Four Corners Property Trust, Inc. (FCPT) — 2022 Form 10-K
Business context and reporting period. This annual report covers the fiscal year ended December 31, 2022; it reports full-year results, not standalone fourth-quarter results. FCPT is a REIT that primarily owns and leases restaurant and retail properties on a net-lease basis, and also operates seven LongHorn Steakhouse restaurants through its Kerrow subsidiary. At year-end, FCPT reported 1,023 rental properties in 47 states, 99.9% occupancy, an 8.3-year weighted-average remaining lease term, and 1.42% average annual rent escalations through 2027.
Financial and operating results
| Metric | 2022 | 2021 | Change |
|---|---|---|---|
| Total revenue | $223.2 million | $199.4 million | +12.0% |
| Rental revenue | $193.6 million | $172.8 million | +12.0% |
| Restaurant revenue | $29.6 million | $26.6 million | +11.4% |
| Net income | $97.9 million | $85.7 million | +14.2% |
| Net income available to common shareholders | $97.8 million | $85.6 million | +14.2% |
| Diluted EPS | $1.20 | $1.11 | Up $0.09 |
| Operating cash flow | $142.0 million | $122.4 million | +16.0% |
| FFO per diluted share | $1.60 | $1.56 | +2.6% |
| AFFO per diluted share | $1.64 | $1.56 | +5.1% |
Operating expenses were $97.3 million, including $41.5 million of depreciation and amortization; interest expense was $36.4 million. The filing does not present a single consolidated operating-margin measure. Rental revenue growth reflected a full year of contribution from 2021 acquisitions and 115 properties and ground leasehold interests acquired in 2022. Restaurant revenue rose with increased guest traffic and a full year from the seventh restaurant; restaurant expenses also increased, and the segment reported $0.2 million of net income.
Cash flow from operations was $142.0 million; investing activities used $270.9 million, primarily for $296.3 million of real estate investment, partly offset by sale proceeds. Financing activities provided $148.9 million, including $141.8 million net ATM equity proceeds. Year-end cash and cash equivalents were $26.3 million.
At December 31, 2022, debt principal comprised $430 million of variable-rate term loans and $575 million of fixed-rate senior notes; there were no revolver borrowings and $250 million of revolving capacity remained available. Balance-sheet long-term debt, net of financing costs, was $995.5 million. FCPT reported total assets of $2.20 billion and total liabilities of $1.06 billion. Interest-rate swaps covered $325 million of variable-rate exposure, and the company reported compliance with all debt covenants. The filing cites investment-grade ratings of BBB from Fitch and Baa3 from Moody’s.
Material changes and notable items
- FCPT invested $296.3 million in 115 property and ground-leasehold acquisitions during 2022, compared with $268.4 million for 122 properties in 2021. Its portfolio included 131 tenant brands; non-restaurant retail represented 14.7% of total revenue.
- Rental revenue increased $20.8 million. General and administrative expense rose $2.4 million, and depreciation and amortization rose approximately $6.6 million, primarily reflecting portfolio growth and higher staffing, compensation, audit, and IT costs.
- FCPT sold eight properties for a net realized gain of $8.1 million, compared with two properties and a $0.4 million gain in 2021. No impairment provision was recorded in 2022, 2021, or 2020.
- FCPT issued 5.25 million shares under its ATM programs in 2022 for $141.8 million of net proceeds. A new ATM program authorized sales of up to $450 million; $376.9 million remained available at year-end.
- Dividends declared were $1.3375 per share for 2022; the company stated its current annualized dividend rate was $1.36 per share. Dividends are subject to Board discretion and available cash.
Outlook, risks, and contingencies
The filing provides no specific 2023 earnings or acquisition guidance. Management describes a strategy of pursuing appropriately priced acquisitions, broadening the tenant and property mix beyond Darden and restaurants, maintaining balance-sheet flexibility, and providing attractive and growing quarterly dividends. The company cautions that forward-looking expectations are uncertain.
- Tenant and brand concentration: Darden represented approximately 54.3% of annual cash base rent; Brinker represented 8.5%. Olive Garden alone represented 40.5% of annual cash base rent. Tenant financial health, lease renewals, and re-leasing outcomes are significant risks.
- Rates and inflation: Higher interest rates could raise borrowing and refinancing costs, affect tenant finances, and pressure property values. Contractual rent increases may not keep pace with inflation.
- Other risks: Real estate illiquidity, acquisition execution and financing, restaurant-industry competition, geographic exposure, casualty and environmental liabilities, regulation, cybersecurity, and maintaining REIT qualification could affect results, liquidity, or distributions.
- Contingencies and controls: FCPT reported ordinary-course litigation that management did not expect to have a material adverse effect. Management and the auditor concluded internal control over financial reporting was effective; the auditor issued unqualified opinions on the financial statements and controls.
Investor facts to verify
- Reconcile the portfolio counts: the filing describes 1,023 rental properties, while its state diversification table totals 1,043 leases.
- Review Darden’s and Brinker’s financial condition, rent coverage, lease terms, and renewal exposure, including Olive Garden concentration.
- Assess debt maturities, variable-rate exposure after hedges, covenant headroom, and access to financing in higher-rate markets.
- Track acquisition returns and the effects of ATM issuance on share count and per-share AFFO; compare the dividend with recurring cash generation.
- Distinguish recurring operating performance from the $8.1 million property-sale gain and review the assumptions behind non-GAAP FFO and AFFO.