Four Corners Property Trust, Inc. Aktie

Hello, everyone. Thank you for joining us, and welcome to Four Corners Property Trust's Second Quarter 2026 Conference Call. [Operator Instructions]

I will now hand the conference over to Patrick Wernig, CFO. Please go ahead.

Thank you, Aidan. During the course of this call, we will make forward-looking statements, which are based on our beliefs and assumptions. Actual results will be affected by known and unknown factors that are beyond our control or ability to predict. Our assumptions are not a guarantee of future performance and some will prove to be incorrect. For a more detailed description of some potential risks, please refer to our SEC filings, which can be found at fcpt.com.

All the information presented on this call is current as of today, July 30, 2026. In addition, reconciliation to non-GAAP financial measures presented on this call, such as FFO and AFFO, can be found in the company's supplemental report.

With that, I will turn the call over to Bill.

Good morning. Following my initial remarks, Josh will comment on our investment activity, and Patrick will discuss financial results and capital position. It has been a remarkable time for FCPT. First, we are only through the first 7 months, and we've already exceeded our prior record annual investment volume. Year-to-date we've acquired $382 million of properties at a blended 6.6% cash cap rate. This investment activity has pushed us past an important diversification milestone as FCPT has now acquired over 1,000 properties since inception. Our original spin-off portfolio is now just 29% of the properties we own today.

Since April, we have also completed 2 large financings with very low coupons for total proceeds of $600 million. Not only do these refinancings push our maturity schedule meaningfully, but also provide us with sufficient dry powder for our investments in 2026. It is also worth noting that the coupon represent approximately a 200 basis point spread to our historical investment yields. We encourage our analysts and investors to revisit their models given the major developments at FCPT, including those that occurred in July, closing after Q2. These major developments aren't yet reflected in our Q2 financials and have not been realized in our reported AFFO. For ease of reference, we have included a number of slides in our latest investor presentation with pro forma figures.

Lastly, we also recently announced switching to a monthly dividend with the first monthly payment scheduled for August. This move aligns timing of rent payments from our tenants with distributions to our shareholders. We believe a monthly dividend is consistent with our long-standing focus on shareholder alignment, transparency and predictable cash flow generation. Moreover, this reflects our confidence in stable rent receipts from our fortress portfolio, and we believe the change will better match the income preferences of many retail investors.

Switching over to an update on portfolio performance. Occupancy remains above 99%, and our rent coverage for Q2 was 5.2x for the majority of our portfolio that reports this figure. This is amongst the best coverage within the net lease industry and what we believe is a reflection of our conservative underwriting. The rent coverage figure for our Darden properties specifically is 6.0x and has improved over time, remaining above 5x for the past 3 years.

Our 3 largest restaurant brands, Olive Garden, LongHorn and Chili's continue to outperform their peers and grow sales quarter after quarter, most recently 2.4x, 9.5% and 4%, respectively. As such, we note that we have avoided some of the most problematic net lease sectors experiencing headwinds in recent years, including pharmacies, experiential retail. By scoring every property and targeting low basis, fungible properties with scaled operators, we have built a recession- and e-commerce-resistant portfolio. As a reminder, to date, we have had no major tenant credit issues, limited vacancy and very, very low bad debt expense.

We continue to significantly diversify. Pro forma for the Mission Pet Health portfolio, approximately 41% of our rent now comes from outside the casual dining tenants, including medical retail at 16%, auto service at 13% and quick service restaurants at 10%. Darden now represents just 41% of cash rent approximately.

We note that the first tranche of the original Darden spin properties is due to send us extension notices by no later than October of this year for leases maturing the following year in Q4 2027. We are expecting a very, very high renewal percentage given the strong performance of the stores and 6x coverage overall on our Darden properties.

So I'll leave you with this before turning it over to Josh. ABR has grown by 11% annually since inception, and we have meaningfully diversified results on a very granular safe portfolio. FCPT has matured a great deal over the past decade. And as we look forward, we believe we are uniquely positioned within the net lease universe. We are clearly able to execute on large transactions while also maintaining a strong regular way pipeline as a baseline for sustained, attractive risk-adjusted growth. We believe we've built a very strong credit-focused portfolio, all the way staying within our stated leverage metrics. The world has a lot of volatility, especially today, but FCPT has been remarkably stable.

Over to you, Josh.

Thanks, Bill. I'll start with a review of Q2 activity, walk through the Mission Pet Health portfolio and then touch on our investment pipeline. In Q2, we acquired 23 properties with a weighted average lease term of 10 years for $57 million at a blended 6.8% cash cap rate or a 7.5% GAAP cap rate.

Our investment activity in the quarter was heavily weighted towards automotive at 64% of volume and anchored by a $26 million acquisition of 14 properties leased to Sun Auto Tire & Service, a leading operator in the automotive service and repair sector. The remainder were restaurant and medical retail investments at 22% and 14% of volume, respectively. As a reminder, we do not maintain sector quotas or pipeline targets. We allocate capital purely on the opportunity set, finding the best risk-adjusted returns with what we see as the strongest spread generation.

Subsequent to quarter end, we completed the acquisition of a 102-property portfolio leased to Mission Pet Health for $268 million. The seller was Shore Capital Partners and the portfolio represented the entirety of Shore Capital's Real Estate Fund I. The portfolio closed very early in Q3, so we will have the benefit of nearly all of the annualized cash rent of $17.4 million in our Q3 results and further gain from its approximately 2% annual rent growth on a go-forward basis.

While it was the largest acquisition in our 10-year history, it was also highly consistent with the characteristics that have defined FCPT since inception, low basis properties, conservative rents, strong unit level economics and a leading operator as our tenants. We've historically preferred to build our portfolio granularly as large portfolios on the market often come with properties that may not fit our selection criteria. This was not the case here, and it was clear that Shore constructed this high-quality platform with a buyer like us in mind.

First, the portfolio is largely structured across 2 absolute triple net master leases of high institutional quality. The master leases have approximately 10 years of term remaining, approximately 2% annual rent escalations and strong financial reporting requirements. Next, the rents were set conservatively and aligned with our net lease philosophy. Unit level coverage is over 6x and an average basis per property at $2.6 million compares well with our Q2 rent coverage of 5.2x and average basis of approximately $3 million.

Lastly, and similar to many of our favorite investment sectors, veterinary real estate is a mission-critical -- veterinary real estate is mission-critical and their services are often nondiscretionary. Additionally, Mission is one of the largest veterinary operators with over 900 locations across the country. The recent investment from Silver Lake valued the company at $8.6 billion. We were already familiar with the credit and team as they are an existing tenant of ours, which makes us even more excited to welcome them as our #3 brand across the portfolio.

We'd like to thank Shore, Mission and [ Eastdil ] teams as well as everyone at FCPT involved in executing this transaction. Completing diligence on 102 properties with the same rigor as our usual process while still closing less than 49 days from announcement is a strong testament to the talented and motivated team we've assembled and the strength of our platform.

Moving on to our pipeline. We've also continued to source and execute our regular way investments as well, spanning restaurants, automotive service and other medical retail investments across 10 existing transactions in Q2. I'd like to commend our investment team and the entire platform for their ability to diligently execute both large and small transactions in an extremely organized and efficient manner.

Looking forward, we're continuing to explore potential investments in new subsectors such as grocery and industrial outdoor storage as evidenced by our July investment activity. We remain active in evaluating opportunities across these 2 sectors, among others, as we actively expand our opportunity set and build domain expertise. Whether it's a grocery store in Florida or a restaurant in Texas, we remain committed to acquiring low-basis properties that are leased to best-in-class operators at pricing accretive to our cost of capital.

Patrick, back to you.

Thanks, Josh. I'll start by talking about our recently closed debt deals and updated balance sheet. And I'll provide some commentary on the quarterly results. Since April, we have closed a total of $600 million in new debt capital while adding Citi and RBC to our already strong lending syndicate to provide further borrowing support. This $600 million represents over 1/3 of our total in-place debt, creating meaningful improvement for our balance sheet while avoiding dilutive refinancings.

This included closing both a $200 million term loan facility with 7-year tenure at SOFR plus 125 basis points and a $400 million term loan with 5-year tenure at SOFR plus 90 basis points just a few days ago. I call out that at current SOFR levels, this debt has all-in rates of approximately 4.5% to 4.9%. Use of proceeds for the new 5-year term loan will be; one, repaying $190 million of term loans coming due in the next 6 months; and two, remaining amounts will be used to fund the investment pipeline as well as for general corporate purposes.

I'd also like to highlight the positive interest savings we were able to achieve in our most recent refinancings. Our lenders agreed to refresh the credit spread pricing on our facility to save 5 to 10 basis points annually versus prior levels of $450,000 in annual interest expense across the total $800 million in this facility. The latest demonstration of FCPT's steady pace of improving our cost of capital through scale and conservative balance sheet management. Importantly, pro forma for this debt transaction and closing on the Mission Pet portfolio, we are now fully undrawn on our $350 million revolver and on a run rate leverage remaining below the 6x upper bound of our stated range of 5x to 6x.

From a maturity schedule perspective, these deals have pushed out our maturity profile with our pro forma weighted average debt tenor now 4.3 years. We've removed all near-term maturities aside from a small $50 million private note coming due in December. As noted previously, we expect to handle that private note maturity in due course closer to the maturity date, but believe we have ample options at our disposal. Our staggered maturity schedule ensures we will not face a significant maturity wall in any year thereafter.

Now turning to some of our earnings highlights for Q2. Q2 AFFO per share was $0.45, representing 1.4% growth versus prior year. Q2 cash rental income was $70 million, representing 8.7% growth versus prior year. Annualized cash base rent for leases in place as of quarter end was $270.5 million, and our weighted average 5-year annual cash rent escalator is 1.5%. Our cash G&A expense was $4.8 million for the quarter, representing 6.8% of cash rental income compared to 6.9% for the prior year.

This improvement in operating leverage illustrates our continued efforts at achieving efficient growth and the benefits of our rising scale. Our fixed charge coverage ratio remains a very healthy 4.6x as of quarter end. Following our Q2 results, we are affirming our guidance range for 2026 cash G&A remains $19.2 million to $19.7 million.

As a brief update on Bahama Breeze, we learned earlier this year that Darden would be closing 4 of our 10 Bahama Breeze properties with the other 6 being renovated and converted to other Darden brands. The 4 Darden properties represent about 0.5% of ABR and are supported by leases expiring 1 to 4 years from now and benefit from Darden entities committed to rent payments through expiration. While we have that multiyear cushion, we have also had strong backfill demand, so we are deep in LOI and lease negotiations to re-tenant the properties with strong rents.

Based on the rents being negotiated and the small scale of the exposure, we expect to have little to no AFFO disruption. Remarkable results to be sure. But again, just worth noting the risk and quantum here was never significant to begin with. And so we don't expect to continue detailed updates on this topic going forward. Our portfolio occupancy remains strong at 99.5% today. We collected 99.7% of base rent for Q2. Finally, last quarter did not see any material changes to our collectability or credit reserves.

With that, I'll turn the call back over to Aidan for questions.

[Operator Instructions] Your first question comes from the line of John Kilichowski with Wells Fargo.

Pat, maybe just to circle back on what you're talking about on the balance sheet. Some of the activity you had in the quarter is handling some maturities coming up, but you still have a few maturities that aren't spoken for yet. I guess could you just talk about your plans for those and what you're seeing on pricing?

Yes, sure. Thanks for the question. 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. So there's a lot of opportunities to address it. We could have addressed them sooner now, but those rates are really attractive rates, and we want to enjoy them and utilize the tenor that we paid for at the beginning of putting those issuance out there.

Got it. And then Bill, maybe just on the back of that, could you talk about, given where your stock is trading today and as you think about your cost of capital, are you imputing that based off of where you're seeing the pricing of maybe some of these term loans? Or are you still thinking about it in terms of where your longer-term 10-year unsecured cost of debt may be and where that blends relative to where your equity trades?

Sure. 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. And we had raised a very substantial amount of equity on a forward, which we've used for 2 years to make acquisitions, all with equity. So the way I would think about up until this point this year is using attractively priced debt to get our leverage metrics back to where they typically were.

Your next question comes from the line of Eric Borden with BMO Capital Markets.

As you begin discussions around the 2027 Darden expirations, what's your latest thinking on overall renewal economics with the coverage -- healthy coverage of 6x, does that create an opportunity to push rents higher? Or are most of those leases governed by renewal extension options?

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. And again, these are for '27 maturities. We have a favorable 12-month notification period. So those will start coming in towards the end of October.

Okay. Great. And then just one on the monthly dividend in a world where short-term cash yields are relatively attractive. Can you talk about the give and takes around moving to a monthly dividend and effectively accelerating the timing of those cash outflows to shareholders versus keeping the cash on the balance sheet and earning interest income for a little bit longer?

Yes. It wasn't really a corporate finance decision. It's -- that cash flow is our shareholders' cash flow and we're returning it to them as quickly as we can. It was more getting the logistics right because it increases the number of payments. And so we wanted to feel comfortable that wasn't a cost burden or an operational burden. And I think we're very comfortable that it will be neither. And it just is, again, more aligns with how we receive our shareholders' capital and getting it back to them in the form of dividends quickly.

Your next question comes from the line of Michael Goldsmith with UBS.

This is Anna O'Neil on for Michael Goldsmith. You talked about grocery and industrial outdoor storage as subsectors you're exploring. What are some of the things that are making those subsectors more attractive to you?

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. I will say, on grocery, some grocery is -- price is tighter. So we have to pick our spots. But -- and then I would say with the storage, something that I've done a lot of when I was on the Board of Gramercy, that was one of the investments we regularly made. So I have a lot of familiarity with it.

Great. And then given the elevated acquisition volume might not be fully appreciated by the market, would you explore the idea of providing guidance in some form? Or how are you thinking about that?

Yes. I would say that we've added a bunch of new disclosure that should help people get there. I would agree, it seems like analysts have been slow to update their numbers. And in my prepared remarks, I think I alluded to that. But for now, I think we're going to be consistent with how we've done over the last decade since inception and not provide acquisition or earnings guidance.

Your next question comes from the line of Alec Feygin with Baird.

First one for me would be the recent reduction in the debt spreads, have they benefited from that incremental diversification in the big portfolios that you closed? Or is that a future opportunity where you can see further benefit?

Yes. I think it's just consistent with, as Pat mentioned, consistent grinding down our cost of capital as we get larger and the portfolio matures. And as mentioned, the original spin portfolio is 30% of where we are today. So we've gotten a lot bigger. It's a lot more diverse. It's a much more seasoned company. Our acquisition team at inception was just a handful of folks. Now it's 10% and growing. So I think we just have a lot more capability, and that's reflected in the stability of our balance sheet and improved pricing.

Got it. And second one for me, kind of on the theme of new sectors. Could you provide any additional details about the drilling tools international property you acquired? Should we expect that industrial type properties may become part of the sandbox going forward?

Yes, sure. It's just one property out of a number, but just off the top of my head, DTI manufactures drilling equipment just got over 50% North American rig penetration. This is like a 10-acre parcel. It's one of only a handful of properties where they manufacture. I think it's actually on their cover of their annual report. So Josh, anything you want to add to that?

Just that, Bill, exactly what you stated and it's just an extension of our IOS industrial outdoor storage strategy that Bill mentioned. We do it very similar to the United Rentals property we acquired in Q4 of '25, and we're just constantly evaluating new opportunities in the space and just dipping our toes in.

Your next question comes from the line of Rich Hightower with Barclays.

I want to talk about Mission Pet Health. I know we talked about the deal when it was first announced a little bit, but just to go a little deeper. So tell me about how the business is performing and what the underwriting assumptions were in the context of really very high 6x rent coverage? And how is the business growing? What's the capital structure with the private equity firm and kind of where the sale-leaseback financing here fits into that? And then I've got one follow-up.

Yes. 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.

As Josh mentioned, 6x covered, a very strong entity providing a guarantee. Silver Lake recently co-invested into the business along with Shore. It is a company that I would guess might go public in the next couple of years, but just a very large, stable high scoring portfolio. Out of the 102 properties, the vast, vast majority we would have been interested in on a one-off basis, but to get them together in a master lease with 2% rent growth is very favorable.

So we leaned in a little bit on pricing. I think it also was strategic in getting our under-levered balance sheet back in line and should provide growth that we think folks are missing in the second half of the year and in 2027.

Okay. That's helpful. And then I guess just to follow up on maybe that last point, Bill, or even for Patrick. Granting you're -- towards the low end of the comfort range leverage-wise, I presume you wouldn't want to sort of bump up against the high end if you didn't need to. And so what do you think your comfortable investment capacity is from here without really thinking you would need to raise new equity?

Yes. I'm not going to answer that because it gets really close to providing acquisition guidance, which for us is basically the same as AFFO guidance. But we put a bunch of pro forma numbers in the book. You can see where we stand. We are committed to that 5x to 6x leverage ratio. We haven't been off sides of that other than below it since inception. So I think you'll see these acquisitions that we've announced in the last couple of weeks and the remainder of our pipeline really pencil to favorable growth for the second half of the year. I just encourage folks to update the numbers.

Your next question comes from the line of Mitch Germain with Citizens Bank.

Bill, as some of this leasing gets done over the next couple of -- or I guess, the validation of maybe some of this leasing, has there been any consideration to maybe consider continuing to pare down your Darden exposure with some asset sales?

Yes. So the leasing that's been done, just to make sure everyone is clear, there will be no interruption of payments from the Bahama Breeze leases. So those 10 buildings, 6 of them will become other brands within the Darden portfolio. The others we will re-lease quite likely before any of those leases come to maturity. So that will be uninterrupted. Justin has done a terrific job addressing the small number of properties that have become vacant at maturity, and we've picked up rent.

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. Every once in a while, we get an offer that's too good to refuse, but we typically want to hold those assets.

Great. And God, I hate asking this question because I know that you don't give guidance. But is it safe to think that we'll at least see a little bit of a deceleration in acquisition activity for the next couple of months? Or is it still all systems go?

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. So we're really trying to double underline that on this call. You've seen that I bought a bunch of stock. I think that speak volumes to where I think we're trading versus the value of the company.

Congrats to you and the team.

Your next question comes from the line of Jim Kammert with Evercore.

Following a couple of themes in the call, are you in the kind of the red, green or yellow zone on the equity bill? I guess you just -- the last topic you're just touching on.

Yes. I think we're in the yellow zone, yes. And we've been very disciplined about that since inception. I think it's one of the things that makes us stand out is how disciplined we are on capital allocation. My background is -- I spent the formative part of my career as an equity investor. And I fundamentally believe that companies that are disciplined about capital allocation are worth more. So we feel like it's not being reflected in our stock right now, but we're putting up the results that should change that.

Fair enough. And second question, obviously, it's brand new with the Mission Pet and a very large new exposure. It sounds very constructive. Would you do other veterinary activity at this point? Or do you think that this is more of just a standout sort of portfolio construction, all of that, that you're kind of full up on that particular line of exposure?

No, I think we would still seek out very high scoring assets. But keep in mind, Jim, we've been working on this Mission Health portfolio probably for 5-plus years. And we're very close with the seller on a personal basis and their advisers are folks that we've worked with a lot. This was, in some ways, put together with a strong sense that we might be the likely buyer. So we're happy that after all the time that we put into it, that the portfolio was at such a high quality and was available at a price that was accretive. But we would certainly, as we grow, if we find things that we think score highly, we would add to it regardless of what sector it's in.

[Operator Instructions] Your next question comes from the line of Anthony Paolone with JPMorgan.

I think I just have one left here. You expressed your confidence in just the renewals or just leases getting extended over the next few years. Bill, maybe if we were to think about anything that doesn't get renewed, even if you feel good about just getting these things backfilled because you own good assets, like what's typical downtime for us to think about just if you have to switch tenants?

Sure. So we would have 12 months with Darden operating and paying rent in any event. And so historically, for assets like this, it's been less than 12 months, but we have a long runway that's supported by Darden rents. And again, these properties have long operating histories, very high coverage, and they're in great locations. So I think there'll be a pretty good line waiting to get access to them, to be honest. And that's been our experience with Bahama Breeze as a recent test case.

Got it. So looking at the '27-'28 expirations like lease maturities, like they have to let you know 12 months in advance of the maturity, whether they're staying or going. And so that gives you the time to market it and find a backup to it.

Correct. Yes. Exactly.

We have reached the end of the Q&A session. I will now turn the call back to Bill Lenehan for closing remarks.

Thank you. Ultimately, the first 7 months of 2026 have been a defining period for FCPT. We have already exceeded our prior record annual investment volume, completed the largest acquisition in our history with the Mission Pet Health portfolio and continue to demonstrate the consistency and durability of the portfolio we have built over the past decade. Our occupancy, rent collections and tenant coverage outcomes remain amongst the strongest in our sector and on the back of some of our largest and most accretive capital raising. We believe that we are well positioned to execute with the same underwriting discipline that has defined FCPT since inception.

Our team will be at the Wells Fargo and Bank of America conferences in September, and we would welcome the opportunity to meet in person. Please reach out to Patrick or me to coordinate schedules. With that, thank you.

This concludes today's call. Thank you for attending. You may now disconnect.

Hello, everyone. Thank you for joining us, and welcome to Four Corners Property Trust's First Quarter 2026 Financial Results Conference Call. [Operator Instructions] I will now hand the conference over to Patrick Wernig, CFO. Patrick, please go ahead.

Thank you. During the course of this call, we will make forward-looking statements, which are based on our beliefs and assumptions. Actual results will be affected by known and unknown factors that are beyond our control or ability to predict. Our assumptions are not a guarantee of future performance and some will prove to be incorrect. For a more detailed description of some potential risks, please refer to our SEC filings, which can be found at fcpt.com. All the information presented on this call is current as of today, April 30, 2026. In addition, reconciliation to non-GAAP financial measures presented on this call, such as FFO and AFFO can be found in the company's supplemental report.

Please note that if you are a research analyst, you have been e-mailed a meeting ID, which is (865)913-566. We'll repeat that at the end of our prepared remarks. That pin will allow you to ask questions during the Q&A session.

With that, I will turn the call over to Bill.

Good morning. Following my initial remarks, Josh will comment on our investment activity, and Patrick will discuss financial results and capital position. Q1 marked a continuation of the momentum from 2025 and a strong start to 2026. AFFO per share grew by 3.4% versus the prior year period, continuing our focus on steady risk-adjusted growth. During Q1, we acquired $26 million of net lease properties at a 6.8% blended cash cap rate, equivalent to a 7.3% GAAP cap rate.

This is marginally lower volume versus the start of 2025, but I'd emphasize we're seeing a lot of attractive opportunities and feel good about the strength of our pipeline. Seasonally, we tend to see fewer deals close in Q1 versus later in the year, and Q2 is shaping out that way so far. Over the last 12 months, we've acquired $288 million of properties.

We are also excited to have closed on a new $200 million term loan with a 7-year tenor earlier this month. The term loan all-in rate is 4.9%, which represents 200 basis points of spread to historical acquisition yields. We will be able to invest that money accretively.

Our rent coverage in Q1 was 5.1x for the majority of our portfolio that reports this figure. This remains amongst the strongest coverage within the net lease industry. The rent coverage figure for our garden properties specifically is 5.8x, which has been very consistent, remaining above a very lofty 5x for the past 3 years.

As a reminder, the first tranche of lease maturities is due to send us extension notices by October of this year. While we can't know the outcome of certainty, barring a material change in the operating performance of the source, we would expect a very high renewal percentage for the spin-off portfolio in the coming years.

To that end, our largest brands, Olive Garden, LongHorn and Chili's continue to be leaders within the net lease tenant universe. Most recently, Brinker reported Chili's same-store growth of 4% for the quarter ended March 2026 after a 31% increase a year ago. Olive Garden and LongHorn reported same-store sales growth of 3% and 7%, respectively, for the quarter, remarkable results for the 3 brands that represent 40% -- 47% of our portfolio rent combined.

To bring that point home, I'll call out a new slide on Page 7 of our investor deck that shows the strong outperformance of our publicly traded tenants versus the generic all restaurant index. The key takeaway is portfolio construction is extremely important. And by being selective with our tenant partners, we are building what we believe is a fortress portfolio brick by brick.

Our new restaurant tenants appear to be taking market share and have not shown signs of slowing down. To that end, our portfolio has avoided some of the more problematic lease sectors experiencing long-term macro headwinds. This includes theaters, pharmacies and experiential retail more generally. We benefit from our strong portfolio construction, including low basis, fungible buildings operated by tenants in sectors that are e-commerce and recession resistant. We have had no major tenant credit issues, leading to very low bad debt expense and very little vacancy in our portfolio.

On this topic, we would like to provide a brief update on our Bahama Breeze properties. As a point of clarification, we own 10 Bahama Breeze properties, which is 1.3% of our ABR. That said, Darden is planning to convert six of these locations to other brands they operate, Yard House, Olive Garden, LongHorn, Chuy's, et cetera. They'd like to convert more, but they are limited by already having nearby existing locations and in some cases, co-tenancy restrictions. So the remaining 4 properties are 50 basis points of ABR, and we already have actively negotiating letters of intent with new tenants to backfill these locations. Based on the figures we're negotiating, we expect to recover or possibly even exceed the prior rent paid by Darden, although the timing and final economics will ultimately depend on the outcome of these negotiations. It takes a few months to negotiate a lease, and we should have further updates on timing at the Q2 earnings call. But overall, very good shape. Remarkably, I'd like to point out that it's been less than 3 months since Darden announced the brand closure. For us to have potential solutions across the board for all 10 locations so quickly just highlights how our focused strategy and strong underlying real estate replaceable rent levels will benefit us long term. In any case, we'll continue to collect rent throughout the backfill process as Darden is still obligated to make rent payments on these leases for all 10 locations for at least 1.5 years and in some cases, up to 4. That provides us flexibility as we work through the preferred backfill tenant options.

Shifting gears, we continue to diversify our portfolio, 37% of our rent now from key tenants outside the casual dining subsector, including automotive service at 13%, medical retail at 11% and QSR restaurants at 11%. We are actively exploring new retail categories and property types as we look to expand the top of our funnel for investments. As when we developed our automotive service and medical retail property strategies, prior to investing in a new sector, we evaluate the business resiliency and AI disruption risk, availability of creditworthy tenants, real estate quality and pricing attractiveness. That said, for us, the limiting factor on new sectors and deals is typically sellers lofty pricing expectations.

Finally, and this is a very exciting point. I'd like to mention that Michael Friedland has joined our Board. Michael recently retired from JPMorgan and brings 30 years of Wall Street experience in real estate finance and corporate credit to FCPT. We've known Michael a long time, and we're really impressed and glad he's joined our Board. Welcome, Michael. Over to you, Josh.

Thanks, Bill. I'll start with a review of Q1 activity and then touch on our investment pipeline. In Q1, we acquired 10 properties with a weighted average lease term of 10 years for $26 million at a blended 6.8% cash cap rate or a 7.3% GAAP cap rate. This represents an average basis of $2.6 million per property, extending our strategy of partnering with creditworthy operators while focusing on fungible low-cost basis assets to help mitigate downside risk. We are really happy with the asset selection this quarter. And as Bill noted, Q1 is typically a lower volume period for us, and the ending volume for the period lined up well with our internal expectations. That said, Q2 is shaping up to be consistent with our typical seasonal volume ramp.

Our Q1 acquisitions were composed of 46% restaurant, 28% auto service and 26% medical retail properties. On the credit side, all of our properties acquired in Q1 were leased to corporate operators with the only exception being our McAllister's Deli, Michigan, which is leased to Southern Rock, the largest McAllister's franchisee with 178 locations across 13 states.

Our team continues to partner with leading operators in each of our chosen retail subsectors. Coupled with our low basis rent filtering, we have a proven track record of building a resilient and long-standing portfolio. In the meantime, our team continues to actively explore all avenues for investment, both large portfolios and small granular deals in addition to assets in new subsectors as evidenced in Q4 '25. While we are expanding the top of our investment funnel, we will continue to maintain our discipline in acquiring low basis investments based at best-in-class operators at pricing accretive to our cost of capital. Patrick, back to you.

Thanks, Josh. I'll start by talking about the state of our balance sheet and an update on our capital sourcing, including our recently closed term loan. We funded $50 million of the new incremental $200 million term loan in April, and the balance will be used to fund acquisitions in Q2 and Q3. The term loan credit margin is 125 basis points over SOFR for an all-in rate of approximately 4.9% -- we fully hedged our current outstanding term loan balance of $640 million as of April 30 at a blended SOFR rate of 3.1% or approximately 4% all in with that rate steady through November 2027.

Our supplemental disclosure includes a detailed pro forma hedge schedule. We also continue to benefit from full capacity under our $350 million revolver. With respect to leverage at the end of Q1, our net debt to adjusted EBITDA was just 5x. This is our seventh consecutive quarter of leverage below 5.5x and at the bottom end of our stated leverage range of 5 to 6x.

Noting that our term loan closed after quarter end, but after fully funding and investing the proceeds, estimated run rate leverage will be 5.4x. Our fixed charge coverage ratio remains a very healthy 4.8x as of quarter end.

Turning to debt maturities. Once factoring in the extension options for our existing term loan, we have no debt maturities until December when just $50 million of private notes come due. We plan to address this in due course closer to the maturity date. Our staggered maturity schedule will ensure we do not face a significant maturity wall at any point thereafter.

Now turning to some of our earnings highlights for Q1. AFFO per share was $0.45, representing 3.4% growth versus prior year. Cash rental income was $70 million, representing 10% growth versus prior year. Annualized cash base rent for leases in place as of quarter end was $266 million, and our weighted average 5-year annual cash rent escalator is 1.5% Cash G&A expense was $4.9 million for the quarter, representing 7% of cash rental income compared to 7.7% for the prior year.

The 70 basis point improvement in operating leverage and flat cash G&A compared to the prior year illustrates our continued efforts at achieving efficient growth and the benefits of our rising scale.

Following our Q1 results, we are reaffirming our guidance range for 2026 cash G&A of $19.2 million to $19.7 million. We've also continued to make progress with 27 of the 42 leases originally expiring in 2026 extended. The recapture rate on these locations is 6% above prior year rent. We are currently negotiating to retenant two of those properties and the remaining 13 now represent just 1% of ABR, down from 2.6% at the beginning of 2025.

Our portfolio occupancy remains very strong at 99.6% today, which benefits from releasing some of our very limited number of vacant sites. We collected 99.7% of base rent in Q1. Last quarter did not see any material changes to our collectability or credit reserves. As an aside, during this call, we referenced two of our new disclosure updates, which I'll highlight again now.

First, going forward, we plan to disclose GAAP cap rates along with the cash cap rate figure we've always done. We have very low default rates historically, and our intention is to hold our properties long term. Therefore, the data related to those expected long-term returns is another helpful metric for our investors.

Our presentation includes a new slide on Page 8 that has GAAP cap rates going back to 2023 and shows that historically, they have averaged about 70 basis points higher than our initial cash cap rates. Second, we are updating the way we disclose AFFO per share growth by calculating without the impact of decimal routing. Based on our share count ring can be impactful in this figure, particularly for quarterly comparisons. Our updated approach will allow us to quote a more accurate growth figure. We continue to aim for ways to improve transparency with the investor community and believe these changes are aligned with.

With that, we'll turn it over to questions for the Q&A session. And just a reminder, the meeting ID is 865913-566 if you would like to ask a question. Thank you.

[Operator Instructions] Your first question comes from Michael Goodsmith from the line of... It's Michael Goldsmith from UBS.

First question is, I know you guys don't provide discrete guidance, but maybe this $200 million term loan is shadow guidance in that you've talked about fully drawing that down to the second and the third quarter. So is that -- as we think about just acquisition activity, you've got the $200 million there, consensus at $275 million in acquisitions for the year and stepping down to $250 million next year. So just trying to get a sense of your liquidity, the acquisition market and now you kind of have clear line of sight into acquisitions of, let's say, $200 million through the third quarter. should you be able to exceed that and continue to acquire healthily into next year?

So Michael, you know our business well. I think the answer might be hidden in your question. But yes, if we very -- are particular about how our press releases are drafted, and I think we gave more specific timing guidance than we have in the past. I would say it's always curious that analysts seem to have declining acquisitions for us, which is unusual in the space. I don't think there are other companies that that's the case. I'm not sure why. It's not what has been a historical record.

Got it. And then as a follow-up, I appreciate the new slides in the presentation, I think Pages 7 and 8. Can you just kind of walk through what you're trying to show here? I think you're indicating that the Four Corners portfolio or the tenants and the tenants that you guys are -- your tenants are outperforming maybe the general overall restaurant industry and then separately, like your GAAP cap rates are exceeding your cash flow, but maybe you can just provide a little bit more detail about what's the point that you're trying to make with both of these.

Yes, absolutely. Great question. We had an investor show us our stock price versus some generic index. I think it might have been MSCI or Morgan Stanley, some generic restaurant index. And you had to be a little cute with the start date to get it to line up, but there was a pretty high correlation. And so they were sort of making the point, do you trade like a restaurant index? And we think that, that's a silly concept on the space. But if we were going to trade like a restaurant index, at a minimum, you should weight the index by our rent and look at the stock performance of our tenants weighted by our rent.

And if you do that, you get the yellow line, which is -- shows how strong Darden and Chili's has been and that we don't have because we weighted it basically down as far as we could with public companies. We don't have companies that have fallen into distress. Our tenant roster is really strong. The GAAP cap rate, we have a competitor, [ A ] that we admire -- it's a great company. They have historically used GAAP cap rates. We have gotten questions about where our cap rates are versus theirs. There seems to be some investor confusion that they're quoting two different things.

Both numbers are perfectly legitimate ways of looking at it. But sometimes we felt our cash cap rates were being compared against their GAAP cap rates. And so we just did the math and showed you the data so you can pick and choose the way you want to do it. I'll handle the last new disclosure. You didn't ask about it, Michael, but I'll just handle it now about rounding, which is we just thought this is a more accurate way of doing it. We went back, not surprisingly, some of the times, the rounding would -- comparing rounded to rounded versus more closely actual to actual would have a higher growth rate some of the time, a lower growth rate some of the time. We just thought this was a better way of showing it. There seems to be a lot of focus on growth today, and we wanted to give you the most accurate number you can. If you have more questions about that, it's a pretty technical calculation. I'd probably recommend you reach back out to Pat after the call on the rounding issue.

Your next question comes from the line of Eric Borden from BMO Capital Markets.

Just given your strong relationship with Yum! -- and Brinker, are there any identical acquisition opportunities as Yum! -- expands on its Taco Bell platform and Brinker expands on its Chili platform, just given the strength in same-store sales there, whether it's on the acquisition front or potentially a development opportunity?

Yes, we're always working on those. The one comment I'd make is Taco Bell tend to trade for very, very tight cap rates. But we're always working on things like that, being aligned with strong brands where we can play offense and not have to be licking the rounds of prior investment mistakes is a huge advantage. But I would say that both of the brands you mentioned, they trade at very, very competitive cap rates on the secondary market.

Okay. That's helpful. And then just on the bad debt side of things, can you just talk about anything that's been realized year-to-date? And how are you thinking about bad debt for the remainder of 2026?

Okay. So the number is 0 for the year-to-date. We have over 1,300 leases. So we're always kind of monitoring something in the portfolio. But we have not had any bad debt this year, and the portfolio continues to perform really strong. So like you probably saw Brinker's results yesterday, recent prints by Darden as well. The brands we've aligned with are weathering any sort of macro headwinds very well. There's going to be some brands that don't, but we've tried to pick our horses very carefully so that we avoid that.

Your next question comes from the line of Wes Golladay with Baird.

Can you go back to that comment on the expirations? I think you said 27 of 42 have been renewed. I believe you said 6%. So I would have thought maybe it has been a little bit lower with the contractual rent extensions. But maybe how should we think about that going forward?

I wouldn't overemphasize it. I think we had a positive quarter. Our typical rent growth is 1.5%. If you're modeling our company, I think that's a good place to go. But the quarter is worse better. There might be a quarter where it isn't as good, but 1.5%, I think, is a good place to start and finish. I would also just -- just real quick, I would just like to emphasize that Justin and his team have done just a terrific job on property management and asset management and re-leasing. And that's a new capability for us, frankly, in the last couple of years, Justin has really aggressively restructured his team and has done a terrific job.

We are more on top of that as a company than we've ever been by far.

Okay. When we look at the pipeline going forward, is there a bigger percentage of that in the new categories that you're evaluating? Or are you looking to enter those new categories a little bit more methodically?

Yes, we're really store focused. So we're not really putting emphasis on one category over the other. We're trying to find the assets to score the best and make sure that those rise to the top with appropriate pricing.

But we are looking at some new sectors, as we talked about last quarter and really leaning into building relationships, finding what tenants we want to emphasize, et cetera. So the aperture is bigger than it's ever been.

Your next question comes from the line of John Kilichowski with Wells Fargo.

First one for me, Bill, thanks for the color on Bahama Breeze. I guess just to expand on that, you mentioned the positive mark on the other assets that weren't being converted. Is there going to be downtime there? Will there be rent loss before the mark? Or do you think there will be no net credit loss there?

No, I don't think there will be downtime. The Darden is responsible for 1.5 years at the minimum up to 4 years for the handful that we are converting to other tenants. But to the extent that there's rent growth or capital provided, all that's baked into our comments. We feel really good about being able to re-lease these to strong tenants. And Darden is taking a lot of them, too. So a good diversification move. I think it shines a light on the Bahama Breezes that we sold a number of years ago for really, really high prices that we did a good job managing our value at risk with any one particular tenant, but it could be a good result.

I would just add to that. I mean, Bill said in his comments that we're talking about 4 stores and 50 basis points of ABR. It's a small amount.

Understood. And then just quarter-to-date, if we kind of run the numbers here, it looks like the average blend is about 20 bps higher than what you closed in 1Q. I know it's early based on what you've released. Is there any sort of upward creep in yields that you're seeing, I think driving that? Or is that just a small sample size there that's driving that move?

Small sample size.

Your next question comes from the line of Mitch Germain from Citizens Bank.

Bill, just you mentioned just a second ago, obviously looking at a couple of new industries. I think it was capital that you allocated to a rental company and a rental operator and a grocer. What -- how do you -- what sort of education do you and your team take in reviewing the sector? Kind of what are the attributes that made those sort of assets or sectors interesting for you? And does that really -- obviously, it clearly changes the TAM in terms of how you're allocating capital. Is that the way we should be thinking about this now?

Yes, I think that's a good way of thinking about it. I guess we use what we call the cripple filter, which is this something that we know enough to buy, and I'll talk a little bit more about that in a second. Do we have a permission from our investors to buy it? And would we buy it with our own money. And so while those sound very high level, that is a very challenging gauntlet for an asset class to get through. So I personally wouldn't buy a pickleball facility with my own money. So that makes it pretty easy to not buy pickleball facilities. I wouldn't buy a Carvana with my own money. So that makes it pretty easy.

Do we have permission from our investors? That's a harder one. And I think we tend to take it pretty gradually to make sure that we're bringing our investors along with us. But pretty clearly, our investors don't need Four Corners to buy Class A office in New York City. They have other ways to get that exposure. Do we know enough to know is manifest in writing white papers for our Board, going to conferences, meeting and talking with tenants, walking the floors. And then I would say humbly that a lot of these sectors are things that I have experienced within in the past, it just preceded Four Corners. So when I was at [ Carl ], when I was on Gramercy's Investment Committee and other things I worked on, we bought outdoor industrial storage. We bought grocery. So I have a familiarity with it, making sure we bring the team along with me.

Great. And last one for me. I asked this a couple of times this quarter, but I'm just curious, are you seeing any real changes in the competitive landscape within the investment sales market? I mean, obviously, for quite some time, there was a lot of competition that was sitting on the sidelines and some of that appears to be back, but is that shifting kind of any way that you're approaching underwriting and bidding on properties?

Where we are buying these onesies and twosies, we obviously look at portfolios and have closed on several in our existence. I think we're really well competitively positioned. We can build a portfolio throughout a year that we're proud of doing onesies and twosies, but we have the scale to do bigger things as well. We read a lot in the news about private credit and the private credit firms creating a discounts to NAV, questioning of their marks. Will that cause them to pull back? I don't think we have evidence of that yet. And certainly, there's been recently -- there's been a lot of corporate M&A activity. I think there's a lot of shadow corporate M&A activity, but there's a lot of things to work on now.

There are no further questions at this time. I will now turn the call over to Bill Lenehan, CEO, for closing remarks. Bill, go ahead.

Great. Terrific and glad to land the plane on the 30-minute mark. Ultimately, our existing portfolio strength is compelling for us to focus on offense, where many of our peers are playing defense. Our $200 million term loan gives us a direct line of sight for funding between now and Q3. The attractive pricing we're seeing in the debt markets should give us even more access to low-cost funding later this year at scale.

The acquisition market is stable and with a bit larger aperture for our property types, we expect another successful year of building our portfolio brick by brick. Our team will be at ICSC the week of May 18 and NAREIT in New York, the week of June 1. As many of you know, we host a cocktail party in conjunction with ICSC. We'd love to meet with you in person at either of these events. So please reach out Patrick or myself to coordinate schedules. Thank you all and look forward to continuing to see many of you in person this year.

This concludes today's call. Thank you for attending. You may now disconnect.

Hello, everyone, and thank you for joining the FCPT Fourth Quarter 2025 Financial Results Conference Call. My name is Claire and I will be coordinating your call today. [Operator Instructions] I will now hand over to Patrick Wernig, Chief Financial Officer, to begin. Please go ahead.

Thank you, Claire. During the course of this call, we will make forward-looking statements, which are based on our beliefs and assumptions. Actual results will be affected by known and unknown factors that are beyond our control or ability to predict.

Our assumptions are not a guarantee of future performance and some prove to be incorrect. For a more detailed description of potential risks, please refer to our SEC filings which can be found at fcpt.com.

All the information presented on this call is current as of today, February 12, 2026, In addition, reconciliation to non-GAAP financial measures presented on this call such as FFO and AFFO can be found in the company's supplemental report. Now I will turn the call over to Bill.

Good morning. Following my initial remarks, Josh will comment on our investment activity, and Patrick will discuss financial results and capital position. This past November marked our 10-year anniversary as a public company. Over the past decade, we have grown from just 4 employees with 418 properties leased to a single tenant into a platform with 44 team members and 1,325 leases.

We've acquired $2.3 billion of properties and paid out over $1 billion of dividends to our shareholders. We are proud of the portfolio and company and we've built and look forward to continuing our mission to drive shareholder value by a conservative and thoughtful capital allocation.

During Q4, we acquired $95 million of net lease properties at a 7% blended cap rate. In total during 2025, we acquired $318 million of net lease properties. We largely funded these acquisitions with equity we raised on the ATM via forward issuance. One important note on our acquisition volume as we accomplished this without the benefit of any large portfolio transactions. Most of the deals in 2025 were midsized transactions between $5 million and $20 million furthering our extremely granular and selective portfolio construction via a high-quality acquisition.

And we did this while staying the course of what has become core to FCPT's brand a focus on attractive real estate occupied by creditworthy tenants without sacrificing quality for volume or adding investment spread. Even in an era of increased competition for larger net lease portfolios, we believe that we have a business model that can scale and source attractive opportunities for growth.

Our in-place portfolio retains its fortress quality with 0 exposure to problematic retail sectors such as theaters, pharmacies, high-rent car washers and experiential retail. We have sidestepped major tenant credit issues, including 0 bad debt expense in 2025 and have very little vacancy in the portfolio.

Our rent coverage in Q4 was 5.1x on the majority of our portfolio report that reports this figure. This remains amongst the strongest coverage within the net lease industry. To that end, our core anchor tenants of Olive Garden, LongHorn and Chili's continue to be leaders within the net lease tenant universe. Most recently, Brinker reported Chili's same-store sales growth of 9% for the quarter ended December 2025, which represents a 2-year sales growth comp of plus 43%.

Olive Garden and LongHorn reported same-store sales growth of near 5% and 6%, respectively, for the quarter ended November 2025. Really amazing results from our largest tenants, which represent over 51% of our portfolio rent on a combined basis. This improves our portfolio metrics and further demonstrates the benefits of thoughtful asset selection and alignment with best-in-class tenants.

On the topic of our Darden assets, Darden announced last week that they are shutting down the Bahama Breeze brand and are converting many of these locations to other Darden brands. Our current Bahama Breeze exposure is just 1.3% of base rent across 10 properties, which equates to an average rent of $341,000 per property, which is very reasonable. While it is early, we are in discussions with Darden about these properties. And as of now, we do expect several of these stores will be converted to other Darden concepts.

Further, these properties are all subject to leases with a minimum of 1.7 years of term remaining. During which time, Darden will continue paying rent taxes, insurance and all other costs at these locations while we seek new tenants. In the event that they do become permanent closures, we have already received significant inbound inquiries about backfilling locations over the past week. We have lots of confidence in the quality of the real estate of these properties and expect they could be retenanted at similar rents.

It's worth noting the impact of our proactive approach to portfolio management here, we sold 2 high rent Bahama Breeze locations back in 2016 and 2018 in the 4.75% to 5% cap rate range. This reduced our exposure to the brand by $2 million in rent, roughly 35% of where it would otherwise be today. We continue to make meaningful progress in the area of diversification.

Olive Garden and LongHorn are 32% and 9% of our rents today versus a combined 94% of the spinoff, while 37% of our rents come from outside of casual dining. This includes automotive service at 13% quick service restaurants at 11% and medical retail at 10%. Our deal sourcing remains focused on essential retail and services, in our view, creating a prudently positioned portfolio with limited exposure to tariff-sensitive sectors and a strategy centered on everyday consumer demand.

We are constantly evaluating new retail tariff categories as we look to expand the top of our funnel for investments. Similar to our decision to expand into automotive service and medical retail properties, we consider business and AI resilience, availability of creditworthy tenants, real estate quality and pricing relative attractiveness.

Patrick is going to discuss this in more detail, but the key takeaway is that since Q3 2024, our last circa $520 million of acquisitions, essentially all of the 171 buildings purchased over the last 18 months have been funded 85% with equity only, raised at attractive pricing and the balance funded with low rate term loans.

So today, our balance sheet is over-equitized. I'll repeat that. Today, our balance sheet is overequitized with net leverage near 5x. Further, we didn't raise debt when we would have acquired a 7%-plus coupon. Now we can access much more favorable debt capital markets with a coupon rate in the 4.5% to 5.5% range, depending on the structure and term, whether term loans or notes. This is much more attractive given where we see cap rates today.

We are proud of the year that we put together for both the capital raising and acquisition fronts, the team has shown great growth over the last 10 years since inception, and we feel that we are well positioned heading into 2026. We entered the year with low leverage and ample dry powder for opportunities that may arise. Over to you, Josh.

Thanks, Bill. I'll start with a review of this quarter's activity and more details on 2025 investments.

In Q4, we acquired 30 properties with a weighted average lease term of 10 years for $95 million and a blended 7% cap rate. This is a 20 basis point expansion over the previous quarter and our highest blended cap rate in 2025. We finished the year with 105 properties acquired for $318 million at a 6.8% blended cap rate.

This represents an average basis of $3 million per property and continues our strategy of partnering with creditworthy operators in selecting fungible, low-basis properties to further protect against any downside.

Looking back, 2025 was one of our busiest years to date. Our total investment volume increased 20% from 2024, and we have 53 unique transactions. Said another way, our team was able to post stellar results without reliance on large portfolio transactions. This is important to note because, one, these large deals often command pricing premiums for the ease of putting a greater amount of capital to work.

And two, they often require buyers to accept all or nothing, where a good chunk of properties may not fit our underwriting thresholds. That said, our team remains capable and ready to execute on these larger opportunities when the right deal comes around, but we are encouraged our platform can still post significant volume in years where we do not anchor a large portfolio deal sitting in the market.

In Q4, we also expanded the team's capabilities outside of our main 3 categories, restaurants, automotive service, and medical retail with our acquisition of a Sprouts grocery store and our first equipment rental acquisition of the United Rentals property.

As Bill mentioned, our team is constantly evaluating new opportunities in adjacent sectors to understand the resilience of the business, weigh the attractiveness of their credit and real estate locations versus our existing portfolio. We feel that both the grocery and equipment rental sectors fit our existing underwriting approach of focusing on recession-resistant essential service retailers with high-quality and fungible real estate.

Similar to how we approach our entrance into the automotive service and medical retail sectors, that is by dipping our toes and building extensive knowledge and expertise before launching an official strategy, we will follow the same pattern here. While grocery and equipment rental are newer categories for us, we chose these specific properties because of their similarities to the assets we regularly purchase in our existing portfolio.

For example, both are leased and best-in-class creditworthy operators in their respective subcategories. Sprouts is a publicly traded grocer with more than 400 locations across the U.S., no debt. Our $8.6 million basis in this location is also much lower than $10 million to $15 million we typically see for the brand in the market. United Rentals is also a publicly traded company with over 1,600 locations across the U.S. and has rated BB+ by S&P. They are the largest equipment rental provider in the nation and have a demonstrated track record of strong operations.

We'll continue to evaluate similar opportunities in these sectors, but only so long as they match our existing underwriting thresholds and investment criteria. Now reflecting on our strategy going forward for 2026.

2025 evidenced substantial repeat counterparty transactions, a trend we expect to continue. Coupled with the expanding top of our funnel, we expect '26 to be another strong year of increased diversification and expanded platform capabilities. Patrick, back to you.

Thanks, Josh. I'll start by talking about capital sourcing and the state of our balance sheet. We have full capacity on our $350 million revolver and feel that we have the liquidity to continue executing our business plan in Q1 and into 2026. With respect to leverage at the end of Q4, our net debt to adjusted EBITDAre was just 4.9x inclusive of outstanding net equity. Excluding our forward equity balance, our leverage is 5.1x. This is our sixth consecutive quarter of leverage below 5.5x at the very bottom of our stated leverage range of 5 to 6x.

We've now fully settled our forward equity balance in 2025, but with a fully available revolver we feel we still have ample capacity on the debt side. After including debt capacity and free cash flow, we have over $220 million in liquidity before reaching 5x leverage and substantially more than that before approaching 6x.

Said another way, we believe we could utilize lower interest rate debt for our acquisitions in 2026 and still remain under our self imposed leverage. As always, we aim to be opportunistic to achieve the best cost of capital in our funding decision based on the market.

We're encouraged by the current state of the term loan market, which was much more constrained just a few years ago. As a reminder, 5-year term loans have historically been priced at 95 basis points over SOFR or an all-in rate today of approximately 4.6% after swaps and before fees. Private placement notes would be higher than that, but also accretive to current market cap rates while offering longer-term [indiscernible]. We have 95% of our floating rate debt fixed through November 2027 at 3% versus spot rates today at 4%.

Overall, 98% of our debt stack is fully fixed and our blended cash interest rate is 4%. We maintain a very healthy fixed charge coverage ratio of 4.8x. I'd also like to remind everyone that in Q3 of last year, we removed SOFR credit spread adjustment of 10 basis points to our interest expense on the revolver and term loans. Our new borrowing rate on term loan is SOFR plus 95 basis points and revolver is SOFR plus 85 basis points. It's been a positive flow through to AFFO of approximately $600,000 per year.

Turning to debt maturities, including extension options, we have no debt maturities until December 2026 with $50 million in private [indiscernible]. Our staggered maturity schedule will ensure we do not face a significant maturity will at any point thereafter.

That said, we are focused on the small upcoming maturities in '26 and '27. We've been very encouraged by the liquidity in the bank market today as well as the very attractive credit spreads being achieved in the private placement and public bond sector. Said another way, we believe we have numerous avenues to address these minor maturities at attractive rates.

Now turning to some of the earnings highlights for Q4. We reported Q4 AFFO per share of $0.45 and our full year AFFO was $1.78 per share, representing 2.9% growth over 2024. Q4 cash rental income was $67.5 million, representing growth of 11.1% for the quarter compared to last year. Annualized cash base rent for leases in place as of quarter end was $264.2 million, and our weighted average 5-year annual cash rent escalator is 1.5%.

Cash G&A expense was $18 million for the year at the very bottom of our guidance range and representing 6.9% cash rental income for the year compared to 7.1% for the prior year. This improved operating leverage illustrates our continued efforts at efficient growth and the benefits of our improving scale.

Our new guidance range for cash G&A in 2026 is $19.2 million to $19.7 million. As for managing our lease maturity profile, 95% of the 41 leases expiring in 2025 remain occupied today, which includes a high renewal rate in 2 properties that were quickly released to new tenants.

Additionally, we have started to make progress on our 42 leases expiring in 2026, which now represents just 1.5% of ABR, down from 2.6% at the start of 2025. Our portfolio occupancy remains very strong today at 99.6%, benefiting from efforts to release our very limited number of debt being impacted. We collected 99.5% of base rent in Q4 and 99.8% for the year.

Last quarter did not see any material changes to our collectibility or credit reserves. We do want to call out one new slide we introduced in the presentation on Page 11. We regularly see private market cap rates for properties similar to the properties owned in our own portfolio. So our public valuation has lower in recent months, we thought it would be helpful to compare our current implied cap rate to the blended cap rate of recently sold net lease properties. This demonstrates the sizable gap between the higher value of our underlying assets where the stock is actually trading today.

With that, we'll turn it back over to Claire for questions.

[Operator Instructions] Our first question comes from Michael Goldsmith from UBS.

First question is on the move into United Rentals and industrial outdoor storage. Can you just talk a little bit about the market you see there, maybe the total addressable size, it feels like some of your net lease peers have been moving into that space. So what would you see from like a competition perspective there? And then if you could talk a little bit about how the cap rates in that space compared to the rest of your portfolio, that would be helpful.

Thanks, Michael. Well, I'd say I've been following the sector for a long time, I was Chair of the Investment Committee at Gramercy 15 years ago, and we were doing quite a bit of this. It's attractive. It's a lot of the value is in the land residual. If you're careful, you can get in at a good basis there's creditworthy tenants. It's hard to get new sites entitled.

So there's some entrenchment if you can find an existing site, a very large addressable market, very defensive and cap rates that make sense. So we've looked at a lot of them we'll continue to pursue that strategy. There are players who focus on it now. One of them was just taken private by Brookfield, but it's an attractive space, as is grocery, by the way. But we found that very often high credit grocers have a much chunkier purchase price than we typically plan.

But we're looking at both of those sectors and others on a continuous basis. But to answer your question on TAM, we can get back to you, but it's enormous compared to the size of our company.

Got it. And then second question, just following up on Bahama Breeze. It sounds like you got ahead of this a little bit in the prior year. So you still have a little bit of exposure here. I guess like can you just kind of -- I guess the question is just it sounds like rents are about the same of where -- like the level of interest is high, but rents are about the same, is that the right -- is that the case? And then also like if you compare the publicized list, I think you've got like 4 or 5 locations remaining. So can you just kind of confirm that? Just talk a little bit more about that.

Yes. I think that's right. There will be a handful that get converted to other Darden brands, there'll be -- there may be 1 that we swap out with Darden for another property, and there'll be a couple that in 1.5 year plus we have to release. We've been inundated with people interested in these sites. They're very well located. And I think we're being pretty conservative on the rents, but it's -- we've sort of been working on this for a week, and we're sorting through a lot of people who are interested in taking the size.

Our next question comes from John Kilichowski from Wells Fargo.

Maybe just to stay on Bahama Breeze here. Bill, forgive me if I missed in the opening remarks, you talked about the rents there. Are you able to talk about the performance at these assets? I'm just -- if they're getting converted, would that be at the same rent? And then for the assets that would need to turn in 1.5 years, I mean, if you're getting substantial interest at this point, is there a potential for even a positive mark-to-market. I'm curious like what the total losses that you're kind of baking into internal estimates?

Yes, I don't think we're baking in losses at all. These brands are -- Bahama Breeze as a brand had limited market expansion. Simply, I don't think a lot of the U.S. has a view on what Bahamian cuisine is. So it worked in the Southeast. And it just wasn't relevant to the total size of Darden. And so they'll convert some of these.

They have existing leases. So there won't be a change in the rental rate would be my assumption. But we'll have brand-new stores with higher AUV brands. And then for a couple that will get back, I feel good that we'll be able to release them, although it's early days. So -- and we're talking about a couple of stores on a portfolio of 1,325..

This is Patrick. I would just add that when you look at that press release Darden to put out and the list of sites that they want to convert, there's still some moving pieces there. And you have to factor in some of those stores that have really high-quality real estate are restricted by covenants by other tenants either by the shopping center itself.

So Darden's interest in converting a lot of these sites was clear and it's just amount of what they can do within the restrictions that are on those properties. But the demand in the last week has been, I'd say, tremendous from other tenants that want to backfill on these locations.

Okay. That's helpful. And then maybe another 1 for you, just on the balance sheet. You've called the forwards, I think in the opening remarks, you said $220 million of liquidity gets you to 5.5x. I'm just curious how you think about managing the balance sheet I know, Bill, you kept saying over-equitized, at what point is the high end is 6x, but maybe as you get to 5.5x in an effort to not necessarily reach the high end, do you start to maybe pull on thinner spreads on equity at a certain point? Or you kind of stick to your guns and you'll write that number up to 6x.

And then at that point, if the equity is not cooperating, then you start to pull back on the acquisition cadence. I'm just curious how you think about all scenarios. And obviously, if the risk off trade works, that's great, we get a cost of equity, we keep moving, but just trying to think about all scenarios here.

Yes. I think we've evidenced that we're disciplined in our capital allocation that we don't go out the risk spectrum on acquisitions. We don't provide guidance for a reason. But that said, we have lots of runway with very accretive acquisitions funded with low leverage inexpensive financing.

That's readily available today in a way that it wasn't readily available a couple of years ago. So I think we feel like we're in great shape and we have minimal maturities to address. So I think we have a long runway of acquisitions. And our stock has been soft. And I think we -- as Pat mentioned, added some detail in our presentation how well supported by NAV, we feel our stock price is, but I think it offers real value today.

Our next question comes from Anthony Paolone from JPMorgan.

Great. Can you talk about just Red Lobster exposure? Because I think that's another 1 that's been out there talking about perhaps more store closures.

Yes. I don't think there's much to say the brand is doing much, much better than it was under prior ownership. Our stores are predominantly in a master lease. It was affirmed when they restructured at the same rent I think we feel quite good about that.

Okay. And then on the diversification strategy. Can you maybe just talk about anything that you don't want to get into or other areas of interest that you haven't quite tapped yet?

Yes. I think we've been very clear, we have a page in our presentation of sectors that we have avoided, I would double down on what's on that page. We try to focus on a balanced real estate and credit approach. And we try to stay within sectors that have been through cycles.

And so we don't own pickleball facilities that cost $20 million. We don't own $9 million car washes. We don't own corporate headquarters in the middle of nowhere, where you can get more spread, and it works typically for a while. But on lease renewal, you have a lot of risk. So I think we take a much more balanced approach than our peers and shown in the last decade that our credit performance has been best-in-class.

Our next question comes from Rich Hightower from Barclays.

I just wanted to follow up on 1 of the earlier questions. But what's the real comfort level with approaching that sort of 6x upper limit on leverage if that's the only option the market gives you as far as executing the sort of plan for '26 on growth?

I think that's quite a bit of a ways off. So hard to make predictions that many months in the future. So I think we feel very good that we have a couple of hundred million dollars of acquisitions before we even have to be thinking about that. And honestly, we've had the same leverage ceiling for -- since inception. We've essentially never been close to it. So I think that, that track record speaks volumes.

All right. Fair enough. I mean, as far as the, I guess, that sort of early vintage of Darden leases coming due in '27 and I wonder if I've asked this before, but where do you guys sort of peg the mark-to-market or the recapture rate potentially on those upon renewal, that sort of thing.

They have multiple 5-year extension options at 1.5% growth. So the continuation of that 1.5% escalator. So I would say that our expectation is the vast majority of those will renew at the 1.5% contractual option.

Our next question comes from Wes Golladay from Baird.

Just looking at your valuation chart you put in the presentation, you have a lot of assets that will trade call it, mid, low 5s and up to the low 6s. Would you have any appetite to just start disposing of some of those assets and recycling into a little bit higher yield and higher growth assets and get the diversification higher?

Yes. It's always an option, West. We've done very little of it. Where we have done it, frankly, was a number of years ago in selling Bahamas Breeze assets at extraordinary pricing with very high rents. We haven't had to do it in the past. We don't have to do it today. The Darden assets are very, very high quality and very hard to replace. They trade for strong values for a reason.

Darden as a company has a $25 billion market cap. It's credit default swaps are like a G7 country. So they're hard to let go of, to be honest. It's an option. We know how that works. I would remind everyone that there are REIT rules. You can't just sell properties 1 by 1 like some people assume you can. But it's an option, we haven't had to do it yet. Nothing wrong [indiscernible] hasn't been primary.

Okay. And then you did have a rare impairment in the quarter. What drove that?

It was a quick service restaurant that we purchased right at the beginning of our life was parties in Gadsden, Alabama. We've had a hard time re-leasing it. It's a tiny property. It's kind of hard to write down properties, to be honest. We found that the conditions were right to do it, but it's been vacant for a while. We've had a hard time of releasing it. But 1 property, over 1,325.

Not bad. And 1 last 1 on the Red Lobster. I think you mentioned there were ground leases. Is that for all of them? And can you share the rent level?

They're master lease. And again, they were just reaffirmed. So I would say there's been a tremendous emphasis on credit issues that aren't credit issues in the Q&A. And I would ask listeners to sort of see the forest for the trees. The story here is that we have substantial growth in 2026, that will be really accretive.

Our next question comes from Mitch Germain from Citizens Bank.

I think, Bill, you talked a little bit about, obviously, bigger ticket for a grocer. I'm curious how do you potentially look to maybe scale up in that sort of sector?

Yes, I think it's very similar, Mitch, how we looked at medical, retail and auto service. We spend a lot of time doing research upfront. We're conservative in what we purchase. And then as we are active in the market, it helps with seeing deals as you get more deal flow. So it's no different than what we've done in the past, to be honest. It's just the attributes of different property types you need to be sensitive to. And I think because we've been cautious and you've seen the positive results on our credit results.

And do you envision doing direct deals with grocers or maybe leveraging some of your shopping center contacts to kind of scale it up.

Yes. It's all of the above, Mitch. We take a pretty agnostic view on sourcing. So we've sourced things directly in auto service. We've had a number of brands that we've had repeat sale-leaseback business, but we'll look at everything that we can.

Got you. And last 1 for me is anything not hitting the strikes zone today? in terms of where you've been allocating capital? Like, are you pulling back in any way at all? Or it's all -- as long as it continues to meet your underwriting criteria, it's all systems go?

Yes, I think it's the latter. We've been pretty thoughtful in what we've acquired, and we don't tend to have a view of buy it and if the performance starts declining, we'll be able to sell it at a great price. That hasn't been the way we've looked at the world. We've pruned things in the past, but it's been minimal. And I think it reflects what we've purchased, we feel really good about.

Our next question comes from Jim Kammert from Evercore ISI.

Perhaps a derivative of where Mitch was heading, could you remind me what is the percentage of dollars over the past couple of years that really were direct deals with developers and you didn't have a broker involved because I'm presuming that the former gives you a better yield. I'm just curious how that's been playing out proportionately.

Yes, I don't think -- I wouldn't look at it that way, Jim. I think that the returns are pretty similar. Sophisticated large brands have access to information. They know what their properties trade for. There are some ease of use when you do repeat transactions and the sale leaseback because often, you have existing documents that you can replace or you know who the people are and the sort of cadence of information flow can be better. But I don't think that there is some meaningful advantage of doing originated sale-leaseback. Not that we're against them anyway, but I don't think that there is anything difference.

[Operator Instructions] We currently have no further questions. So I'd like to hand back to Bill Lenehan for any closing remarks.

Thank you, Claire. For 2026, we are in a fortunate position of being able to use very economical long-term debt to fund new investments. We see ample external acquisition opportunities. And based on cap rates today, we expect healthy investment spreads and growth for the year.

I'd emphasize that in this environment, we do not anticipate slowing down given our dry powder and where we are seeing our cost of debt capital. Our team will be on the road for some non-deal roadshows in Los Angeles and Chicago, the weeks of March 10 and March 17, respectively. We'd love to meet with you in person, so please reach out to Patrick or myself to coordinate.

Thank you all, and look forward to seeing many of you in person this year.

Thank you. This now concludes today's call. Thank you all for joining. You may now disconnect your lines.

Hello, everyone, and thank you for joining the FCPT Third Quarter 2025 Financial Results Conference Call. My name is Claire, and I will be coordinating your call today. I will now hand over to Patrick Wornig from Four Corners Property Trust to begin. Please go ahead.

Thank you, Claire. During the course of this call, we will make forward-looking statements, which are based on our beliefs and assumptions. Actual results will be affected by known and unknown factors that are beyond our control or ability to predict. Our assumptions are not identity or future performance on some will prove to be incorrect. For a more detailed description of some potential risks, please refer to our SEC filings, which can be found at fcpt.com.

All the information presented on this call is current as of today, October 29, 2025. and -- in addition, reconciliation to non-GAAP financial measures presented on this call, such as FFO and AFFO, can be signed in the company's supplemental report.

With that, I will turn the call over to Bill.

Good morning. November 9 marks our 10-year anniversary as a public company. We are truly grateful to our shareholders, advisers, counterparties, Board and team members, past and present, for their support, guidance and contributions over the past decade. We are proud of the portfolio we've built and look forward to continuing our mission of creating shareholder value.

Reflecting on our 10-year history, the highlights have been starting with thoughtful structuring to spin-off, including our asset selection, modest well-covered rents, low leverage and low corporate overhead. Executing an acquisition strategy with clear underwriting standards that has led to $2.2 billion of acquisitions and annual cash rent nearly tripling from $94 million spend to $256 million at our current run rate.

In expanding the investment aperture into new sectors and tenants while conservatively sticking to healthy sectors with mission-critical real estate. Taking a shareholder-friendly posture with significant insider ownership, best-in-class disclosure, thoughtful capital allocation and 10 straight years of top decile governance scores building a very capable organization.

We began with just 4 employees and a single tenant across 418 properties. Today, we have 44 team members and 170 brands across nearly 1,300 leases. We've had very high retention along the way and heading into 2026, we are fortunate to have a bright, young and motivated team. We have more capacity than ever across the organization.

Now shifting back to the current quarter's results. Following my initial remarks, Josh will comment on our investment activity, and Patrick will discuss financial results and capital position.

Required $82 million of net lease properties in Q3 at a 6.8% blended cap rate. Over the trailing 12 months, we acquired $355 million, which is amongst our highest volume across 4 consecutive quarters. These acquisitions were funded with equity we raised on the ATM by 4 issuance earlier in the year at an average price above $28 a share. We accomplished this year's acquisitions while maintaining what's become core to the FCPT brand, a focus on real estate and creditworthy tenants while avoiding sacrificing quality for volume or spread.

At the heart of FCPT is also a commitment to modulating our acquisition pace when cost of capital becomes weaker as we saw last year and then ramping back up when things improve. Said another way, we believe how you raise capital and the cost of the capital is as important as what we purchase with it. Our ability to modulate acquisitions to protect accretive spreads without weakening our portfolio quality is in our view, a strong competitive advantage of FCPT.

Our in-place portfolio remains very strong, with zero exposure to the problem retailers or sectors such as theaters, pharmacy, high rent car washes and experiential retail. To that end, we have sidestep tenant credit issues, including 0 bad debt expense this year. Our rent coverage in Q3 was 5.1x for the majority of our portfolio that reports this figure. This remains among the strongest coverage within the net lease industry.

Olive Garden, Longhorn Chili's continue to be industry leaders in casual dining has recently seen outperformance versus quick service and fast casual. Most recently, Brinker reported Tiles same-store sales growth of 21% for the quarter ended September 2025. And which follows a full fiscal year of over 25% same-store sales. Similarly, Olive Garden and LongHorn reported same-store sales growth of near 6% for the quarter ended August 2025. The truly stellar results from our larger tenants and highlights the benefit of being aligned with best-in-class operators.

We continue to make meaningful progress on our stated goal of diversification. Olive Garden corn are now 32% and 9% of our rent today versus a combined 94% of spin-off while 35% of our rents comes from outside of casual dining. This includes automotive service at 13%, quick service restaurants at 11% and medical retail at 10%. All of our chosen sectors are focused on central retail services, creating a prudently defensive portfolio that is also tariff resistant.

The question we regularly examines how can we best smack our strategy in the current environment. Fortunately, we have undrawn forward equity an encouraging set of opportunities in the pipeline and context on where we stand today. We believe FCPT is well positioned, and we are encouraged by our pipeline and the opportunities we are seeing on the acquisition side.

The debt market has improved substantially in recent months, both with greater letter capacity and falling interest rates. We have circa $270 million in combined dry powder that is a combination of equity debt and retained cash flow to fuel growth before reaching a mid-5x leverage target. That's still below our levered cap. Because of our green roller acquisition strategy, we can react quickly and efficiently to adjust our strategy for any major macro events or pauses in the rate environment.

Finally, over the past few quarters, the deal-making environment has been characterized by some stops and starts. There's been less of that as of late and looking at recent successes, we believe that we remain well positioned heading into year-end. Over to you, Josh.

Thanks, Bill. I'll start with a review of this quarter's activity. We acquired 28 properties in Q3 for $82 million at a blended 6.8% cap rate with a weighted average lease term of 12 years. Over the first 10 months of 2025, we have now acquired 77 properties for $229 million, also at a blended 6.8% cap rate with a weighted average rate in.

Despite construction costs and overall real estate inflation, we maintained a low basis of less than $3 million per property in both Q3 and 2025 year-to-date acquisitions. Our selective approach of buying granular properties with fungible retail use, often well below estimated replacement cost have been a key factor to our company's success over the past 10 years. During the quarter, we are roughly even spread of investment volume across our primary sectors of restaurants, automotive and medical retail.

Our acquisitions included some of our existing national brands such as LongHorn Steakhouse, BCA and Midas. We also welcome new brands such as doctors care as we acquired 6 of the urgent care properties. As mentioned in our transaction press release, these leases are guaranteed by Nova Health, a hospital network with over 900 locations and a AA- credit.

Lastly, while we did not complete any dispositions in Q3, our team continues to feel frequent reverse increase and offers on our properties. Now reflecting on our strategy. Over half of our year-to-date investment volume came directly from within our existing cafes. In particular, we had 2 repeat series back in Q3 1 with Christian Brothers Automotive and another with Ample, one of the largest Burger King franchisees with nearly 500 restaurants across the brands. Both of these transactions reiterate the strength of our existing tenant relationships and our reputation as buyers.

Per usual, we'll continue to balance sourcing investments via sale leasebacks with opportunistic acquisitions from institutional and independent sellers. The goal is to buy the best risk-adjusted return opportunities rather than focus on how it was source. We have also received questions about increased competition in our sector. As the first 3 quarters of 2025 demonstrate, we are finding ample opportunities.Our platform now has a 10-year history of sourcing and executing granular investments at scale, providing a service to both sellers and our existing tenants. We do not plan to deviate from this strategy.

As a reminder, our competition is trusted off in individual 1031 buyers as it is other institutional buyers. Our platform is focused on execution, reputation and track record allows us to continue to.

Finally, while we do not provide acquisition guidance, Q4 is generally a busy time for our company. And as Bill noted, we have a positive outlook on recent peer sourcing. We utilize our press release regime to give the investor community a real-time update, so please be sure to watch the same over the next few months. Patrick, back to you.

Thanks, Josh. I'll start by talking about capital sourcing in the state of our balance sheet. As of yesterday, we have $100 million of unsettled equity forward at a price of $28.33. We note that maintaining a forward equity balance at higher silver rates largely offset our carrying costs. We have near full capacity under our $350 million revolver and believe we have the dry powder to continue executing our business plan in Q4 and into 2026 without further accessing the capital markets.

With respect to leverage, at the end of Q3, our net debt to adjusted EBITDA was just 4.7x inclusive of our outstanding net equity for us. Excluding those equity forts are levered 5.3x. This is our fifth consecutive quarter of leverage below 5.5x and remains near a 7-year low for us. Historically, we've always guided to a stated leverage range of 5.5x to 6x. We decided to lower that bottom on leverage target to 5x to 6x to reflect our greater use of optionality, switching between debt and equity funding sources.

As Bill mentioned, we have $270 million in dry powder before reaching just the middle of that leverage range the combined use of equity forwards, debt capacity and free cash flow. We aim to be opportunistic to achieve the best cost of capital based on market conditions. We layered in 3 additional hedges in Q3, lowering our floating interest rate exposure. We now have 95% of our floating rate debt fixed through November 2027 at 3% versus spot rates today above 4%.

Overall, 97% of our debt stack is fully fixed, and our blended cash interest rate is 3.9%. I'd also like to provide an update on our credit facility. This past quarter, we removed the LIBOR to over adjustment of an additional 10 basis points on our revolver and term loan interest rate. Our new borrowing rate on term loans is still for plus 95 basis points and on the revolver at SOFR plus 85 basis points. This will improve AFFO by approximately $600,000 per year.

Including extension options, we have narrow debt maturities until the end of 2026 and our staggard maturity schedule to ensure we do not face a significant maturity law at any point thereafter. Additionally, our fixed charge coverage ratio remains a very healthy 4.7x.

Now turning to some of our financial highlights for Q3. We reported Q3 AFFO of $0.45 per share, which increased 3% from Q3 last year. Q3 cash rental income was $66.1 million, representing growth of 12.6% for the quarter compared to last year. Annualized cash base rent for leases in place as of quarter end is $255.6 million, and our weighted average 5-year annual cash rent escalator remains 1.4%.

Cash G&A expense, excluding stock-based compensation, was $4.3 million, representing 6.5% of cash rental income for the quarter compared to 6.9% for the quarter last year. This improved operating leverage illustrates our continued efforts at efficient growth and the benefits of our improving scale.

We're still expecting cash G&A will be in our guidance range of $18 million to $18.5 million for 2025 but at this point, we're expecting to be towards the bottom end of that range. As we're managing our lease maturity profile, we began with 41 leases expiring in 2025 and and our team has made significant progress with 90% of those tenants extending their lease or indicating intent to do so and even better 95% occupied after including 2 properties that are already leased to new time.

Additionally, we started to make progress on our 42 leases expiring in 2026, which now represents just 1.8% of ABR, down from 2.6% at the start of 2025. There were no material changes to our collectibility or credit reserves nor any balance sheet merits. Our portfolio occupancy today remains strong as we have released several sites, improving to 99.5%, and we collected 99.9% of base rent for Q3.

Last, we are also excited to share a meaningful new disclosure. We've always focused on transparency. And in that vein, we posted into our website under the the portfolio section, a full list of all of our properties with accompanying data on brand location, purchase price, square footage in acreage. We believe this level of transparency will help our investor community to better understand the quality of our portfolio and our exposure to all retail brands.

With that, we'll turn it back over to [indiscernible] for questions.

[Operator Instructions]

Our first question comes from John Kilichowski from Wells Fargo.

Bill, first one for you here, just on underwriting standards. You have pretty strict underwriting standards, and we've walked through the process before. And I'm sure it's a somewhat iterative process as you develop that. I'm curious as you're curating your portfolio today, are there any standards or sort of guidelines that you're working with that you may you'd be willing to adjust that might open up your investment aperture and allow you to increase acquisitions from here?

It's a great question. I don't really foresee us lowering the scores that we pursue. There's always things at the individual brand level that we're following that informs veracity of the scores such as Starbucks, closing stores, things like that. But I think we're sticking with having a high-quality portfolio -- and really, from our perspective, it's the cost of capital that informs the purchase price, which drives the volume of acquisitions primarily. And as Pat mentioned, because we were active on our forward at a stock price north of $28 we're in a great position there.

Okay. Very helpful. And then Pat, you talked about this earlier. There's about $100 million left on the forward. given where your cost of equity is today and where cap rates are today, let's say, those were to hold somewhat constant into '26. How would you think about funding your pipeline?

Yes, I'll take that question. I think the $100 million you should add to that, we used the number $270 twice in our remarks. I'd add to million $170 million of debt capacity and retain free cash flow. So that gives us a substantial amount of acquisition capacity. And I think we'll probably be good at that for the comment. Thank you.

Our next question comes from Michael Goldsmith from UBS.

Bill, you said in the prepared remarks that you are you called out the pipeline, you call that acquisition opportunities and improved debt market, dry powder. I guess like -- can you assess the environment overall? It seems like it's very cooperative and favorable. And what would be your willingness to kind of accelerate activity just given the backdrop that you described?

Yes, I think you've got it right. We have a super capable team. Our acquisition team is bigger and more trained up and experience than we've ever had. They've been very successful sourcing acquisitions. But we want to make sure what we buy is accretive. And so we've modulated our acquisition volume based upon our cost of capital in the past. As I mentioned, we have a long runway before we need to consider that. And it's been very fortunate that we raised a ton of equity when our stock price was attractive to do so. And we didn't originate debt at higher rates.

So now we're in a great position where we can use our forward again, north of $28 a share of forward equity, and we can raise that in a much more favorable market at a cost of funds that's probably 150 basis points or more below where it could have been had we relied on debt in the past. So in essence, I look at our balance sheet as being slightly overequitized right now, which we can get back into balance and have very accretive acquisitions because of that.

And my second question relates to Darden. You're calling out the first year of done spin-off lease maturities is in 2027. And at the same time, you did identify that the same-store sales at some of these Darden brands have remained really strong. So does that give you increased confidence in their interest in renewing leases? I'm sure you have conversations with them regularly, but just trying to get a sense of how the temperature of that has evolved through the year? And as you start to have those conversations next year in anticipation of these maturities.

Sure. Yes. Our expectations, as you mentioned, are for very high renewal rates. They're very well covered leases. These are dramatically higher revenue sites than the average casual dining restaurant. Garden has done an exceptional job navigating increased food prices. And so there's a ton of value in Garden's menu right now. I would argue there's a ton of value and menu, and they're taking share not just from casual dining, but they're taking the fast casual and QSR customer because their pricing is now right above where certainly fast casual, but even QSR pricing would be.

So there's just a lot of value in their menu. So these sites have been curated that spin to be the sites that they're very committed to. Rents are set very low coverage on the Darden assets is twice what you would expect and so -- and many of these buildings have been in operations since late '80s, early '90s. So they are core locations, irreplaceable locations with low reps. So we would expect very high renewal

Good luck in the fourth quarter.

Our next question comes from Anthony Paolone from JP Morgan.

Your 6 cap rates have been pretty consistent all year, and you talked about not having any real desire to change your scoring. But just wondering if you wanted to go to, say, 7.25%, what would those deals start to look like versus everything you've been doing all year?

I think the distinction between 6%, 8% and 7.25% is probably too fine. So if you give me a permission, I'll answer the question in the 7.75% range. I think you start seeing I think you start seeing assets outside of traditional net lease. So things that are either experiential like Pickleball facilities, or top golf, I think you'd start seeing things like, obviously, challenged brands like Ponderosa or other things like that. Brands that haven't been opening new units for a long time.

I think you've seen things like manufacturing facilities, you'd see medical more office versus the medical retail that we focus on or you'd see things like it's the tenant that you might see us buy, but it's not a retail use. So maybe it's a storage facility or an office -- corporate office, that sort of thing. So we see tons of things at higher cap rates and obviously, lots of things at cap rates where we're not competitive. And our scoring system really allows us to be just passionate and analytical in how we approach it. And we definitely don't sort of calculate or whack out of spread and say, Josh, go out and find things at that cap rate, and we'll hold their nose and buy them. By being disciplined, that's why for a decade or occupancy and collections have been so strong.

Okay. And then I think in your comments, Bill, you maybe alluded to just looking at lots of different things. And does that suggest that you're considering some stuff outside of auto, restaurants or medical or just broadening out kind of within those categories?

Yes. We're always looking for other categories to explore as you look over the last 10 years, our willingness to expand beyond restaurants has allowed us to safely grow faster. We're always looking for new ideas the world of all you have to be willing to consider new things. Nothing to announce on this call, but it's something that we're continually looking at.

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Our next question comes from Mitch Germain from Citizens.

Bill, congrats on 10 years. And I think my question is looking back. I mean, obviously, you've diversified revenues gone into new sectors, but as your core underwriting principles remain somewhat consistent? Or have you been kind of tweaking that as the environment changes?

Thanks for the question, Mitch. I think you were the first research analyst to cover us 10 years ago. It's been a great 10 years. I think the answer is our basic premise is very similar from the beginning. We are not volume driven. We are not trying to scale at all costs we try to be conservative. We try to be analytical.

But I would say that over 10 years, the amount of institutional knowledge that we have has grown substantially. And we tend to bring people in the acquisition group now as in turns, when they're in undergrad, they come to a firm after graduation. And we've instituted a very formal training program. I frankly think it's an exceptional training program. We're bringing people to the firm, training them, giving them exposure to lots of acquisitions, small dollars, but lots of swings at the bat. And I've been very impressed by the quality of people we've been able to attract over the last 10 years. There's no question that I would be -- I would have no chance of getting an internship at Four Corners today.

I appreciate that context. Just curious about Starbucks. I mean, in prior issues that some of your tenants have had, you guys seem to be coming out of many of these situations with little disruption. Obviously, that's a tenant of yours, not that big in terms of size, but clearly, they're going through some sort of reorg plan -- is any of that expected to hit your portfolio?

We don't think so. The -- a lot of the things that are closing are Starbucks that don't have drive crews. and Starbucks that are in urban areas. But as Pat mentioned, we put on our website a list, it's I think 31 pages long of every single tenant. So you can follow along got an extremely granular level. But Starbucks is a great example of the idea that you need to think for yourself when investing.

I think a lot of people Starbucks with very low cap rates. Starbucks often have a kick out in year 5 of their lease. And so while they're marketed is having a long lease term, the tenant has the ability to leave that's why they're able to do so many of these closures Mitch. So we have been cautious on Starbucks. We've been cautious on Starbucks that don't have drive-throughs especially.

Great. And look forward to the next 10 years.

Absolutely.

Our next question comes from Rich Hightower from Barclays.

I apologize, I joined the call a little bit late from another call. But I guess just a follow-up maybe on the Darden upcoming, I guess, renewal option. Where do you sort of peg market rents for those properties? And how do you sort of set the balance in that negotiation coming up between obviously, very high coverage, which we're all very comfortable with and maybe getting a little more rent from a higher-performing space.

Yes. So just to be clear, those leases, Garden has -- and the lease is public. It's in our spin disclosure. So it's 10 years out our lease is public. The way it works is Darden has an option to renew for 5 years at the 1.5% annual rent growth that the entire portfolio has. They have to tell us a year in advance. So the don't tell us.

We have plenty of time to re-lease the building. But their rental rate is accretive by 1.5% from the then in-place rental rate. So the negotiation is actually not nearly as involved as site by site, what's the rent sort of argument.

Okay. That's all I appreciate that. I mean do you -- I guess, in a different world or a different structure, would you assume that market rents are significantly higher, I guess, given some of the underlying revenue growth that those properties or am I barking up the run tree on that.

No, I think you're right. The rents were set quite reasonably. The locations are extraordinarily strong -- and in the last 10 years, replacement cost has gone up very, very substantially, but the tenant has 4 or 5-year extension rates at that 1.5%. So I would just view it as being a very high likelihood that they're going to renew.

Okay. Got it. That's great. And then I guess more broadly, I think a lot of your peers are probably getting the same question this quarter. But just maybe some broader commentary on the level of competition, the breadth and the depth of given some of these new private capital pools that have been raised targeting net lease specifically, who are you running into on deals? And what's your take there?

Yes. So we've always looked at larger transactions in the last 10 years, we've done a handful of them. But our business model is not predicated on waiting for a call that there's a $150 million portfolio or a $400 million portfolio out there. We're always working on something, but that's not our business model. We do those, as I mentioned, but we -- as you can tell from our press release regime, we're doing $3 million one-off acquisitions as well.

And so I'm happy that we don't rely on those larger transactions, as you inferred in your question, I think it's right. There's more competition from private equity folks who are pretty aggressive. And want to scale and have sort of mandates to scale, which is typically not a very wise thing in investing, but that's where they stand.

So we feel very comfortable that we can execute our business plan, have been executing our business plan in our very wide aperture of how we source deals, everything from big portfolios down to $1 million one-offs. But if we were solely looking at portfolios, I think that would be a concern, but that's not where we stand today.

Our next question comes from Wes Golladay from Baird.

With the cost of equity where it is today, I know you have the free cash flow, the debt capacity. But as we look a little further out, would you have any appetite to increase dispositions.

We've done very little dispositions. It's something we can think about. Our portfolio is in really good shape. So you'll largely be selling things that are very high quality. So we fortunately don't have the dynamic that you've seen with a lot of REITs that do dispositions where they're trying to sell assets that are likely to underperform going forward in order to upgrade their portfolio.

Our portfolio is almost all very, very strong. We consider it, we know how to do it. We've done it in the past, a very particular circumstances. But I don't think that, that's top of mind for us today.

Okay. And I think you pretty much essentially asked my next one I was going to see if there's been any change to the watch list of tenants that you're looking at, but does it sound like there's much there of a watch list?

There is -- we're in great shape. And if you know, we've actually increased occupancy. And we have very few unleased buildings. But Justin and the asset management team have done a great job leasing up some of the few ones that are tenants we're in great shape. And actually, because of replacement costs going up so much, the tenants are coming to us proactively on opportunities to either re-tenant of 1 of our few vacant properties, but even coming to us and saying, if you could get this lesser tenant out of the space, we'd love to take it, which is a reflection of where, as I mentioned, replacement cost has gone.

Are you seeing anything with your existing centers that have renewals? I know you don't have that many, but maybe look at the pull? You dropped off there -- can you restate the question? like are you seeing anything where your existing tenants? I know you don't have a lot of tenant renewals coming due, but where the tenant may want to pull forward a renewal just to get prices locked in?

Most of the time, their renewal options are contractual. So they have a cadence where they know when they need to renew buy, and you typically get it right before the renewal. So they can sort of make that decision internally, but they don't have to notify us specifically until a year or 6 months before the leases go.

[Operator Instructions]

We have a question from Jim Kammert from Evercore.

Bill, speaking to your long tenure with many of these assets and your experience in these 3 main silos. Competition is always coming and going, but I think this new property disclosure you provided is very interesting. Is there an opportunity for you to densify a number of your locations? I mean, it looks like they have a pretty solid acreage relative to the improved size -- improved building square footage -- is that not really viable? Just curious.

Yes. Acreage is one of the components of our scorecard. And while obviously building envelope is important typically acreage, it ties to parking and having highly parked locations greatly increases re-leasing opportunity. What can often have if you're not careful is you buy a building that is poorly parked or has ambiguous parking relies on let's say, a neighbor not enforcing their parking situation. And those become difficult to release. So we do focus on it.

It's part of our scorecard, both parking and acreage. That said, I think the opportunity to go to our tenants and say, we'd like to negotiate with you for an additional use is limited. The advantage comes in protecting the downside. -- probably more than upside potential to be honest about it. But that's exactly the kind of thing that you can do with this additional disclosure. -- hopefully, will answer questions before they come up. And I think the shareholders that we've talked through it, appreciate the level of transparency. Thank you.

We currently have no further questions. So I'll hand back to Bill for closing remarks.

Thank you, Claire. In summary, the portfolio remains resilient and unique. Small and fungible buildings leased to sophisticated national operators with scale, which have proven resilient in uncertain times -- we have evidence that strong track record through extremely low bad debt expense, strong occupancy and collection rates. FCPT has shown to be sensitive to our cost of capital by modulating capital raising and investment when necessary. We believe that FCPT is in a very strong position to continue to execute our strategy, no matter the near-term market conditions, having over $270 million of dry powder. It has been a productive decade and we are exceptionally well positioned to continue to execute for our shareholders. Thank you.

This concludes today's call. Thank you all for joining. You may now disconnect your lines.