Four Corners (FCPT) Buys Properties for $4.2M, Boosts Growth
Four Corners Property Trust FCPT recently shelled out $4.2 million for the acquisition of two Oak Street Health properties located in the highly trafficked corridors in Iowa and Louisiana. The move is in line with the FCPT’s portfolio-expansion efforts, with real estate leased to strong credit operators.
The buyout of the properties, which are corporate-operated under long-term, net leases, was priced at a cap rate in range with prior FCPT transactions. The properties add a reliable stream of income to the company’s already impressive portfolio, making the buyout a strategic fit.
This real estate investment trust (REIT) is mainly engaged in the ownership and acquisition of high-quality, net-leased restaurant and retail properties. It usually leases its properties to creditworthy tenants through net lease arrangements. This shifts most of the costs relating to the properties to the tenant, paving the way for stable rental revenue generation.
In December 2023, the company concluded the purchase of two Popeyes properties for $4.7 million. The properties are strategically located in the strong retail corridors in Arizona and Illinois and are occupied under a long-term, triple net lease with roughly 20 years of residual term. The transaction was priced at a cap rate in range with earlier FCPT transactions.
In the same month, FCPT acquired a Tire Discounters property each in Kentucky and Ohio for $1.8 million and $1.7 million, respectively, through sale-leaseback transactions.
Further, in November 2023, the company purchased a Taco Bell property situated in a strong retail corridor in Oklahoma for $2.2 million. The property is a franchisee-operated under a triple net lease to K-MAC Enterprises, LLC, with around five years of residual term. Priced at a cap rate on rent of 7.3% as of the closing date, excluding transaction costs, the transaction seems prudent.
The company’s efforts to invest in additional restaurant and retail properties to expand and diversify its existing portfolio bode well for long-term growth. In the nine months ended Sep 30, 2023, FCPT acquired 90 properties for $328.5 million, inclusive of transaction costs. The properties are 100% occupied under net leases with a weighted average remaining lease term of 11.9 years.
However, FCPT’s expansion might face potential headwinds in a high interest rate environment, which could increase borrowing costs for future acquisitions. Nonetheless, the company’s investment strategy focused on properties with strong credit operators and long-term leases could help cushion these challenges.
FCPT currently carries a Zacks Rank #4 (Sell).
The company shares have lost 12.9% in the past three months against the real estate market’s growth of 15.3%.
Image Source: Zacks Investment Research
Stocks to Consider
Some better-ranked stocks from the REIT sector are Rexford Industrial Realty REXR, Stag Industrial STAG and Park Hotels & Resorts PK. While PK sports a Zacks Rank #1 (Strong Buy) at present, REXR and STAG carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Rexford Industrial Realty’s 2023 FFO per share is pegged at $2.18, indicating a year-over-year increase of 11.2%.
The Zacks Consensus Estimate for Stag Industrial’s 2023 FFO per share stands at $2.28, suggesting year-over-year growth of 3.2%.
The Zacks Consensus Estimate for Park Hotels & Resorts’ 2023 FFO per share is pegged at $2.03, implying a year-over-year rise of 31.8%.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
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