, nearly tripling its annual cash rent from $94 million at inception to a current run rate of $256 million. This growth has been accompanied by a significant reduction in tenant concentration. Darden's combined rent exposure, which stood at 94% at the spin-off, has been strategically reduced to 41% (32% from Olive Garden and 9% from LongHorn) by Q3 2025.

Diversification efforts have extended beyond casual dining, with 35% of FCPT's rents now originating from outside this core sector. Automotive service properties account for 13% of rents, quick service restaurants for 11%, and medical retail for 10%. These chosen sectors are characterized by essential retail and services, contributing to a prudently defensive and tariff-resistant portfolio.

In the nine months ended September 30, 2025, FCPT invested $228.2 million in 75 properties across 23 states, all 100% occupied under net leases with a weighted average remaining lease term of 13.5 years. Acquisitions in Q3 2025 alone totaled $82 million at a blended 6.8% cap rate with a 12-year weighted average lease term. Over half of the year-to-date investment volume has come from existing tenant relationships, including repeat sale-leasebacks with Christian Brothers Automotive and Ampler Restaurant Group, one of the largest Burger King (RBI) franchisees. This highlights FCPT's reputation as a reliable real estate partner and its ability to cultivate strong tenant relationships.

Financial Strength and Operational Excellence

FCPT's financial performance reflects its disciplined strategy and operational effectiveness. For the three months ended September 30, 2025, rental revenue increased by $7.2 million, or 12%, to $66.51 million, primarily driven by the acquisition of 120 leased properties over the preceding year. Total revenues for the quarter reached $74.15 million, contributing to a net income of $28.88 million. Adjusted Funds From Operations (AFFO) per share for Q3 2025 was $0.45, marking a 3% increase from the prior year period. Cash rental income for the quarter grew 12.6% year-over-year to $66.1 million.

The company's operational efficiency is further evidenced by its cash General and Administrative (G&A) expense, excluding stock-based compensation, which was $4.3 million (6.5% of cash rental income) for Q3 2025, an improvement from 6.9% in Q3 2024. This demonstrates the benefits of FCPT's improving scale and efficient growth. FCPT's portfolio maintains exceptional health, with a 99.5% occupancy rate and 99.9% of contractual base rent collected for Q3 2025. The company has reported zero bad debt expense in 2025, and since 2016, total bad debt has amounted to only $1.76 million against $1.5 billion in rent collected, averaging a mere 12 basis points annually. This performance is a direct outcome of FCPT's rigorous underwriting and focus on high-quality tenants, with rent coverage in Q3 2025 standing at a robust 5.1x for the majority of its portfolio.

Strategic Capital Management: Fueling Accretive Growth

FCPT's capital management strategy is a cornerstone of its investment thesis, emphasizing flexibility and opportunism to ensure accretive growth. As of September 30, 2025, the company maintained a strong liquidity position with $6.7 million in cash and cash equivalents and $339 million of available borrowing capacity under its revolving credit facility. Furthermore, FCPT had $100 million in unsettled equity forwards at a price of $28.33 per share as of October 29, 2025.

The company's net debt to adjusted EBITDA stood at 4.7x at the end of Q3 2025, inclusive of outstanding net equity forwards, and 5.3x excluding them, marking its fifth consecutive quarter below 5.5x and near a seven-year low. This conservative leverage profile provides FCPT with approximately $270 million in "dry powder" (a combination of equity, debt, and retained cash flow) to fuel future growth before reaching its mid-5x leverage target. FCPT has strategically lowered its leverage target to 5x-6x to reflect its increased optionality in funding sources. The company has also proactively managed its interest rate exposure, with 97% of its debt stack fully fixed and 95% of its floating rate debt hedged through November 2027 at a favorable 3% rate, significantly below current spot rates above 4%. This hedging strategy, coupled with the removal of a 10 basis point LIBOR to SOFR adjustment, is expected to improve AFFO by approximately $600,000 per year. With no debt maturities until the end of 2026 (including extension options) and a healthy fixed charge coverage ratio of 4.7x, FCPT is exceptionally well-positioned to capitalize on market opportunities.

Competitive Landscape: A Differentiated and Resilient Stance

FCPT operates within a competitive net-lease REIT market, distinguishing itself through a highly focused and disciplined approach that contrasts with the broader strategies of many peers. While larger, more diversified competitors like Realty Income Corporation (O), National Retail Properties, Inc. (NNN), Spirit Realty Capital, Inc. (SRC), and Agree Realty Corporation (ADC) cast a wider net across various retail segments, FCPT maintains a specialized focus on essential retail and service sectors, primarily restaurants, automotive services, and medical retail. This niche expertise allows FCPT to cultivate deeper industry relationships and potentially achieve more stable occupancy in its targeted segments.

FCPT's competitive advantage is rooted in its rigorous underwriting scorecard and granular acquisition strategy. This systematic approach enables the company to consistently acquire high-quality assets with strong tenant credit, avoiding "problem retailers or sectors" such as theaters, pharmacies, high-rent car washes, and big box retail, which have impacted some competitors. Management explicitly states that cap rates higher than FCPT's typical range (around 6.8% in Q3 2025) often involve "measurably more risk" in undesirable subsectors or with weaker credit profiles. FCPT's transparency, exemplified by its detailed property disclosures, further differentiates it from peers who may employ "barbell strategies" that obscure underlying portfolio risks. The company's ability to modulate its acquisition volume based on its cost of capital, rather than chasing volume, is a "strong competitive advantage." This discipline, combined with its reputation for execution and track record, allows FCPT to "win deals" against both individual 1031 buyers and aggressive private equity firms, even as the Boulder Group's report indicates "flattening cap rates" and a "flight to credit quality" in the broader net lease market.

Outlook and Risk Mitigation

FCPT's management maintains a positive outlook, encouraged by its robust acquisition pipeline and improving debt market conditions, despite not providing formal guidance. The company anticipates its cash G&A for 2025 to be at the lower end of its $18 million to $18.5 million guidance range, reflecting continued operational efficiency. A significant portion of FCPT's portfolio, particularly its Darden leases, is expected to see very high renewal rates. These leases feature strong rent coverage (approaching 6x), reasonable rents, and contractual 1.5% annual rent growth on renewal options, making renewal highly likely for these core, irreplaceable locations.

While FCPT's portfolio is designed for resilience, certain risks warrant attention. Tenant concentration, particularly with Darden leases representing approximately 45.6% of scheduled base rents and Olive Garden comprising 32.2% of lease revenues, remains a factor. However, FCPT's ongoing diversification efforts are actively mitigating this. The company acknowledges the potential for a pullback in consumer spending during a recession or high inflation, but its strategy of acquiring properties with "low rents" provides a "significant cushion." FCPT has also demonstrated proactive risk management, for example, by being cautious on Starbucks (SBUX) properties without drive-thrus due to potential five-year kick-out options in their leases. The company's business model, which does not rely on new construction, also provides insulation from potential inflation in building materials, with higher replacement costs potentially benefiting tenant renewal rates.

Conclusion

Four Corners Property Trust has forged a compelling investment narrative over its first decade as a public company, characterized by a relentless focus on quality, disciplined capital allocation, and strategic diversification. Its unique operational technology, embodied in its rigorous underwriting scorecard and efficient deal management systems, provides a distinct competitive advantage, enabling the company to consistently acquire high-quality assets and maintain an exceptionally resilient portfolio with minimal credit issues. This disciplined approach, coupled with a strong balance sheet and ample liquidity, positions FCPT for continued accretive growth. As FCPT looks ahead, its commitment to essential retail and service sectors, proactive risk management, and opportunistic capital strategy underscore its potential for sustained shareholder value creation, making it a noteworthy consideration for discerning investors seeking stability and growth in the net-lease REIT space.