Four Corners Property Trust (NYSE:FCPT announced that it has signed a definitive agreement for the purchase of 20 additional outparcel properties from Washington Prime Group (NYSE: WPG), for a purchase price of approximately $37.8 million. This pricing reflects a mid-six percent capitalization rate on in-place net operating income. This transaction includes 12 restaurant properties as well as 8 properties operating in other retail sectors. While this transaction represents FCPT’s first investments outside of restaurant net lease, it is consistent with a well developed and previously articulated strategy to diversify our investments over time. Initially FCPT’s efforts to diversify focused on acquiring high quality assets across the restaurant sector. We are pleased to report that FCPT is well along the path to accomplish this objective. FCPT’s holdings outside of Darden concepts have risen from 0% of rental income at inception to approximately 25% at the end of Q2 2019. Given the strong progress made on this diversification effort to date, the Company intends to continue its initial work and measured steps to diversify beyond restaurants.
The transaction is a continuation of the strategy announced in September 2017 to acquire 41 restaurant outparcels from WPG. Since that announcement, 33 properties have closed for $50.0 million, 1 property was removed during due diligence, and 4 were added to the portfolio to bring the total deal size up to 44 properties for approximately $70 million. Closing for the remaining 11 properties from the September 2017 announcement, as well as for the 20 properties in the new transaction, are expected to occur in rolling tranches as the properties become available to be conveyed, subject to due diligence and customary closing conditions.
The 20 additional outparcels span 17 brands, of which 9 will be new to FCPT’s portfolio, including 6 non-restaurant brands. The restaurant brands include Buffalo Wild Wings, Chick-fil-A, Chili’s (2), Chipotle, Olive Garden, Outback Steakhouse, Raising Cane’s, Slim Chickens, Starbucks, Texas Roadhouse, and Wendy’s. The non-restaurant brands include Citibank, Firestone, Jared Jewelry (2), JPMorgan Chase, PNC, and Wells Fargo. The non-restaurant properties share similar qualities as FCPT’s restaurant assets: nearly identical locations, comparable building sizes, predictable growing rental streams, similar net-lease structures, and strong tenancy with credit-worthy operators. Of the 20 properties, 19 are leased to the brand’s corporate entity. Further, each property has a separate individual lease and the leases have a current weighted average remaining term of approximately 8 years.
Bill Lenehan, CEO of Four Corners Property Trust added: “Washington Prime has always been best-in-class at identifying value for their shareholders and been an excellent partner for us. We are enthusiastic to announce our first foray into the non-restaurant, retail net-lease space with them and look forward to continue building on the relationship. These non-restaurant outparcels share similar qualities as our current restaurant assets and will be great additions as we further diversify our portfolio. We look forward to leveraging our deal sourcing ability and acquisition infrastructure to grow in both restaurant and non-restaurant net lease sectors.”
Lou Conforti, CEO and Director of Washington Prime Group stated: “Very rarely does a company have the ability to consummate multiple transactions with the same counterparty whereby there is truly reciprocal benefit and mutual respect. Our continued interaction with FCPT illustrates just such a relationship. Plain and simple, FCPT adds to their growing portfolio of high quality credit tenant lease product and WPG procures cost advantaged capital.”
The retail outparcels are located within highly trafficked corridors in Connecticut, Florida, Illinois, Indiana, Iowa, Kentucky, North Carolina, New York, Ohio, Pennsylvania, Texas, and Virginia. Approximately 51% of the net operating income is from properties on out-lots to WPG’s Tier One properties and the remaining 49% are from WPG’s Open Air assets.
FCPT, headquartered in Mill Valley, CA, is a real estate investment trust primarily engaged in the acquisition and leasing of restaurant 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.