Hello, everyone, and thank you for joining the FCPT Fourth Quarter 2025 Financial Results Conference Call. My name is Claire and I will be coordinating your call today. [Operator Instructions] I will now hand over to Patrick Wernig, Chief Financial Officer, to begin. Please go ahead.

Thank you, Claire. During the course of this call, we will make forward-looking statements, which are based on our beliefs and assumptions. Actual results will be affected by known and unknown factors that are beyond our control or ability to predict. Our assumptions are not a guarantee of future performance and some prove to be incorrect. For a more detailed description of potential risks, please refer to our SEC filings which can be found at fcpt.com. All the information presented on this call is current as of today, February 12, 2026, In addition, reconciliation to non-GAAP financial measures presented on this call such as FFO and AFFO can be found in the company's supplemental report. Now I will turn the call over to Bill.

Good morning. Following my initial remarks, Josh will comment on our investment activity, and Patrick will discuss financial results and capital position. This past November marked our 10-year anniversary as a public company. Over the past decade, we have grown from just 4 employees with 418 properties leased to a single tenant into a platform with 44 team members and 1,325 leases. We've acquired $2.3 billion of properties and paid out over $1 billion of dividends to our shareholders. We are proud of the portfolio and company and we've built and look forward to continuing our mission to drive shareholder value by a conservative and thoughtful capital allocation. During Q4, we acquired $95 million of net lease properties at a 7% blended cap rate. In total during 2025, we acquired $318 million of net lease properties. We largely funded these acquisitions with equity we raised on the ATM via forward issuance. One important note on our acquisition volume as we accomplished this without the benefit of any large portfolio transactions. Most of the deals in 2025 were midsized transactions between $5 million and $20 million furthering our extremely granular and selective portfolio construction via a high-quality acquisition. And we did this while staying the course of what has become core to FCPT's brand a focus on attractive real estate occupied by creditworthy tenants without sacrificing quality for volume or adding investment spread. Even in an era of increased competition for larger net lease portfolios, we believe that we have a business model that can scale and source attractive opportunities for growth. Our in-place portfolio retains its fortress quality with 0 exposure to problematic retail sectors such as theaters, pharmacies, high-rent car washers and experiential retail. We have sidestepped major tenant credit issues, including 0 bad debt expense in 2025 and…

Thanks, Bill. I'll start with a review of this quarter's activity and more details on 2025 investments. In Q4, we acquired 30 properties with a weighted average lease term of 10 years for $95 million and a blended 7% cap rate. This is a 20 basis point expansion over the previous quarter and our highest blended cap rate in 2025. We finished the year with 105 properties acquired for $318 million at a 6.8% blended cap rate. This represents an average basis of $3 million per property and continues our strategy of partnering with creditworthy operators in selecting fungible, low-basis properties to further protect against any downside. Looking back, 2025 was one of our busiest years to date. Our total investment volume increased 20% from 2024, and we have 53 unique transactions. Said another way, our team was able to post stellar results without reliance on large portfolio transactions. This is important to note because, one, these large deals often command pricing premiums for the ease of putting a greater amount of capital to work. And two, they often require buyers to accept all or nothing, where a good chunk of properties may not fit our underwriting thresholds. That said, our team remains capable and ready to execute on these larger opportunities when the right deal comes around, but we are encouraged our platform can still post significant volume in years where we do not anchor a large portfolio deal sitting in the market. In Q4, we also expanded the team's capabilities outside of our main 3 categories, restaurants, automotive service, and medical retail with our acquisition of a Sprouts grocery store and our first equipment rental acquisition of the United Rentals property. As Bill mentioned, our team is constantly evaluating new opportunities in adjacent sectors to understand the resilience…

Thanks, Josh. I'll start by talking about capital sourcing and the state of our balance sheet. We have full capacity on our $350 million revolver and feel that we have the liquidity to continue executing our business plan in Q1 and into 2026. With respect to leverage at the end of Q4, our net debt to adjusted EBITDAre was just 4.9x inclusive of outstanding net equity. Excluding our forward equity balance, our leverage is 5.1x. This is our sixth consecutive quarter of leverage below 5.5x at the very bottom of our stated leverage range of 5 to 6x. We've now fully settled our forward equity balance in 2025, but with a fully available revolver we feel we still have ample capacity on the debt side. After including debt capacity and free cash flow, we have over $220 million in liquidity before reaching 5x leverage and substantially more than that before approaching 6x. Said another way, we believe we could utilize lower interest rate debt for our acquisitions in 2026 and still remain under our self imposed leverage. As always, we aim to be opportunistic to achieve the best cost of capital in our funding decision based on the market. We're encouraged by the current state of the term loan market, which was much more constrained just a few years ago. As a reminder, 5-year term loans have historically been priced at 95 basis points over SOFR or an all-in rate today of approximately 4.6% after swaps and before fees. Private placement notes would be higher than that, but also accretive to current market cap rates while offering longer-term [indiscernible]. We have 95% of our floating rate debt fixed through November 2027 at 3% versus spot rates today at 4%. Overall, 98% of our debt stack is fully fixed and our…

[Operator Instructions] Our first question comes from Michael Goldsmith from UBS.

First question is on the move into United Rentals and industrial outdoor storage. Can you just talk a little bit about the market you see there, maybe the total addressable size, it feels like some of your net lease peers have been moving into that space. So what would you see from like a competition perspective there? And then if you could talk a little bit about how the cap rates in that space compared to the rest of your portfolio, that would be helpful.

Thanks, Michael. Well, I'd say I've been following the sector for a long time, I was Chair of the Investment Committee at Gramercy 15 years ago, and we were doing quite a bit of this. It's attractive. It's a lot of the value is in the land residual. If you're careful, you can get in at a good basis there's creditworthy tenants. It's hard to get new sites entitled. So there's some entrenchment if you can find an existing site, a very large addressable market, very defensive and cap rates that make sense. So we've looked at a lot of them we'll continue to pursue that strategy. There are players who focus on it now. One of them was just taken private by Brookfield, but it's an attractive space, as is grocery, by the way. But we found that very often high credit grocers have a much chunkier purchase price than we typically plan. But we're looking at both of those sectors and others on a continuous basis. But to answer your question on TAM, we can get back to you, but it's enormous compared to the size of our company.

Got it. And then second question, just following up on Bahama Breeze. It sounds like you got ahead of this a little bit in the prior year. So you still have a little bit of exposure here. I guess like can you just kind of -- I guess the question is just it sounds like rents are about the same of where -- like the level of interest is high, but rents are about the same, is that the right -- is that the case? And then also like if you compare the publicized list, I think you've got like 4 or 5 locations remaining. So can you just kind of confirm that? Just talk a little bit more about that.

Yes. I think that's right. There will be a handful that get converted to other Darden brands, there'll be -- there may be 1 that we swap out with Darden for another property, and there'll be a couple that in 1.5 year plus we have to release. We've been inundated with people interested in these sites. They're very well located. And I think we're being pretty conservative on the rents, but it's -- we've sort of been working on this for a week, and we're sorting through a lot of people who are interested in taking the size.

Our next question comes from John Kilichowski from Wells Fargo.

Maybe just to stay on Bahama Breeze here. Bill, forgive me if I missed in the opening remarks, you talked about the rents there. Are you able to talk about the performance at these assets? I'm just -- if they're getting converted, would that be at the same rent? And then for the assets that would need to turn in 1.5 years, I mean, if you're getting substantial interest at this point, is there a potential for even a positive mark-to-market. I'm curious like what the total losses that you're kind of baking into internal estimates?

Yes, I don't think we're baking in losses at all. These brands are -- Bahama Breeze as a brand had limited market expansion. Simply, I don't think a lot of the U.S. has a view on what Bahamian cuisine is. So it worked in the Southeast. And it just wasn't relevant to the total size of Darden. And so they'll convert some of these. They have existing leases. So there won't be a change in the rental rate would be my assumption. But we'll have brand-new stores with higher AUV brands. And then for a couple that will get back, I feel good that we'll be able to release them, although it's early days. So -- and we're talking about a couple of stores on a portfolio of 1,325..

This is Patrick. I would just add that when you look at that press release Darden to put out and the list of sites that they want to convert, there's still some moving pieces there. And you have to factor in some of those stores that have really high-quality real estate are restricted by covenants by other tenants either by the shopping center itself. So Darden's interest in converting a lot of these sites was clear and it's just amount of what they can do within the restrictions that are on those properties. But the demand in the last week has been, I'd say, tremendous from other tenants that want to backfill on these locations.

Okay. That's helpful. And then maybe another 1 for you, just on the balance sheet. You've called the forwards, I think in the opening remarks, you said $220 million of liquidity gets you to 5.5x. I'm just curious how you think about managing the balance sheet I know, Bill, you kept saying over-equitized, at what point is the high end is 6x, but maybe as you get to 5.5x in an effort to not necessarily reach the high end, do you start to maybe pull on thinner spreads on equity at a certain point? Or you kind of stick to your guns and you'll write that number up to 6x. And then at that point, if the equity is not cooperating, then you start to pull back on the acquisition cadence. I'm just curious how you think about all scenarios. And obviously, if the risk off trade works, that's great, we get a cost of equity, we keep moving, but just trying to think about all scenarios here.

Yes. I think we've evidenced that we're disciplined in our capital allocation that we don't go out the risk spectrum on acquisitions. We don't provide guidance for a reason. But that said, we have lots of runway with very accretive acquisitions funded with low leverage inexpensive financing. That's readily available today in a way that it wasn't readily available a couple of years ago. So I think we feel like we're in great shape and we have minimal maturities to address. So I think we have a long runway of acquisitions. And our stock has been soft. And I think we -- as Pat mentioned, added some detail in our presentation how well supported by NAV, we feel our stock price is, but I think it offers real value today.

Our next question comes from Anthony Paolone from JPMorgan.

Great. Can you talk about just Red Lobster exposure? Because I think that's another 1 that's been out there talking about perhaps more store closures.

Yes. I don't think there's much to say the brand is doing much, much better than it was under prior ownership. Our stores are predominantly in a master lease. It was affirmed when they restructured at the same rent I think we feel quite good about that.

Okay. And then on the diversification strategy. Can you maybe just talk about anything that you don't want to get into or other areas of interest that you haven't quite tapped yet?

Yes. I think we've been very clear, we have a page in our presentation of sectors that we have avoided, I would double down on what's on that page. We try to focus on a balanced real estate and credit approach. And we try to stay within sectors that have been through cycles. And so we don't own pickleball facilities that cost $20 million. We don't own $9 million car washes. We don't own corporate headquarters in the middle of nowhere, where you can get more spread, and it works typically for a while. But on lease renewal, you have a lot of risk. So I think we take a much more balanced approach than our peers and shown in the last decade that our credit performance has been best-in-class.

Our next question comes from Rich Hightower from Barclays.

I just wanted to follow up on 1 of the earlier questions. But what's the real comfort level with approaching that sort of 6x upper limit on leverage if that's the only option the market gives you as far as executing the sort of plan for '26 on growth?

I think that's quite a bit of a ways off. So hard to make predictions that many months in the future. So I think we feel very good that we have a couple of hundred million dollars of acquisitions before we even have to be thinking about that. And honestly, we've had the same leverage ceiling for -- since inception. We've essentially never been close to it. So I think that, that track record speaks volumes.

All right. Fair enough. I mean, as far as the, I guess, that sort of early vintage of Darden leases coming due in '27 and I wonder if I've asked this before, but where do you guys sort of peg the mark-to-market or the recapture rate potentially on those upon renewal, that sort of thing.

They have multiple 5-year extension options at 1.5% growth. So the continuation of that 1.5% escalator. So I would say that our expectation is the vast majority of those will renew at the 1.5% contractual option.

Our next question comes from Wes Golladay from Baird.

Just looking at your valuation chart you put in the presentation, you have a lot of assets that will trade call it, mid, low 5s and up to the low 6s. Would you have any appetite to just start disposing of some of those assets and recycling into a little bit higher yield and higher growth assets and get the diversification higher?

Yes. It's always an option, West. We've done very little of it. Where we have done it, frankly, was a number of years ago in selling Bahamas Breeze assets at extraordinary pricing with very high rents. We haven't had to do it in the past. We don't have to do it today. The Darden assets are very, very high quality and very hard to replace. They trade for strong values for a reason. Darden as a company has a $25 billion market cap. It's credit default swaps are like a G7 country. So they're hard to let go of, to be honest. It's an option. We know how that works. I would remind everyone that there are REIT rules. You can't just sell properties 1 by 1 like some people assume you can. But it's an option, we haven't had to do it yet. Nothing wrong [indiscernible] hasn't been primary.

Okay. And then you did have a rare impairment in the quarter. What drove that?

It was a quick service restaurant that we purchased right at the beginning of our life was parties in Gadsden, Alabama. We've had a hard time re-leasing it. It's a tiny property. It's kind of hard to write down properties, to be honest. We found that the conditions were right to do it, but it's been vacant for a while. We've had a hard time of releasing it. But 1 property, over 1,325.

Not bad. And 1 last 1 on the Red Lobster. I think you mentioned there were ground leases. Is that for all of them? And can you share the rent level?

They're master lease. And again, they were just reaffirmed. So I would say there's been a tremendous emphasis on credit issues that aren't credit issues in the Q&A. And I would ask listeners to sort of see the forest for the trees. The story here is that we have substantial growth in 2026, that will be really accretive.

Our next question comes from Mitch Germain from Citizens Bank.

I think, Bill, you talked a little bit about, obviously, bigger ticket for a grocer. I'm curious how do you potentially look to maybe scale up in that sort of sector?

Yes, I think it's very similar, Mitch, how we looked at medical, retail and auto service. We spend a lot of time doing research upfront. We're conservative in what we purchase. And then as we are active in the market, it helps with seeing deals as you get more deal flow. So it's no different than what we've done in the past, to be honest. It's just the attributes of different property types you need to be sensitive to. And I think because we've been cautious and you've seen the positive results on our credit results.

And do you envision doing direct deals with grocers or maybe leveraging some of your shopping center contacts to kind of scale it up.

Yes. It's all of the above, Mitch. We take a pretty agnostic view on sourcing. So we've sourced things directly in auto service. We've had a number of brands that we've had repeat sale-leaseback business, but we'll look at everything that we can.

Got you. And last 1 for me is anything not hitting the strikes zone today? in terms of where you've been allocating capital? Like, are you pulling back in any way at all? Or it's all -- as long as it continues to meet your underwriting criteria, it's all systems go?

Yes, I think it's the latter. We've been pretty thoughtful in what we've acquired, and we don't tend to have a view of buy it and if the performance starts declining, we'll be able to sell it at a great price. That hasn't been the way we've looked at the world. We've pruned things in the past, but it's been minimal. And I think it reflects what we've purchased, we feel really good about.

Our next question comes from Jim Kammert from Evercore ISI.

Perhaps a derivative of where Mitch was heading, could you remind me what is the percentage of dollars over the past couple of years that really were direct deals with developers and you didn't have a broker involved because I'm presuming that the former gives you a better yield. I'm just curious how that's been playing out proportionately.

Yes, I don't think -- I wouldn't look at it that way, Jim. I think that the returns are pretty similar. Sophisticated large brands have access to information. They know what their properties trade for. There are some ease of use when you do repeat transactions and the sale leaseback because often, you have existing documents that you can replace or you know who the people are and the sort of cadence of information flow can be better. But I don't think that there is some meaningful advantage of doing originated sale-leaseback. Not that we're against them anyway, but I don't think that there is anything difference.

[Operator Instructions] We currently have no further questions. So I'd like to hand back to Bill Lenehan for any closing remarks.

Thank you, Claire. For 2026, we are in a fortunate position of being able to use very economical long-term debt to fund new investments. We see ample external acquisition opportunities. And based on cap rates today, we expect healthy investment spreads and growth for the year. I'd emphasize that in this environment, we do not anticipate slowing down given our dry powder and where we are seeing our cost of debt capital. Our team will be on the road for some non-deal roadshows in Los Angeles and Chicago, the weeks of March 10 and March 17, respectively. We'd love to meet with you in person, so please reach out to Patrick or myself to coordinate. Thank you all, and look forward to seeing many of you in person this year.

Thank you. This now concludes today's call. Thank you all for joining. You may now disconnect your lines.