Four Corners Property Continues Its Acquisition Spree

It might seem like an unusual time for a real estate investment trust (REIT) to be acquiring new properties, as talk of recession and loss of value for commercial real estate continues. But often, it’s the bold companies that succeed in the financial world when others are too afraid to take risks.

A recent Benzinga article highlighted a fairly small but growing REIT — Four Corners Property Trust Inc. FCPT — that had purchased several properties in April, considerably expanding its national footprint.

Four Corners Property is a Mill Valley, California-based diversified REIT, with a specialty in owning restaurants, healthcare and other retail properties in the Sun Belt. According to its website, Four Corners’ portfolio as of May 1 included 1,030 long-term leased properties with 131 brands across 47 states.

You might think that Four Corners Property would be resting on its laurels following its April shopping spree, but since then, the REIT has snapped up additional restaurant, healthcare and retail properties in several different states.

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These are just some of its most recent acquisitions:

June 27: Olive Garden property in Indiana for $3.4 million

June 26: National Veterinary Alliance property in Pennsylvania for $7.8 million

June 23: Texas Roadhouse property in Wisconsin for $3.7 million; Bojangles restaurant in North Carolina for $1.4 million

June 22: Three Mo’Bettahs Hawaiian-style restaurant properties in Kansas, Missouri and Oklahoma for $6.6 million 

June 20: Five Oak Street Health properties in Illinois and Indiana for $24.3 million

June 14: Fast Pace Health property in Louisiana for $2.1 million.

June 6: Fresenius Medical Care AG & Co. property in Indiana for $2.6 million

May 24: Entered into an agreement to purchase 13 Cheddar’s Scratch Kitchen and one Olive Garden property from Darden Restaurants Inc. DRI across Tennessee, Indiana, Kentucky and Ohio

As of June 2, Four Corners has closed or announced $154 million in transactions for 2023. The acquisitions have been on triple-net leased, long-term properties, with some leases having as much as 15 years remaining. Many of the properties have been newly constructed buildings, which should minimize maintenance expenses. Cap rates have generally been in the 6% to 6.5% range. Of the acquisitions, 66% have been casual dining properties and 25% medical retail sites.

Several hedge funds have taken notice of Four Corners’ continuing growth and are snapping up shares. HighTower Advisors acquired 9,342 shares of Four Corners Property Trust stock for approximately $246,000. Millennium Management purchased 796,437 shares earlier this year. Other hedge funds accumulating shares recently include CenterSquare Investment Management and Nuveen Asset Management.

There has also been recent insider activity. On June 6, CEO William H. Lenehan bought 7,600 shares of company stock at an average cost of $26.06 per share for approximately $198,056.

As of March 31, Four Corners had a 99.9% occupancy rate with an average remaining lease term of eight years on existing properties. Rent collections in the first quarter this year were also 99.9%. Of its debt, 92% is fixed rate with an average debt maturity of five years.

Other Recent Developments

On May 1, Four Corners reported its first-quarter operating results. Adjusted funds from operations (AFFO) of $0.41 per share was unchanged from the first quarter of 2022 but missed estimates by a penny. Revenue of $59.95 million beat the estimates of $57.81 million and was 10.21% better than revenue of $54.4 million in the first quarter of 2022.

On June 5, Four Corners entered into an agreement to issue $100 million of senior unsecured 10-year notes, with a fixed interest rate of 6.44% and 5.39% yield to maturity. The money will be used for general corporate purposes, including funding future acquisitions.

On June 14, Four Corners declared a second-quarter dividend of $0.34 per share, in line with its previous quarterly dividend. The dividend is payable on July 14 for shareholders of record as of June 30, with an ex-dividend date of June 29.

The Latin proverb “Audentes Fortuna luvat,” or “fortune favors the bold,” could well apply to Four Corners Property Trust in the future. Although restaurants may see a reduction in earnings should a recession arise, the brands Four Corners is acquiring are strong enough to withstand that possibility, and healthcare establishments are usually somewhat recession-proof. The cap rates are good, and you can expect FFO to continue growing as each new acquisition becomes accretive to earnings.

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