Four Corners Property Trust, Inc. (NYSE:FCPT) Q2 2020 Earnings Conference Call - Final Transcript

Jul 30, 2020 • 11:00 am ET


Four Corners Property Trust, Inc. (NYSE:FCPT) Q2 2020 Earnings Conference Call - Final Transcript


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William Lenehan

importantly, these concessions include lease term extensions, increased financial reporting, guarantor improvement, annual rent bumps, swapping fair market rent adjustments for stable contractual rent, and incremental percentage rent, amongst other terms.

Despite the ongoing difficulties in coping with the pandemic, through these difficult negotiations, we have longer contracts release duration and higher rent growth than we had going into this, and believe we have strengthened our working relationships with many of our tenants. In essence, the stance we've taken over the last few months is that, FCPT is always willing to listen to and work with our tenants, but we need to make sure that we are capturing value for our shareholders as part of any occasion, where we open the lease document.

Free rent relief and deferment is not something FCPT has provided to any tenant and we were careful not to rush to negotiations in the early days of the pandemic when operators were most fearful of the environment. It was very helpful that we've acquired and scored in our investment model all of these properties from the past few years. This proved important in determining where we wanted to focus our efforts in lease modification discussions.

Nearly all deferment and abatement was contained within the second quarter, which resulted in our step-up for July collections to over 99% of rental payments. We expect the collection trend to continue going forward and that remaining outstanding rent balances for April through June will reach resolution in the very near-term. We do note that for a very small number of tenants we established a minimal credit reserve for the second quarter rents.

Please note that we've included a new slide in our quarterly supplemental entitled COVID-19 Rent Collections Update, which summarizes the rent collection deferral and abatement numbers we've disclosed in tabular form. I think you'll find it very helpful.

The reopening of the country and the impact on restaurant traffic will continue to be a fluid situation and, of course, is hard to predict. As we've said in the last quarter, however, we continue to believe that strong operators like Darden, Brinker, Bloomin' Brands, RBI and others in our portfolio should benefit in the long run from their scale, and in the near term from the investment technology, specifically off-premise and to-go capabilities.

It is worth calling out that in an environment like this is exactly why FCPT has focused on low rent properties with strong sales and rent coverage and on fortified balance sheets. We observed many tenants in the quick service and casual dining sectors returns to sales near 2019 levels by late June. In the case of quick service operators, some even exceeded 2019 sales levels. This is despite one of the most challenging operating periods in restaurant industry. And yet, despite these challenges, we believe our portfolio remains very healthy.

The coming months will undoubtedly continue to have market volatility and consumer behavior mix shift once again, but we believe that our conservative underwriting we