FCPT Announces New $85 Million Term Loan Under Existing Credit Facility

Rhea-AI Summary

Four Corners Property Trust (FCPT) announced an $85 million Term Loan agreement to pay down near-term debt and fund acquisitions. The Term Loan matures in March 2027 with a 12-month extension option. FCPT also entered into interest rate swaps to fix the rate at 3.94% through maturity. The effective interest rate on the Term Loan is 4.89%.

Insights

Financial Analyst

The announcement by Four Corners Property Trust (FCPT) regarding the new $85 million term loan is a strategic financial move that deserves attention. By paying down the $50 million of private notes due in June 2024, FCPT is effectively managing its debt profile, which can be seen as a proactive step in liquidity management. This action not only improves the company's near-term financial flexibility but also reduces potential refinancing risk associated with the upcoming debt maturity.

Furthermore, the decision to lock in the interest rate at 3.94% through interest rate swaps is a prudent hedge against potential rising interest rates, which can be a significant concern for real estate investment trusts (REITs) as they often carry a substantial amount of interest-bearing debt. The effective interest rate of 4.89%, given the company's current investment grade ratings, appears competitive in the current economic environment, potentially leading to interest savings over the term of the loan.

Investors should note that the company's emphasis on maintaining an investment-grade balance sheet is indicative of a conservative financial strategy, which could be favorable for the stock's risk profile. The additional capital for acquisitions also signals potential growth, albeit it's important to monitor how effectively this capital is deployed to generate returns.

Market Research Analyst

FCPT's entry into a new term loan and the subsequent interest rate swap transaction indicate a strategic move to optimize its capital structure within the real estate market. Given the company's focus on net-leased restaurant and retail properties, the additional capital for acquisitions could allow FCPT to take advantage of market opportunities and expand its portfolio in a sector that has been experiencing a post-pandemic recovery.

It's important to consider the broader market implications of such financial maneuvers. Access to capital at a fixed interest rate provides FCPT with a predictable cost of debt, which is essential for long-term budgeting and investment planning. This stability can be an attractive quality for investors who are risk-averse, especially in an industry where cash flow predictability is highly valued.

The involvement of multiple reputable financial institutions in this deal also serves as a positive signal to the market regarding FCPT's creditworthiness and the trust these institutions have in the company's financial health and management.

Real Estate Investment Expert

From a real estate investment perspective, FCPT's actions reflect a strategic approach to capital management within the REIT sector. The use of the accordion feature in their Credit Agreement to secure additional funds demonstrates a well-planned financial structure that provides flexibility for future growth. The term loan's maturity in 2027, with an option for a twelve-month extension, offers a timeline that aligns well with the typical investment horizon in real estate, allowing for potential property acquisitions and value-add strategies to materialize.

Investors should recognize that the company's strategy to address its only near-term debt maturity effectively reduces the risk of a liquidity crunch. This is particularly relevant in the real estate sector where cash flow management is critical due to the cyclical nature of property markets. The commitment to a strong balance sheet and the focus on maintaining investment grade ratings are positive indicators of FCPT's risk management practices, which are essential for sustaining investor confidence in a REIT.

MILL VALLEY, Calif.--(BUSINESS WIRE)-- Four Corners Property Trust (NYSE:FCPT), a real estate investment trust primarily engaged in the ownership and acquisition of high-quality, net-leased restaurant and retail properties (“FCPT” or the “Company”), announced today that the Company entered into an Incremental Amendment to the Third Amended and Restated Revolving Credit and Term Loan Agreement with a group of existing lenders (the “Credit Agreement”). The Company utilized the accordion feature of the Credit Agreement to enter into a new $85 million term loan (the “Term Loan”). The Term Loan matures in March 2027 with one twelve-month extension exercisable at the Company’s option, subject to certain conditions. The Term Loan will be fully drawn at close and will be used to pay down the $50 million of private notes maturing in June 2024 as well as for acquisitions and other general corporate purposes.

Bill Lenehan, Chief Executive Officer of FCPT, commented “We are very appreciative of the support of our existing bank partners. This Term Loan allows us to pay down our only near-term debt maturity at a favorable borrowing cost and provides additional capital for acquisitions. This transaction highlights FCPT's commitment to a strong, investment grade-balance sheet, and positions the Company well with our next maturity not scheduled until November 2025.”

In conjunction with the Term Loan, the Company entered into $85 million of interest rate swaps to fix the reference rate at 3.94% through maturity. Including a credit margin of 0.95% determined under the Credit Agreement by FCPT’s current investment grade ratings of BBB/Baa3 (Fitch/Moody’s), the effective interest rate on the Term Loan is 4.89%.

Barclays Bank PLC acted as Syndication Agent and Joint Lead Arranger on the Term Loan with J.P. Morgan Chase Bank, N.A. remaining as administrative agent. The additional lenders acting as Joint Lead Arrangers and Co-Documentation Agents were The Huntington National Bank, Mizuho Bank, Ltd, Raymond James Bank, Truist Bank, and Wells Fargo Bank, N.A..

About FCPT

FCPT, headquartered in Mill Valley, CA, is a real estate investment trust primarily engaged in the ownership, acquisition and leasing of restaurant and retail properties. The Company seeks to grow its portfolio by acquiring additional real estate to lease, on a net basis, for use in the restaurant and retail industries. Additional information about FCPT can be found on the website at www.fcpt.com.

Cautionary Note Regarding Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the federal securities laws. Forward-looking statements include all statements that are not historical statements of fact and those regarding FCPT’s intent, belief or expectations, including, but not limited to, statements regarding: the Company’s operating and financial performance, the funding of the Term Loan and intended use of proceeds. Words such as “anticipate(s),” “expect(s),” “intend(s),” “plan(s),” “believe(s),” “may,” “will,” “would,” “could,” “should,” “seek(s)” and similar expressions, or the negative of these terms, are intended to identify such forward-looking statements. Forward-looking statements speak only as of the date on which such statements are made and, except in the normal course of FCPT’s public disclosure obligations, FCPT expressly disclaims any obligation to publicly release any updates or revisions to any forward-looking statements to reflect any change in FCPT’s expectations or any change in events, conditions or circumstances on which any statement is based. Forward-looking statements are based on management’s current expectations and beliefs and FCPT can give no assurance that its expectations or the events described will occur as described. For a further discussion of these and other factors that could cause FCPT’s future results to differ materially from any forward-looking statements, see the section entitled “Risk Factors” in FCPT’s most recent annual report on Form 10-K, and other risks described in documents subsequently filed by FCPT from time to time with the Securities and Exchange Commission.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240314251704/en/

Four Corners Property Trust:

Bill Lenehan, 415-965-8031

CEO

Gerry Morgan, 415-965-8032

CFO

Source: Four Corners Property Trust

FAQ

What did Four Corners Property Trust (FCPT) announce?

FCPT announced an $85 million Term Loan agreement to pay down near-term debt and fund acquisitions.

When does the Term Loan mature?

The Term Loan matures in March 2027 with a 12-month extension option.

What is the effective interest rate on the Term Loan?

The effective interest rate on the Term Loan is 4.89%.

Who acted as Syndication Agent and Joint Lead Arranger on the Term Loan?

Barclays Bank PLC acted as Syndication Agent and Joint Lead Arranger on the Term Loan.