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What changed in Four Corners Property Trust, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Four Corners Property Trust, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+143 added−146 removedSource: 10-K (2024-02-15) vs 10-K (2023-02-17)

Top changes in Four Corners Property Trust, Inc.'s 2023 10-K

143 paragraphs added · 146 removed · 134 edited across 5 sections

Item 1. Business

Business — how the company describes what it does

28 edited+1 added−2 removed57 unchanged
Biggest change(3) Lease term remaining is defined as the lease term weighted by the annual cash base rent. 4 The following table summarizes the diversification of FCPT’s lease portfolio by state as of December 31, 2022: State # of Leases % of Annual Base Rent Texas 86 10.5% Florida 82 9.7% Ohio 75 6.9% Illinois 68 6.4% Georgia 59 5.7% Indiana 61 4.1% Michigan 51 4.0% Maryland 33 2.9% Tennessee 29 2.9% Virginia 28 2.7% New York 28 2.7% Pennsylvania 24 2.7% Alabama 35 2.6% North Carolina 30 2.6% South Carolina 28 2.4% California 15 2.3% Wisconsin 30 2.2% Colorado 25 2.2% Mississippi 24 2.2% Missouri 22 1.8% Iowa 23 1.8% Louisiana 18 1.7% Oklahoma 18 1.7% Kentucky 20 1.7% Kansas 14 1.5% Arizona 14 1.4% Minnesota 12 1.4% Nevada 8 1.2% Arkansas 10 1.0% 18 other states (none greater than 1%) 73 7.1% Total 1,043 100.0% Leases with Darden The estimated annual cash rent based on current rates for the leases in place with Darden is approximatel y $105.8 million, with average annual rent escalations of 1.5% through December 31, 2027.
Biggest change(3) Lease term remaining is defined as the lease term weighted by the annual cash base rent. 7 The following table summarizes the diversification of FCPT’s lease portfolio by state as of December 31, 2023: State # of Leases % of Annual Base Rent Texas 89 10.1% Florida 83 9.0% Ohio 85 7.3% Illinois 77 6.9% Georgia 61 5.3% Indiana 73 5.1% Michigan 62 4.3% Tennessee 37 4.0% Virginia 32 2.8% New York 34 2.7% Maryland 33 2.7% North Carolina 32 2.5% South Carolina 31 2.5% Pennsylvania 23 2.5% Wisconsin 32 2.3% Alabama 32 2.2% California 15 2.1% Colorado 26 2.0% Mississippi 24 2.0% Kentucky 24 2.0% 27 other states (none greater than 2%) 230 19.7% Total 1,135 100.0% Leases with Darden The estimated annual cash rent based on current rates for the leases in place with Darden is approximately $112.7 million, with average annual rent escalations of 1.5% through December 31, 2028.
See “Risk Factors - Risks Related to Our Business - We are dependent on our major tenants successfully operating their businesses, and a failure to do so could have a material adverse effect on our business, financial position or results of operations.” Franchise Agreements Pursuant to the Franchise Agreements, Darden grants the right and license to our subsidiary, Kerrow, to operate the Kerrow Restaurant Operating Business.
See “Risk Factors - Risks Related to Our Business - We are dependent on our major tenants successfully operating their businesses, and a failure to do so could have a material adverse effect on our business, financial position or results of operations.” 8 Franchise Agreements Pursuant to the Franchise Agreements, Darden grants the right and license to our subsidiary, Kerrow, to operate the Kerrow Restaurant Operating Business.
Darden is currently the source of a majority of our revenues, and its financial condition and ability and willingness to satisfy its obligations under the leases and its willingness to renew the leases upon expiration of the initial base term thereof 5 significantly impacts our revenues and our ability to service our indebtedness and make distributions to our shareholders.
Darden is currently the source of a majority of our revenues, and its financial condition and ability and willingness to satisfy its obligations under the leases and its willingness to renew the leases upon expiration of the initial base term thereof significantly impacts our revenues and our ability to service our indebtedness and make distributions to our shareholders.
We intend to continue to invest in both restaurant properties and, increasingly over time, other retail property types beyond the restaurant industry. 3 We expect that future investments in properties, including any improvements or renovations of currently owned or newly-acquired properties, will be financed, in whole or in part, with cash flow from our operations, borrowings under our $250 million revolving credit facility, or the proceeds from issuances of common stock, preferred stock, debt or other securities.
We intend to continue to invest in both restaurant properties and, increasingly over time, other retail property types beyond the restaurant industry. 6 We expect that future investments in properties, including any improvements or renovations of currently owned or newly-acquired properties, will be financed, in whole or in part, with cash flow from our operations, borrowings under our $250 million revolving credit facility, or the proceeds from issuances of common stock, preferred stock, debt or other securities.
We expect this acquisition strategy will decrease our reliance on Darden and help 1 us gain exposure to non-restaurant retail properties over time. We intend to purchase properties that are well located, occupied by durable concepts, with creditworthy tenants whose operating cash flows are expected to meaningfully exceed their lease payments to us.
We expect this acquisition strategy will decrease our reliance on Darden and help 4 us gain exposure to non-restaurant retail properties over time. We intend to purchase properties that are well located, occupied by durable concepts, with creditworthy tenants whose operating cash flows are expected to meaningfully exceed their lease payments to us.
We will employ a 2 disciplined, opportunistic acquisition strategy and price transactions appropriately based on, among other things, the mix of assets acquired, length and terms of the lease, location and submarket attractiveness, and the credit worthiness of the existing tenant. Increase Diversity of Portfolio: We seek to develop a diverse asset portfolio as we continue to expand.
We will employ a 5 disciplined, opportunistic acquisition strategy and price transactions appropriately based on, among other things, the mix of assets acquired, length and terms of the lease, location and submarket attractiveness, and the credit worthiness of the existing tenant. Increase Diversity of Portfolio: We seek to develop a diverse asset portfolio as we continue to expand.
We do not intend our website to be an active link or to otherwise incorporate the information contained on our website into this report or other filings with the SEC. Our filings can also be obtained for free on the SEC’s Internet website at www.sec.gov. We are providing our website address solely for the information of investors. 8
We do not intend our website to be an active link or to otherwise incorporate the information contained on our website into this report or other filings with the SEC. Our filings can also be obtained for free on the SEC’s Internet website at www.sec.gov. We are providing our website address solely for the information of investors. 11
As of December 31, 2022, we hold an investment grade rating of BBB from Fitch Ratings and an investment grade rating of Baa3 from Moody’s Investor Service. Flexible UPREIT Structure We operate in what is commonly referred to as an UPREIT structure, in which substantially all of our properties and assets are held through FCPT OP.
As of December 31, 2023, we hold an investment grade rating of BBB from Fitch Ratings and an investment grade rating of Baa3 from Moody’s Investor Service. Flexible UPREIT Structure We operate in what is commonly referred to as an UPREIT structure, in which substantially all of our properties and assets are held through FCPT OP.
Two of these restaurants are subject to ground leases to third parties. The following table summarizes the rental properties by brand as of December 31, 2022: Brand Number of FCPT Properties and Leasehold Interests Total Square Feet (000s) Annual Cash Base Rent $(000s) % Total Cash Base Rent (1) Avg.
Two of these restaurants are subject to ground leases to third parties. The following table summarizes the rental properties by brand as of December 31, 2023: Brand Number of FCPT Properties and Leasehold Interests Total Square Feet (000s) Annual Cash Base Rent $(000s) % Total Cash Base Rent (1) Avg.
We believe that we have operated in conformity with the requirements for qualification and taxation as a REIT for the taxable year ended December 31, 2022, and we intend to continue to operate in a manner that will enable us to maintain our qualification as a REIT.
We believe that we have operated in conformity with the requirements for qualification and taxation as a REIT for the taxable year ended December 31, 2023, and we intend to continue to operate in a manner that will enable us to maintain our qualification as a REIT.
Darden also entered into guaranties, pursuant to which it guarantied the obligations of the tenants under substantially all of the leases entered into in respect of the Properties. The Properties are leased to one or more of Darden’s operating subsidiaries pursuant to the leases, which are net leases.
Darden also entered into guaranties, pursuant to which it guaranteed the obligations of the tenants under substantially all of the leases entered into in respect of the Properties. The Properties are leased to one or more of Darden’s operating subsidiaries pursuant to the leases, which are net leases.
(2) We have estimated Darden current quarter EBITDAR coverage using latest FCPT portfolio reported sales results for the quarter ended November 2022 and Darden brand average margins reported for the same period.
(2) We have estimated Darden current quarter EBITDAR coverage using latest FCPT portfolio reported sales results for the quarter ended November 2023 and Darden brand average margins reported for the same period.
These properties were held for investment, with an aggregate leasable area of approximately 6.8 million square feet, and had a weighted average remaining lease term of 8.3 years before any lease renewals. An additional seven properties, representing the Kerrow Restaurant Operating Business, are operated by Kerrow subject to franchise agreements with Darden (“Franchise Agreements”).
These properties were held for investment, with an aggregate leasable area of approximately 7.5 million square feet, and had a weighted average remaining lease term of 7.8 years before any lease renewals. An additional seven properties, representing the Kerrow Restaurant Operating Business, are operated by Kerrow subject to franchise agreements with Darden (“Franchise Agreements”).
As a result, this structure potentially may facilitate our acquisition of assets in a more efficient manner and may allow us to acquire assets that the owner would otherwise be unwilling to sell to us. Our Portfolio At December 31, 2022, our investment portfolio included 1,023 rental properties located in 47 states, all within the continental United States.
As a result, this structure potentially may facilitate our acquisition of assets in a more efficient manner and may allow us to acquire assets that the owner would otherwise be unwilling to sell to us. Our Portfolio At December 31, 2023, our investment portfolio included 1,111 rental properties located in 47 states, all within the continental United States.
As of February 17, 2023, we have not been notified by any governmental authority of, nor is management aware of, any non-compliance with the ADA that management believes would have a material adverse effect on our business, financial position or results of operations. Other Regulations State and local fire, life-safety and similar entities regulate the use of the properties.
As of February 15, 2024, we have not been notified by any governmental authority of, nor is management aware of, any non-compliance with the ADA that management believes would have a material adverse effect on our business, financial position or results of operations. 9 Other Regulations State and local fire, life-safety and similar entities regulate the use of the properties.
The leases in place with Darden provide for a weighted average remaining initial term of approximatel y 7.4 years as of December 31, 2022, with no purchase options provided that Darden will have a right of first offer with respect to our sale of any property, if there is no default under the lease, and we will be prohibited from selling any Properties to (i) any nationally recognized casual or fine dining brand restaurant or entity operating the same or (ii) any other regionally recognized casual or fine dining brand restaurant or entity operating the same, with 25 or more units.
The leases in place with Darden provide for a weighted average remaining initial term of approximately 6.7 years as of December 31, 2023, with no purchase options provided that Darden will have a right of first offer with respect to our sale of any property, if there is no default under the lease, and we will be prohibited from selling any Properties to (i) any nationally recognized casual or fine dining brand restaurant or entity operating the same or (ii) any other regionally recognized casual or fine dining brand restaurant or entity operating the same, with 25 or more units.
Our principal sources of liquidity will be our cash generated through operations, our revolving credit facility which has an undrawn capacity as of December 31, 2022 of $250 million, our ability to access the public equity markets, and our ability to access bank and private placement debt markets.
Our principal sources of liquidity will be our cash generated through operations, our revolving credit facility which has an undrawn capacity as of December 31, 2023 of $234 million, our ability to access the public equity markets, and our ability to access bank and private placement debt markets.
Human Capital Resources and Management As of February 15, 2023, we had 543 employees, of which 508 were employed at our Kerrow Restaurant Operating Business. None of these employees are represented by a labor union. Our human capital development goals and initiatives are focused on enhancing employee growth, satisfaction and wellness while maintaining a diverse and thriving culture.
Human Capital Resources and Management As of February 15, 2024, we had 516 employees, of which 476 were employed at our Kerrow Restaurant Operating Business. None of these employees are represented by a labor union. Our human capital development goals and initiatives are focused on enhancing employee growth, satisfaction and wellness while maintaining a diverse and thriving culture.
Our properties are leased to our tenants on a net lease basis with a weighted average remaining lease term of approximately 8.3 years before any renewals and an average annual rent escalation of 1.42% through December 31, 2027 (weighted by annualized base rent), thereby providing a long-term, stable income stream.
Our properties are leased to our tenants on a net lease basis with a weighted average remaining lease term of approximately 7.8 years before any renewals and an average annual rent escalation of 1.4% through December 31, 2028 (weighted by annualized base rent), thereby providing a long-term, stable income stream.
Additionally, as of December 31, 2022, restaurant properties and non-restaurant retail properties accounted for 85.3% and 14.7% , respectively, of our total revenues. Acquiring restaurant properties while also acquiring non-restaurant retail properties allows us to leverage our experience with the restaurant industry and accelerate our diversified growth and, in doing so, reduce our concentration with Darden.
Additionally, as of December 31, 2023, restaurant properties and non-restaurant retail properties accounted for 80.3% and 19.7%, respectively, of our total revenues. Acquiring restaurant properties while also acquiring non-restaurant retail properties allows us to leverage our experience with the restaurant industry and accelerate our diversified growth and, in doing so, reduce our concentration with Darden.
As of December 31, 2022, properties in our leasing portfolio were located in 47 different states across the continental United States, comprised of 131 unique tenant brands, and our properties in only one state, Texas, individually accounted for more than 10% of our total revenue at 10.5% of our total revenue .
As of December 31, 2023, properties in our leasing portfolio were located in 47 different states across the continental United States, comprised of 148 unique tenant brands, and our properties in only one state, Texas, i ndividually accounted for more than 10% of our total revenue at 10.1% of our total revenue .
As of December 31, 2022, our lease portfolio had the following characteristics: • 1,023 free-standing properties located in 47 states and representing an aggregate leasable area of 6.8 million square feet; • 99.9% occupancy (based on leasable square footage); • An average remaining lease term of 8.3 years (weighted by annualized base rent); • An average annual rent escalation of 1.42% through December 31, 2027 (weighted by annualized base rent); and • 61% investment-grade tenancy (weighted by annualized base rent).
As of December 31, 2023, our lease portfolio had the following characteristics: • 1,111 free-standing properties located in 47 states and representing an aggregate leasable area of 7.5 million square feet; • 99.8% occupancy (based on leasable square footage); • An average remaining lease term of 7.8 years (weighted by annualized base rent); • An average annual rent escalation of 1.4% through December 31, 2028 (weighted by annualized base rent); and • 59% investment-grade tenancy (weighted by annualized base rent).
In 2022, FCPT engaged in various real estate transactions for a total investment of $296.3 million, including capitalized transaction costs. Pursuant to these transactions, we acquired 115 rental properties and ground leasehold interests, aggregating 824 thousand square feet.
In 2023, FCPT engaged in various real estate transactions for a total investment of $341.1 million, including capitalized transaction costs. Pursuant to these transactions, we acquired 92 rental properties and ground leasehold interests, aggregating 757 thousand square feet.
We use a mix of competitive salaries and other benefits to attract and retain these individuals. We offer competitive compensation and benefits, including, but not limited to, retirement savings plans and medical, dental and vision coverage.
Compensation and Benefits Our compensation program is designed to, among other things, attract, retain and incentivize talented and experienced individuals. We use a mix of competitive salaries and other benefits to attract and retain these individuals. We offer competitive compensation and benefits, including, but not limited to, retirement savings plans and medical, dental and vision coverage.
Available Information All filings we make with the Securities and Exchange Commission (the “SEC”), including this Annual Report on Form 10-K, our quarterly reports on Form 10-Q, and our current reports on Form 8-K, and any amendments to those reports are available for free on our website, www.fcpt.com, as soon as reasonably practicable after they are filed with, or furnished to, the SEC.
Our employees, many of whom have been employed by the Company for the majority of the Company’s existence, frequently express satisfaction with management including by responding positively about the Company’s management in anonymous surveys. 10 Available Information All filings we make with the Securities and Exchange Commission (the “SEC”), including this Annual Report on Form 10-K, our quarterly reports on Form 10-Q, and our current reports on Form 8-K, and any amendments to those reports are available for free on our website, www.fcpt.com, as soon as reasonably practicable after they are filed with, or furnished to, the SEC.
The presence of contamination or the failure to remediate contamination may adversely affect our ability to sell, develop or lease the real estate or to borrow using the real estate as collateral. 6 As of February 17, 2023, we have not been notified by any governmental authority of, nor is management aware of, any non-compliance or liability with respect to environmental laws that management believes would have a material adverse effect on our business, financial position or results of operations.
As of February 15, 2024, we have not been notified by any governmental authority of, nor is management aware of, any non-compliance or liability with respect to environmental laws that management believes would have a material adverse effect on our business, financial position or results of operations.
We aim to develop our employees by providing internal training, leadership coaching programs and providing tuition assistance and course reimbursement for career-enhancing education and licensure requirements.
We aim to develop our employees by providing internal training, leadership coaching programs and providing tuition assistance and course reimbursement for career-enhancing education and licensure requirements. We encourage both formal and informal mentorship to provide employees with critical developmental feedback, including by conducting annual performance and professional development planning opportunities.
Rent Per Square Foot ($) Tenant EBITDAR Coverage (2) Lease Term Remaining (Yrs) (3) Olive Garden 312 2,654 $ 78,936 40.5 % $ 30 5.0x 7.7 LongHorn Steakhouse 115 645 22,360 11.5 % 35 4.4x 6.5 Other Brands - Restaurant 385 1,870 60,419 31.0 % 32 2.6x 10.8 Other Brands - Retail 197 1,478 28,629 14.7 % 19 N/A 6.4 Other Brands - Darden 14 128 4,527 2.3 % 35 3.5x 6.0 Total 1,023 6,775 $ 194,871 100.0 % $ 29 4.0x 8.3 (1) Current scheduled minimum contractual rent as of December 31, 2022.
Rent Per Square Foot ($) Tenant EBITDAR Coverage (2) Lease Term Remaining (Yrs) (3) Olive Garden 314 2,673 $ 80,839 37.1 % $ 30 5.9x 6.8 LongHorn Steakhouse 115 645 22,730 10.4 % 35 5.3x 5.5 Other Brands - Restaurant 394 1,920 62,403 28.6 % 33 2.8x 9.7 Other Brands - Retail 262 2,016 43,036 19.7 % 21 3.3x 7.7 Other Brands - Darden 26 231 9,161 4.2 % 40 3.3x 9.0 Total 1,111 7,485 $ 218,169 100.0 % $ 29 4.9x 7.8 (1) Current scheduled minimum contractual rent as of December 31, 2023.
Removed
We encourage both formal and informal mentorship to provide employees with critical developmental feedback, including by conducting annual performance and professional development planning opportunities. 7 Compensation and Benefits Our compensation program is designed to, among other things, attract, retain and incentivize talented and experienced individuals.
Added
The presence of contamination or the failure to remediate contamination may adversely affect our ability to sell, develop or lease the real estate or to borrow using the real estate as collateral.
Removed
Our employees, many of whom have been employed by the Company for the majority of the Company’s existence, frequently express satisfaction with management including by responding positively about the Company’s management in anonymous surveys.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIf we incur significant additional expenses or are delayed in being able to pursue returns on our real estate investments, it may have a materially adverse effect on our ability to operate and grow our business and our ability to achieve our strategic objectives. 14 We or our tenants may experience uninsured or underinsured losses, which could result in a significant loss of the capital we have invested in a property, decrease anticipated future revenues or cause us to incur unanticipated expense.
Biggest changeIf we incur significant additional expenses or are delayed in being able to pursue returns on our real estate investments, it may have a materially adverse effect on our ability to operate and grow our business and our ability to achieve our strategic objectives.
While the tenants under our leases generally indemnify, defend and hold us harmless for the foregoing liabilities, there can be no assurance that the respective tenant will have sufficient assets, income or access to financing to enable it to satisfy its payment obligations to us under its lease.
While the tenants under our leases generally indemnify, defend and hold us harmless for the foregoing liabilities, there can be no assurance that the respective tenant will have sufficient assets, income or access to financing to enable it to satisfy its payment obligations to us under its lease.
While the tenants under our leases generally indemnify, defend and hold us harmless for the foregoing liabilities, there can be no assurance that the respective tenant will have sufficient assets, income or access to financing to enable it to satisfy its payment obligations to us under its lease.
While the tenants under our leases generally indemnify, defend and hold us harmless for the foregoing liabilities, there can be no assurance that the respective tenant will have sufficient assets, income or access to financing to enable it to satisfy its payment obligations to us under its lease.
While the tenants under our leases generally indemnify, defend and hold us harmless for the foregoing liabilities, there can be no assurance that the respective tenant will have sufficient assets, income or access to financing to enable it to satisfy its payment obligations to us under its lease.
While the tenants under our leases generally indemnify, defend and hold us harmless for the foregoing liabilities, there can be no assurance that the respective tenant will have sufficient assets, income or access to financing to enable it to satisfy its payment obligations to us under its lease.
However, we cannot assure you that we will continue to require the same levels of insurance coverage under our lease agreements, that such insurance will be available at a reasonable cost in the future or that the insurance coverage provided will fully cover all losses on our properties upon the occurrence of a catastrophic event, nor can we assure you of the future financial viability of the insurers.
However, we cannot be assured that we will continue to require the same levels of insurance coverage under our lease agreements, that such insurance will be available at a reasonable cost in the future or that the insurance coverage provided will fully cover all losses on our properties upon the occurrence of a catastrophic event, nor can we assure you of the future financial viability of the insurers.
Accordingly, our performance is subject to risks inherent to the ownership of real estate, including: • inability to collect rent from tenants due to financial hardship, including bankruptcy; • changes in consumer trends and preferences that reduce demand for the products or services of our tenants; • inability to lease at or above the current rental rates, or at all, or sell properties upon expiration or termination of existing leases; • needing to make capital expenditures to renovate vacant properties; • environmental risks related to the presence of hazardous or toxic substances or materials on our properties; • subjectivity of real estate valuations and changes in such valuations over time; • illiquid nature of real estate compared to most other financial assets; • changes in laws and regulations, including those governing real estate usage and zoning; • changes in interest rates and the availability of financing; and • changes in the general economic and business climate.
Accordingly, our performance is subject to risks inherent to the ownership of real estate, including: • inability to collect rent from tenants due to financial hardship, including bankruptcy; • changes in consumer trends and preferences that reduce demand for the products or services of our tenants; • inability to lease at or above the current rental rates, or at all, or sell properties upon expiration or termination of existing leases; • capital expenditures to renovate vacant properties; • environmental risks related to the presence of hazardous or toxic substances or materials on our properties; • subjectivity of real estate valuations and changes in such valuations over time; • illiquid nature of real estate compared to most other financial assets; • changes in laws and regulations, including those governing real estate usage and zoning; • changes in interest rates and the availability of financing; and • changes in the general economic and business climate.
Risks Related to Our Indebtedness • Our level of indebtedness could materially and adversely affect our financial position, including reducing funds available for other business purposes and reducing our operational flexibility, and we may have future capital needs and may not be able to obtain additional financing on acceptable terms. • An increase in market interest rates would increase our interest costs on existing and future debt and could adversely affect our stock price, as well as our ability to refinance existing debt and conduct acquisition activity. • Hedging transactions could have a negative effect on our results of operations. 9 Risks Related to Our Organizational Structure • Our charter restricts the ownership and transfer of our outstanding stock, which may have the effect of delaying, deferring or preventing a transaction or change of control of our company.
Risks Related to Our Indebtedness • Our level of indebtedness could materially and adversely affect our financial position, including reducing funds available for other business purposes and reducing our operational flexibility, and we may have future capital needs and may not be able to obtain additional financing on acceptable terms. • An increase in market interest rates would increase our interest costs on existing and future debt and could adversely affect our stock price, as well as our ability to refinance existing debt and conduct acquisition activity. • Hedging transactions could have a negative effect on our results of operations. 12 Risks Related to Our Organizational Structure • Our charter restricts the ownership and transfer of our outstanding stock, which may have the effect of delaying, deferring or preventing a transaction or change of control of our company.
Our 9.8% ownership limitation may have the effect of 21 delaying, deferring or preventing a change in control, including an extraordinary transaction (such as a merger, tender offer or sale of all or substantially all of our assets) that might provide a premium price for our stockholders.
Our 9.8% ownership limitation may have the effect of delaying, deferring or preventing a change in control, including an extraordinary transaction (such as a merger, tender offer or sale of all or substantially all of our assets) that might provide a premium price for our stockholders.
Furthermore, some environmental laws can create a lien on the contaminated site in favor of the government for damages and the costs the government incurs in connection with such contamination or can restrict the manner in which a property may be 15 used because of contamination.
Furthermore, some environmental laws can create a lien on the contaminated site in favor of the government for damages and the costs the government incurs in connection with such contamination or can restrict the manner in which a property may be used because of contamination.
Furthermore, the dividend yield on our common stock, as a percentage of the price of such common stock, will influence the price of such common stock. Thus, an increase in market interest rates may lead prospective purchasers of our common stock to expect a higher dividend yield, which could adversely affect the market price of our common stock.
Furthermore, the dividend yield on our common stock, as a percentage of the price of such common stock, will influence the price of such common stock. Thus, an increase in market interest rates may lead prospective purchasers of our common stock to expect a higher dividend yield, which could 23 adversely affect the market price of our common stock.
Additionally, while our leases typically contain provisions, such as rent escalators, designed to mitigate the adverse impact of inflation on our results of operations, the increases in rent provided by many of our leases may not keep up with the rate of inflation.
Additionally, while our leases typically contain provisions, such as rent escalators, designed to mitigate the adverse impact of inflation on our results of operations, the increases in rent provided by many of our leases may not keep up with the rate of 16 inflation.
We or our designee will have the right to purchase the shares from the trustee at this calculated price as well. A transfer of shares of our capital stock in violation of the limit may be void under certain circumstances.
We or our designee will have the right to purchase the shares from the trustee at this calculated price as well. A transfer of shares of our capital 24 stock in violation of the limit may be void under certain circumstances.
However, increased operating expenses at vacant properties and the limited number of properties that are not subject to full triple-net leases could cause us to incur additional operating expenses, which could 13 increase our exposure to inflation.
However, increased operating expenses at vacant properties and the limited number of properties that are not subject to full triple-net leases could cause us to incur additional operating expenses, which could increase our exposure to inflation.
In addition, decreases in interest rates may lead to additional competition for the acquisition of real estate due to a reduction in desirable alternative income-producing investments. 20 Increased competition for the acquisition of real estate may lead to a decrease in the yields on real estate we have targeted for acquisition.
In addition, decreases in interest rates may lead to additional competition for the acquisition of real estate due to a reduction in desirable alternative income-producing investments. Increased competition for the acquisition of real estate may lead to a decrease in the yields on real estate we have targeted for acquisition.
Techniques used to breach 17 security change frequently, and are generally not recognized until launched against a target, so we may not be able to promptly detect that a security breach or unauthorized access has occurred.
Techniques used to breach security change frequently, and are generally not recognized until launched against a target, so we may not be able to promptly detect that a security breach or unauthorized access has occurred.
Accordingly, we could be materially and adversely affected if Darden or Brinker does not operate their respective businesses successfully. 11 Actual or perceived threats associated with epidemics, pandemics or public health crises could have a material adverse effect on our and our tenants’ businesses, financial condition, results of operations, cash flow, liquidity and ability to access the capital markets and satisfy debt service obligations and make distributions to our stockholders.
Accordingly, we could be materially and adversely affected if Darden or Brinker does not operate their respective businesses successfully. 14 Actual or perceived threats associated with epidemics, pandemics or public health crises could have a material adverse effect on our and our tenants’ businesses, financial condition, results of operations, cash flow, liquidity and ability to access the capital markets and satisfy debt service obligations and make distributions to our stockholders.
In addition, any net taxable income earned directly by our TRSs will be subject to U.S. federal, state, and local corporate-level income taxes and we may incur a 100% excise tax on transactions 24 with a TRS if they are not conducted on an arm’s-length basis. Any of these taxes would decrease cash available for distribution to our stockholders.
In addition, any net taxable income earned directly by our TRSs will be subject to U.S. federal, state, and local corporate-level income taxes and we may incur a 100% excise tax on transactions 27 with a TRS if they are not conducted on an arm’s-length basis. Any of these taxes would decrease cash available for distribution to our stockholders.
We also may not be able to implement security measures in a timely manner or, if and when implemented, we may not be able to determine the extent to which these measures could be circumvented.
We also may not be able to implement security measures in a 20 timely manner or, if and when implemented, we may not be able to determine the extent to which these measures could be circumvented.
Our charter provides for restrictions on ownership and transfer of our shares of stock, including restrictions on such ownership or transfer that would cause the rents received or accrued by us from Darden to be treated as non-qualifying rent for purposes of the REIT gross income requirements. 23 Nevertheless, there can be no assurance that such restrictions will be effective in ensuring that rents received or accrued by us from Darden will not be treated as qualifying rent for purposes of REIT qualification requirements.
Our charter provides for restrictions on ownership and transfer of our shares of stock, including restrictions on such ownership or transfer that would cause the rents received or accrued by us from Darden to be treated as non-qualifying rent for purposes of the REIT gross income requirements. 26 Nevertheless, there can be no assurance that such restrictions will be effective in ensuring that rents received or accrued by us from Darden will not be treated as qualifying rent for purposes of REIT qualification requirements.
An increase in market interest rates would increase our interest costs on existing and future debt and could adversely affect our stock price, as well as our ability to refinance existing debt and conduct acquisition activity. As of December 31, 2022, our $680 million Loan Agreement bore interest at a variable rate on any amount drawn and outstanding.
An increase in market interest rates would increase our interest costs on existing and future debt and could adversely affect our stock price, as well as our ability to refinance existing debt and conduct acquisition activity. As of December 31, 2023, our $680 million Loan Agreement bore interest at a variable rate on any amount drawn and outstanding.
We intend to continue to pursue acquisitions of additional properties and seek acquisitions and other strategic opportunities, including, but not limited to, continuing to expand 12 our tenant base to third parties other than Darden and acquiring non-restaurant properties. Accordingly, we may often be engaged in evaluating potential transactions, potential new tenants and other strategic alternatives.
We intend to continue to pursue acquisitions of additional properties and seek acquisitions and other strategic opportunities, including, but not limited to, continuing to expand 15 our tenant base to third parties other than Darden and acquiring non-restaurant properties. Accordingly, we may often be engaged in evaluating potential transactions, potential new tenants and other strategic alternatives.
We have entered into interest rate swaps to effectively fix $325 million of our variable-rate indebtedness, and we may enter into other hedging transactions. Because tenants are typically required to pay all property operating expenses, increases in property-level expenses at our leased properties generally do not affect us.
We have entered into interest rate swaps to effectively fix $375 million of our variable-rate indebtedness, and we may enter into other hedging transactions. Because tenants are typically required to pay all property operating expenses, increases in property-level expenses at our leased properties generally do not affect us.
If our or our tenants’ reputation is damaged, it could adversely affect our business, results of operations, financial condition or ability to attract the most highly qualified employees. 18 Third-party expectations relating to environmental, social and governance factors may impose additional costs and expose us to new risks.
If our or our tenants’ reputation is damaged, it could adversely affect our business, results of operations, financial condition or ability to attract the most highly qualified employees. 21 Third-party expectations relating to environmental, social and governance factors may impose additional costs and expose us to new risks.
We are dependent on Darden to make payments to us and fulfill its obligations under its leases, as well as to provide services to us under the Franchise Agreements, and an event that materially and adversely affects Darden’s business, financial 10 position or results of operations could materially and adversely affect our business, financial position or results of operations.
We are dependent on Darden to make payments to us and fulfill its obligations under its leases, as well as to provide services to us under the Franchise Agreements, and an event that materially and adversely affects Darden’s business, financial 13 position or results of operations could materially and adversely affect our business, financial position or results of operations.
In addition, any claim we have for unpaid past rent could be substantially less than the amount owed. The failure of any of our tenants to fulfill its maintenance obligations may have a materially adverse effect on our ability to operate and grow our business.
In addition, any claim we have for unpaid past rent could be substantially less than the amount owed. The failure of any of our tenants to fulfill their maintenance obligations may have a materially adverse effect on our ability to operate and grow our business.
As of December 31, 2022, no other executive officer or director of FCPT owns common stock of Darden. Risks Related to Our Common Stock The market price and trading volume of our common stock may be volatile and may face negative pressure including as a result of future sales or distributions of our common stock.
As of December 31, 2023, no other executive officer or director of FCPT owns common stock of Darden. Risks Related to Our Common Stock The market price and trading volume of our common stock may be volatile and may face negative pressure including as a result of future sales or distributions of our common stock.
Furthermore, with respect to certain non-U.S. stockholders, we may be required to withhold U.S. federal income tax with respect to such dividends, including in respect of all 25 or a portion of such dividend that is payable in our stock.
Furthermore, with respect to certain non-U.S. stockholders, we may be required to withhold U.S. federal income tax with respect to such dividends, including in respect of all 28 or a portion of such dividend that is payable in our stock.
We cannot assure shareholders of our ability to pay dividends in the future. Our current dividend rate is $1.36 per share per annum. We may pay a portion of our dividends in common stock.
We cannot assure shareholders of our ability to pay dividends in the future. Our current dividend rate is $1.3650 per share per annum. We may pay a portion of our dividends in common stock.
We 22 cannot assure shareholders that we will achieve investment results that will allow us to make a specified level of cash dividends or year-to-year increases in cash dividends in the future.
We 25 cannot assure shareholders that we will achieve investment results that will allow us to make a specified level of cash dividends or year-to-year increases in cash dividends in the future.
Therefore, we are subject to risks associated with having a highly concentrated property brand base. As of December 31, 2022, our restaurant properties include 312 Olive Garden restaurants. As a result, our success, at least in the short-term, is dependent on the continued success of the Olive Garden brand and, to a lesser extent, Darden’s other restaurant brands.
Therefore, we are subject to risks associated with having a highly concentrated property brand base. As of December 31, 2023, our restaurant properties include 314 Olive Garden restaurants. As a result, our success, at least in the short-term, is dependent on the continued success of the Olive Garden brand and, to a lesser extent, Darden’s other restaurant brands.
In addition, the revolving credit and term loan agreement contains an accordion feature allowing the facility to be increased by an additional aggregate amount not to exceed $350 million, subject to certain conditions. As of December 31, 2022, the term loan facility is fully drawn and the undrawn revolving credit facility had $250 million remaining capacity.
In addition, the revolving credit and term loan agreement contains an accordion feature allowing the facility to be increased by an additional aggregate amount not to exceed $350 million, subject to certain conditions. As of December 31, 2023, the term loan facility is fully drawn and the undrawn revolving credit facility had $234 million remaining capacity.
The Notes consist of $50 million of notes due in June 2024 priced at a fixed interest rate of 4.68%, $75 million of notes due in June 2027 priced at a fixed interest rate of 4.93%, $50 million of notes due in December 2026 priced at a fixed interest rate of 4.63%, $50 million of notes due in December 2028 priced at a fixed interest rate of 4.76%, $50 million of notes due in June 2029 priced at a fixed interest rate of 3.15%, $75 million of notes due in April 2030 priced at a fixed interest rate of 3.20%, $50 million of notes due in April 2029 priced at a fixed interest rate of 2.74%, $50 million of notes due in March 2031 priced at a fixed interest rate of 3.09%, $50 million of notes due in April 2031 priced at a fixed interest rate of 2.99%, and $75 million of notes due in March 2032 priced at a fixed interest rate of 3.11%.
The Notes consist of $50 million of notes due in June 2024 priced at a fixed interest rate of 4.68%, $50 million of notes due in December 2026 priced at a fixed interest rate of 4.63%, $75 million of notes due in June 2027 priced at a fixed interest rate of 4.93%, $50 million of notes due in December 2028 priced at a fixed interest rate of 4.76%, $50 million of notes due in April 2029 priced at a fixed interest rate of 2.74%, $50 million of notes due in June 2029 priced at a fixed interest rate of 3.15%, $75 million of notes due in April 2030 priced at a fixed interest rate of 3.20%, $50 million of notes due in March 2031 priced at a fixed interest rate of 3.09%, $50 million of notes due in April 2031 priced at a fixed interest rate of 2.99%, $75 million of notes due in March 2032 priced at a fixed interest rate of 3.11%, and $100 million of notes due in July 2033 priced at a fixed interest rate of 6.44%.
Our tax protection agreement could limit our ability to sell or otherwise dispose of certain properties. In connection with the acquisition of ten properties from U.S. Restaurant Properties, Inc. (“USRP”) in November 2016 and four additional properties from USRP in January 2017, in exchange for FCPT OP units, we entered into a tax protection agreement with affiliates of USRP.
Our tax protection agreement could limit our ability to sell or otherwise dispose of certain properties. In connection with the acquisition of four properties from U.S. Restaurant Properties, Inc. (“USRP”) in January 2017, in exchange for FCPT OP units, we entered into a tax protection agreement with affiliates of USRP.
We are dependent on our major tenants successfully operating their businesses, and a failure to do so could have a material adverse effect on our business, financial position or results of operations. For the year ended December 31, 2022, Darden and Brinker International, Inc. (“Brinker”) constituted approximately 54.3% and 8.5%, r espectively, of our annual cash base rent.
We are dependent on our major tenants successfully operating their businesses, and a failure to do so could have a material adverse effect on our business, financial position or results of operations. For the year ended December 31, 2023, Darden and Brinker International, Inc. (“Brinker”) constituted approximately 51.7% and 7.8%, r espectively, of our annual cash base rent.
In addition, we have issued $575 million of senior unsecured fixed rate notes (the “Notes”).
In addition, we have issued $675 million of senior unsecured fixed rate notes (the “Notes”).
Athough our properties have an average annual rent escalation of 1.42% through December 31, 2027, the impact of the current rate of inflation may not be adequately offset by some of our rent escalations, and it is possible that the resetting of rents from our renewal and re-leasing activities would not fully offset the impact of the current inflation rate.
Although our properties have an average annual rent escalation of 1.4% through December 31, 2028 , the impact of the current rate of inflation may not be adequately offset by some of our rent escalations, and it is possible that the resetting of rents from our renewal and re-leasing activities would not fully offset the impact of the current inflation rate.
As of December 31, 2022, we are in compliance with our existing financial covenants.
As of December 31, 2023, we are in compliance with our existing financial covenants.
As of December 31, 2022, $430 million was outstanding under such agreement, and we may borrow an additional $250 million on the revolving credit facility or incur additional variable rate debt in the future, including through the exercise of the accordion feature pursuant to the Loan Agreement.
As of December 31, 2023, $446 million was outstanding under such agreement, and we may borrow an additional $234 million on the revolving credit facility or incur additional variable rate debt in the future, including through the exercise of the accordion feature pursuant to the Loan Agreement.
The tax protection agreement provides that, if we dispose of any of those 14 properties in a taxable transaction through November 2023 for the initial ten properties or January 2024 for the additional four properties, we will indemnify the USRP partners for their tax liabilities attributable to the built-in gain that existed with respect to those properties as of the time of the acquisition of those properties in November 2016 or January 2017, respectively (and tax liabilities incurred as a result of the reimbursement payment).
The tax protection agreement provides that, if we dispose of any of those four properties in a taxable transaction through January 2024, we will indemnify the USRP partners for their tax liabilities attributable to the built-in gain that existed with respect to those properties as of the time of the acquisition of those properties in January 2017 (and tax liabilities incurred as a result of the reimbursement payment).
Our portfolio has some geographic concentration, which makes us more susceptible to adverse events in these areas. Our properties are located throughout the United States with t he highest concentrations located in the states of Texas and Florida, where 10.5% and 9.7% of our annualized base rent was derived as of December 31, 2022, respectively.
Our portfolio has some geographic concentration, which makes us more susceptible to adverse events in these areas. Our properties are located throughout the United States with t he highest concentration located in the state of Texas, where 10.1% of our annualized base rent was derived as of December 31, 2023.
In 2022, we acquired 115 properties and ground leasehold interests for a total investment of $296.3 million , including capitalized transaction costs, which were added to our leasing portfolio.
In 2023, we acquired 92 properties and ground leasehold interests for a total investment of $341.1 million , including capitalized transaction costs, which were added to our leasing portfolio.
In addition, we are required to operate our properties in compliance with fire and safety regulations, building codes and other land use regulations, as they may be adopted by governmental agencies and bodies and become applicable to our properties.
State and local laws may also require modifications to our properties related to access by disabled persons. In addition, we are required to operate our properties in compliance with fire and safety regulations, building codes and other land use regulations, as they may be adopted by governmental agencies and bodies and become applicable to our properties.
Also, the law relating to the tax treatment of other entities, or an investment in other entities, could change, making an investment in such other entities more attractive relative to an investment in a REIT. 26 Item 1B. Unresolved Staff Comments. Not applicable. Item 2. Properties. Please refer to “Item 1. Business.”
Also, the law relating to the tax treatment of other entities, or an investment in other entities, could change, making an investment in such other entities more attractive relative to an investment in a REIT. Item 1B. Unresolved Staff Comments. Not applicable. 29
Moreover, our ability to obtain additional financing and satisfy our financial obligations under our indebtedness outstanding from time to time will depend upon our future operating performance, which is subject to then prevailing general 19 economic and credit market conditions, including interest rate levels and the availability of credit generally, and financial, business and other factors, many of which are beyond our control.
Increased future debt service obligations may limit our operational flexibility, including our ability to acquire assets, finance or refinance our assets, contribute assets to joint ventures or sell assets as needed. 22 Moreover, our ability to obtain additional financing and satisfy our financial obligations under our indebtedness outstanding from time to time will depend upon our future operating performance, which is subject to then prevailing general economic and credit market conditions, including interest rate levels and the availability of credit generally, and financial, business and other factors, many of which are beyond our control.
We also could be liable for the costs of remediating contamination at third party sites, e.g., landfills, where we send waste for disposal without regard to whether we comply with environmental laws in doing so.
We also could be liable for the costs of remediating contamination at third party sites, e.g., landfills, where we send waste for disposal without regard to whether we comply with environmental laws in doing so. 18 The presence of contamination or the failure to remediate contamination may adversely affect our ability to sell, develop or lease the real estate or to borrow using the real estate as collateral.
A sustained or further increase in inflation could have a negative impact on variable-rate debt we and our tenants currently have or that we or our tenants may incur in the future. Our leases typically contain provisions, such as rent escalators, designed to mitigate the adverse impact of inflation on our results of operations.
Inflation may materially and adversely affect us and our tenants. A sustained or further increase in inflation could have a negative impact on variable-rate debt we and our tenants currently have or that we or our tenants may incur in the future.
While the tenants to whom we lease properties are obligated by law to comply with the ADA provisions, under the law we are also legally responsible for our properties’ ADA compliance. State and local laws may also require modifications to our properties related to access by disabled persons.
All of our properties are required to comply with Title III of the Americans with Disabilities Act, or the ADA. While the tenants to whom we lease properties are obligated by law to comply with the ADA provisions, under the law we are also legally responsible for our properties’ ADA compliance.
Any such regulation could impose substantial costs on our 16 tenants, thereby impacting the financial condition of our tenants and their ability to meet their lease obligations and to lease or re-lease our properties.
Any such regulation could impose substantial costs on our tenants, thereby impacting the financial condition of our tenants and their ability to meet their lease obligations and to lease or re-lease our properties. 19 Compliance with the Americans with Disabilities Act and fire, safety and other regulations may require us to make unanticipated expenditures that materially adversely impact our cash flow.
Our current lease agreements generally require, and new lease agreements that we enter into are expected to require, that the tenant maintain comprehensive insurance and hazard insurance or self-insure its obligations.
We or our tenants may experience uninsured or underinsured losses, which could result in a significant loss of the capital we have invested in a property, decrease anticipated future revenues or cause us to incur unanticipated expense. 17 Our current lease agreements generally require, and new lease agreements that we enter into are expected to require, that the tenant maintain comprehensive insurance and hazard insurance or self-insure its obligations.
As of December 31, 2022, we had $105 million of variable-rate debt, excluding the impact of interest rates swaps in effect.
Our leases typically contain provisions, such as rent escalators, designed to mitigate the adverse impact of inflation on our results of operations. As of December 31, 2023, we had $446 million of variable-rate debt, excluding the impact of interest rates swaps in effect.
The presence of contamination or the failure to remediate contamination may adversely affect our ability to sell, develop or lease the real estate or to borrow using the real estate as collateral. In addition, regulations in response to climate change could result in increased compliance and energy costs.
In addition, regulations in response to climate change could result in increased compliance and energy costs.
Removed
Inflation may materially and adversely affect us and our tenants. In recent months, the consumer price index has increased substantially. Federal policies and recent global events, such as the rising price of oil and the conflict between Russia and Ukraine, may have exacerbated, and may continue to exacerbate, increases in the consumer price index.
Added
Further, while we carry cyber liability insurance, such insurance may not be adequate to cover all losses related to such events.
Removed
Compliance with the Americans with Disabilities Act and fire, safety and other regulations may require us to make unanticipated expenditures that materially adversely impact our cash flow. All of our properties are required to comply with Title III of the Americans with Disabilities Act, or the ADA.
Removed
Increased future debt service obligations may limit our operational flexibility, including our ability to acquire assets, finance or refinance our assets, contribute assets to joint ventures or sell assets as needed.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeRecord Date Payment Date Total Distribution ($ per share) Form 1099 Box 1a Ordinary Taxable Dividend ($ per share) Form 1099 Box 1b Qualified Taxable Dividend ($ per share) Form 1099 Box 3 Return of Capital ($ per share) Form 1099 Box 5 Section 199A Dividends ($ per share) 1/3/2022 1/14/2022 $ 0.3325 $ 0.3002 $ — $ 0.0323 $ 0.3002 3/31/2022 4/14/2022 0.3325 0.3002 — 0.0323 0.3002 6/30/2022 7/15/2022 0.3325 0.3002 — 0.0323 0.3002 9/30/2022 10/14/2022 0.3325 0.3002 — 0.0323 0.3002 Totals $ 1.3300 $ 1.2008 $ — $ 0.1292 $ 1.2008 We intend to pay regular quarterly dividends to our stockholders, although future distributions will be declared and paid at the discretion of the Board of Directors and will depend upon cash generated by operating activities, our financial condition, capital requirements, annual distribution requirements under the REIT provision of the Code and such other factors as the Board of Directors deems relevant.
Biggest changeRecord Date Payment Date Total Distribution ($ per share) Form 1099 Box 1a Ordinary Taxable Dividend ($ per share) Form 1099 Box 1b Qualified Taxable Dividend ($ per share) Form 1099 Box 3 Return of Capital ($ per share) Form 1099 Box 5 Section 199A Dividends ($ per share) 12/30/2022 1/13/2023 $ 0.3400 $ 0.3020 $ — $ 0.0380 $ 0.3020 3/31/2023 4/14/2023 0.3400 0.3020 — 0.0380 0.3020 6/30/2023 7/14/2023 0.3400 0.3020 — 0.0380 0.3020 9/29/2023 10/13/2023 0.3400 0.3020 — 0.0380 0.3020 Totals $ 1.3600 $ 1.2080 $ — $ 0.1520 $ 1.2080 We intend to pay regular quarterly dividends to our stockholders, although future distributions will be declared and paid at the discretion of the Board of Directors and will depend upon cash generated by operating activities, our financial condition, capital requirements, annual distribution requirements under the REIT provision of the Code and such other factors as the Board of Directors deems relevant.
Dividends The following table presents the characterizations for tax purposes of such common stock dividends for the year ended December 31, 2022.
Dividends The following table presents the characterizations for tax purposes of such common stock dividends for the year ended December 31, 2023.
Holders As of February 17, 2023, there were approximately 5,616 registered holders of record of our common stock. Sales of Unregistered Securities None. 27 Purchases of Equity Securities by the Company and Affiliated Purchasers None.
Holders As of February 15, 2024, there were approximately 5,335 registered holders of record of our common stock. Sales of Unregistered Securities None. 31 Purchases of Equity Securities by the Company and Affiliated Purchasers None.
Equity Compensation Plan For information about our equity compensation plan, please see Note 11 of our consolidated financial statements, included in Part II, Item 8 of this Annual Report on Form 10-K.
Also, see Item 12—“Security Ownership of Certain Owners and Management and Related Stockholder Matters.” Equity Compensation Plan For information about our equity compensation plan, please see Note 11 of our consolidated financial statements, included in Part II, Item 8 of this Annual Report on Form 10-K.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

48 edited+7 added−7 removed73 unchanged
Biggest changeInterest expense increased by approximately $3.9 million for the year ended December 31, 2022 compared to the year ended December 31, 2021. This w as primarily due to the issuance of $100 million of senior unsecured fixed rate notes issued in April 2021 and the issuance of $125 million of senior fixed notes in March 2022.
Biggest changeThis w as primarily due to the issuance of $125 million of senior fixed notes in March 2022, the issuance of $100 million of senior fixed notes in July 2023, an increase of $30 million of our term loan facility as part of the loan agreement in October 2022, and a higher effective interest rate on the unhedged portion of our term loan facility.
FFO is a non-GAAP measure and should not be considered a measure of liquidity including our ability to pay dividends or make distributions. In addition, our calculations of FFO are not necessarily comparable to FFO as calculated by other REITs that do not use the same definition or implementation guidelines or interpret the standards differently from us.
FFO is a non-GAAP measure and should not be considered a measure of liquidity including our ability to pay dividends or make distributions. In 42 addition, our calculations of FFO are not necessarily comparable to FFO as calculated by other REITs that do not use the same definition or implementation guidelines or interpret the standards differently from us.
However, subject to certain exceptions, we may also elect, in our sole discretion, to cash settle or net share settle all or any portion of our obligations under any forward sale agreement, in which case we may not receive any proceeds (in the case of cash settlement) or will not receive any proceeds (in the case of net share settlement), and we may owe cash (in the case of cash settlement) or shares of our common stock (in the case of net share settlement) to the relevant forward purchaser.
However, subject to certain exceptions, we may also elect, in our sole 40 discretion, to cash settle or net share settle all or any portion of our obligations under any forward sale agreement, in which case we may not receive any proceeds (in the case of cash settlement) or will not receive any proceeds (in the case of net share settlement), and we may owe cash (in the case of cash settlement) or shares of our common stock (in the case of net share settlement) to the relevant forward purchaser.
Property Expense We record all tenant expenses, both reimbursed and non-reimbursed, to property expense. We also record initial direct costs (lease negotiation and other previously capitalizable transaction expenses) as property expenses. Other property expenses consist of expenses incurred on vacant properties, abandoned deal costs, and franchise taxes.
Property Expense We record all tenant expenses, both reimbursed and non-reimbursed, to property expense. We also record initial direct costs (lease negotiation and other previously capitalizable transaction expenses) as property expenses. Other property expenses consist of expenses incurred on vacant properties, abandoned deal costs, lease transaction costs, property-level expenses and franchise taxes.
Lease incentives are included in Intangible lease assets, net, on our Consolidated Balance Sheets. We assess the collectability of our lease receivables, including deferred rents receivable, on several factors, including payment history, the financial strength of the tenant and any guarantors, historical operations and operating trends of the property, and current economic conditions.
Lease incentives are included in Intangible real estate assets, net, on our Consolidated Balance Sheets. We assess the collectability of our lease receivables, including deferred rents receivable, on several factors, including payment history, the financial strength of the tenant and any guarantors, historical operations and operating trends of the property, and current economic conditions.
Additionally, the Company has not acquired a substantive process used to generate outputs. As substantially all of the fair value of the gross assets acquired are concentrated in a single identifiable asset and there were no processes acquired, the acquisitions do not 32 qualify as businesses and are accounted for as asset acquisitions.
Additionally, the Company has not acquired a substantive process used to generate outputs. As substantially all of the fair value of the gross assets acquired are concentrated in a single identifiable asset and there were no processes acquired, the acquisitions do not 36 qualify as businesses and are accounted for as asset acquisitions.
We have entered into the following interest rate swaps to hedge the interest rate variability associated with the Loan Agreement as of December 31, 2022. These hedging agreements were entered into to mitigate the interest rate risk inherent in FCPT OP’s variable rate debt and not for trading purposes.
We have entered into the following interest rate swaps to hedge the interest rate variability associated with the Loan Agreement as of December 31, 2023. These hedging agreements were entered into to mitigate the interest rate risk inherent in FCPT OP’s variable rate debt and not for trading purposes.
For a discussion of the year ended December 31, 2021 compared to the year ended December 31, 2020, please refer to Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2021.
For a discussion of the year ended December 31, 2022 compared to the year ended December 31, 2021, please refer to Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2022.
We believe that we have operated in conformity with the requirements for qualification and taxation as a REIT for the taxable year ended December 31, 2022, and we intend to continue to operate in a manner that will enable us to maintain our qualification as a REIT.
We believe that we have operated in conformity with the requirements for qualification and taxation as a REIT for the taxable year ended December 31, 2023, and we intend to continue to operate in a manner that will enable us to maintain our qualification as a REIT.
Recognizing rental income on a 33 straight-line basis generally results in recognized revenues during the first half of a lease term exceeding the cash amounts contractually due from our tenants, creating a deferred rent receivable.
Recognizing rental income on a 37 straight-line basis generally results in recognized revenues during the first half of a lease term exceeding the cash amounts contractually due from our tenants, creating a deferred rent receivable.
These swaps are accounted for as cash flow hedges with all interest income and expense recorded as a component of net income and other valuation changes recorded as a component of other comprehensive income. The following table presents the swaps held as of December 31, 2022.
These swaps are accounted for as cash flow hedges with all interest income and expense recorded as a component of net income and other valuation changes recorded as a component of other comprehensive income. The following table presents the swaps held as of December 31, 2023.
During the year ended December 31, 2022, amortization of above and below market rents, and lease incentives decreased rental revenue by $2.2 million, as compared to $2.1 million for the year ended December 31, 2021. 30 General and Administrative Expense General and administrative expense is comprised of costs associated with personnel, office rent, legal, accounting, information technology and other professional and administrative services in association with our real estate operations, our REIT structure and public company reporting requirements.
During the year ended December 31, 2023, amortization of above and below market rents, and lease incentives decreased rental revenue by $2.1 million, as compared to $2.2 million for the year ended December 31, 2022. 34 General and Administrative Expense General and administrative expense is comprised of costs associated with personnel, office rent, legal, accounting, information technology and other professional and administrative services in association with our real estate operations, our REIT structure and public company reporting requirements.
Notional Amount ($ in thousands) Effective Date Maturity Date Fixed Rate to Pay Variable Rate to Receive $ 100,000 10/25/2022 11/9/2023 2.19 % Daily Simple SOFR + 10 bps 150,000 11/9/2022 11/9/2024 1.88 % Daily Simple SOFR + 10 bps 50,000 10/25/2022 11/9/2025 0.44 % Daily Simple SOFR + 10 bps 25,000 11/9/2022 11/9/2025 2.70 % Daily Simple SOFR + 10 bps 50,000 11/9/2023 11/9/2025 0.82 % Daily Simple SOFR + 10 bps 25,000 11/9/2023 11/9/2026 3.65 % Daily Simple SOFR + 10 bps 25,000 10/25/2025 11/9/2028 2.25 % 1m Term SOFR 50,000 11/10/2025 11/9/2027 1.48 % Daily Simple SOFR + 10 bps 50,000 11/10/2025 11/9/2027 1.54 % Daily Simple SOFR + 10 bps 50,000 11/10/2025 11/9/2028 1.49 % Daily Simple SOFR + 10 bps 50,000 11/10/2025 11/9/2028 2.02 % Daily Simple SOFR + 10 bps During the year ended December 31, 2022, we entered into three interest rate swaps to hedge the interest rate variability associated with the term loan portion of our revolving credit facility.
Notional Amount ($ in thousands) Effective Date Maturity Date Fixed Rate to Pay Variable Rate to Receive 150,000 11/9/2022 11/9/2024 1.88 % Daily Simple SOFR + 10 bps 50,000 10/25/2022 11/9/2025 0.44 % Daily Simple SOFR + 10 bps 25,000 11/9/2022 11/9/2025 2.70 % Daily Simple SOFR + 10 bps 25,000 3/9/2023 11/9/2026 4.12 % Daily Simple SOFR + 10 bps 50,000 11/9/2023 11/9/2025 0.82 % Daily Simple SOFR + 10 bps 25,000 11/9/2023 11/9/2026 3.65 % Daily Simple SOFR + 10 bps 25,000 11/9/2023 11/9/2028 4.25 % Daily Simple SOFR + 10 bps 25,000 11/13/2023 11/9/2028 4.42 % Daily Simple SOFR + 10 bps 50,000 11/10/2025 11/9/2027 1.48 % Daily Simple SOFR + 10 bps 50,000 11/10/2025 11/9/2027 1.54 % Daily Simple SOFR + 10 bps 25,000 11/10/2025 11/9/2028 2.25 % 1m Term SOFR 50,000 11/10/2025 11/9/2028 1.49 % Daily Simple SOFR + 10 bps 50,000 11/10/2025 11/9/2028 2.02 % Daily Simple SOFR + 10 bps During the year ended December 31, 2023, we entered into three interest rate swaps to hedge the interest rate variability associated with the term loan portion of our revolving credit facility.
AFFO is a widely reported measure by other REITs; however, other REITs may use different methodologies for calculating AFFO and, accordingly, our AFFO may not be comparable to other REITs. 38
AFFO is a widely reported measure by other REITs; however, other REITs may use different methodologies for calculating AFFO and, accordingly, our AFFO may not be comparable to other REITs. 43
In this section, we discuss the results of our operations for the year ended December 31, 2022 compared to the year ended December 31, 2021.
In this section, we discuss the results of our operations for the year ended December 31, 2023 compared to the year ended December 31, 2022.
Maturity Interest Outstanding Balance (Dollars in thousands) Date Rate December 31, 2022 Notes Payable: Senior unsecured fixed rate note, issued June 2017 Jun 2024 4.68 % $ 50,000 Senior unsecured fixed rate note, issued December 2018 Dec 2026 4.63 % 50,000 Senior unsecured fixed rate note, issued June 2017 Jun 2027 4.93 % 75,000 Senior unsecured fixed rate note, issued December 2018 Dec 2028 4.76 % 50,000 Senior unsecured fixed rate note, issued April 2021 Apr 2029 2.74 % 50,000 Senior unsecured fixed rate note, issued March 2020 Jun 2029 3.15 % 50,000 Senior unsecured fixed rate note, issued March 2020 Apr 2030 3.20 % 75,000 Senior unsecured fixed rate note, issued March 2022 Mar 2031 3.09 % 50,000 Senior unsecured fixed rate note, issued April 2021 Apr 2031 2.99 % 50,000 Senior unsecured fixed rate note, issued March 2022 Mar 2032 3.11 % 75,000 Total Notes $ 575,000 35 Capital Resources and Financing Strategy On a short-term basis, our principal demands for funds will be for operating expenses, distributions to shareholders and interest and principal on current and any future debt financings.
Maturity Interest Outstanding Balance (Dollars in thousands) Date Rate December 31, 2023 Notes Payable: Senior unsecured fixed rate note, issued June 2017 Jun 2024 4.68 % $ 50,000 Senior unsecured fixed rate note, issued December 2018 Dec 2026 4.63 % 50,000 Senior unsecured fixed rate note, issued June 2017 Jun 2027 4.93 % 75,000 Senior unsecured fixed rate note, issued December 2018 Dec 2028 4.76 % 50,000 Senior unsecured fixed rate note, issued April 2021 Apr 2029 2.74 % 50,000 Senior unsecured fixed rate note, issued March 2020 Jun 2029 3.15 % 50,000 Senior unsecured fixed rate note, issued March 2020 Apr 2030 3.20 % 75,000 Senior unsecured fixed rate note, issued March 2022 Mar 2031 3.09 % 50,000 Senior unsecured fixed rate note, issued April 2021 Apr 2031 2.99 % 50,000 Senior unsecured fixed rate note, issued March 2022 Mar 2032 3.11 % 75,000 Senior unsecured fixed rate note, issued July 2023 Jul 2033 6.44 % 100,000 Total Notes $ 675,000 Capital Resources and Financing Strategy On a short-term basis, our principal demands for funds will be for operating expenses, distributions to shareholders and interest and principal on current and any future debt financings.
Debt Instruments At December 31, 2022, our long-term debt consisted of $430 million of non-amortizing term loans, $0 million in outstanding borrowings under the revolving credit facility, and $575 million aggregate principal amount of senior unsecured fixed rate notes issued by FCPT OP.
At December 31, 2022, our debt consisted of $430 million of non-amortizing term loans, no outstanding borrowings under the revolving credit facility, and $575 million aggregate principal amount of senior unsecured fixed rate notes issued by FCPT OP.
Interest expense, excluding deferred financing costs, on the $430 million of term loans and the interest rate swaps we entered into to hedge the variability associated with the term loans was $13.0 million and $12.6 million for the years ended December 31, 2022 and 2021, respectively. This interest expense includes the reclassification of other comprehensive income into interest expense.
Interest expense, excluding deferred financing costs, on the $430 million of term loans and the interest rate swaps we entered into to hedge the variability associated with the term loans was $15.7 million and $13.0 million for the years ended December 31, 2023 and 2022, respectively. This interest expense includes the reclassification of other comprehensive income into interest expense.
During the year ended December 31, 2022, we recognized costs paid by the lessor and reimbursed by the lessees within rental revenue of $6.6 million, compared to $3.8 million during the year ended December 31, 2021 due to the increase in the number of mall outparcel and multi-tenant property acquisitions. These amounts are also recognized in property expenses.
During the year ended December 31, 2023, we recognized costs paid by the lessor and reimbursed by the lessees within rental revenue of $9.4 million, compared to $6.6 million during the year ended December 31, 2022 due to the increase in the number of mall outparcel and multi-tenant property acquisitions. These amounts are also recognized in property expenses.
The Company intends to exercise the extension option or refinance prior to maturity. At December 31, 2022 and 2021, the weighted average interest rate on the term loans, after consideration of the interest rate hedges, was 3.42% and 2.93%, respectively.
The Company intends to exercise the extension option or refinance prior to maturity. At December 31, 2023 and 2022, the weighted average interest rate on the term loans, after consideration of the interest rate hedges, was 3.69% and 3.42%, respectively.
As of December 31, 2022, there was $376.9 million available for issuance under the current ATM program. On a long-term basis, our principal demands for funds include payment of dividends, financing of property acquisitions, and scheduled debt maturities.
As of December 31, 2023, there was $243.8 million available for issuance under the current ATM program. On a long-term basis, our principal demands for funds include payment of dividends, financing of property acquisitions, and scheduled debt maturities.
As of December 31, 2022, our lease portfolio had the following characteristics: • 1,023 properties located in 47 states and representing an aggregate leasable area of 6.8 million square feet; • 99.9% occupancy (based on leasable square footage); • An average remaining lease term of 8.3 years (weighted by annualized base rent); • An average annual rent escalation of 1.42% through December 31, 2027 ( weighted by annualized base rent); and • 99.9% of the contractual base rent collected for the year ended December 31, 2022. 29 Results of Operations The results of operations for the accompanying consolidated financial statements discussed below are derived from our consolidated statements of comprehensive income (“Comprehensive Income Statement”) found elsewhere in this Annual Report on Form 10-K.
As of December 31, 2023, our lease portfolio had the following characteristics: • 1,111 properties located in 47 states and representing an aggregate leasable area of 7.5 million square feet; • 99.8% occupancy (based on leasable square footage); • An average remaining lease term of 7.8 years (weighted by annualized base rent); • An average annual rent escalation of 1.4% through December 31, 2028 ( weighted by annualized base rent); and • 99.9% of the contractual base rent collected for the year ended December 31, 2023. 33 Results of Operations The results of operations for the accompanying consolidated financial statements discussed below are derived from our consolidated statements of comprehensive income (“Comprehensive Income Statement”) found elsewhere in this Annual Report on Form 10-K.
Liquidity and Financial Condition At December 31, 2022, we had $26.3 million of cash and cash equivalents and $250 million of borrowing capacity under our revolving credit facility. The revolving credit facility provides for a letter of credit sub-limit of $25 million. As of February 17, 2023, we had $250 million of borrowing capacity under the revolving credit facility.
Liquidity and Financial Condition At December 31, 2023, we had $16.3 million of cash and cash equivalents and $234 million of borrowing capacity under our revolving credit facility. The revolving credit facility provides for a letter of credit sub-limit of $25 million. As of February 15, 2024, we had $215 million of borrowing capacity under the revolving credit facility.
During the year ended December 31, 2021, the Company sold two properties with a combined net book value of $2.8 million for a realized gain on sale of $431 thousand . Income Taxes During the years ended December 31, 2022 and 2021, income tax expense on real estate operations was $206 thousand and $174 thousand, respectively.
During the year ended December 31, 2022, the Company sold eight properties with a combined net book value of $16.3 million for a realized gain on sale of $8.1 million . Income Taxes During the years ended December 31, 2023 and 2022, income tax expense on real estate operations was $227 thousand and $206 thousand, respectively.
At December 31, 2021, our long-term debt consisted of $400 million of non-amortizing term loans, $36 million in outstanding borrowings under the revolving credit facility, and $450 million aggregate principal amount of senior unsecured fixed rate notes issued by FCPT OP.
Debt Instruments At December 31, 2023, our debt consisted of $430 million of non-amortizing term loans, $16 million in outstanding borrowings under the revolving credit facility, and $675 million aggregate principal amount of senior unsecured fixed rate notes issued by FCPT OP.
Real Estate Operations Rental Revenue Rental revenue increased $20.8 million during the year ended December 31, 2022 compared to the year ended December 31, 2021. This increase is due to recognizing a full year of revenue in 2022 from the 122 properties acquired in 2021, and the acquisition of 115 properties and ground leaseholds in 2022.
Real Estate Operations Rental Revenue Rental revenue increased $26.3 million during the year ended December 31, 2023 compared to the year ended December 31, 2022. This increase is due to recognizing a full year of revenue in 2023 from the 112 properties acquired in 2022, and the acquisition of 92 properties and ground leaseholds in 2023.
D epreciation and amortization expense increased by approximately $6.6 million for the year ended December 31, 2022 compared to the year ended December 31, 2021, primarily due to the acquisition of 115 restaurant properties acquired in 2022, and the depreciation on 122 properties acquired in 2021 that incurred a full year of depreciation.
D epreciation and amortization expense increased by approximately $9.2 million for the year ended December 31, 2023 compared to the year ended December 31, 2022, primarily due to the acquisition of 92 properties in 2023, and the depreciation on 112 properties acquired in 2022 that incurred a full year of depreciation.
During the year ended December 31, 2022, we recorded property expenses of $8.0 million, of which $6.6 million was reimbursed by tenants. During the year ended December 31, 2021, we recorded property expenses of $5.0 million, of which $3.8 million was reimbursed by tenants.
During the year ended December 31, 2023, we recorded property expenses of $11.6 million, of which $9.4 million was reimbursed by tenants. During the year ended December 31, 2022, we recorded property expenses of $8.0 million, of which $6.6 million was reimbursed by tenants.
At December 31, 2022 there were no outstanding borrowings under the 34 revolving credit facility and no outstanding letters of credit. At December 31, 2021, there were outstanding borrowings of $36 million under the revolving credit facility and no outstanding letters of credit.
At December 31, 2023 there were outstanding borrowings of $16 million 38 under the revolving credit facility and no outstanding letters of credit. At December 31, 2022, there were no outstanding borrowings under the revolving credit facility and no outstanding letters of credit.
During 2022, we issued 5,253,257 shares under the ATM programs, including physically settled forward sale agreements, at a weighted-average selling price of $27.46 per share, for net proceeds of approximately $141.8 million (after issuance costs). The net proceeds were employed to fund acquisitions and for general corporate purposes.
During 2023, we issued 5,805,334 shares under the ATM programs, including physically settled forward sale agreements, at a weighted-average selling price of $26.42 per share, for net proceeds of approximately $153.4 million (after issuance costs). The net proceeds were employed to fund acquisitions and for general corporate purposes.
Non-GAAP Definitions The certain non-GAAP financial measures included above management believes are helpful in understanding our business, as further described below. Our definition and calculation of non-GAAP financial measures may differ from those of other REITs and therefore may not be comparable.
(2) Assumes the issuance of common shares for OP units held by non-controlling interests. Non-GAAP Definitions The certain non-GAAP financial measures included above management believes are helpful in understanding our business, as further described below. Our definition and calculation of non-GAAP financial measures may differ from those of other REITs and therefore may not be comparable.
We also omit the tax impact of non-FFO producing activities from FFO determined in accordance with the NAREIT definition. 37 Our management uses FFO as a supplemental performance measure because, in excluding real estate related depreciation and amortization and gains and losses from property dispositions, it provides a performance measure that, when compared year over year, captures trends in occupancy rates, rental rates and operating costs.
Our management uses FFO as a supplemental performance measure because, in excluding real estate related depreciation and amortization and gains and losses from property dispositions, it provides a performance measure that, when compared year over year, captures trends in occupancy rates, rental rates and operating costs.
Realized Gain on Sale, Net During the year ended December 31, 2022, the Company sold eight properties with a combined net book value of $16.3 million for a realized gain on sale of $8.1 million .
Realized Gain on Sale, Net During the year ended December 31, 2023, the Company sold seven properties with a combined net book value of $23.7 million for a realized gain on sale of $2.3 million .
Year Ended December 31, (In thousands) 2022 2021 2020 Revenues: Rental $ 193,611 $ 172,812 $ 154,721 Restaurant 29,583 26,566 16,223 Total revenues 223,194 199,378 170,944 Operating expenses: General and administrative 20,043 17,650 15,046 Depreciation and amortization 41,471 34,826 29,433 Property 7,989 5,040 3,508 Restaurant 27,822 24,563 16,082 Total operating expenses 97,325 82,079 64,069 Interest expense (36,405) (32,555) (29,231) Other income, net 542 36 170 Realized gain on sale, net 8,139 431 — Income tax benefit (expense) (237) 534 (247) Net income 97,908 85,745 77,567 Net income attributable to noncontrolling interest (136) (164) (235) Net Income Available to Common Shareholders $ 97,772 $ 85,581 $ 77,332 Analysis of Results of Operations We operate in two segments, real estate operations and restaurant operations.
Year Ended December 31, (In thousands) 2023 2022 2021 Revenues: Rental $ 219,881 $ 193,611 $ 172,812 Restaurant 30,725 29,583 26,566 Total revenues 250,606 223,194 199,378 Operating expenses: General and administrative 22,680 20,043 17,650 Depreciation and amortization 50,731 41,471 34,826 Property 11,550 7,989 5,040 Restaurant 28,707 27,822 24,563 Total operating expenses 113,668 97,325 82,079 Interest expense (44,606) (36,405) (32,555) Other income, net 919 542 36 Realized gain on sale, net 2,341 8,139 431 Income tax benefit (expense) (130) (237) 534 Net income 95,462 97,908 85,745 Net income attributable to noncontrolling interest (122) (136) (164) Net Income Available to Common Shareholders $ 95,340 $ 97,772 $ 85,581 Analysis of Results of Operations We operate in two segments, real estate operations and restaurant operations.
GAAP, excluding gains (or losses) from sales of property and undepreciated land and impairment write-downs of depreciable real estate, plus real estate related depreciation and amortization (excluding amortization of deferred financing costs) and after adjustments for unconsolidated partnerships and joint ventures.
GAAP, excluding gains (or losses) from sales of property and undepreciated land and impairment write-downs of depreciable real estate, plus real estate related depreciation and amortization (excluding amortization of deferred financing costs) and after adjustments for unconsolidated partnerships and joint ventures. We also omit the tax impact of non-FFO producing activities from FFO determined in accordance with the NAREIT definition.
Interest rates and other factors, such as occupancy, rental rate and the financial condition of our tenants, influence our performance more so than does inflation. Changes in interest rates do not necessarily correlate with inflation rates or changes in inflation rates. As described above, we currently offer leases that provide for payments of base rent with scheduled annual fixed increases.
Interest rates and other factors, such as occupancy, rental rate and the financial condition of our tenants, influence our performance more so than does inflation. Changes in interest rates do not necessarily correlate with inflation rates or changes in inflation rates.
Year Ended December 31, (In thousands, except share and per share data) 2022 2021 2020 Net income $ 97,908 $ 85,745 $ 77,567 Depreciation and amortization 41,342 34,715 29,351 Realized gain on sales of real estate (8,139) (431) — Funds from Operations (FFO) (as defined by NAREIT) 131,111 120,029 106,918 Straight-line rent adjustment (6,372) (7,583) (8,588) Recognized rental revenue abated (1) — — (1,568) Deferred income tax benefit (2) (125) (864) — Stock-based compensation expense 4,978 3,948 3,376 Non-cash amortization of deferred financing costs 2,104 2,368 2,132 Non-real estate investment depreciation 129 111 82 Amortization of above and below market leases, net 2,151 2,119 1,296 Adjusted Funds from Operations (AFFO) $ 133,976 $ 120,128 $ 103,648 Fully diluted shares outstanding (3) 81,921,624 76,986,538 71,823,973 FFO per diluted share $ 1.60 $ 1.56 $ 1.49 AFFO per diluted share $ 1.64 $ 1.56 $ 1.44 (1) Amount represents base rent that the Company abated as a result of lease amendments.
Year Ended December 31, (In thousands, except share and per share data) 2023 2022 2021 Net income $ 95,462 $ 97,908 $ 85,745 Depreciation and amortization 50,592 41,342 34,715 Realized gain on sales of real estate (2,341) (8,139) (431) Funds from Operations (FFO) (as defined by NAREIT) 143,713 131,111 120,029 Straight-line rent adjustment (5,523) (6,372) (7,583) Deferred income tax benefit (1) (259) (125) (864) Stock-based compensation expense 6,271 4,978 3,948 Non-cash amortization of deferred financing costs 2,311 2,104 2,368 Non-real estate investment depreciation 139 129 111 Amortization of above and below market leases, net 2,061 2,151 2,119 Adjusted Funds from Operations (AFFO) $ 148,713 $ 133,976 $ 120,128 Fully diluted shares outstanding (2) 88,861,587 81,921,624 76,986,538 FFO per diluted share $ 1.62 $ 1.60 $ 1.56 AFFO per diluted share $ 1.67 $ 1.64 $ 1.56 (1) Amount represents non-cash deferred income tax benefit recognized at Kerrow Restaurant Operating Business.
Interest expense and fees on our revolving credit facility was $0.7 million and $1.0 million for the years ended December 31, 2022 and 2021, respectively. Amortization of deferred financing costs was $2.1 million and $2.4 million for the years ended December 31, 2022 and 2021, respectively. For additional information on the Company’s debt instruments, see “Liquidity and Financial Condition” below.
Amortization of the senior unsecured notes deferred financing costs was $0.7 million and $0.6 million for the years ended December 31, 2023 and 2022, respectively. For additional information on the Company’s debt instruments, see “Liquidity and Financial Condition” below.
During the year ended December 31, 2022, the Company recorded an income tax expense of $31 thousand at the Kerrow Restaurant Operating Business, compared to an income tax benefit of $708 thousand primarily due to the removal of a valuation allowance on net deferred tax assets for the year ended December 31, 2021.
During the year ended December 31, 2023, the Company recorded an income tax benefit of $97 thousand at the Kerrow Restaurant Operating Business, compared to an income tax expense of $31 thousand primarily due to return to provision adjustments for the year ended December 31, 2022.
We expect that our primary uses of capital will be for property and other asset acquisitions and the funding of tenant improvements and other capital expenditures, and debt refinancing. 36 Because the properties in our portfolio are generally leased to tenants under net leases, where the tenant is responsible for property operating costs and expenses, our exposure to rising property operating costs due to inflation is mitigated.
Because the properties in our portfolio are generally leased to tenants under net leases, where the tenant is responsible for property operating costs and expenses, our exposure to rising property operating costs due to inflation is mitigated.
Income tax expense on real estate operations consists of state and local income taxes incurred by FCPT on its lease portfolio.
Income tax expense on real estate operations consists of state and local income taxes incurred by 35 FCPT on its lease portfolio. As FCPT acquires additional properties in states subject to state income taxes, income tax expense will continue to increase.
General and administrative expense increased $2.4 million in the year ended December 31, 2022 compared to the year ended December 31, 2021, primarily due to an increase in cash compensation-related expenses and non-cash stock compensation expenses stemming from a higher head count and benefits costs related to employees added in 2021 and 2022, as well as an increase in audit and IT fees related to system enhancements.
General and administrative expense increased $2.6 million in the year ended December 31, 2023 compared to the year ended December 31, 2022, primarily due to a $2.7 million increase in cash compensation-related expenses and non-cash stock compensation expenses stemming from a higher head count and benefits costs, offset by $0.1 million decrease in professional services.
Total restaurant expenses increased approximately $3.3 million in the year ended December 31, 2022 compared to the year ended December 31, 2021, primarily due to an increase in cost of goods sold and labor costs and having a full year of restaurant expenses from a seventh restaurant which began operations in April 2021.
Total restaurant expenses increased approximately $0.9 million in the year ended December 31, 2023 compared to the year ended December 31, 2022, primarily due to an increase in costs of good sold and labor costs.
Supplemental Financial Measures The following table presents a reconciliation of GAAP net income to Funds from Operations (“FFO”) and Adjusted Funds from Operations (“AFFO”) for the years ended December 31, 2022, 2021, and 2020.
As described above, we currently offer leases that provide for payments of base rent with scheduled annual fixed increases. 41 Supplemental Financial Measures The following table presents a reconciliation of GAAP net income to Funds from Operations (“FFO”) and Adjusted Funds from Operations (“AFFO”) for the years ended December 31, 2023, 2022, and 2021.
Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the assets to the future undiscounted net cash flows expected to be generated by the assets.
Such events and changes may include macroeconomic conditions which may result in property operational disruption and indicate that the carrying amount may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the assets to the future undiscounted net cash flows expected to be generated by the assets.
However, we cannot be assured that we will have access to the capital markets at times and at terms that are acceptable to us.
However, we cannot be assured that we will have access to the capital markets at times and at terms that are acceptable to us. We expect that our primary uses of capital will be for property and other asset acquisitions and the funding of tenant improvements and other capital expenditures, and debt refinancing.
The Company has issued the following $575 million of senior unsecured fixed rate notes (together, the “Notes”) in private placements pursuant to note purchase agreements with the various purchasers.
The swaps were terminated on May 25, 2023 for approximately a $8.1 million gain which will be amortized over the 10 years of the unsecured note as a reduction to interest expense. 39 The Company has issued the following $675 million of senior unsecured fixed rate notes (together, the “Notes”) in private placements pursuant to note purchase agreements with the various purchasers.
The non-reimbursed property expenses relate to abandoned deal costs, lease transaction costs and property-level expenses that were the responsibility of the Company rather than the tenant. Interest Expense We incur interest expense on our $430 million of term loans, any outstanding borrowings on our revolving credit facility, interest rate swaps, and our $575 million of senior unsecured fixed rate notes.
Interest Expense We incur interest expense on our $430 million of term loans, any outstanding borrowings on our revolving credit facility, interest rate swaps, and our $675 million of senior unsecured fixed rate notes. Interest expense increased by approximately $8.2 million for the year ended December 31, 2023 compared to the year ended December 31, 2022.
Removed
In 2022, FCPT engaged in various real estate transactions for a total investment of $296.3 million, including capitalized transaction costs.
Added
In 2023, FCPT engaged in various real estate transactions for a total investment of $341.1 million, including capitalized transaction costs. Pursuant to these transactions, we acquired 92 properties and ground leaseholds, aggregating 757 thousand square feet, and representing 41 brands, including Aspen Dental, Cheddar’s, Oak Street Health, Take 5 Car Wash, Tire Discounters, W.W. Williams, and WellNow Urgent Care.
Removed
Pursuant to these transactions, we acquired 115 properties and ground leaseholds, aggregating 824 thousand square feet, and representing 52 brands, including Aspen Dental, Caliber Collision, Chili’s Grill & Bar, First Midwest Bank, Jack in the Box, National Tire & Battery, Sonic, Tires Plus, and WellNow Urgent Care.
Added
The increase in non-reimbursed property expenses are primarily due to increases in abandoned deal costs and property-level expenses that were the responsibility of the Company rather than the tenant.
Removed
As FCPT acquires additional properties in states subject to state income taxes, income tax expense will continue to increase. 31 Restaurant Operations Restaurant revenues increased approximately $3.0 million in the year ended December 31, 2022 compared to the year ended December 31, 2021, due to increased guest traffic and having a full year of revenue from a seventh restaurant which began operations in April 2021.
Added
Interest expense and fees on our revolving credit facility was $2.1 million and $0.7 million for the years ended December 31, 2023 and 2022, respectively. Amortization of the term loan and revolving credit facility deferred financing costs was $1.6 million and $1.5 million for the years ended December 31, 2023 and 2022, respectively.
Removed
Such events and changes may include macroeconomic conditions, including those caused by global pandemics, like the coronavirus disease pandemic (“COVID-19”) and restrictions intended to prevent its spread, which may result in property operational disruption and indicate that the carrying amount may not be recoverable.
Added
Restaurant Operations Restaurant revenues increased approximately $1.1 million in the year ended December 31, 2023 compared to the year ended December 31, 2022, primarily due to higher net pricing and continued emphasis on customer service.
Removed
The Company has hedged its exposure to the variability in future cash flows for a forecasted issuance of long-term debt over a maximum period ending February 15, 2033. As of December 31, 2022, these interest rate swaps were valued as an asset of approximately $7.4 million within derivative assets.
Added
During the year ended December 31, 2023, the Company terminated four cash flow hedges in connection with the $100 million senior unsecured note offering that was entered into on June 5, 2023 and funded on July 12, 2023.
Removed
In 2020, the Company abated $1.57 million of rental revenue recognized in the second and third quarters of 2020. The receivables associated with the abatements were recognized as lease incentives and will be amortized as a reduction to rental revenue over the amended lease terms.
Added
These cash flow hedges had a total notional value of $100 million and were entered into at various dates ranging from February 2022 through April 2023 to hedge the interest rate on the offering.
Removed
(2) Amount represents non-cash deferred income tax benefit in 2022 and the removal of a valuation allowance on net deferred tax assets in 2021 at Kerrow Restaurant Operating Business. (3) Assumes the issuance of common shares for OP units held by non-controlling interests.
Added
The following table presents the Notes outstanding as of December 31, 2023.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

3 edited+0 added−0 removed7 unchanged
Biggest changeThe remaining $430.0 million of our total indebtedness consisted of three to five-year variable-rate obligations for which we have entered into swaps that effectively fix $325 million through November 2023.
Biggest changeThe remaining $446 million of our total indebtedness consisted of three to five-year variable-rate obligations for which we have entered into swaps that effectively fix $375 million through November 2024, and outstanding borrowings on the revolving credit facility.
As of December 31, 2022, our assets were primarily long-term, fixed-rate leases (though most have scheduled rental increases during the terms of the leases). As of December 31, 2022, $575.0 million of our total indebtedness consisted of senior unsecured fixed rated notes.
As of December 31, 2023, our assets were primarily long-term, fixed-rate leases (though most have scheduled rental increases during the terms of the leases). As of December 31, 2023, $675 million of our total indebtedness consisted of senior unsecured fixed rated notes.
Risk Factors - Risks Related to Our Business - Hedging transactions could have a negative effect on our results of operations.” Due to the fixed rate nature of $325.0 million of our indebtedness and the hedging transactions described above, a hypothetical one percentage point decline in interest rates would not have materially affected our consolidated financial position, results of operations or cash flows as of December 31, 2022. 39 Item 8.
Risk Factors - Risks Related to Our Business - Hedging transactions could have a negative effect on our results of operations.” Due to the fixed rate nature of $1.05 billion of our indebtedness and the hedging transactions described above, a hypothetical one percentage point decline in interest rates would not have materially affected our consolidated financial position, results of operations or cash flows as of December 31, 2023. 44 Item 8.

Other FCPT 10-K year-over-year comparisons