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| Statement |
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| This reinforces our confidence that rents are set at attractive levels for the tenants in our portfolio |
| Additionally, while it's not reflected directly in the numbers, the quality of these properties was also particularly strong in 2023 versus prior years, given the reduced number of active net lease buyers in the market, which allowed FCPT to be very selective |
| Our existing portfolio is performing exceptionally well with 99.8% rent collections for the quarter and 99.8% occupancy at quarter end |
| And based on our strong credit profile and recent conversations with multiple banks in our lender group, we expect that the bank market remains open to us at an attractive cost of capital amongst the many options we have available when thinking about this maturity |
| And our continued progress in outpacing prior year's volume reflects our growing capacity |
| We are fortunate that even our weakest performing stores are able to be sold at attractive cap rates and recycled into our investments accretively |
| This remains amongst the strongest coverage within the net lease industry |
| Finally, we benefit from low absolute and relative overhead and can be nimble and modulate our investment activities up and down without negatively impacting the organization or employee morale |
| All three brands saw margins expand as well as commodity and labor inflation easing |
| We continue to monitor the market and expect to have more favorable opportunities and more attractive pricing in 2024 compared to 2023 |
| For the fourth quarter, our cash rental revenues grew 15.8% on a year-over-year basis, including the benefit of rental increases and the $333 million of acquisitions that were closed in the last 12 months |
| That was up 16% from our full year 2022, which was also a previous record acquisition year |
| And Chili's saw same-store sales rise 5% for the most recent quarter ended December 27 |
| Year-over-year for the restaurant sector as a whole remained positive in the fourth quarter in the 4% range according to Baird research |
| We are benefiting from establishing verticals in medical retail, auto services and other retail in addition to restaurants, our historical core area of focus |
| So it really is being able to very quickly ignore properties that we still see every once in a while that are priced very aggressively or have very high rents or have small, unproven tenants |
| We believe that we are prepared to operate successfully in today's environment and expect to ratchet up activity when we believe it is accretive to do so |
| Our portfolio today stands at 99.8% occupancy and remains well positioned with only 1.3% and 2.2% of annual base rent maturing in 2024 and 2025, respectively |
| Maybe to add to my comments and segue this to Anthony's previous question, we are very happy that we didn't do novel net lease in the last handful of years |
| FCPT had a record acquisition year with $333 million of capital deployed in 2023 |
| It reminds us that even if the capital markets continue to be challenging, our portfolio has immense value that can be unlocked through selective dispositions |
| Cap rates have widened, and we have found interesting investment opportunities that Pat will elaborate on |
| Well, pleased to have the call conclude in about the 20-minute mark as we were able to accomplish in our early days |
| But I would say that the cap rates, we're seeing good stuff to do in the low 7s |
| We reported fourth quarter AFFO of $0.43 per share, which is up $0.02 or 4.9% from Q4 last year |
| We started the first quarter of 2024 with $234 million of available capacity on our revolving credit facility, very minimal near-term debt maturities and highly attractive properties to sell to 1031 buyers if we choose to access that source of liquidity |
| Our overall cap rate for the year was 20 bps higher than our previous year's acquisitions despite a large long-term investment-grade transaction with Darden as the tenant |
| Darden was a standout from that trend, reporting same-store sales growth of 4.1% and 4.9% for Olive Garden and LongHorn, respectively for their quarters ending November 26 |
| As mentioned earlier though, we believe that our team is entirely equipped to transact where it meets our underwriting criteria and is still accretive |
| All that said, the team is laser-focused on building an accretive pipeline while minimizing risk |
| Statement |
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| As we look ahead, the current capital market environment is making it challenging to deploy capital accretively |
| The macro backdrop continues to be uncertain |
| Although the casual dining sector is seeing small declines off strong levels in the prior year period |
| As such, we moderated our acquisitions volume down in Q4 despite the last few months historically being our busiest time of the year |
| Obviously, the recent Fed commentary has sent the market up and down seemingly on a daily basis |
| Connor Siversky In the opening remarks, you mentioned the elevated level of broker deal costs that impacted acquisition volumes |
| After utilizing these funds, we slowed down acquisition activity in the second half of the year to reflect the impact of higher interest rates on equity and debt sources of capital |
| Our assumptions are not a guarantee of future performance, and some will prove to be incorrect |
| I would also highlight that an impact of purposely slowing down acquisition activities in 2023 was an elevated level of broken deal costs, which increased property expenses by approximately $250,000 versus the 2022 level |
| We sold one Red Lobster property in October in Q4 last year that was underperforming versus brand average for $3.8 million, representing a small gain |
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