Four Corners Property Trust, Inc.

Previous wording

The following discussion and analysis should be read in conjunction with the consolidated financial statements and related notes included in the Annual Report on Form 10-K of Four Corners Property Trust, Inc. for the year ended December 31, 2023 and in the Quarterly Report on Form 10-Q of Four Corners Property Trust, Inc. for the quarters ended March 31, 2024 and June 30, 2024. Any references to “FCPT,” “the Company,” “we,” “us,” or “our” refer to Four Corners Property Trust, Inc. as an independent, publicly traded, self-administered company.

Current wording

The following discussion and analysis should be read in conjunction with the Consolidated Financial Statements and related notes included in the Annual Report on Form 10-K of Four Corners Property Trust, Inc. for the year ended December 31, 2024. Any references to “FCPT,” “the Company,” “we,” “us,” or “our” refer to Four Corners Property Trust, Inc. as an independent, publicly traded, self-administered company.

Previous wording

Our revenues are primarily generated by leasing properties to tenants through net lease arrangements under which the tenants are primarily responsible for ongoing costs relating to the properties, including utilities, property taxes, insurance, common area maintenance charges, and maintenance and repair costs. We focus on income producing properties leased to high quality tenants in major markets across the United States. We also generate revenues by operating seven LongHorn Steakhouse restaurants located in the San Antonio, Texas area (the “Kerrow Restaurant Operating Business”) pursuant to franchise agreements with Darden.

Current wording

Our revenues are primarily generated by leasing properties to tenants through net lease arrangements under which the tenants are primarily responsible for ongoing costs relating to the properties, including utilities, property taxes, insurance, common area maintenance charges, and maintenance and repair costs. We focus on income producing properties leased to high quality tenants in major markets across the United States. We also generate revenues by operating seven LongHorn Steakhouse restaurants located in the San Antonio, Texas area (the “Kerrow Restaurant Operating Business”) pursuant to franchise agreements with Darden Restaurants, Inc., (together with its consolidated subsidiaries “Darden”).

Previous wording

During the nine months ended September 30, 2024, FCPT acquired 42 properties for a total investment value of $136.7 million, including transaction costs. These properties are 100% occupied under net leases with a weighted average remaining lease term of 11.7 years.

Current wording

During the three months ended March 31, 2025, FCPT acquired 23 properties for a total investment value of $57.8 million, including transaction costs. These properties are 100% occupied under net leases with a weighted average remaining lease term of 7.3 years.

Previous wording

1,153 properties located in 47 states and representing an aggregate leasable area of 7.8 million square feet;

Current wording

1,221 properties located in 47 states and representing an aggregate leasable area of 8.2 million square feet;

Previous wording

99.6% occupancy (based on leasable square footage);

Current wording

99.4% occupancy (based on leasable square footage);

Previous wording

99.8% of the contractual base rent collected for the three months ended September 30, 2024; and

Current wording

99.5% of the contractual base rent collected for the three months ended March 31, 2025; and

Previous wording

57% investment-grade tenancy (weighted by annualized base rent).

Current wording

54.7% investment-grade tenancy (weighted by annualized base rent).

Previous wording

During the three and nine months ended September 30, 2024 and 2023, we operated in two segments: real estate operations and restaurant operations. The following discussion includes the results of our operations for the three and nine months ended September 30, 2024 and 2023 as summarized in the table below:

Current wording

We operate in two segments: real estate operations and restaurant operations. The following discussion includes the results of our operations for the three months ended March 31, 2025 and 2024 as summarized in the table below:

Previous wording

Rental revenue increased $2.0 million, or 3.6%, during the three months ended September 30, 2024 compared to the three months ended September 30, 2023. This increase was due primarily to the acquisition of 48 leased properties during the year-over-year period from October 1, 2023 through September 30, 2024, which was partially offset by the disposal of one property during the period. We do not anticipate the disposition to have a material impact on future revenue. During the three months ended September 30, 2024, we recognized variable lease revenue, including costs paid by the lessor and reimbursed by the lessees within rental revenue of $2.1 million as compared to $2.4 million during the three months ended September 30, 2023. These amounts are also recognized in property expenses.

Current wording

Rental revenue increased $4.9 million, or 8.4%, during the three months ended March 31, 2025 compared to the three months ended March 31, 2024. This change was due primarily to the acquisition of 106 leased properties during the year-over-year period from April 1, 2024 through March 31, 2025. During the three months ended March 31, 2025, we recognized variable lease revenue, including costs paid by the lessor and reimbursed by the lessees within rental revenue of $2.7 million as compared to $2.7 million during the three months ended March 31, 2024. These amounts are also recognized in property expenses.

Previous wording

General and administrative expense is comprised of costs associated with staff, office rent, legal, accounting, information technology, and other professional services and other administrative services in association with our real estate operations and our REIT structure and reporting requirements. General and administrative expenses increased $349 thousand, or 6.3%, in the three months ended September 30, 2024 compared to the three months ended September 30, 2023, primarily due to an increase in cash compensation-related expenses and increased non-cash stock compensation expense.

Current wording

General and administrative expense is comprised of costs associated with personnel, office rent, legal, accounting, information technology, and other professional and administrative services in association with our real estate operations, our REIT structure and public company reporting requirements. General and administrative expenses increased $1.4 million, or 23.0%, in the three months ended March 31, 2025 compared to the three months ended March 31, 2024, primarily due to an increase in stock-based compensation expense. General and administrative expense, after excluding stock-based compensation, for the three months ended March 31, 2025 was $4.9 million, compared to $4.6 million of general and administrative expense, after excluding stock-based compensation, for the three months ended March 31, 2024.

Previous wording

Depreciation and amortization expense represents the depreciation on real estate investments that have estimated lives ranging from two to fifty-five years. Depreciation and amortization increased by approximately $0.2 million, or 1.4%, for the three months ended September 30, 2024 compared to the three months ended September 30, 2023, due to the acquisition of 48 properties, during the year-over-year period from October 1, 2023 through September 30, 2024.

Current wording

Depreciation and amortization expense represents the depreciation on real estate investments and equipment that have estimated lives ranging from 2 to 55 years. Depreciation and amortization increased by approximately $1.0 million, or 7.1%, for the three months ended March 31, 2025 compared to the three months ended March 31, 2024, due to the acquisition of 106 properties, during the year-over-year period from April 1, 2024 through March 31, 2025.

Previous wording

We record all tenant expenses, both reimbursed and non-reimbursed, to property expense. We also record initial direct costs (lease negotiation and other previously capitalizable transaction expenses) as property expenses. Other property expenses consist of expenses incurred on vacant properties, abandoned deal costs, and franchise taxes. During the three months ended September 30, 2024, we recorded property expenses of $2.6 million, of which $2.1 million was reimbursed by tenants. During the three months ended September 30, 2023, we recorded property expenses of $2.9 million, of which $2.4 million was reimbursed by tenants.

Current wording

We record all tenant expenses, both reimbursed and non-reimbursed, to property expense. We also record initial direct costs (lease negotiation and other previously capitalizable transaction expenses) as property expenses. Other property expenses consist of expenses incurred on vacant properties, abandoned deal costs, lease transaction costs, property-level expenses and franchise taxes. During the three months ended March 31, 2025, we recorded property expenses of $3.3 million, of which $2.7 million was reimbursed by tenants. During the three months ended March 31, 2024, we recorded property expenses of $3.1 million, of which $2.7 million was reimbursed by tenants.

Previous wording

We incur interest expense on our $515 million of term loans, any outstanding borrowings on our revolving credit facility, interest rate swaps, and our $625 million of senior fixed rate notes. Interest expense increased by less than $0.1 million for the three months ended September 30, 2024 compared to the three months ended September 30, 2023, primarily due to the issuance of the additional $85 million term loan in March 2024, which was offset by a reduction of interest expense due to the repayment of the $50 million senior unsecured fixed rate note.

Current wording

We incur interest expense on our $590 million of term loans, any outstanding borrowings on our revolving credit facility, interest rate swaps, and our $625 million of senior fixed rate notes. Interest expense increased by $0.5 million for the three months ended March 31, 2025 compared to the three months ended March 31, 2024, primarily due to the issuance of the additional $85 million in March 2024 and $75 million net increase in term loans in January 2025, which was partially offset by a reduction of interest expense due to the repayment of the $50 million senior unsecured fixed rate note and lower utilization of the revolving credit facility.

Previous wording

Restaurant revenues decreased by less than $0.1 million during the three months ended September 30, 2024 compared to the three months ended September 30, 2023 primarily due to city construction projects outside two locations, partially offset by higher net pricing.

Current wording

Restaurant revenues increased by $0.1 million during the three months ended March 31, 2025 compared to the three months ended March 31, 2024 primarily due to higher net pricing, partially offset by less foot traffic as a result of city construction projects outside two locations and temporary closure for roof repairs at one location.

Previous wording

Total restaurant expenses decreased by $200 thousand, or 2.8%, during the three months ended September 30, 2024 compared to the three months ended September 30, 2023, primarily due to improved staffing and a reduction in overtime hours.

Current wording

Total restaurant expenses decreased by $9 thousand, or 0.1%, during the three months ended March 31, 2025 compared to the three months ended March 31, 2024, primarily due to decreased food costs and improved staffing, partially offset by an increase in property taxes and insurance rates.

Previous wording

At September 30, 2024, we had $44.5 million of cash and cash equivalents and $250 million of borrowing capacity under our revolving credit facility, which expires on November 9, 2025, subject to our ability to extend the term for one additional six-month period to May 9, 2026. The revolving credit facility provides for a letter of credit sub-limit of $25 million. See Note 6 - Debt, Net of Deferred Financing Costs included in Part I, Item 1 of this Quarterly Report on Form 10-Q for more information. As of September 30, 2024, we had no outstanding borrowings under the revolving credit facility. At September 30, 2024, the weighted average interest rate on the term loans, after consideration of the interest rate hedges, was 3.76%.

Current wording

At March 31, 2025, we had $22.3 million of cash and cash equivalents and $350 million of borrowing capacity under our revolving credit facility, which expires on February 1, 2029, subject to our ability to extend the term for two additional six-month periods to February 1, 2030. The revolving credit facility provides for a letter of credit sub-limit of $25 million. See Note 6 - Debt, Net of Deferred Financing Costs included in Part I, Item 1 of this Quarterly Report on Form 10-Q for more information. As of March 31, 2025, we had no outstanding borrowings under the revolving credit facility. At March 31, 2025, the weighted average interest rate on the term loans, after consideration of the interest rate hedges, was 3.87%.

Previous wording

During the first nine months of 2024, we entered into these interest rate swaps to hedge the interest rate variability associated with the term loan portion of our credit facility

Current wording

During the first three months of 2025, we entered into these interest rate swaps to hedge the interest rate variability associated with the term loan portion of our credit facility

Previous wording

The Company also enters into forward-starting interest rate swap agreements to hedge against changes in future cash flows resulting from changes in interest rates from the trade date through the forecasted issuance date of debt. During the nine months ended September 30, 2024, the Company terminated one cash flow hedge in connection with the $85 million Term Loan that was entered into on March 11, 2024 and funded on March 14, 2024. This cash flow hedge had a total notional value of $25 million and was entered into in August 2023 to hedge the interest rate on a future offering or term loan. The swap was terminated on February 28, 2024, with the corresponding asset of $211 thousand which will be amortized over the next 10 years as an increase to interest expense.

Current wording

The Company also enters into forward-starting interest rate swap agreements to hedge against changes in future cash flows resulting from changes in interest rates from the trade date through the forecasted issuance date of debt.

Previous wording

On a short-term basis, our principal demands for funds will be for operating expenses, distributions to stockholders and interest and principal on current and any future debt financings. We expect to fund our operating expenses and other short-term liquidity requirements, capital expenditures, payment of principal and interest on our outstanding indebtedness, property improvements, re-leasing costs and cash distributions to common stockholders, primarily through cash provided by operating activities, and, for acquisitions, investments, and other capital expenditures, from borrowings under our $250 million revolving credit facility.

Current wording

On a short-term basis, our principal demands for funds will be for operating expenses, distributions to shareholders and interest and principal on current and any future debt financings. We expect to fund our operating expenses and other short-term liquidity requirements, capital expenditures, payment of principal and interest on our outstanding indebtedness, property improvements, re-leasing costs and cash distributions to common shareholders, primarily through cash provided by operating activities. We expect to fund acquisitions, investments, and other capital expenditures, from borrowings under our $350 million revolving credit facility and equity securities. At times the Company may evaluate opportunities to sell certain assets and redeploy the capital into new properties.

Previous wording

On September 17, 2024, the Company terminated the prior ATM program and entered into a new ATM program (the "ATM programs"), pursuant to which shares of the Company’s common stock having an aggregate gross sales price of up to $500.0 million may be offered and sold (1) by the Company to, or through, a consortium of banks acting as its sales agents or (2) by a consortium of banks acting as forward sellers on behalf of any forward purchasers contemplated thereunder, in each case by means of ordinary brokers’ transactions on the NYSE or otherwise at market prices prevailing at the time of sale, at prices related to prevailing market prices or at negotiated prices, by privately negotiated transactions (including block sales) or by any other methods permitted by applicable law. The ATM program replaces the Company's previous $450.0 million ATM program (the "prior ATM program" and, together with the ATM program, the "ATM programs"), which was established in November 2022, under which the Company had sold shares of its common stock having an aggregate gross sales price of $404.8 million through September 17, 2024. In connection with the Company’s ATM programs, the Company may enter into forward sale agreements with certain financial institutions acting as forward purchasers whereby, at the Company's discretion, the forward purchasers may borrow and sell shares of common stock. The use of forward sale agreements allows the Company to lock in a share price on the sale of shares of common stock at the time the respective forward sale agreements are executed but defer settling the forward sale agreements and receiving the proceeds from the sale of shares until a later date.

Current wording

We have an effective shelf registration statement on file with the SEC under which we may issue equity financing through the instruments and on the terms most attractive to us at such time. On September 17, 2024, the Company terminated the prior ATM program (as defined below) and entered into a new ATM program (the "ATM program"), pursuant to which shares of the Company’s common stock having an aggregate gross sales price of up to $500.0 million may be offered and sold (1) by the Company to, or through, a consortium of banks acting as its sales agents or (2) by a consortium of banks acting as forward sellers on behalf of any forward purchasers contemplated thereunder, in each case by means of ordinary brokers’ transactions on the NYSE or otherwise at market prices prevailing at the time of sale, at prices related to prevailing market prices or at negotiated prices, by privately negotiated transactions (including block sales) or by any other methods permitted by applicable law. The ATM program replaces the Company's previous $450.0 million ATM program (the "prior ATM program" and, together with the ATM program, the "ATM programs"), which was established in November 2022, under which the Company had sold shares of its common stock having an aggregate gross sales price of $404.8 million through September 17, 2024. In connection with the Company’s ATM programs, the Company may enter into forward sale agreements with certain financial institutions acting as forward purchasers whereby, at the Company's discretion, the forward purchasers may borrow and sell shares of common stock. The use of forward sale agreements allows the Company to lock in a share price on the sale of shares of common stock at the time the respective forward sale agreements are executed but defer settling the forward sale agreements and receiving the proceeds from the sale of shares until a later date.

Previous wording

During the three months ended September 30, 2024, the Company executed forward sale agreements with financial institutions acting as forward purchasers under the ATM programs to sell 4,131,747 shares of common stock at a weighted average sales price of $27.79 per share before sales commissions and offering expenses. During the three months ended September 30, 2024, the Company physically settled a portion of its forward sale agreements and issued 950,000 shares at a gross weighted average sales price of $26.81. After sales commissions and offering expenses, these shares were sold at a net weighted average share price of $26.41 for net proceeds of $25.1 million. At September 30, 2024, the Company had outstanding forward sale agreement to sell 3,181,747 shares of common stock at a weighted average sales price of $28.08 before sales commission and offering expenses.

Current wording

At March 31, 2025, the Company had outstanding forward sale agreements to sell 8,797,027 shares of common stock at a weighted average sales price of $28.29 before sales commission and offering expenses.

Previous wording

At September 30, 2024, there was $483.3 million available for issuance under the ATM programs.

Current wording

At March 31, 2025, there was $231.9 million available for issuance under the ATM programs.

Previous wording

The following tables presents a reconciliation of U.S. GAAP net income to National Association of Real Estate Investment Trusts (“NAREIT”) funds from operations (“FFO”) and adjusted funds from operations (“AFFO”).

Current wording

The following table presents a reconciliation of U.S. GAAP net income to National Association of Real Estate Investment Trusts (“NAREIT”) funds from operations (“FFO”) and adjusted funds from operations (“AFFO”).

Previous wording

Amount represents non-cash deferred income tax benefit recognized in the three and nine months ended September 30, 2024 and 2023 for income tax benefit at the Kerrow Restaurant Business.

Current wording

Amount represents non-cash deferred income tax benefit recognized in the three months ended March 31, 2025 and 2024 for income tax benefit at the Kerrow Restaurant Business.