Four Corners Property Trust, Inc. — 2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. This is an annual filing, not a standalone fourth-quarter report. FCPT is a REIT that primarily owns and leases restaurant and retail properties on a net-lease basis; it also operates seven LongHorn Steakhouse restaurants through its Kerrow subsidiary.
Business context and portfolio
- At year-end, FCPT had 919 rental properties across 46 states, totaling approximately 6.0 million square feet. Occupancy was 99.9%, remaining lease term averaged 9.3 years, average annual rent escalation was 1.4%, and investment-grade tenancy represented 63.6% of annualized base rent.
- FCPT invested $268.4 million in 2021, including capitalized transaction costs, acquiring 122 rental properties and ground-lease interests. The portfolio included 112 tenant brands; non-restaurant retail generated 9.6% of total revenue.
- Tenant and brand concentration remains significant: Darden accounted for 59.4% of annual cash base rent, and Olive Garden represented 44.4% of portfolio cash base rent. Texas and Florida accounted for 10.9% and 10.5% of annual base rent, respectively.
Financial performance and key metrics
Amounts below are in millions except per-share data. The filing reports full-year figures.
| Metric | 2021 | 2020 | Change |
|---|---|---|---|
| Total revenue | $199.4 | $170.9 | +16.6% |
| Rental revenue | $172.8 | $154.7 | +11.7% |
| Restaurant revenue | $26.6 | $16.2 | +63.8% |
| Net income | $85.7 | $77.6 | +10.5% |
| Net income available to common shareholders | $85.6 | $77.3 | +10.7% |
| Diluted earnings per share | $1.11 | $1.08 | +2.8% |
| FFO | $120.0 | $106.9 | +12.3% |
| AFFO | $120.1 | $103.6 | +15.9% |
| FFO / AFFO per diluted share | $1.56 / $1.56 | $1.49 / $1.44 | +4.7% / +8.3% |
| Cash provided by operating activities | $122.4 | $91.5 | +33.8% |
- Rental revenue rose primarily from a full year of contribution from 2020 acquisitions and the 122 properties acquired in 2021. Restaurant revenue improved with easing capacity restrictions and the opening of a seventh Kerrow restaurant in April 2021.
- Total operating expenses increased to $82.1 million from $64.1 million; interest expense rose to $32.6 million from $29.2 million, partly reflecting financing costs from the amended credit facility and the 2021 notes issuance.
- Net margin was approximately 43.0% in 2021 versus 45.4% in 2020, calculated as net income divided by total revenue. This comparison reflects the different contribution and cost profile of restaurant operations as well as the REIT business.
- Capital investment in real estate was $268.4 million. Cash and cash equivalents were $6.3 million at year-end, down from $11.1 million. Net cash used in investing activities was $264.9 million; financing activities provided $137.7 million.
- Year-end debt was $886 million in principal: $400 million of term loans, $36 million drawn on the revolver, and $450 million of fixed-rate notes. The balance-sheet carrying amount, net of deferred financing costs, was $877.6 million. Revolver availability was $214 million at year-end; FCPT reported $191 million available as of February 22, 2022.
- FCPT collected 99.9% of contractual portfolio base rent in 2021 and reported no rent abatements or deferrals during the year. The 2021 dividend declared was $1.285 per share; the filing also states a current annual dividend rate of $1.33 per share.
Material changes, outlook and notable items
- FCPT expanded and diversified through acquisitions and a $100 million issuance of senior unsecured notes at fixed rates of 2.74% and 2.99%. It also sold 4.20 million shares through its ATM program for net proceeds of approximately $116.5 million, used for acquisitions and general corporate purposes.
- The June 2021 credit agreement amendment reset term-loan maturities across 2023–2026 and extended the revolving facility maturity to November 2025, with an extension option. Management expects to extend or refinance before maturity. FCPT was in compliance with debt covenants at year-end and held a Fitch BBB- investment-grade rating.
- FCPT entered agreements for an additional $125 million of senior notes, scheduled to fund in March 2022, at fixed rates of 3.11% and 3.09%. It also reported $2.8 million of acquisitions through February 22, 2022.
- Management’s strategy is to pursue acquisitions that meet return and financing objectives, expand third-party tenants and non-restaurant retail exposure, maintain balance-sheet flexibility, and provide attractive and growing quarterly dividends. The filing gives no quantified earnings or acquisition guidance and no fixed acquisition schedule.
- COVID-19 remained a stated risk to tenants, rent collection, capital access and property values, although 2021 collections were strong. Other principal risks include dependence on Darden and major tenants, restaurant-sector and Olive Garden concentration, inflation and tenant cost pressures, interest-rate exposure, refinancing and debt covenant risk, and natural disasters, environmental liabilities and property re-leasing risk.
- Three hundred million dollars of debt was effectively fixed through interest-rate swaps, according to the market-risk discussion. The filing also describes LIBOR transition uncertainty and recommends SOFR as a potential replacement. A hypothetical 1 percentage point decline in rates was not expected to materially affect year-end financial position, results or cash flows.
- FCPT reported no impairment charges in 2019–2021. The auditor identified assessment of long-lived-asset impairment indicators as a critical audit matter, particularly management’s estimated holding period; the financial statements received an unqualified audit opinion, and internal control over financial reporting was found effective.
- Management said ordinary-course litigation was not expected to materially affect results, financial condition or liquidity. No material environmental or ADA non-compliance was identified by management, and no off-balance-sheet arrangements were reported.
Important facts for investors to verify
- Assess Darden’s and other major tenants’ credit and operating performance, lease guarantees, renewal prospects, and FCPT’s progress in reducing tenant and Olive Garden concentration.
- Reconcile debt principal, revolver availability and swap notionals across the filing, and review upcoming maturities, interest-rate exposure, LIBOR transition terms and covenant headroom.
- Compare the $1.285 dividend declared for 2021 and the stated $1.33 current annual rate with AFFO, cash from operations, debt service and future capital needs; remember FFO and AFFO are non-GAAP measures and may not be comparable across REITs.
- Review acquisition pricing, lease terms, tenant credit quality and the performance of newer non-restaurant investments, including whether portfolio diversification supports management’s strategy.
- Monitor rent collection, tenant health, inflation-related cost pressures, and the assumptions underlying straight-line rent, property valuations and impairment assessments.