2016 Annual Report
Dear Fellow Shareholders:
2016 was a year of significant accomplishment for Four Corners Property Trust, Inc. It was our first full
year as a stand‐alone, public company following our spin‐off from Darden Restaurants, Inc., which
occurred on November 9, 2015. In 2016, we managed the company consistently with the business plan
and corporate governance principles reflected in our inaugural investor presentation. More specifically,
we accomplished the following during 2016 while delivering a total stockholder return of 33.8% from
January 1, 2016 through December 31, 2016:
Created a team‐oriented culture that we believe will provide a competitive advantage
over the long term;
Designed a framework for accretive investing that can be conveyed clearly both internally
and externally;
Established an acquisition process, including recruiting and training an acquisition team;
Conducted significant investor outreach, which resulted in a stockholder base that is
consistent with a large‐cap REIT and supportive of an advantageous cost of capital;
Installed systems and processes that resulted in obtaining Section 404 Certification under
the Sarbanes‐Oxley Act upon the filing of our 10‐K for the 2016 Fiscal Year;
Established and implemented a comprehensive enterprise risk matrix;
Disposed of two restaurant properties for a gross sales price of $24.8 million, representing
a weighted average capitalization rate of 4.8%, and used the proceeds in 1031 Exchanges
to acquire multiple restaurants with going‐in cash capitalization rates of 6.5‐6.6%;
Tightly managed overhead costs resulting in industry low whole‐dollar general and
administrative expenses that were below budget;
Engaged in 13 acquisition transactions for a total investment of $94.1 million in our
leasing portfolio representing 59 properties and 13 brands, including Burger King, Taco
Bell, Pizza Hut and KFC;
Broadened access to capital by establishing a $150 million At‐The‐Market (ATM) stock
offering program on December 5, 2016;
Restructured operating partnership in order to permit OP Unit transactions and acquired
10 properties in 2016 using such structure; and
Laid groundwork for investment grade rating (which we received in early 2017 from Fitch
Ratings), which facilitates bond financing.
As we stated and demonstrated last year, we will continue to pursue a disciplined acquisition approach
focused on acquiring restaurant properties that are well located, occupied by durable restaurant
concepts, with rents that are well covered by restaurant operations’ cash flows. The addressable
acquisition market continues to be very large. That said, we have remained conservative on pricing
acquisitions as we believe that market pricing for net leased assets is elevated due to a generally yield‐
starved investment environment. It is our belief that acquisitions are only advisable if they (i) further our
diversification goals and (ii) are accretive to our cost of capital.
We appreciate the counsel of our board and the energy and commitment the Four Corners team exhibits
every day. Thank you for your support.
John Moody
Chairman
Bill Lenehan
Chief Executive Officer
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
___________________________________________
FORM 10-K
___________________________________________
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2016
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
OR
Commission File Number: 1-37538
FOUR CORNERS PROPERTY TRUST, INC.
(Exact name of Registrant as specified in its charter)
Maryland
(State or other jurisdiction of
incorporation or organization)
47-4456296
(IRS Employer Identification No.)
591 Redwood Highway, Suite 1150, Mill Valley, California
(Address of principal executive offices)
94941
(Zip Code)
Registrant’s telephone number, including area code: (415) 965-8030
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock, $0.0001 par value
Name of each exchange
on which registered
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes
No
Indicate by check mark if Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes
No
Indicate by check mark if the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90 days. Yes
No
Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months
(or for such shorter period that the Registrant was required to submit and post such files). Yes
No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and
will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference
in Part III of this Form 10-K or any amendment to this Form 10-K.
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a
smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule
12b-2 of the Exchange Act. (Check one):
Large accelerated filer
Non-accelerated filer
Accelerated filer
(Do not check if a smaller reporting company) Smaller reporting company
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes
No
The aggregate market value of Common Stock held by non-affiliates of the Registrant, computed by reference to the closing
sales price of such shares on the New York Stock Exchange as of the last business day of the Registrant’s most recently completed
second fiscal quarter was approximately: $1,230,657,258.
Number of shares of Common Stock, par value $0.0001, outstanding as of February 27, 2017: 59,973,547.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant’s Definitive Proxy Statement for its Annual Meeting of Stockholders to be filed with the Securities
and Exchange Commission no later than April 29, 2017 are incorporated by reference into Part III of this Report.
FOUR CORNERS PROPERTY TRUST, INC.
FORM 10 - K
YEAR ENDED DECEMBER 31, 2016
TABLE OF CONTENTS
Part 1
Item 1.
Business
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2.
Item 3.
Item 4.
Part II
Item 5.
Item 6.
Item 7.
Properties
Legal Proceedings
Mine Safety Disclosure
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 8.
Item 9.
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosures
Item 9A. Controls and Procedures
Item 9B. Other Information
Part III
Item 10.
Directors, Executive Officers and Corporate Governance
Item 11.
Executive Compensation
Item 12.
Security Ownership of Certain Owners and Management and Related Stockholder Matters
Item 13.
Certain Relationships and Related Transactions, and Director Independence
Item 14.
Principal Accounting Fees and Services
Part IV
Item 15.
Exhibits, Financial Statement Schedules
Signatures
Page
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10
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Forward-Looking Statements
PART I
Statements contained in this Annual Report on Form 10-K, including the documents that are incorporated by reference, that
are not historical facts are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section
21E of the Securities Exchange Act of 1934 (the “Exchange Act”). Also, when Four Corners Property Trust, Inc. uses any of the
words “anticipate,” “assume,” “believe,” “estimate,” “expect,” “intend,” or similar expressions, Four Corners Property Trust, Inc.
is making forward-looking statements. Although management believes that the expectations reflected in such forward-looking
statements are based upon present expectations and reasonable assumptions, actual results could differ materially from those set
forth in the forward-looking statements. Certain factors that could cause actual results or events to differ materially from those
anticipated or projected are described in “Item 1A. Risk Factors.” of this Annual Report on Form 10-K.
Given these uncertainties, readers are cautioned not to place undue reliance on such statements, which speak only as of the
date of this Annual Report on Form 10-K or any document incorporated herein by reference. Four Corners Property Trust, Inc.
undertakes no obligation to publicly release any revisions to these forward-looking statements that may be made to reflect events
or circumstances after the date of this Annual Report on Form 10-K.
Item 1. Business.
Unless the context indicates otherwise, all references to “FCPT,” the “Company,” “we,” “our” or “us” include Four Corners
Property Trust, Inc. and all of its consolidated subsidiaries.
History
We were incorporated as a Maryland corporation on July 2, 2015 as a wholly owned indirect subsidiary of Darden Restaurants,
Inc. (together with its consolidated subsidiaries “Darden”). On November 9, 2015, Darden completed a spin-off of FCPT (the
“Spin-Off”) pursuant to which Darden contributed to us (i) 100% of the equity interest in entities that owned 418 properties in
which Darden operates Olive Garden, LongHorn SteakHouse and other branded restaurants and (ii) six LongHorn Steakhouse
restaurants, including the properties or interests associated with such restaurants, located in the San Antonio, Texas area (the
“Kerrow Restaurant Operating Business”). In connection with the Spin-Off, Darden distributed our common stock to its common
stockholders and, subsequently, we became an independent, publicly traded, self-administered company.
Business Overview
We are a Maryland real estate investment trust (“REIT”) which owns, acquires and leases properties for use in the restaurant
and food-service related industries. Substantially all of our business is conducted through Four Corners Operating Partnership,
LP (“FCPT OP”), a Delaware limited partnership of which we are a majority limited partner and our wholly owned subsidiary,
Four Corners GP, LLC (“FCPT GP”), is its sole general partner. We intend to qualify as a REIT for U.S. federal income tax purposes
with the taxable year beginning January 1, 2016.
Our revenues are primarily generated by leasing properties to Darden and other tenants through triple-net lease arrangements
under which the tenants are primarily responsible for ongoing costs relating to the properties, including utilities, property taxes,
insurance, common area maintenance charges, and maintenance and repair costs. We focus on income producing properties leased
to high quality tenants in major markets across the United States. We also generate revenues by operating the LongHorn San
Antonio Business pursuant to franchise agreements with Darden.
In addition to managing our existing properties, our strategy includes investing in additional restaurant and food service real
estate properties to grow and diversify our existing restaurant portfolio. We expect this acquisition strategy will decrease our
reliance on Darden over time. We intend to purchase properties that are well located, occupied by durable restaurant concepts,
with creditworthy tenants whose operating cash flow are expected to meaningfully exceed their lease payments to us. We seek
to improve the probability of successful tenant renewal at the end of initial lease terms by acquiring properties that have high
levels of restaurant operator profitability compare to rent payments and have absolute rent levels that are not artificially higher
than market rates.
1
In 2016, FCPT engaged in 13 acquisition transactions for a total investment of $94.1 million in our leasing portfolio. Pursuant
to these transactions, we acquired an additional 59 properties, aggregating 184 thousand square feet and representing 13 brands,
including Burger King, Taco Bell, Pizza Hut and KFC. During the same period, FCPT sold two properties for $24.8 million. The
proceeds from the sales were used for subsequent acquisitions in the 1031 exchange market. As of December 31, 2016, our wholly-
owned lease portfolio had the following characteristics:
•
•
475 free-standing properties located in 44 states and representing an aggregate leasable area of 3.4 million square feet;
100% occupancy;
• A weighted average remaining lease term of 13.7 years (based on annual base rent);
• A weighted average annual rent escalator of 1.5% (based on annual base rent); and
•
94% investment grade tenancy (based on annual base rent).
Segments
We operate in two segments, real estate operations and restaurant operations. Our segments are based on our organizational
and management structure, which aligns with how our results are monitored and performance is assessed.
Our real estate operations segment consists of rental revenues primarily generated by leasing restaurant properties to tenants
through triple-net lease arrangements under which the tenant is primarily responsible for ongoing costs relating to the properties.
It also includes expenses associated with continuing efforts to invest in additional restaurant and food service real estate properties
and our corporate operating expenses.
Our restaurant operations segment is conducted through our taxable REIT subsidiary (“TRS”) and consists of our Kerrow
Restaurant Operating Business. The associated sales revenues, restaurant expenses and overhead, and depreciation on Kerrow’s
six buildings and equipment comprise our restaurant operations.
Our shares of common stock are listed on the New York Stock Exchange under the ticker symbol “FCPT”.
Our executive offices are located at 591 Redwood Highway, Suite 1150, Mill Valley, California 94941, and our telephone
number is (415) 965-8030.
At February 24, 2017, we employed 324 individuals.
Competitive Advantage
We believe that we have significant competitive advantages that support our core business of owning and leasing restaurant
and food-service related properties as further outlined below.
Leading Nationwide REIT Focused on Restaurant Properties
We are focused on the ownership of properties used in the restaurant industry and have tailored our business strategy to address
the needs of restaurant operators. We believe our scale, national reach, restaurant operations experience, and efficient lease
structuring will help us achieve operational efficiencies and support future growth opportunities. In contrast to the majority of
existing net-lease REITs that are diversified by retail industry and property type, we believe that our focus and expertise in the
restaurant sector will generate data and understanding to better support effective investment and leasing decisions.
Large Addressable Market Potential in US Food Service
By virtue of its large scale, we believe that the U.S. restaurant industry offers a sizable pool of attractive property acquisition
targets across different types of restaurant properties, including quick service, take-out, casual dining, fast casual, and fine dining,
to enable diversified growth for us. FCPT’s addressable market of restaurant real estate is substantial despite FCPT’s narrowed
focus within retail sales. According to the Census Bureau and the Bureau of Economic Data, the food service industry had over
$620 billion in sales in 2015, of which Quick Service Restaurants (“QSR”) and Casual Dining Restaurants (“CDR”) comprise
over $430 billion combined. FCPT plans to focus on acquisitions that shift its portfolio to be more reflective of the national
2
restaurant landscape, targeting QSR and some casual dining concepts, and with less focus on Italian and steak restaurants given
the current portfolio concentration of Olive Garden and LongHorn Steakhouse restaurants.
Furthermore, implementation of “asset light” strategies by restaurant companies may provide landlords like us an opportunity
to enter into sale-leaseback transactions with the parent company of corporate-operated restaurants for their existing properties
and to finance future restaurant development by these restaurant companies.
We also believe there may be other attractive opportunities for growth outside the traditional restaurant sector. This may
include one or more of the following: food service distribution facilities, cold storage facilities, retail properties and other triple-
net leased real estate.
Uniquely Positioned to Capitalize on Expansion Opportunities
We believe there is a large market opportunity to acquire additional restaurant properties and that a number of restaurant
operators would like the opportunity to monetize their real estate holdings while continuing to operate their existing core businesses.
We believe that a number of restaurant operators would be willing to enter into transactions designed to monetize their real estate
assets through sale-leaseback transactions with an unrelated party not perceived to be a competitor, such as us. These restaurant
operators could use the proceeds from the sale of their real estate assets for several different business purposes, including (i)
reducing bank loans and lines of credit, (ii) reinvestment in existing operations, or (iii) for new business initiatives including
opening new locations or pursuing acquisitions. Sale-leaseback transactions can provide an attractive means for both mature
operators as well as fast-growing businesses to repatriate capital into more attractive opportunities. We may also provide such
restaurant operators with expansion opportunities that they may not otherwise be in a position to pursue by providing them with
capital to expand and enhance their operations at rates that provide both an attractive risk-adjusted return to us and are more
attractive to the restaurant or retail operators than they may be able to receive through traditional debt financing arrangements.
Large and Consolidating Restaurant Franchisee Market
Franchisees, which often lease the restaurants that they operate, are potential future partners for us. According to Nation’s
Restaurant News 2016 Top 100, franchisees operate over 75% of the Top 100’s aggregate units, representing more than 148,000
restaurants and growing. In addition, the franchise restaurant operation industry is highly fragmented, but it is undergoing
consolidation as brands and franchisees recognize the benefits of larger, more professional operators. According to Franchise
Times, between 2009 and 2015, the top restaurant franchisees have seen their unit count increase by 7.0% annually. Due to the
adoption of an asset-light model, both unit expansion and franchisee consolidation provide significant opportunities for real estate
monetization programs and for FCPT to be a preferred, reliable real estate partner as part of these transactions.
Geographically Diverse Asset Portfolio
Properties in our leasing portfolio are located in 44 different states across the continental United States. The leasing portfolio
properties in any one state do not account for more than 12% of our total rental revenue. We believe this geographic diversification
will limit the effect of changes in any one market on our overall performance.
Financially Secure Principal Tenant
Darden is currently our largest tenant representing approximately 95% of our tenant base. Darden owns and operates seven
nationally recognized brands, including the five brands that are represented among the properties we lease to Darden: Olive
Garden®, LongHorn Steakhouse®, Bahama Breeze®, Seasons 52® and Wildfish Seafood Grille®. For the twelve-months ended
November 27, 2016, Darden reported revenue of approximately $7.0 billion and net cash from operations of $924.1 million.
Darden is investment grade rated at BBB/BBB/Baa3 (Fitch/S&P/Moody’s) and its liquidity position, leverage position and ability
to generate significant free cash flow should provide it with the ability to pay the annual lease obligations to FCPT for the foreseeable
future. Darden is subject to SEC reporting requirements, which provide ongoing transparency regarding its operating and financial
performance. For further information, refer to the investor relations section of www.darden.com. We do not intend Darden’s website
to be an active link or to otherwise incorporate the information contained on its website into this report or other filings with the
SEC.
3
Long-Term, Triple-Net Lease Structure
FCPT’s properties are leased to our tenants on a triple-net lease basis with a weighted average initial lease term of approximately
13.7 years and a weighted average annual rent escalator of 1.5% (both weightings based on annual base rent), thereby providing
a long-term, stable income stream. Under the leases, the tenant is responsible for maintaining the properties in accordance with
prudent industry practice and in compliance with all federal and state standards. The maintenance responsibilities include, among
others, maintaining the building, building systems including roofing systems and other improvements. In addition to maintenance
requirements, the tenant is also responsible for insurance required to be carried under the leases, taxes levied on or with respect
to the properties, payment of common area maintenance charges and all utilities and other services necessary or appropriate for
the properties and the business conducted on the properties. At the option of the tenant, the leases will generally allow extensions
for a certain number of multi-year renewal terms beyond the initial term and the tenant can elect which of the properties then
subject to the leases to renew. The number and duration of the renewal terms for any given property may vary, however, based on
the initial term of the relevant lease and other factors.
Management Team with Extensive Real Estate and Net Lease Experience
FCPT has a highly regarded management team with extensive retail net lease and public market REIT experience. The team
is led by President and Chief Executive Officer Bill Lenehan and Chief Financial Officer Gerry Morgan. Prior to joining FCPT,
Mr. Lenehan was on the Darden Board of Directors and chair of its Real Estate and Finance Committee. Mr. Lenehan also previously
served as interim chief executive officer of MI Developments, Inc., now named Granite REIT, an owner of net leased industrial
and manufacturing real estate.
Our Business Objectives and Strategy
Our primary goal is to create long-term stockholder value by executing our investment objectives to maximize the value of
our assets, to acquire assets with growth and diversification opportunities due to favorable lease structures and attractive submarket
demographics, and to provide attractive and growing quarterly cash dividends. We do not currently have a fixed schedule of the
number of acquisitions we intend to make over a particular time period, but rather, we intend to pursue those acquisitions that
meet our investing and financing objectives where we can earn a return above our weighted-average cost of capital adjusted to
reflect counterparty risk.
The key components of our business strategy, beyond managing our properties in accordance with our leases with Darden,
include:
Acquire Additional Restaurant Properties: Initially, we expect to focus on growing and diversifying our property portfolio
by acquiring restaurant properties in the Quick Service Restaurant (“QSR”) and some Casual Dining Restaurant (“CDR”)
concepts. These transactions may take many forms including triple-net, sale-leaseback transactions with restaurant
operators, acquisitions in the 1031 exchange market or acquisitions of portfolios of properties from other REITs and other
public and private real estate owners. We will employ a 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 initial tenant.
Fund Strategic Capital Improvements for Existing and Future Tenants: We will consider supporting the growth initiatives
of our tenant operators by providing capital to them for a variety of purposes, including capacity augmentation projects.
If completed, we expect to structure these investments under terms that we deem to be economically attractive to our
stockholders, either as lease amendments that produce additional rents or as loans that are repaid by operators during the
applicable lease term.
Re-lease Properties: Over time we will face a re-tenanting risk and opportunity. If our tenants elect to cease operations
at any of our properties, we will need to find a replacement tenant at the end of the lease term. We plan to use leasing
expertise and relationships developed through our national operations to replace tenants under any expiring leases.
Develop New Tenant Relationships: Our focus in the restaurant and related food service industry will allow us to cultivate
new relationships with potential tenants and restaurant operators in order to expand the mix of tenants operating our
properties and, in doing so, reduce our concentration with Darden.
4
Maintain Balance Sheet Strength and Liquidity: We intend to maintain a capital structure that provides the resources and
financial flexibility to support the growth of our business. Our principal sources of liquidity will be our cash generated
through operations, our revolving credit facility which has an undrawn capacity as of February 27, 2017 of $305 million,
our At-the-Market equity follow-on program filed in December 2016 and access to bank and private placement debt
markets. Through disciplined capital spending and working capital management, we intend to maximize our cash flows
and maintain our targeted balance sheet and leverage ratios.
Operate the Kerrow Restaurant Operating Business: We operate the Kerrow Restaurant Operating Business through
Kerrow Holdings, LLC (“Kerrow”). Although we intend to derive the majority of our revenue from leasing properties
on a triple-net basis to restaurant and retail operators, the Kerrow Restaurant Operating Business will provide us with a
diversified revenue stream and equip us with the expertise to better analyze other restaurant properties that could serve
as expansion opportunities.
Investment and Financing Policies
Our investment objectives are to increase cash flow, provide quarterly cash dividends, maximize the value of our assets and
acquire assets with cash flow growth potential. Initially, we intend to invest primarily in restaurant properties. Over time, we
believe we have the potential to diversify into other food service and related property types beyond the restaurant industry.
We expect that future investments in properties, including any improvements or renovations of currently owned or newly-
acquired restaurant properties, will be financed, in whole or in part, with cash flow from our operations, borrowings under our
$350 revolving credit facility, or the proceeds from issuances of common stock, preferred stock, debt or other securities. Our
investment and financing policies and objectives are subject to change periodically at the discretion of our Board of Directors
without a vote of stockholders. We also have a shelf registration statement on file with the SEC under which we may issue secured
or unsecured indebtedness and equity financing through the instruments and on the terms most attractive to us at such time. In
December 2016, the Company entered into an “At-the-Market” (“ATM”) sales agreement under which it can sell common stock
with a sales value of up to $150 million through broker-dealers. In January 2017, we achieved an investment grade rating of BBB-
from Fitch Ratings.
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. It is managed by FCPT GP, which accordingly controls the management and decisions of FCPT OP.
Conducting business through FCPT OP allows us flexibility in the manner in which we structure and acquire properties. In particular,
an UPREIT structure enables us to acquire additional properties from sellers in exchange for limited partnership units in FCPT
OP. 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, 2016, we owned 481 properties, all within the continental United States. Of these properties, 475 were held
for investment and leased to tenants under triple-net leases. These 475 properties had an aggregate leasable area of approximately
3.4 million square feet, were located in 44 states, and had a weighted average remaining lease term of 13.7 years before any lease
renewals. The remaining six properties, representing the Kerrow Restaurant Operating Business, are operated by Kerrow subject
to franchise agreements with Darden (“Franchise Agreements”). Three of these restaurants are subject to ground leases. See “Item
2. Properties” for additional information about our properties and tenants.
5
The following table summarizes the rental properties by brand as of December 31, 2016:
Number
of FCPT
Properties
Total
Square
Feet
(000s)
Annual
Cash
Base
Rent
$(000s)
Percentage of
Total
Annualized
Base Rent
Avg.
Rent Per
Square
Foot ($)
299
104
59
13
475
2,556 $ 70,926
579
184
126
19,229
6,130
4,688
3,445 $100,973
70.2% $
19.0%
6.1%
4.7%
100.0% $
28
33
33
37
29
Average
Lease
Expiration
Date
Assuming No
Renewals (2)
13.8
12.7
17.0
11.6
13.7
EBITDAR
Coverage (1)
4.4x
3.9x
2.8x
3.6x
4.2x
Brand
Olive Garden
Longhorn SteakHouse
Other Brands - non-Darden
Other Brands Darden
Total
(1) EBITDAR Coverage is calculated by dividing our tenants estimated trailing 12-month EBITDAR by annual contractual cash
rent paid to FCPT. EBITDAR is defined as earnings before interest, income taxes, depreciation, amortization, and rent. EBITDAR
is derived from the most recent data from tenants who disclose this information, representing approximately 98% of our run-rate
rental income. FCPT does not independently verify financial information provided by its tenants.
(2) Average Lease Expiration Date (Assuming No Renewals) is defined as the average ending date of the lease if there is no renewal
of the initial term of the lease.
6
The following table summarizes the diversification of FCPT’s leased portfolio by state as of December 31, 2016:
State
Florida
Texas
Georgia
Ohio
Michigan
Indiana
Tennessee
North Carolina
California
Pennsylvania
Illinois
Virginia
Wisconsin
New York
Maryland
Kentucky
Alabama
Iowa
South Carolina
Arizona
Nevada
Minnesota
Oklahoma
Colorado
Mississippi
Arkansas
Kansas
Louisiana
West Virginia
Missouri
Other (none greater than 4%)
Total
# of Properties
45
43
44
33
25
24
18
17
10
13
17
14
16
9
10
10
11
10
8
8
6
8
7
7
7
7
5
6
5
6
26
475
% of Annual Base Rent
11.8%
10.8%
8.4%
6.4%
4.1%
3.4%
3.3%
3.2%
3.2%
3.0%
2.7%
2.6%
2.4%
2.2%
2.2%
2.0%
2.0%
1.9%
1.9%
1.8%
1.8%
1.7%
1.5%
1.5%
1.4%
1.3%
1.3%
1.3%
1.2%
1.1%
6.3%
100.0%
Leases with Darden
The estimated annual cash rent based on current rates for the leases in place with Darden is approximately $94.8 million.
Each November 1, the rent is subject to annual escalation of 1.5%, as well as, in most of the leases, a fair market value adjustment
at the start of one of the renewal options. 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 triple-net leases. The leases provide for an average remaining
initial term of approximately fourteen years, 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. At the option of Darden, the
leases will generally allow extensions for a certain number of renewal terms of five years each beyond the initial term and Darden
can elect which of our properties then subject to the leases to renew. The number and duration of the renewal terms for any given
Property may vary, however, based on the initial term of the relevant lease and other factors.
7
Darden is currently the source of a substantial 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 to make distributions to our stockholders. There
can be no assurance that Darden will have sufficient assets, income and access to financing to enable it to satisfy its obligations
under the leases with us, and any inability or unwillingness on its part to do so would have a material adverse effect on our business,
financial condition, results of operations and liquidity, on our ability to service our indebtedness and other obligations and on our
ability to pay dividends to our shareholders, as required for us to qualify, and maintain our status, as a REIT. We also cannot assure
you that Darden will elect to renew the lease arrangements with us upon expiration of the initial base terms or any renewal terms
thereof or, if such leases are not renewed, that we can remarket the affected properties on the same or better terms. See “Risk
Factors-Risks Related to Our Business - We are dependent on Darden successfully operating its business, and a failure do so could
have a material adverse effect on our business, financial position or results of operations. Therefore, we are subject to factors
which affect the performance of Darden.”
Franchise Agreements
Pursuant to the Franchise Agreements, Darden grants the right and license to our subsidiary, Kerrow, to operate the Kerrow
Restaurant Operating Business. The Franchise Agreements include, among other things, a license to display trademarks, utilize
trade secrets and purchase proprietary products from Darden. Other services to be included pursuant to the Franchise Agreements
are marketing services, training and access to certain LongHorn® operating procedures. The Franchise Agreements also contain
provisions under which Darden may provide certain technical support for the Kerrow Restaurant Operating Business. The fees
and conditions of these franchising services are on terms comparable to similar franchising services negotiated on an arm’s length
basis and consistent with industry standard provisions.
Competition
We operate in a highly competitive market and face competition from other REITs, investment companies, private equity and
hedge fund investors, sovereign funds, restaurant and retail operators, lenders and other investors, some of whom are significantly
larger and have greater resources and lower costs of capital. These institutions may accept greater risk or lower returns, allowing
them to offer more attractive terms to prospective tenants or for the acquisition of restaurant properties. Our restaurant operations
also face active competition with national and regional chains and locally-owned restaurants for guests, management and hourly
personnel.
Governmental Regulations Affecting Properties
Property Environmental Considerations
As an owner and operator of real property, we are subject to various federal, state and local environmental and health and
safety laws and regulations. Although we do not operate or manage most of our properties, we may be held primarily or jointly
and severally liable for costs relating to the investigation and clean-up of any of our current or former properties at or from which
there has been a release or threatened release of hazardous material, as well as other affected properties, regardless of whether we
knew of or caused the contamination.
In addition to these costs, which are typically not limited by law or regulation and could exceed the property’s value, we or
our tenants could be subject to other liabilities, including governmental penalties for violation of environmental, health and safety
laws, liabilities for injuries to persons for exposure to hazardous materials, and damages to property or natural resources.
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. 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.
Although the leases require our tenants to indemnify us for environmental liabilities, and although we intend to require our
other operators and tenants to undertake to indemnify us for certain environmental liabilities, including environmental liabilities
they cause, the amount of such liabilities could exceed the financial ability of Darden, or such other tenant or operator to indemnify
us. 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.
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As of February 24, 2017, 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.
Americans with Disabilities Act of 1990
The properties, as commercial facilities, are required to comply with Title III of the Americans with Disabilities Act of 1990
and similar state and local laws and regulations (collectively the “ADA”). Investigation of a property may reveal non-compliance
with the ADA. The tenant has the primary responsibility for complying with the ADA, but we may incur costs if the tenant does
not comply. As of February 24, 2017, 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. The tenant has the primary responsibility
for complying with regulations but failure to comply could result in fines by governmental authorities, awards of damages to
private litigants, or restrictions to conduct business on such properties.
Insurance
We require that our tenants maintain all customary lines of insurance on our properties and their operations, including
comprehensive insurance and hazard insurance. The tenants under the Leases may have the ability to self-insure or use a captive
provider with respect to its insurance obligations. We believe that the amount and scope of insurance coverage provided by our
policies and the policies maintained by our tenants are customary for similarly situated companies in our industry. However, we
cannot make any assurances that Darden or any other tenants in the future will maintain the required insurance coverages, and the
failure by any of them to do so could have a material adverse effect on us.
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. 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 SEC filings are also available to be read or copied at the SEC’s public reference room, located
at 100 F Street, N.E., Washington, D.C. 20549. Information regarding the operation of the public reference room can be obtained
by calling the SEC at 1-800-SEC-0330. 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.
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Item 1A. Risk Factors.
Various risks and uncertainties could affect our business. Any of the risks described below or elsewhere in this report or our
other filings with the SEC could have a material impact on our business, financial condition or results of operations. It is not
possible to predict or identify all risk factors. Additional risks and uncertainties not presently known to us or that we currently
believe to be immaterial may also impair our business operations.
Risks Related to Our Business
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 position
or results of operations could materially and adversely affect our business, financial position or results of operations.
Currently, Darden is our primary lessee in our lease portfolio and, therefore, is the source of substantially all of our revenues.
Additionally, because Darden’s leases with us are triple-net leases, we depend on Darden to pay all insurance, taxes, utilities,
common area maintenance charges, maintenance and repair expenses and to indemnify, defend and hold us harmless from and
against various claims, litigation and liabilities arising in connection with its business, including any environmental liabilities.
There can be no assurance that Darden will have sufficient assets, income and access to financing to enable it to satisfy its payment
obligations to us under its leases. The inability or unwillingness of Darden to meet its rent obligations to us under any of its leases
could materially adversely affect our business, financial position or results of operations, including our ability to pay dividends
to our stockholders as required to maintain our status as a REIT. The inability of Darden to satisfy its other obligations under its
leases with us, such as the payment of insurance, taxes and utilities could materially and adversely affect the condition of our
properties.
Since Darden Restaurants, Inc. is a holding company, it is dependent to an extent on distributions from its direct and indirect
subsidiaries in order to satisfy the payment obligations under its leases with us, and the ability of Darden to make such distributions
may be adversely impacted in the event of the insolvency or bankruptcy of such entities or by covenants in its debt agreements
or otherwise that restrict the amount of the distributions that may be made by such entities. For these reasons, if Darden were to
experience a material and adverse effect on its business, financial position or results of operations, our business, financial position
or results of operations could also be materially and adversely affected.
Due to our dependence on rental payments from Darden as our primary source of revenues, we may be limited in our ability
to enforce our rights under, or to terminate, our leases with Darden. Failure by Darden to comply with the terms of its leases with
us could require us to find other lessees for some or all of the properties and there could be a decrease or cessation of rental
payments by Darden.
There is no assurance that we would be able to lease any of our properties to other lessees on substantially equivalent or better
terms than any of our leases with Darden, or at all, successfully reposition our properties for other uses or sell our properties on
terms that are favorable to us. It may be more difficult to find a replacement tenant for a restaurant or retail property than it would
be to find a replacement tenant for a general commercial property due to the specialized nature of the business.
In addition, our operation of the Kerrow Restaurant Operating Business depends on the provision of services to us by Darden
pursuant to the Franchise Agreements. The Franchise Agreements provide that Darden agrees to provide certain franchising services
to our subsidiary, Kerrow. The franchising services include licensing the right to use and display certain trademarks, utilize trade
secrets and purchase proprietary products from Darden in connection with the operation of the Kerrow Restaurant Operating
Business. Other services provided pursuant to the Franchise Agreements are marketing services, training and access to certain
LongHorn operating procedures. The Franchise Agreements also contain provisions under which Darden may provide certain
technical support for the Kerrow Restaurant Operating Business.
The risk factor immediately below describes certain risks that may impact the performance of Darden. Additional risks relating
to Darden’s business can be found in Darden’s public filings with the SEC. You can get copies of these public filings, for free on
Darden’s website, www.darden.com. Darden’s SEC filings are also available to be read or copied at the SEC’s public reference
room, located at 100 F Street, N.E., Washington, D.C. 20549. Information regarding the operation of the public reference room
can be obtained by calling the SEC at 1-800-SEC-0330. Darden’s filings can also be obtained for free on the SEC’s Internet website
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at www.sec.gov. We are providing Darden’s website address solely for the information of investors. We do not intend Darden’s
website to be an active link or to otherwise incorporate the information contained on Darden’s website into this report or other
filings with the SEC.
We are dependent on Darden successfully operating its business, and a failure do so could have a material adverse effect on
our business, financial position or results of operations. Therefore, we are subject to factors which affect the performance of
Darden.
Currently, Darden constitutes approximately 95% of our annual base rent. As a result, we are dependent on Darden successfully
operating its business and fulfilling its obligations to us that depends, in part, on the overall performance and profitability of
Darden. Factors which may impact the business, financial position or results of operations of Darden include the following:
•
•
•
•
•
food safety and food-borne illness concerns throughout the supply chain; health concerns arising from food-related
pandemics, outbreaks of flu viruses or other diseases;
litigation, including allegations of illegal, unfair or inconsistent employment practices;
unfavorable publicity, or a failure to respond effectively to adverse publicity;
labor and insurance costs;
insufficient guest or employee facing technology, or a failure to maintain a continuous and secure cyber network, free
from material failure, interruption or security breach;
• Darden’s inability or failure to execute a comprehensive business continuity plan following a major natural disaster such
as a hurricane or man-made disaster, including terrorism;
• Darden’s failure to drive both short-term and long-term profitable sales growth through brand relevance, operating
excellence, opening new restaurants of existing brands and developing or acquiring new dining brands;
•
•
•
•
•
•
a lack of suitable new restaurant locations or a decline in the quality of the locations of Darden’s current restaurants;
a failure to identify and execute innovative marketing and guest relationship tactics and ineffective or improper use of
social media or other marketing initiatives; an inability or failure to recognize, respond to and effectively manage the
accelerated impact of social media;
a failure to address cost pressures, including rising costs for commodities, health care and utilities used by Darden’s
restaurants, and a failure to effectively deliver cost management activities and achieve economies of scale in purchasing;
the impact of shortages or interruptions in the delivery of food and other products from third-party vendors and
suppliers;
disruptions in the financial markets that may impact consumer spending patterns, affect the availability and cost of credit
and increase pension plan expenses;
economic and business factors specific to the restaurant industry and other general macroeconomic factors including
energy prices and interest rates that are largely out of Darden’s control; and
•
a failure of Darden’s internal controls over financial reporting and future changes in accounting standards.
A significant portion of our restaurant properties are Olive Garden properties. Therefore, we are subject to risks associated
with having a highly concentrated property brand base.
As of December 31, 2016, our restaurant properties include 299 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. We believe that building brand value is critical to increasing demand and building customer loyalty. Consequently, if
market recognition or the positive perception of the Olive Garden or other Darden brands is reduced or compromised, the value
associated with Olive Garden or other Darden-branded properties in our portfolio may be adversely affected.
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We intend to continue to pursue acquisitions of additional properties and seek other strategic opportunities, which may result
in the use of a significant amount of management resources or significant costs, and we may not fully realize the potential
benefits of such transactions.
In 2016, FCPT acquired 59 properties in 13 transactions for a total investment of $94.1 million which were added to our
leasing portfolio. 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 our tenant base to third parties other than Darden. Accordingly,
we may often be engaged in evaluating potential transactions, potential new tenants and other strategic alternatives. In addition,
from time to time, we may engage in discussions that may result in one or more transactions. Although there is uncertainty that
any of these discussions will result in definitive agreements or the completion of any transaction, we may devote a significant
amount of our management resources to such a transaction, which could negatively impact our operations. We may incur significant
costs in connection with seeking acquisitions or other strategic opportunities regardless of whether the transaction is completed
and in combining our operations if such a transaction is completed. In the event that we consummate an acquisition or strategic
alternative in the future, there is no assurance that we would fully realize the potential benefits of such a transaction.
We operate in a highly competitive market and face competition from other REITs, investment companies, private equity and
hedge fund investors, sovereign funds, restaurant and retail operators, lenders and other investors, some of whom are significantly
larger and have greater resources and lower costs of capital. Increased competition will make it more challenging to identify and
successfully capitalize on acquisition opportunities that meet our investment objectives. Our Board of Directors may change our
investment objectives at any time without stockholder approval. If we cannot identify and purchase a sufficient quantity of suitable
properties at favorable prices or if we are unable to finance acquisitions on commercially favorable terms, our business, financial
position or results of operations could be materially and adversely affected. Additionally, the fact that we must distribute 90% of
our net taxable income in order to maintain our qualification as a REIT may limit our ability to rely upon rental payments from
our leased properties or subsequently acquired properties in order to finance acquisitions and other strategic opportunities. As a
result, if debt or equity financing is not available on acceptable terms, our ability to pursue further acquisitions might be limited
or curtailed.
Acquisitions of properties we might seek to acquire entail risks associated with real estate investments generally, including
that the investment’s performance will fail to meet expectations or that the tenant, operator or manager will underperform.
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.
We have entered into a $750 million Credit Facility providing for a $400 million term loan due in November 2020 and a $350
million revolving credit facility with an available facility amount through November 2019, each of which are provided by a
syndicate of banks and other financial institutions. The term loan facility is fully drawn and the revolving credit facility had drawn
$45 million at December 31, 2016, with $305 million remaining capacity. We may incur additional indebtedness in the future to
refinance our existing indebtedness, to finance newly-acquired assets or for other purposes. Our governing documents do not
contain any limitations on the amount of debt we may incur and we do not have a formal policy limiting the amount of debt we
may incur in the future. Subject to the restrictions, if any, set forth in our debt agreements, our Board of Directors may establish
and change our leverage policy at any time without stockholder approval. Any significant additional indebtedness could require
a substantial portion of our cash flow to make interest and principal payments due on our indebtedness. Greater demands on our
cash resources may reduce funds available to us to pay dividends, make capital expenditures and acquisitions, or carry out other
aspects of our business strategy. Increased indebtedness can also limit our ability to adjust rapidly to changing market conditions,
make us more vulnerable to general adverse economic and industry conditions and create competitive disadvantages for us compared
to other companies with relatively lower debt levels. 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.
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
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factors, many of which are beyond our control. A worsening of credit market conditions could materially and adversely affect our
ability to obtain financing on favorable terms, if at all.
We also may be unable to obtain additional financing or financing on favorable terms or our operating cash flow may be
insufficient to satisfy our financial obligations under our indebtedness outstanding from time to time. Among other things, although
we received an investment grade credit rating of BBB- from Fitch Ratings in January 2017, any credit rating downgrade could
increase our financing costs and could limit our access to financing sources. If financing is not available when needed, or is
available on unfavorable terms, we may be unable to complete acquisitions or otherwise take advantage of business opportunities
or respond to competitive pressures, any of which could materially and adversely affect our business, financial condition and
results of operations.
Covenants in our debt agreements may limit our operational flexibility, and a covenant breach or default could materially and
adversely affect our business, financial position or results of operations.
The agreements governing our indebtedness contain customary covenants that may limit our operational flexibility. The credit
agreement contains customary affirmative and negative covenants that, among other things, restrict, subject to certain exceptions,
the incurrence of debt, the incurrence of secured debt, the ability of Four Corners OP and the guarantors to enter into mergers,
consolidations, sales of assets and similar transactions, limitations on distributions and other restricted payments, and limitations
on transactions with affiliates and customary reporting obligations.
In addition, we are required to comply with the following financial covenants: (1) total indebtedness to consolidated
capitalization value not to exceed 60%; (2) mortgage-secured leverage ratio not to exceed 40%; (3) total secured recourse
indebtedness not to exceed 5% of consolidated capitalization value; (4) minimum fixed charge coverage ratio of 1.75 to 1.00; (5)
minimum consolidated tangible net worth; (6) unhedged floating rate debt not to exceed 50% of all indebtedness; (7) maximum
unencumbered leverage ratio not to exceed 60%; and (8) minimum unencumbered debt service coverage ratio of 1.50 to 1.00. As
of December 31, 2016, we are in compliance with our existing financial covenants.
The credit agreement contains customary events of default including, without limitation, payment defaults, violation of
covenants and other performance defaults, defaults on payment of indebtedness and monetary obligations, bankruptcy-related
defaults, judgment defaults, REIT status default and the occurrence of certain change of control events. Breaches of certain
covenants may result in defaults and cross-defaults under certain of our other indebtedness, even if we satisfy our payment
obligations to the respective obligee.
Covenants that limit our operational flexibility, as well as covenant breaches or defaults under our debt instruments, could
materially and adversely affect our business, financial position or results of operations, or our ability to incur additional indebtedness
or refinance existing indebtedness.
An increase in market interest rates could increase our interest costs on existing and future debt and could adversely affect
our stock price, and a decrease in market interest rates could lead to additional competition for the acquisition of real estate,
which could adversely affect our results of operations.
If interest rates increase, so could our interest costs for any new debt and our variable rate debt obligations pursuant to the
credit agreement. This increased cost could make the financing of any acquisition more expensive as well as lower our current
period earnings. Rising interest rates could limit our ability to refinance existing debt when it matures or cause us to pay higher
interest rates upon refinancing. In addition, an increase in interest rates could decrease the access third parties have to credit,
thereby decreasing the amount they are willing to pay to lease our assets and consequently limiting our ability to reposition our
portfolio promptly in response to changes in economic or other conditions. 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. 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. In such circumstances,
if we are not able to offset the decrease in yields by obtaining lower interest costs on our borrowings, our results of operations
will be adversely affected.
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Hedging transactions could have a negative effect on our results of operations.
We have entered into hedging transactions with respect to interest rate exposure on our term loan and we may enter into other
hedging transactions, with respect to one or more of our assets or other liabilities. The use of hedging transactions involves certain
risks, including: (1) the possibility that the market will move in a manner or direction that would have resulted in a gain for us
had a hedging transaction not been used, in which case our performance would have been better had we not engaged in the hedging
transaction; (2) the risk of an imperfect correlation between the risk sought to be hedged and the hedging transaction used; (3) the
potential illiquidity for the hedging instrument used, which may make it difficult for us to close out or unwind a hedging transaction;
(4) the possibility that our counterparty fails to honor its obligations; and (5) the possibility that we may have to post collateral to
enter into hedging transactions, which we may lose if we are unable to honor our obligations. Our election to be subject to tax as
a REIT will also result in limitations on our income sources, and the hedging strategies available to us will be more limited than
those available to companies that are not REITs.
Our pursuit of investments in, and acquisitions or development of, additional properties may be unsuccessful or fail to meet
our expectations.
Investments in and acquisitions of restaurant and retail properties and other properties we might seek to acquire entail risks
associated with real estate investments generally, including that the investment’s performance will fail to meet expectations, that
the cost estimates for necessary property improvements will prove inaccurate or that the tenant, operator or manager will
underperform. Real estate development projects present other risks, including construction delays or cost overruns that increase
expenses, the inability to obtain required zoning, occupancy and other governmental approvals and permits on a timely basis, and
the incurrence of significant development costs prior to completion of the project.
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.
In order for us to qualify as a REIT, not more than 50% in value of our outstanding shares of stock may be owned, beneficially
or constructively, by five or fewer individuals at any time during the last half of each taxable year after the first year for which
we elect to be subject to tax and qualify as a REIT. Additionally, at least 100 persons must beneficially own our stock during at
least 335 days of a taxable year (other than the first taxable year for which we elect to be subject to tax and qualify as a REIT).
Our charter, with certain exceptions, authorizes our Board of Directors to take such actions as are necessary or advisable to preserve
our qualification as a REIT. Our charter also provides that, unless exempted by the Board of Directors, no person may own more
than 9.8% in value or in number, whichever is more restrictive, of the outstanding shares of our common stock or more than 9.8%
in value of the aggregate of the outstanding shares of all classes and series of our stock. The constructive ownership rules are
complex and may cause shares of stock owned directly or constructively by a group of related individuals or entities to be
constructively owned by one individual or entity. These ownership limits could delay or prevent a transaction or a change in control
of us that might involve a premium price for shares of our stock or otherwise be in the best interests of our stockholders. The
acquisition of less than 9.8% of our outstanding stock by an individual or entity could cause that individual or entity to own
constructively in excess of 9.8% in value of our outstanding stock, and thus violate our charter’s ownership limit. Our charter also
prohibits any person from owning shares of our stock that would result in our being “closely held” under Section 856(h) of the
Internal Revenue Code of 1986, as amended (the “Code”) or otherwise cause us to fail to qualify as a REIT. In addition, our charter
provides that (i) no person shall beneficially own shares of stock to the extent such beneficial ownership of stock would result in
us failing to qualify as a “domestically controlled qualified investment entity” within the meaning of Section 897(h) of the Code,
and (ii) no person shall beneficially or constructively own shares of stock to the extent such beneficial or constructive ownership
would cause us to own, beneficially or constructively, more than a 9.9% interest (as set forth in Section 856(d)(2)(B) of the Code)
in a tenant of our real property. Subject to certain exceptions, rents received or accrued by us from a tenant will not be treated as
qualifying rent for purposes of the REIT gross income requirements if we or a beneficial or constructive owner of 10% or more
of our stock beneficially or constructively owns 10% or more of the total combined voting power of all classes of the tenant’s
stock entitled to vote or 10% or more of the total value of all classes of the tenant’s stock. Any attempt to own or transfer shares
of our stock in violation of these restrictions may result in the transfer being automatically void. Our charter also provides that
shares of our capital stock acquired or held in excess of the ownership limit will be transferred to a trust for the benefit of a
charitable beneficiary that we designate, and that any person who acquires shares of our capital stock in violation of the ownership
limit will not be entitled to any dividends on the shares or be entitled to vote the shares or receive any proceeds from the subsequent
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sale of the shares in excess of the lesser of the market price on the day the shares were transferred to the trust or the amount realized
from the sale. 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. 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.
Maryland law and provisions in our charter and bylaws may delay or prevent takeover attempts by third parties and therefore
inhibit our stockholders from realizing a premium on their stock.
Our charter and bylaws contain, and Maryland law contains, provisions that may deter coercive takeover practices and
inadequate takeover bids and encourage prospective acquirors to negotiate with our Board of Directors, rather than to attempt a
hostile takeover. Our charter and bylaws, among other things, (1) contain transfer and ownership restrictions on the percentage
by number and value of outstanding shares of our stock that may be owned or acquired by any stockholders; (2) permit the Board
of Directors, without further action of the stockholders, to increase or decrease the authorized number of shares, issue additional
shares, classify or reclassify unissued shares, and issue and fix the terms of one or more classes or series of preferred stock, which
may have rights senior to those of the common stock; (3) establish certain advance notice procedures for stockholder proposals
and director nominations; and (4) provide that special meetings of stockholders may only be called by the company or upon written
request of ten percent in voting power of our outstanding common stock.
Under Maryland law, any written consent of our stockholders must be unanimous. In addition, Maryland law allows a Maryland
corporation with a class of equity securities registered under the Exchange Act to amend its charter without stockholder approval
to effect a reverse stock split at a ratio of not more than ten shares of stock into one share of stock in any twelve-month period.
If we are not able to hire, or if we lose, key management personnel, we may not be able to successfully manage our business
and achieve our objectives.
Our success depends in large part upon the leadership and performance of our executive management team and other key
employees and our ability to attract other key personnel to our business. If we are unable to hire, or if we lose the services of, our
executive management team or we are not able to hire or we lose other key employees, we may not be able to successfully manage
our business or achieve our business objectives.
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.
The failure of any of our tenants to fulfill its maintenance obligations may cause us to incur significant and unexpected
expenses to remediate any resulting damage to the property. Furthermore, the failure by Darden, any other tenant or any future
tenant to adequately maintain a leased property could adversely affect our ability to timely re-lease the property to a new tenant
or otherwise monetize our investment in the property if we are forced to make significant repairs or changes to the property as a
result of the tenant’s neglect. If 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.
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.
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. 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. Certain types of losses,
generally of a catastrophic nature, such as earthquakes, hurricanes and floods, may be uninsurable or not economically insurable
by us or by our tenants. Insurance coverage may not be sufficient to pay the full current market value or current replacement cost
of a loss. Inflation, changes in building codes and ordinances, environmental considerations and other factors might also make it
unfeasible to use insurance proceeds to replace the property after such property has been damaged or destroyed. Under such
15
circumstances, the insurance proceeds received might not be adequate to restore the economic position with respect to such property.
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.
Properties in our leasing portfolio and the Kerrow Restaurant Operating Business are located in 44 states, and if one of our
properties experiences a loss that is uninsured or that exceeds policy coverage limits, we could lose the capital invested in the
damaged property as well as the anticipated future cash flows from the property. If the damaged property is subject to recourse
indebtedness, we could continue to be liable for the indebtedness even if the property is irreparably damaged.
In addition, even if damage to our properties is covered by insurance, a disruption of business caused by a casualty event may
result in loss of revenue for our tenants or us. Any business interruption insurance may not fully compensate them or us for such
loss of revenue. If one of our tenants experiences such a loss, it may be unable to satisfy its payment obligations to us under its
lease with us.
Our relationship with Darden may adversely affect our ability to do business with third-party restaurant operators and other
tenants.
Darden is our primary tenant in our lease portfolio, and our revenue consists primarily of rental payments from Darden. We
may be viewed by third-party restaurant operators and other potential tenants or parties to sale-leaseback transactions as being
closely affiliated with Darden. As these third-party restaurant operators and other potential transaction parties may compete with
Darden within the restaurant industry, our perceived affiliation with Darden could make it difficult for us to attract tenants and
other transaction partners beyond Darden, particularly in the restaurant industry. If we are unable to diversify our tenant and
transaction partner base further beyond Darden, it may have a materially adverse effect on our ability to operate and grow our
business and our ability to achieve our strategic objectives.
The ownership by our executive officers and directors of common stock, options or other equity awards of Darden may create,
or may create the appearance of, conflicts of interest.
As a result of his former positions with Darden, Mr. Lenehan owns common stock, including restricted stock, in both Darden
and FCPT. In addition, there is no restriction on our executive officers and directors acquiring Darden common stock in the future,
and, therefore, this ownership of common stock of both Darden and FCPT may be significant. Equity interests in Darden may
create, or appear to create, conflicts of interest when any such director or executive officer is faced with decisions that could benefit
or affect the equity holders of Darden in ways that do not benefit or affect us in the same manner. As of December 31, 2016, no
other executive officer or director of FCPT owns common stock of Darden.
Real estate investments are relatively illiquid and provisions in our lease agreements may adversely impact our ability to sell
properties and could adversely impact the price at which we can sell the properties.
Properties in our leasing portfolio and the properties leased to Kerrow represent a substantial portion of our total consolidated
assets, and these investments are relatively illiquid. As a result, our ability to sell one or more of our properties or other investments
in real estate we may make in response to any changes in economic or other conditions may be limited. If we want to sell a property,
we cannot assure you that we will be able to dispose of it in the desired time period, or at all, or that the sale price of a property
will exceed the cost of our investment in that property.
In addition, the properties subject to leases with Darden provide them a right of first offer with respect to our sale of any
Property, provided there is no default under the lease, and we are prohibited from selling any of our 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 existence of these provisions in our leases with
Darden, which survive for the full term of the relevant lease, could adversely impact our ability to sell any of the Properties and
could adversely impact our ability to obtain the highest possible price for any of the Properties. If we seek to sell any of our
properties, we would not be able to offer the properties to potential purchasers through a competitive bid process or in a similar
manner designed to maximize the value obtained without first offering to sell to Darden and we would be restricted in the potential
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purchasers who could buy the properties, which may adversely impact our ability to sell any of the properties in a timely manner,
or at all, or adversely impact the price we can obtain from such sale.
We are dependent on the restaurant industry and may be susceptible to the risks associated with it, which could materially
adversely affect our business, financial position or results of operations.
As the owner of properties serving the restaurant industry, we are impacted by the risks associated with the restaurant industry.
Therefore, our success is to some degree dependent on the restaurant industry, which could be adversely affected by economic
conditions in general, changes in consumer trends and preferences and other factors over which we, Darden, and any of our other
tenants in the restaurant industry have no control. As we are subject to risks inherent in substantial investments in a single industry,
a decrease in the restaurant business would likely have a greater adverse effect on our revenues than if we owned a more diversified
real estate portfolio.
The restaurant industry is characterized by a high degree of competition among a large number of participants. Competition
is intense between national and regional restaurant chains and locally-owned restaurants in most of the markets where our properties
are located. As competing properties are constructed, the lease rates we assess for our properties may be negatively impacted upon
renewal or new tenant pricing events.
Our tenants’ businesses are subject to government regulations and changes in current or future laws or regulations could
restrict their ability to operate both their and our business in the manner currently contemplated.
The restaurant industry is subject to extensive federal, state and local and international laws and regulations. The development
and operation of restaurants depend to a significant extent on the selection and acquisition of suitable sites, which are subject to
building, zoning, land use, environmental, traffic and other regulations and requirements. Our tenants are subject to licensing and
regulation by state and local authorities relating to wages and hours, healthcare, health, sanitation, safety and fire standards and
the sale of alcoholic beverages. Our tenants are also subject to, among other laws and regulations, laws and regulations relating
to the preparation and sale of food, including regulations regarding product safety, nutritional content and menu labeling. The
impact of current laws and regulations, the effect of future changes in laws or regulations that impose additional requirements and
the consequences of litigation relating to current or future laws and regulations, or an insufficient or ineffective response to
significant regulatory or public policy issues, could have an adverse effect on our tenants’ results of operations, which could also
adversely affect our business, results of operations or financial condition as we depend on our tenants for almost the entirety of
our revenue.
Environmental compliance costs and liabilities associated with real estate properties owned by us may materially impair the
value of those investments.
As an owner and operator of real property, we are subject to various federal, state and local environmental and health and
safety laws and regulations. We may be held primarily or jointly and severally liable for costs relating to the investigation and
clean-up of any of our current or former properties at or from which there has been a release or threatened release of hazardous
materials as well as other affected properties, regardless of whether we knew of or caused the contamination.
In addition to these costs, which are typically not limited by law or regulation and could exceed the property’s value, we or
our tenants could be subject to other liabilities, including governmental penalties for violation of environmental, health and safety
laws, liabilities for injuries to persons for exposure to hazardous materials, and damages to property or natural resources.
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. 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.
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.
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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.
We may be subject to liabilities and costs associated with the impacts of climate change.
The potential physical impacts of climate change on our properties or operations are highly uncertain and would be particular
to the geographic circumstances in areas in which we operate, including Florida, Georgia and Texas. Such impacts may result
from changes in rainfall and storm patterns and intensities, water shortages, changing sea levels, rising energy and environmental
costs, and changing temperatures. These impacts may adversely impact our business, results of operations and financial condition,
including our or our tenants’ ability to obtain property insurance on acceptable terms. 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.
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. The ADA
generally requires that buildings be made accessible to people with disabilities. Compliance with the ADA requirements could
require, for example, removal of access barriers and non-compliance could result in the imposition of fines by the U.S. Government
or an award of damages to private litigants, or both. 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. If required changes
involve greater expenditures than anticipated, or if the changes must be made on a more accelerated basis than anticipated, the
ability of our tenants to cover costs could be adversely affected and we could be required to expend our own funds to comply with
the provisions of the ADA, which could have an adverse effect on our financial condition and our ability to make distributions.
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. We may be required to
make substantial capital expenditures to comply with those requirements and these expenditures could have a material adverse
effect on our cash flow and ability to make distributions to our security holders.
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.
Our active management and operation of a restaurant business may expose us to potential liabilities beyond those traditionally
associated with REITs.
In addition to our real estate investment activities, we also manage and operate the Kerrow Restaurant Operating Business,
which consists of six LongHorn Steakhouse® restaurants located in the San Antonio, Texas area. Managing and operating the
Kerrow Restaurant Operating Business requires us to employ significantly more people than a REIT which did not operate a
business of such type and scale. In addition, managing and operating an active restaurant business exposes us to potential liabilities
associated with the operation of restaurants. Such potential liabilities are not typically associated with REITs and include potential
liabilities for wage and hour violations, guest discrimination, food safety issues including poor food quality, food-borne illness,
food tampering, food contamination, workplace injury, and violation of “dram shop” laws (providing an injured party with recourse
against an establishment that serves alcoholic beverages to an intoxicated party who then causes injury to himself or a third party).
In the event that one or more of the potential liabilities associated with managing and operating an active restaurant business
materializes, such liabilities could damage the reputation of the Kerrow Restaurant Operating Business as well as the reputation
of FCPT, and could adversely affect our financial position and results of operations, possibly to a material degree.
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If our security measures are breached, we may face liability and public perception of our services could be diminished, which
would negatively impact our ability to attract business partners and advertisers.
Our security measures are not perfect or impenetrable, and we may be unable to anticipate or prevent unauthorized access.
A cyber-attack or other security breach could occur due to the actions of outside parties, employee error, malfeasance or a
combination of these or other actions. If an actual or perceived breach of our security occurs, we could lose competitively sensitive
business information or suffer disruptions to our business operations. In addition, the public perception of the effectiveness of our
security measures or services could be harmed, we could lose consumers, business partners and advertisers, and we could suffer
financial exposure in connection with remediation efforts, investigations and legal proceedings and changes in our security and
system protection measures.
Failure to maintain effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley
Act could materially and adversely affect our business and the market price of our common stock.
Under the Sarbanes-Oxley Act, we must maintain effective disclosure controls and procedures and internal control over
financial reporting, which requires significant resources and management oversight. Internal control over financial reporting is
complex and may be revised over time to adapt to changes in our business, or changes in applicable accounting rules. We cannot
assure you that our internal control over financial reporting will be effective in the future or that a material weakness will not be
discovered with respect to a prior period for which we had previously believed that internal controls were effective. Matters
impacting our internal controls may cause us to be unable to report our financial data on a timely basis, or may cause us to restate
previously issued financial data, and thereby subject us to adverse regulatory consequences, including sanctions or investigations
by the SEC, or violations of applicable stock exchange listing rules. There could also be a negative reaction in the financial markets
due to a loss of investor confidence in us and the reliability of our financial statements. Confidence in the reliability of our financial
statements is also likely to suffer if we or our independent registered public accounting firm reports a material weakness in our
internal control over financial reporting. This could materially adversely affect us by, for example, leading to a decline in the
market price for our common stock and impairing our ability to raise capital.
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.
The market price of our common stock may be volatile in the future. In addition, the trading volume in our common shares
may fluctuate and cause significant price variations to occur. It is not possible to accurately predict how investors in our common
stock will behave.
Any disposition by a significant stockholder of our common stock, or the perception in the market that such dispositions could
occur, may cause the price of our common stock to fall. Any such decline could impair our ability to raise capital through future
sales of our common stock. Furthermore, our common stock may not qualify for investment indices, including indices specific to
REITs, and any such failure may discourage new investors from investing in our common stock.
Our ability to engage in significant equity issuances will also be limited or restricted after our Spin-Off from Darden in order
to preserve the tax-free nature of the Spin-Off. If and when additional funds are raised through the issuance of equity securities,
including our common stock, our stockholders may experience significant dilution.
We cannot assure you of our ability to pay dividends in the future.
Our current dividend rate is $0.97 per share per annum. We may pay a portion of our dividends in common stock. In no event
will the annual dividend be less than 90% of our REIT taxable income on an annual basis, determined without regard to the
dividends paid deduction and excluding any net capital gains. Our ability to pay dividends may be adversely affected by a number
of factors, including the risk factors described in this Annual Report on Form 10-K. Dividends will be authorized by our Board
of Directors and declared by us based upon a number of factors, including actual results of operations, restrictions under Maryland
law or applicable debt covenants, our financial condition, our taxable income, the annual distribution requirements under the REIT
provisions of the Code, our operating expenses and other factors our directors deem relevant. We cannot assure you that we will
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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.
Furthermore, while we are required to pay dividends in order to maintain our REIT status (as described above in the risk
factor “--REIT distribution requirements could adversely affect our ability to execute our business plan”), we may elect not to
maintain our REIT status, in which case we would no longer be required to pay such dividends. Moreover, even if we do elect to
maintain our REIT status, after completing various procedural steps, we may elect to comply with the applicable distribution
requirements by distributing, under certain circumstances, a portion of the required amount in the form of shares of our common
stock in lieu of cash. If we elect not to maintain our REIT status or to satisfy any required distributions in shares of common stock
in lieu of cash, such action could negatively affect our business and financial condition as well as the market price of our common
stock. No assurance can be given that we will pay any dividends on shares of our common stock in the future.
Risks Related to Our Taxation as a REIT
If the Spin-Off were to fail to qualify as a tax-free transaction for U.S. federal income tax purposes, Darden and Darden’s
shareholders could be subject to significant tax liabilities and, pursuant to indemnification obligations under the Tax Matters
Agreement that we entered into with Darden, we could be required to indemnify Darden for material taxes.
Darden has received a private letter ruling (the “IRS Ruling”) from the Internal Revenue Service (the “IRS”) on certain specific
issues relevant to the qualification of the Spin-Off as tax-free under Sections 368(a)(1)(D) and 355 of the Code, based on certain
facts and representations set forth in such request. Although a private letter ruling from the IRS generally is binding on the IRS,
if the factual representations made in the ruling request are untrue or incomplete in any material respect, then Darden will not be
able to rely on the IRS Ruling. The IRS Ruling does not address all of the requirements for tax-free treatment of the Spin-Off
under Sections 355 and 368(a)(1)(D) of the Code; however, Darden has received an opinion from Skadden, Arps, Slate, Meagher
& Flom LLP (“Skadden, Arps”) (the “Spin-Off Tax Opinion”) to the effect that the Spin-Off qualifies as tax-free under Sections
368(a)(1)(D) and 355 of the Code. The Spin-Off Tax Opinion relies on the IRS Ruling as to matters covered by such ruling and
is based on, among other things, current law and certain assumptions and representations as to factual matters made by Darden
and us. Any change in currently applicable law, which may or may not be retroactive, or the failure of any factual representation
or assumption to be true, correct and complete in all material respects, could adversely affect the conclusions reached by counsel
in the Spin-Off Tax Opinion. The Spin-Off Tax Opinion is not binding on the IRS or the courts, and the IRS or the courts may not
agree with the opinion. The Spin-Off Tax Opinion is expressed as of the date issued and does not cover subsequent periods. An
opinion of counsel represents counsel’s best legal judgment based on current law and is not binding on the IRS or any court. We
cannot assure you that the IRS will agree with the conclusions set forth in the Spin-Off Tax Opinion, and it is possible that the
IRS or another tax authority could adopt a position contrary to one or all of those conclusions and that a court could sustain that
contrary position. If any of the facts, representations, assumptions, or undertakings described or made in connection with the IRS
Ruling or the Spin-Off Tax Opinion are not correct, are incomplete or have been violated, the IRS Ruling could be revoked
retroactively or modified by the IRS, and our ability to rely on the Spin-Off Tax Opinion could be jeopardized. We are not aware
of any facts or circumstances, however, that would cause these facts, representations, or assumptions to be untrue or incomplete,
or that would cause any of these undertakings to fail to be complied with, in any material respect.
If the Spin-Off ultimately were determined to be taxable, then a shareholder of Darden that received shares of our common
stock in the Spin-Off would be treated as having received a distribution of property in an amount equal to the fair market value
of such shares on the distribution date and could incur significant income tax liabilities. Such distribution would be taxable to
such shareholder as a dividend to the extent of Darden’s current and accumulated earnings and profits (including earnings and
profits resulting from the recognition of gain by Darden in the Spin-Off). Any amount that exceeded Darden’s earnings and profits
would be treated first as a non-taxable return of capital to the extent of such shareholder’s tax basis in its shares of Darden stock
with any remaining amount being taxed as a capital gain. In addition, if the Spin-Off were determined to be taxable, in general,
Darden would be required to recognize a taxable gain as if it had sold our common stock in a taxable sale for its fair market value.
Under the terms of the Tax Matters Agreement that we entered into with Darden, we generally will be responsible for any
taxes imposed on Darden that arise from the failure of the Spin-Off to qualify as tax-free for U.S. federal income tax purposes to
the extent such failure to qualify is attributable to certain actions, events or transactions relating to our stock, assets or business,
or a breach of the relevant representations or any covenants made by us in the Tax Matters Agreement, the materials submitted to
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the IRS in connection with the request for the IRS Ruling or the representations provided in connection with the Spin-Off Tax
Opinion. Our indemnification obligations to Darden will not be limited by any maximum amount. If we are required to indemnify
Darden under the circumstances set forth in the Tax Matters Agreement, we may also be subject to substantial tax liabilities.
We may not be able to engage in desirable strategic transactions and equity issuances following the Spin-Off because of certain
restrictions relating to requirements for tax-free distributions for U.S. federal income tax purposes. In addition, we could be
liable for adverse tax consequences resulting from engaging in significant strategic or capital-raising transactions.
To preserve the tax-free treatment to Darden of the Spin-Off, for the two-year period following the Spin-Off, we may be
prohibited, except in specific circumstances, from taking certain actions, including: (1) entering into any transaction pursuant to
which all or a portion of our stock would be acquired, whether by merger or otherwise, (2) issuing equity securities beyond certain
thresholds, or (3) repurchasing our common stock. In addition, we may be prohibited from taking or failing to take any other action
that prevents the Spin-Off and related transactions from being tax-free. However, these restrictions are inapplicable in the event
that the IRS has granted a favorable ruling to Darden or us or in the event that Darden or we have received an opinion from counsel
that we can take such actions under certain safe harbor exceptions without adversely affecting the tax-free status of the Spin-Off
and related transactions.
These restrictions may limit our ability to pursue strategic transactions or engage in new business or other transactions that
may increase the value of our business.
If we do not qualify as a REIT, or fail to remain qualified as a REIT, we will be subject to U.S. federal income tax as a regular
corporation and could face a substantial tax liability, which would reduce the amount of cash available for distribution to our
stockholders.
We believe that we were organized and operated and we intend to continue to operate in a manner that will enable us to qualify
as a REIT for U.S. federal income tax purposes commencing with our taxable year ended January 1, 2016. Qualification as a REIT
involves the application of highly technical and complex provisions of the Internal Revenue Code of 1986, as amended (the
“Code”), for which only limited judicial and administrative authorities exist. Even a technical or inadvertent violation could
jeopardize our REIT qualification. The determination of various factual matters and circumstances not entirely within our control
may affect our ability to qualify as a REIT. Our qualification as a REIT depends on our satisfaction of certain asset, income,
organizational, distribution, stockholder ownership and other requirements on a continuing basis. Our ability to satisfy the asset
requirements depends upon our analysis of the fair market values of our assets, some of which are not susceptible to a precise
determination, and for which we do not obtain independent appraisals. Our compliance with the REIT income and asset requirements
also depends upon our ability to successfully manage the composition of our income and assets on an ongoing basis. Moreover,
the proper classification of one or more of our investments may be uncertain in some circumstances, which could affect the
application of the REIT qualification requirements. In addition, our ability to satisfy the requirements to qualify as a REIT may
depend in part on the actions of third parties over which we have no control or only limited influence. Accordingly, there can be
no assurance that the IRS will not contend that our investments violate the REIT requirements.
Darden received an opinion of Skadden, Arps, counsel to Darden, with respect to our qualification to be subject to tax as a
REIT in connection with the Spin-Off. Investors should be aware, however, that opinions of counsel are not binding on the IRS
or any court (the “REIT Tax Opinion”). The REIT Tax Opinion represents only the view of Skadden, Arps, based on its review
and analysis of existing law and on certain representations as to factual matters and covenants made by Darden and us, including
representations relating to the values of our assets and the sources of our income. The opinion is expressed as of the date issued.
Skadden, Arps has no obligation to advise Darden, us or the holders of our common stock of any subsequent change in the matters
stated, represented or assumed or of any subsequent change in applicable law. Furthermore, both the validity of the REIT Tax
Opinion and our qualification as a REIT will depend on our satisfaction of various complex requirements under the Code, relating
to, among other things, the sources of our gross income, the composition and value of our assets, our distribution levels and the
diversity of ownership of our shares on a continuing basis, the results of which will not be monitored by Skadden, Arps. Our ability
to satisfy the asset tests depends upon our analysis of the characterization and fair market values of our assets, some of which are
not susceptible to a precise determination, and for which we will not obtain independent appraisals.
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If we were to fail to qualify as a REIT in any taxable year, we would be subject to U.S. federal income tax, including any
applicable alternative minimum tax, on our taxable income at regular corporate rates, and distributions to stockholders would not
be deductible by us in computing our taxable income. Any such corporate tax liability could be substantial and would reduce the
amount of cash available for distribution to our stockholders, which in turn could have an adverse impact on the value of, and
trading prices for, our common stock. Unless entitled to relief under certain provisions of the Code, we also would be disqualified
from taxation as a REIT for the four taxable years following the year during which we initially ceased to qualify as a REIT.
The rule against re-electing REIT status following a loss of such status could also apply to us if it were determined that a
former subsidiary of Darden failed to qualify as a REIT for certain taxable years and we were treated as a successor to such entity
for U.S. federal income tax purposes. Although Darden has represented to us that it has no knowledge of any fact or circumstance
that would cause us to fail to qualify as a REIT and covenanted to use its reasonable best efforts to cure any issue with respect to
the REIT status of any such predecessor entity, no assurance can be given that such representation and covenant would prevent
us from failing to qualify as a REIT. If we fail to qualify as a REIT due to the REIT status of a predecessor, we would be subject
to corporate income tax as described in the preceding paragraph
We could fail to qualify as a REIT if income we receive from Darden and other tenants is not treated as qualifying income.
Under applicable provisions of the Code, we will not be treated as a REIT unless we satisfy various requirements, including
requirements relating to the sources of our gross income. Rents received or accrued by us from Darden and other tenants will not
be treated as qualifying rent for purposes of these requirements if our leases are not respected as true leases for U.S. federal income
tax purposes and are instead treated as service contracts, joint ventures or other types of arrangements. If our leases are not respected
as true leases for U.S. federal income tax purposes, we may fail to qualify as a REIT.
In addition, subject to certain exceptions, rents received or accrued by us from Darden will not be treated as qualifying rent
for purposes of the REIT gross income requirements if we or a beneficial or constructive owner of 10% or more of our stock
beneficially or constructively owns 10% or more of the total combined voting power of all classes of Darden stock entitled to vote
or 10% or more of the total value of all classes of Darden stock. 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. 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.
Dividends payable by REITs do not qualify for the reduced tax rates available for some dividends.
The maximum U.S. federal income tax rate applicable to income from “qualified dividends” payable to U.S. stockholders
that are individuals, trusts and estates is currently 20%. Dividends payable by REITs, however, generally are not eligible for the
reduced rates. Although these rules do not adversely affect the taxation of REITs, the more favorable rates applicable to regular
corporate qualified dividends could cause investors who are individuals, trusts and estates to perceive investments in REITs to be
relatively less attractive than investments in the stocks of non-REIT corporations that pay dividends, which could adversely affect
the value of the stock of REITs, including our common stock.
REIT distribution requirements could adversely affect our ability to execute our business plan.
We generally must distribute annually at least 90% of our REIT taxable income, determined without regard to the dividends
paid deduction and excluding any net capital gains, in order for us to qualify as a REIT (assuming that certain other requirements
are also satisfied). To the extent that we satisfy this distribution requirement and qualify for taxation as a REIT but distribute less
than 100% of our REIT taxable income, determined without regard to the dividends paid deduction and including any net capital
gains, we will be subject to U.S. federal corporate income tax on our undistributed net taxable income. In addition, we will be
subject to a 4% nondeductible excise tax if the actual amount that we distribute to our stockholders in a calendar year is less than
a minimum amount specified under U.S. federal tax laws. We intend to continue to make distributions to our stockholders to
comply with the REIT requirements of the Code.
Currently our funds from operations are generated primarily by rents paid under our lease agreements. From time to time, we
may generate taxable income greater than our cash flow as a result of differences in timing between the recognition of taxable
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income and the actual receipt of cash or the effect of nondeductible capital expenditures, the creation of reserves or required debt
or amortization payments. If we do not have other funds available in these situations, we could be required to borrow funds on
unfavorable terms, sell assets at disadvantageous prices or distribute amounts that would otherwise be invested in future acquisitions
to make distributions sufficient to enable us to pay out enough of our taxable income to satisfy the REIT distributions requirement
and to avoid corporate income tax and the 4% excise tax in a particular year. These alternatives could increase our costs or reduce
our equity or adversely impact our ability to raise short and long-term debt. Furthermore, the REIT distribution requirements may
increase the financing needed to fund capital expenditures, further growth and expansion initiatives. Thus, compliance with the
REIT requirements may hinder our ability to grow, which could adversely affect the value of our common stock.
Even if we qualify as a REIT, we may face other tax liabilities that reduce our cash flow.
Even if we qualify for taxation as a REIT, we may be subject to certain U.S. federal, state, and local taxes on our income and
assets, including taxes on any undistributed income and state or local income, property and transfer taxes. Moreover, if we have
net income from “prohibited transactions,” that income will be subject to a 100% tax. In general, prohibited transactions are sales
or other dispositions of property held primarily for sale to customers in the ordinary course of business. The determination as to
whether a particular sale is a prohibited transaction depends on the facts and circumstances related to that sale. While we will
undertake sales of assets if those assets become inconsistent with our long-term strategic or return objectives, we do not believe
that those sales should be considered prohibited transactions, but there can be no assurance that the IRS would not contend
otherwise. The need to avoid prohibited transactions could cause us to forego or defer sales of properties that might otherwise be
in our best interest to sell. 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 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.
Complying with the REIT requirements may cause us to forego otherwise attractive acquisition and business opportunities or
liquidate otherwise attractive investments.
To qualify as a REIT for U.S. federal income tax purposes, we must ensure that, at the end of each calendar quarter, at least
75% of the value of our assets consists of cash, cash items, government securities and “real estate assets” (as defined in the Code).
The remainder of our investments (other than government securities, qualified real estate assets and securities issued by a TRS)
generally cannot include more than 10% of the outstanding voting securities of any one issuer or more than 10% of the total value
of the outstanding securities of any one issuer. In addition, in general, no more than 5% of the value of our total assets (other than
government securities, qualified real estate assets and securities issued by a TRS) can consist of the securities of any one issuer,
and no more than 25% (20% effective for taxable years beginning after December 31, 2017) of the value of our total assets can
be represented by securities of one or more TRSs and no more than 25% of the value of our assets can be represented by certain
debt instruments issued by “publicly offered REITs.” If we fail to comply with these requirements at the end of any calendar
quarter, we must correct the failure within thirty days after the end of the calendar quarter or qualify for certain statutory relief
provisions to avoid losing our REIT qualification and suffering adverse tax consequences. As a result, we may be required to
liquidate or forego otherwise attractive investments. These actions could have the effect of reducing our income and amounts
available for distribution to our stockholders.
In addition to the asset tests set forth above, to qualify as a REIT we must continually satisfy tests concerning, among other
things, the sources of our income, the amounts we distribute to our stockholders and the ownership of our stock. We may be unable
to pursue investments that would be otherwise advantageous to us in order to satisfy the source-of-income or asset-diversification
requirements for qualifying as a REIT. Thus, compliance with the REIT requirements may hinder our ability to make certain
attractive investments.
REIT ownership limitations may restrict or prevent you from engaging in certain transfers of our common stock.
In order to satisfy the requirements for REIT qualification, no more than 50% in value of all classes or series of our outstanding
shares of stock may be owned, actually or constructively, by five or fewer individuals (as defined in the Code to include certain
entities) at any time during the last half of each taxable year commencing with our taxable year beginning January 1, 2016. Subject
to certain exceptions, rents received or accrued by us from Darden will not be treated as qualifying rent for purposes of the REIT
gross income requirements if we or a beneficial or constructive owner of 10% or more of our stock beneficially or constructively
23
owns 10% or more of the total combined voting power of all classes of Darden stock entitled to vote or 10% or more of the total
value of all classes of Darden stock. To assist us in satisfying the REIT requirements, our charter contains certain ownership and
transfer restrictions on our stock. More specifically, our charter provides that shares of our capital stock acquired or held in excess
of the ownership limit will be transferred to a trust for the benefit of a designated charitable beneficiary, and that any person who
acquires shares of our capital stock in violation of the ownership limit will not be entitled to any dividends on such shares or be
entitled to vote such shares or receive any proceeds from the subsequent sale of such shares in excess of the lesser of the price
paid for such shares or the amount realized from the sale (net of any commissions and other expenses of sale). A transfer of shares
of our capital stock in violation of the ownership limit will be void ab initio under certain circumstances. Under applicable
constructive ownership rules, any shares of stock owned by certain affiliated owners generally would be added together for purposes
of the common stock ownership limits, and any shares of a given class or series of preferred stock owned by certain affiliated
owners generally would be added together for purposes of the ownership limit on such class or series. Our 9.8% ownership
limitation may have the effect of delaying, deferring or preventing a change in control of us, 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.
See “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” above.
There are uncertainties relating to the Purging Distribution.
Darden has allocated its accumulated earnings and profits (as determined for U.S. federal income tax purposes) for periods
prior to the Spin-Off between Darden and FCPT in a manner that, in its best judgment, is in accordance with the provisions of the
Code. The amount of earnings and profits to be distributed is a complex factual and legal determination. We currently believe and
intend that our Purging Distribution made on March 2, 2016 has satisfied the requirements relating to the distribution of our pre-
REIT accumulated earnings and profits. No assurance can be given, however, that the IRS will agree with our calculation or
Darden’s allocation of earnings and profits to FCPT. If the IRS finds additional amounts of pre-REIT earnings and profits, there
are procedures generally available to cure any failure to distribute all of our pre-REIT earnings and profits, but there can be no
assurance that we will be able to successfully implement such procedures.
We paid the Purging Distribution in a combination of common stock and cash and are permitted to pay other dividends on our
common stock in common stock and/or cash. Our stockholders may sell shares of our common stock to pay tax on such
dividends, placing downward pressure on the market price of our common stock.
We paid the Purging Distribution in a combination of cash and common stock. Each stockholder was permitted to elect to
receive the stockholder’s entire entitlement under the Purging Distribution in either cash or FCPT common stock, subject to the
limitation on the amount of cash to be distributed in the aggregate to all of our stockholders (the “Cash Limitation”). The Cash
Limitation was approximately 20% of the Purging Distribution declaration (without regard to any cash that may be paid in lieu
of fractional shares). In the Purging Distribution and any other distribution paid in a combination of cash and common stock,
stockholders will be required to report dividend income as a result of such distribution for both the cash and stock components of
the distribution and even though we distributed no cash or only nominal amounts of cash to such shareholder.
If we make any taxable dividend payable in cash and common stock, taxable stockholders receiving such dividends will be
required to include the full amount of the dividend as ordinary income to the extent of our current and accumulated earnings and
profits, as determined for U.S. federal income tax purposes. As a result, stockholders may be required to pay income tax with
respect to such dividends in excess of the cash dividends received. If a U.S. stockholder sells shares of our stock that it receives
as a dividend in order to pay this tax, the sales proceeds may be less than the amount included in income with respect to the
dividend, depending on the market price of the stock at the time of the sale. Furthermore, with respect to certain non-U.S.
stockholders, we may be required to withhold federal income tax with respect to such dividends, including in respect of all or a
portion of such dividend that is payable in our stock. If, in any taxable dividend payable in cash and stock, a significant number
of our stockholders determine to sell shares of our stock in order to pay taxes owed on dividends, it may be viewed as economically
equivalent to a dividend reduction and put downward pressure on the market price of our stock.
24
Complying with the REIT requirements may limit our ability to hedge effectively and may cause us to incur tax liabilities.
The REIT provisions of the Code substantially limit our ability to hedge our assets and liabilities. Income from certain hedging
transactions that we may enter into to manage risk of interest rate changes with respect to borrowings made or to be made to
acquire or carry real estate assets (each such hedge, a "Borrowing Hedge") or manages the risk of certain currency fluctuations
(each such hedge, a "Currency Hedge") does not constitute “gross income” for purposes of the 75% or 95% gross income tests
that apply to REITs, provided that certain identification requirements are met. This exclusion from the 95% and 75% gross income
tests also applies if we previously entered into a Borrowings Hedge or a Currency Hedge, a portion of the hedged indebtedness
or property is disposed of, and in connection with such extinguishment or disposition we enter into a new clearly identified hedging
transaction to offset the prior hedging position. To the extent that we enter into other types of hedging transactions or fail to properly
identify such transaction as a hedge, the income is likely to be treated as non-qualifying income for purposes of both of the gross
income tests. As a result of these rules, we may be required to limit our use of advantageous hedging techniques or implement
those hedges through a TRS. This could increase the cost of our hedging activities because the TRS may be subject to tax on gains
or expose us to greater risks associated with changes in interest rates that we would otherwise want to bear. In addition, losses in
the TRS will generally not provide any tax benefit, except that such losses could theoretically be carried back or forward against
past or future taxable income in the TRS.
The ability of our Board of Directors to revoke our REIT election without stockholder approval may cause adverse
consequences to our stockholders.
Our charter provides our Board of Directors with the power, under certain circumstances, to revoke or otherwise terminate our
REIT election and cause us to be taxed as a regular corporation, without the approval of our stockholders. If we cease to qualify
as a REIT, we would become subject to U.S. federal income tax on our net taxable income and we generally would no longer be
required to distribute any of our net taxable income to our stockholders, which may have adverse consequences on our total return
to our stockholders.
Even if we qualify to be subject to tax as a REIT, we could be subject to tax on any unrealized net built-in gains in our assets
held before electing to be treated as a REIT.
Following our REIT election, we will own appreciated assets that were held by Darden, a C corporation, and were acquired
by us in the Spin-Off in a transaction in which the adjusted tax basis of the assets in our hands was determined by reference to the
adjusted basis of the assets in the hands of the C corporation. If we dispose of any such appreciated assets during the five-year
period following the effective date of our REIT election, we will be subject to tax at the highest corporate tax rates on the lesser
of (i) the amount of gain that we recognize at the time of the sale or disposition; and (ii) the amount of gain that we would have
recognized if we had sold the assets at the time we acquired them (i.e., the effective date of our REIT election ) (such gain referred
to as “built-in gains”). We would be subject to this tax liability even if we qualify and maintain our status as a REIT. Any recognized
built-in gain will retain its character as ordinary income or capital gain and will be taken into account in determining REIT taxable
income and our distribution requirement. Any tax on the recognized built-in gain will reduce REIT taxable income. We may choose
not to sell in a taxable transaction appreciated assets we might otherwise sell during the five-year period in which the built-in gain
tax applies in order to avoid the built-in gain tax. However, there can be no assurances that such a taxable transaction will not
occur. If we sell such assets in a taxable transaction, the amount of corporate tax that we will pay will vary depending on the actual
amount of net built-in gain or loss present in those assets as of the time we became a REIT. The amount of tax could be significant.
The same rules would apply to any assets we acquire in the future from a C corporation in a carryover basis transaction with built-
in gain at the time of the acquisition by us. If we choose to dispose of any assets within the specified period, we will attempt to
utilize various tax planning strategies, including Section 1031 of the Code like-kind exchanges, to mitigate the exposure to the
built-in-gains tax. Gain from a sale of an asset occurring after the specified period ends will not be subject to this corporate level
tax.
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 in
exchange for Operating Partnership units, we entered into a tax protection agreement with affiliates of USRP. The tax protection
agreement provides that, if we dispose of any of those ten properties in a taxable transaction through November 2023, we will
25
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 (and tax liabilities incurred as a result of the reimbursement
payment). Consequently, although it otherwise may be in our best interest to sell one of those properties, these obligations may
make it prohibitive for us to do so.
Legislative or other actions affecting REITs could have a negative effect on us.
The rules dealing with U.S. federal income taxation are constantly under review by persons involved in the legislative process
and by the IRS and the U.S. Department of the Treasury (the “Treasury”). Legislative and regulatory changes, including
comprehensive tax reform, may be more likely in the 115th Congress, which convened in January 2017, because the Presidency
and both Houses of Congress will be controlled by the same political party. Changes to the tax laws or interpretations thereof,
with or without retroactive application, could materially and adversely affect our investors or us. We cannot predict how changes
in the tax laws might affect our investors or us. New legislation, Treasury regulations, administrative interpretations or court
decisions could significantly and negatively affect our ability to qualify as a REIT or the U.S. federal income tax consequences
to our investors and us of such qualification.
.
26
Item 1B. Unresolved Staff Comments.
Not applicable.
Item 2. Properties.
Please refer to “Item1. Business.”
Item 3. Legal Proceedings.
In the ordinary course of our business, we are party to various claims and legal proceedings that management believes are
routine in nature and incidental to the operation of our business. Management believes that the outcome of these proceedings will
not have a material adverse effect upon our operations, financial condition or liquidity.
Item 4. Mine Safety Disclosures.
Not applicable.
27
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities.
Our stock began trading on the New York Stock Exchange under the ticker symbol “FCPT” on November 10, 2015 with an
opening price of $19.85. No dividends were declared or paid in 2015. On January 7, 2016, our Board of Directors declared two
dividends totaling $8.32 per share. These dividends were paid in cash on January 29, 2016 and in cash and shares of our common
stock on March 2, 2016 and constitute our Purging Distribution.
For each calendar quarter and year indicated, the following table reflects respective high, low, and closing sales prices for the
common stock as quoted by the NYSE and the dividends paid per share in each period.
2016
High
Low
Close
Dividends per share
2015
High
Low
Close
Dividends per share
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Year
$
23.56
$
20.59
$
21.79
$
21.13
$
14.52
17.95
8.56
17.38
20.59
0.24
19.65
21.33
0.24
17.74
20.52
0.24
23.56
14.52
20.52
9.29
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Year
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
$
24.20
$
19.15
24.16
—
24.20
19.15
24.16
—
The following table presents the characterizations for tax purposes of such common stock dividends for the year ended
December 31, 2016.
Record Date
Payment Date
Total
Distribution
($ per share)
Form 1099
Box 1a
Ordinary Taxable
Dividend
($ per share)
Form 1099
Box 1b
Qualified Taxable
Dividend (1)
($ per share)
Form 1099
Box 3
Return of Capital
($ per share)
1/19/2016
1/19/2016
3/31/2016
6/30/2016
9/30/2016
Totals
1/29/2016 $
3/2/2016
4/15/2016
7/15/2016
10/14/2016
0.2000 (2) $
8.1183 (2)
0.2425
0.2425
0.2000 $
8.1183
0.2425
0.1234
0.0290
0.2000
7.5554
—
—
—
0.2425
9.0458
$
$
8.7132 $
7.7554 $
—
—
—
0.1191
0.2135
0.3326
(1) Qualified Taxable Dividends are a subset of, and included in, Ordinary Taxable Dividends.
(2) Reflects special catch-up distributions of cash and stock, which included the remaining amount of the company’s undistributed
earnings and profits attributable to all taxable periods ending on or prior to December 31, 2015, which, in accordance with tax
rules applicable to real estate investment trust (“REIT”) conversions, the Company was required to pay to its stockholders on or
before December 31, 2016 in connection with its conversion to a REIT.
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.
As of February 21, 2017, there were approximately 9,885 registered holders of record of our common stock.
28
Sales of Unregistered Securities
None.
Purchases of Equity Securities by the Company and Affiliated Purchasers
None.
Performance Graph
The following performance graph compares, for the period from November 10, 2015, the date the Company’s shares of
common stock began trading on the New York Stock Exchange, through December 31, 2016, the cumulative total stockholder
return on the Company’s common stock, based on the market price of the common stock and assuming reinvestments of dividends,
with (i) the cumulative total return of the S&P 500 Index, (ii) the cumulative total return of the MSCI US REIT Index (“RMZ”)
and (iii) the cumulative total return of Dow Jones Industrial Average.
29
Item 6. Selected Financial Data.
The following selected historical financial information should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the historical consolidated and combined financial statements as
of December 31, 2016 and 2015 and for the years ended December 31, 2016, 2015, and 2014, and the related notes included
elsewhere in this Annual Report on Form 10-K.
The Company completed the Spin-Off on November 9, 2015. Due to the timing of the Spin-off, the Company presents herein
consolidated financial data for the Company from the date of consummation of the Spin-off through December 31, 2015 and for
the Kerrow Restaurant Operating Business for all periods. Our real estate operations business was not operated by Darden as a
stand-alone business and, accordingly, there are no historical results of operations related to that business. The Kerrow Restaurant
Operating Business and our real estate operations business were not legal entities, but rather a portion of the real estate assets,
liabilities and operations of Darden. The historical financial data for Kerrow Restaurant Operating Business is not necessarily
indicative of the Company’ results of operations, cash flows or financial position following the completion of the Spin-Off.
The selected historical financial information as of and for the years ended December 31, 2016, 2015, 2014, 2013, and 2012
has been derived from our audited historical financial statements (except in the case of balance sheet data as of December 31,
2012, which is unaudited). The combined statements of comprehensive income include allocations of certain costs from Darden
incurred on the Kerrow Restaurants Operating Business’ behalf. Management considers the allocation methodologies used to be
reasonable and appropriate reflections of the historical Darden expenses allocable to the Kerrow Restaurants Operating Business
for purposes of the combined financial statements. However, the expenses reflected in the combined financial statements may not
be indicative of the actual expenses that would have been incurred during the periods presented if the Kerrow Restaurants Operating
Business had operated as a separate, stand-alone entity. Due to the timing of the Spin-Off, the results of operations for the years
ended December 31, 2014, 2013, and 2012 reflect the financial condition and results of operations of Kerrow Restaurant Operating
Business. The results of operations for the years ended December 31, 2016 and 2015 reflect the financial condition and results of
operations of the Company, together with the Kerrow Restaurant Operating Business prior to the Spin-Off.
Operating Data
(In thousands, except per share data)
Revenues
Net income (loss)
Earnings per share:
Basic
Diluted
Cash dividends declared per common stock
2016
124,018
156,809
2.75
2.63
0.97
$
$
$
$
$
$
$
$
$
Year Ended December 31,
2015
2014
2013
2012
33,456
5,699
$
$
17,695
32
$
$
16,907 $
29 $
16,524
(39)
0.92
0.91
—
NA
NA
NA
NA
NA
NA
NA
NA
NA
30
At December 31,
2016
2015
2014
2013
2012
(Unaudited)
$
421,941
$
404,812
$
3,069
$
3,069
$
3,069
1,055,624
1,477,565
(583,307)
894,258
937,151
467,034
470,117
$
$
992,418
1,397,230
(568,539)
828,691
929,437
487,795
441,642
$
$
$
$
12,513
15,582
(3,860)
11,722
11,949
2,951
8,998
$
$
12,502
15,571
(3,026)
12,545
12,807
2,935
9,872
$
$
12,502
15,571
(2,163)
13,408
13,630
2,899
10,731
Balance Sheet Data
(In thousands)
Real estate investments:
Land
Buildings, equipment and
improvements
Total real estate investments
Less: accumulated depreciation
Total real estate investments, net
Total assets
Total liabilities
Total equity
Other Statistics
(In thousands)
Cash flows provided by operating activities
$
Cash flows used in investing activities
Cash flows provided by (used in) financing activities
Year Ended December 31,
2016
2015
2014
2013
2012
$
70,939
(59,322)
(83,047)
$
21,693
(556)
76,929
$
961
(55)
(906)
$
914
(26)
(888)
806
(131)
(675)
31
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially
from those projected, forecasted or expected in these forward-looking statements as a result of various factors, including those
which are discussed below and elsewhere in this information statement. The following discussion and analysis should be read in
conjunction with the accompanying consolidated financial statements, related notes included thereto and “Item 1.A., Risk Factors”,
appearing elsewhere in this Annual Report on Form 10-K.
Overview
FCPT is a publicly-traded REIT that owns, acquires and leases restaurant and other retail properties on a primarily triple-net
basis. Our primary goal is to create long-term shareholder value through the payment of consistent cash dividends and the growth
of our cash flow and asset base. To achieve this goal, our business strategy focuses on opportunistic acquisitions and asset and
tenant diversification.
On November 9, 2015, in connection with the separation and spin-off of FCPT from Darden, Darden contributed to us 100%
of the equity interest in entities that held 418 properties in which Darden operates restaurants, representing five of their brands
(the “Four Corners Properties”), and six LongHorn Steakhouse® restaurants located in the San Antonio, Texas area (the “Kerrow
Restaurant Operating Business”) and the underlying properties or interests therein associated with the Kerrow Restaurant Operating
Business. In exchange, we issued shares of our common stock which Darden distributed to its shareholders.
Currently, we generate revenues primarily by leasing properties to Darden and to other third-party tenants through triple-net
lease arrangements under which the tenant is primarily responsible for ongoing costs relating to the properties, including utilities,
property taxes, insurance, common area maintenance charges, and maintenance and repair costs (“triple-net”). We also generate
revenues by operating the Kerrow Restaurant Operating Business pursuant to franchise agreements with Darden. As of December
31, 2016, our undepreciated gross investment in real estate totaled approximately $1.5 billion.
We have elected to be taxed as a REIT for federal income tax purposes commencing with the taxable year beginning January
1, 2016.
FCPT initiated acquisition activities in the second quarter of 2016, and between July and December 2016 acquired 59
restaurants for a total investment of $94.1 million in 13 separate transactions, representing 13 additional brands, at a blended
acquisition cap rate of 6.6%. In addition, during the same period FCPT sold two properties for $24.8 million at a 4.75% cap rate.
The proceeds from the sales were used for a subsequent acquisition in the 1031 exchange market.
As of December 31, 2016, FCPT owns 475 properties in its lease portfolio which are 100% unencumbered and represent an
aggregate leasable area of approximately 3.4 million square feet. The portfolio is 100% occupied under leases with an average
lease term of 13.7 years and has no assets under development.
In addition to managing its existing properties, FCPT’s strategy in 2017 includes investing in additional restaurant and food
service real estate properties to grow and diversify its portfolio. The Company intends to purchase properties that are well located
and occupied by durable restaurant concepts with creditworthy tenants with investment grade ratings, whose operating cash flow
are expected to meaningfully exceed their lease payments to FCPT.
32
Results of Operations
The results of operations for the accompanying consolidated and combined financial statements discussed below are derived
from our consolidated statements of comprehensive income found elsewhere in this Annual Report on Form 10-K. The following
discussion includes the results of our continuing operations as summarized in the table below.
(In thousands)
Revenues:
Rental
Restaurant
Total revenues
Operating expenses:
General and administrative
Depreciation and amortization
Restaurant expenses
Interest expense
Total expenses
Other income
Realized gain on sale, net
Income (loss) before income taxes
(Provision for) benefit from income taxes
Net income
Year Ended December 31,
2016
2015
2014
$
105,624
$
15,134
$
18,394
124,018
10,977
20,577
17,853
14,828
64,235
97
16,623
76,503
80,347
156,850
(41)
156,809
18,322
33,456
1,856
3,758
16,996
2,203
24,813
—
—
8,643
(2,944)
5,699
—
$
5,699
$
—
17,695
17,695
—
863
16,942
—
17,805
—
—
(110)
142
32
—
32
Net income attributable to noncontrolling interest
Net Income Available to Common Shareholders
$
We operate in two segments, real estate operations and restaurant operations. Our real estate operations began on
November 9, 2015, accordingly, comparisons to prior periods with respect to this segment are not meaningful. Our real estate
operations generate rental income associated with leases which we recognize on a straight-line basis to include the effects of base
rent escalators.
Rental revenue was $105.6 million, driven principally by recognizing a full year of rental revenue from the initial Darden
portfolio. In addition, we acquired 59 properties in 2016 and sold 2 properties in 2016. The net addition to rental income from
acquired properties less the impact of sold properties was $1.0 million.
General and administrative expense comprises costs associated with staff, office rent, legal, accounting, information technology
and other professional services and other administrative services in association with our lease operations and our REIT structure
and reporting requirements.
Depreciation and amortization expense represents the depreciation on real estate investments and the intangible lease assets
recognized upon the acquisition of leased properties. Depreciation and amortization increased for 2016 by approximately $16.8
million or 448% principally as a result of the Company having real estate operations for a full 12 month period in 2016 when
compared to results for only the period from November 9 through December 31 in 2015.
In the fourth quarter of 2016, we sold two properties and realized a gain of $16.6 million. These sales qualified as 1031
exchanges, and the consideration received was used to purchase other properties in the fourth quarter of 2016.
Interest Expense
On November 9, 2015, immediately preceding the consummation of the Spin-Off, we entered into the Revolving Credit and
Term Loan Agreement (the “Loan Agreement”) that provides for borrowings of up to $750 million and consists of (1) a $400
33
million non-amortizing term loan that matures on November 9, 2020 and (2) a $350 million revolving credit facility that provides
for loans and letters of credit. At December 31, 2016, the weighted average interest rate on the term loan was 2.36%. As of
December 31, 2016, there were $45.0 million of outstanding borrowings under the revolving credit facility with a weighted average
interest rate of 2.46% and no outstanding letters of credit.
On November 9, 2015, we also entered into interest rate swaps with aggregate notional values totaling $400 million to hedge
the variability associated with the Loan Agreement, fixing our gross interest expense at 3.06%. These swaps are accounted for as
cash flow hedges with all interest income/expense recorded as a component of net income and other valuation changes recorded
as a component of other comprehensive income. At December 31, 2016, the average interest rate on the term loan including the
cost of the swap agreements and the amortization of upfront costs was 3.5%.
Restaurant Operations
The following table sets forth for our restaurant operating segment revenues and expenses data for the periods indicated.
Although we completed the spin-off of FCPT from Darden on November 9, 2015, our restaurant operations segment includes the
full operating results for 2015 and 2014.
(Dollars in thousands)
Restaurant revenues
Restaurant expenses:
Food and beverage
Restaurant labor
Other restaurant expenses (1)
Total restaurant expenses
Restaurant Operations, Net
Year Ended December 31,
2016
2015
2014
$
18,394
7,213
5,391
5,638
18,242
152
$
$
% of
Revenues
100.0% $
39.2%
29.3%
30.7%
99.2%
$
$
18,322
7,310
4,688
4,998
16,996
1,326
% of
Revenues
$
% of
Revenues
100.0% $
17,695
100.0%
39.9%
25.6%
27.3%
92.8%
$
7,124
4,639
5,179
16,942
753
40.3%
26.2%
29.3%
95.7%
(1) Other restaurant expenses include $389 thousand of intercompany rent paid to FCPT in 2016, which is eliminated for financial reporting purposes.
Year Ended December 31, 2016 versus Year Ended December 31, 2015
Restaurant revenues increased approximately $0.07 million, or 0.39%, in 2016 compared to 2015, driven primarily by a 4.8%
increase in the average check offset by a 5.6% decrease in average guest counts. The increase in average check amounts was due
to the addition of higher end entrées and price increases during the year. Average annual revenue per restaurant was $3.07 million
in 2016 compared to $3.06 million in 2015.
Total restaurant expenses increased approximately $1.2 million or 6.4% in 2016 compared to 2015 due to increased
administrative overhead and one-time costs associated with the spin-off. As a percent of revenues, total restaurant expenses
increased from 92.8% in 2015 to 99.2% in 2016.
Food and beverage costs decreased approximately $0.1 million, or 0.7% of revenues from 2015 to 2016, due to a focus on
inventory management and a decrease in beef prices during 2016.
Restaurant labor costs increased $0.7 million, or 3.7% of revenues in 2016 compared to 2015, due to an increase in hourly
wages due to staffing challenges, increased management overhead, and a change in incentive compensation structure.
Other restaurant expenses (which include utilities, common area maintenance charges, repairs and maintenance, credit card
fees, lease expense, property tax, workers’ compensation, other restaurant-level operating expenses and administrative costs)
increased approximately $0.6 million, or 3.4% of revenues in 2016 compared to 2015, mainly due to the addition of franchise
fees, brand fund expenses, rising utility costs, an increase in building/equipment maintenance, and one-time spin expenses.
34
Year Ended December 31, 2015 versus Year Ended December 31, 2014
Restaurant revenues increased $0.6 million, or 3.5%, in 2015 compared to 2014, driven primarily by a 4.3% increase in the
average check as well as a 0.8% increase in average guest counts. Average annual revenue per restaurant was $3.06 million in
2015 compared to $2.9 million in 2014.
Total restaurant expenses increased approximately $0.05 million, but lower by 2.9% of revenues due to favorable sales leverage.
As a percent of revenues, total restaurant expenses decreased from 95.7% in 2014 to 92.8% in 2015.
Food and beverage costs increased approximately $0.2 million, but lower by 0.4% of revenues from 2014 to 2015, due to
increased food costs, primarily beef during the year.
Restaurant labor costs increased approximately $0.05 million, but lower by 0.6% of revenues from 2014 to 2015 primarily
as a result of favorable sales leverage.
Other restaurant expenses decreased by approximately $0.2 million or 1.9% of revenues 2015 compared to 2014, primarily
as a result of higher workers’ compensation costs, utilities, repairs and maintenance and media costs, partially offset by favorable
sales leverage.
Critical Accounting Policies and Estimates
The preparation of FCPT’s consolidated and combined financial statements in conformance with accounting principles
generally accepted in the United States of America requires management to make estimates on assumptions that affect the reported
amounts of assets, liabilities, revenues and expenses as well as other disclosures in the financial statements. On an ongoing basis,
management evaluates its estimates and assumptions; however, actual results may differ from these estimates and assumptions,
which in turn could have a material impact on our financial statements. Estimates and assumptions include, among other things,
subjective judgments regarding the fair values and useful lives of our properties for depreciation and lease classification purposes,
and asset impairment analysis.
A summary of FCPT’s accounting policies and procedures are included in Note 2 of our consolidated and combined financial
statements, included in Part II, Item 8 of this Annual Report on Form 10-K. Management believes the following critical accounting
policies, among others, affect its more significant estimates and assumptions used in the preparation of our consolidated and
combined financial statements.
Real Estate Investments
Real estate investments, net are recorded at cost less accumulated depreciation. Building components are depreciated over
estimated useful lives ranging from seven to fifty-four years using the straight-line method. Leasehold improvements, which are
reflected on our balance sheets as a component of buildings, within land, buildings and equipment, net, are amortized over the
lesser of the non-cancelable lease term or the estimated useful lives of the related assets using the straight-line method. Equipment
is depreciated over estimated useful lives ranging from two to fifteen years also using the straight-line method. Real estate
development and construction costs for newly constructed restaurants are capitalized in the period in which they are incurred.
Gains and losses on the disposal of land, buildings and equipment are included in our accompanying statements of comprehensive
income.
Our accounting policies regarding land, buildings and equipment, including leasehold improvements, include our judgments
regarding the estimated useful lives of these assets, the residual values to which the assets are depreciated or amortized, the
determination of what constitutes a reasonably assured lease term, and the determination as to what constitutes enhancing the
value of or increasing the life of existing assets. These judgments and estimates may produce materially different amounts of
reported depreciation and amortization expense if different assumptions were used. As discussed further below, these judgments
may also impact our need to recognize an impairment charge on the carrying amount of these assets as the cash flows associated
with the assets are realized, or as our expectations of estimated future cash flows change.
35
Acquisition of Real Estate
Prior to the fourth quarter of 2016, the Company evaluated the inputs, processes and outputs of each asset acquired to determine
if the transaction is a business combination or asset acquisition. As the Company acquired only real estate investments with triple-
net leases, it determined there are no inputs or processes associated with the acquired assets and the investments should be accounted
for as asset acquisitions. Related transaction costs are generally capitalized and amortized over the useful life of the acquired
assets.
In the fourth quarter of 2016, the Company adopted ASU 2017-01, which provided additional guidance for determining
whether transactions should be accounted for as asset acquisitions or business combinations. The Company evaluated the
acquisitions and concluded that the land, building, site improvements, and in-places leases (if any) were a single asset. The building
and property improvements are attached to the land and cannot be physically removed and used separately from the land without
incurring significant costs or reducing their fair value. As substantially all of the fair value of the gross assets acquired are
concentrated in a single identifiable asset, the acquisitions do not qualify as a business and are accounted for as asset acquisitions.
Related transaction costs are generally capitalized and amortized over the useful life of the acquired assets.
The Company allocates the purchase price (including acquisition and closing costs) of real estate acquisitions to land, building,
improvements, and equipment based on their relative fair values. In making estimates of fair values for this purpose, the Company
uses a third-party specialist that obtains various information about each property, including the pre-acquisition due diligence and
leasing activities of the Company.
Lease Intangibles
Lease intangibles, if any, acquired in conjunction with the purchase of real estate represent the value of in-place leases and
above- or below-market leases. For real estate acquired subject to existing lease agreements, in-place lease intangibles are valued
based on the Company’s estimates of costs related to tenant acquisition and the carrying costs that would be incurred during the
time it would take to locate a tenant if the property were vacant, considering current market conditions and costs to execute similar
leases at the time of the acquisition. Above- and below-market lease intangibles are recorded based on the present value of the
difference between the contractual amounts to be paid pursuant to the leases at the time of acquisition of the real estate and the
Company’s estimate of current market lease rates for the property, measured over a period equal to the remaining initial term of
the lease.
In-place lease intangibles are amortized on a straight-line basis over the remaining initial term of the related lease and included
in depreciation and amortization expense. Above-market lease intangibles are amortized over the remaining initial terms of the
respective leases as a decrease in rental revenue. Below market lease intangibles are generally amortized as an increase to rental
revenue over the remaining initial term of the respective leases, but may be amortized over the renewal periods if the Company
believes it is likely the tenant will exercise the renewal option. Should a lease terminate early, the unamortized portion of any
related lease intangible is immediately recognized in impairment loss in the Company’s consolidated and combined statements
of operations.
Impairment of Long-Lived Assets
Land, buildings and equipment and certain other assets, including definite-lived intangible assets, are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount of an asset 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. Identifiable cash flows are measured at the lowest level for which they are largely
independent of the cash flows of other groups of assets and liabilities, generally at the restaurant level. If these assets are determined
to be impaired, the amount of impairment recognized is measured by the amount by which the carrying amount of the assets
exceeds their fair value. Fair value is generally determined by appraisals or sales prices of comparable assets.
The judgments we make related to the expected useful lives of long-lived assets and our ability to realize undiscounted cash
flows in excess of the carrying amounts of these assets are affected by factors such as the ongoing maintenance and improvements
of the assets, changes in economic conditions, changes in usage or operating performance, desirability of the restaurant sites and
other factors, such as our ability to sell our assets held for sale. As we assess the ongoing expected cash flows and carrying amounts
of our long-lived assets, significant adverse changes in these factors could cause us to realize a material impairment loss.
36
Restaurant sites and certain other assets to be disposed of are reported at the lower of their carrying amount or fair value, less
estimated costs to sell. Restaurant sites and certain other assets to be disposed of are included in assets held for sale when certain
criteria are met. These criteria include the requirement that the likelihood of disposing of these assets within one year is probable.
Assets whose disposal is not probable within one year remain in land, buildings and equipment until their disposal within one year
is probable. Disposals of assets that have a major effect on our operations and financial results or that represent a strategic shift
in our operating businesses are reviewed to determine whether those assets would also meet the requirements to be reported as
discontinued operations.
Exit or disposal activities include the cost of disposing of the assets and are generally expensed as incurred. Upon disposal
of the assets, any gain or loss is recorded in the same caption within our statements of comprehensive income as the original
impairment.
Derivative Instruments and Hedging Activities
We enter into derivative instruments for risk management purposes only, including derivatives designated as hedging
instruments as required by FASB ASC Topic 815, Derivatives and Hedging, and those utilized as economic hedges. Our use of
derivative instruments is currently limited to interest rate hedges. These instruments are generally structured as hedges of the
variability of cash flows related to forecasted transactions (cash flow hedges). We do not enter into derivative instruments for
trading or speculative purposes, where changes in the cash flows of the derivative are not expected to offset changes in cash flows
of the hedged item. All derivatives are recognized on the balance sheet at fair value. For those derivative instruments for which
we intend to elect hedge accounting, at the time the derivative contract is entered into, we document all relationships between
hedging instruments and hedged items, as well as our risk-management objective and strategy for undertaking the various hedge
transactions. This process includes linking all derivatives designated as cash flow hedges to specific assets and liabilities on the
consolidated balance sheet or to specific forecasted transactions. We also formally assess, both at the hedge’s inception and on an
ongoing basis, whether the derivatives used in hedging transactions are highly effective in offsetting changes in cash flows of
hedged items.
To the extent our derivatives are effective in offsetting the variability of the hedged cash flows, and otherwise meet the cash
flow hedge accounting criteria in accordance with GAAP, changes in the derivatives’ fair value are not included in current earnings
but are included in accumulated other comprehensive income (loss), net of tax. These changes in fair value will be reclassified
into earnings at the time of the forecasted transaction. Ineffectiveness measured in the hedging relationship is recorded currently
in earnings in the period in which it occurs.
Revenue Recognition
For those triple-net leases that provide for periodic and determinable increases in base rent, base rental revenue is recognized
on a straight-line basis over the applicable lease term when collectability is reasonably assured. Recognizing rental income on a
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 straight-line rent receivable.
Income from rent, lease termination fees and all other income is recognized when all of the following criteria are met in
accordance with SEC Staff Accounting Bulletin 104: (i) the applicable agreement has been fully executed and delivered; (ii)
services have been rendered; (iii) the amount is fixed or determinable; and (iv) collectability is reasonable assured.
New Accounting Standards
If applicable, a discussion of new accounting standards and the possible effects of these standards on our consolidated financial
statements is included in Note 2 of our consolidated and combined financial statements, included in Part II, Item 8 of this Annual
Report on Form 10-K.
Liquidity and Financial Condition
At December 31, 2016, we had $26.6 million of cash and cash equivalents and $305 million of borrowing capacity under our
Credit Facility.
37
On November 9, 2015, immediately preceding the consummation of the Spin-Off, we entered into the $750 million Revolving
Credit and Term Loan Agreement which consists of (1) a $400 million non-amortizing term loan that matures on November 9,
2020 and (2) a $350 million revolving credit facility that provides for loans and letters of credits and matures on November 9,
2019. The revolving credit facility provides for a letter of credit sub-limit of $45 million. As of December 31, 2016, we had $45
million of outstanding borrowings under our revolving credit facility and no outstanding letters of credit.
On a short-term basis, our principal demands for funds will be for operating expenses, distributions to stockholders and interest
and principal on current and any future debt financings. We expect to fund our operating expenses and other short-term liquidity
requirements, capital expenditures, payment of principal and interest on our outstanding indebtedness, property improvements,
re-leasing costs and cash distributions to common stockholders, primarily through cash provided by operating activities, and, for
acquisitions, investments, and other capital expenditures, from borrowings under our $350 million revolving Credit Facility. As
of February 27, 2017 we had $45 million outstanding under the revolving Credit Facility.
We have a shelf registration statement on file with the SEC under which we may issue secured or unsecured indebtedness
and equity financing through the instruments and on the terms most attractive to us at such time. During 2016, we sold an aggregate
32,513 shares under our ATM program for net proceeds of $0.64 million. The net proceeds were employed to fund acquisitions,
and for general corporate purposes. As of December 31, 2016, $148.4 million in gross proceeds capacity remained available under
the ATM Program.
On a long-term basis, our principal demands for funds include payment of dividends, financing of property acquisitions and
scheduled debt maturities. We plan to meet our long-term capital needs by issuing debt or equity securities or by obtaining asset
level financing, subject to market conditions. In addition, we may issue common stock to permanently finance properties that were
financed on an intermediate basis by our revolving Credit Facility or other indebtedness. In the future, we may also acquire
properties by issuing partnership interests of our operating partnership in exchange for property owned by third parties. Our
common partnership interests would be redeemable for cash or shares of our common stock.
We continually evaluate alternative financing and believe that we can obtain financing on reasonable terms. However, we
cannot assure you 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.
Because the properties in our portfolio are generally leased to tenants under triple-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. 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.
Contractual Obligations
The following table provides information with respect to our commitments as of December 31, 2016. The table does not
reflect available debt extensions.
(In millions)
Notes payable
Interest payments on note payable
obligations (1)
Commitments under non-cancellable
operating leases
Total Contractual Obligations and
Commitments
$
$
Less than 1
Year
1 – 3 Years
3 – 5 Years
More than 5
Years
Total
— $
— $
445.0
$
— $
445.0
14.7
0.5
29.2
0.9
11.4
0.4
—
—
55.3
1.8
15.2
$
30.1
$
456.8
$
— $
502.1
(1) Interest payments computed using the hedged rate as of December 31, 2016 of 3.06% for the $400 million term loan and
undrawn commitment fee of 0.35% on $305 million. Interest for the $45 million draw on credit revolver calculated using the
current 6-month LIBOR plus applicable swap rates.
38
Off-Balance Sheet Arrangements
At December 31, 2016, there were no off-balance sheet arrangements.
Supplemental Financial Measures
The following table presents a reconciliation of GAAP net income to NARIET funds from operations (“FFO”) and Adjusted
funds from operations (“AFFO”) for the year ended December 31, 2016.
(In thousands, except share data)
Year Ended December 31,
2016
2015
Net income attributable to shareholders in accordance with GAAP
$
156,809
$
Depreciation and amortization
Deferred tax benefit from REIT election
Realized gain on sales of real estate
NAREIT funds from operations (FFO)
Non-cash compensation expense
Amortization of deferred financing costs
Other non-cash interest (income) expense
Straight-line rent adjustment
Adjusted funds from operations (AFFO)
Fully diluted shares outstanding(1)
FFO per diluted share
AFFO per diluted share
Footnotes:
20,577
(80,410)
(16,623)
80,353
1,550
1,592
(610)
(10,095)
72,790
59,568,067
1.35
1.22
$
$
$
$
$
$
5,699
3,758
—
—
9,457
13
265
(3)
(1,500)
8,232
6,263,921
1.51
1.31
(1) Weighted average shares outstanding were calculated using the share count in 2015. Prior to November 9th 2015, there were no shares
outstanding.
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. The non-GAAP measures should not be considered an alternative to net income as an
indicator of our performance and should be considered only a supplement to net income, and to cash flows from operating, investing
or financing activities as a measure of profitability and/or liquidity, computed in accordance with GAAP.
Funds From Operations (“FFO”) is a supplemental measure of our performance which should be considered along with, but
not as an alternative to, net income and cash provided by operating activities as a measure of operating performance and liquidity.
We calculate FFO in accordance with the standards established by the National Association of Real Estate Investment Trusts
(“NAREIT”). FFO represents net income (loss) (computed in accordance with 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.
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
39
year, captures trends in occupancy rates, rental rates and operating costs. We offer this measure because we recognize that FFO
will be used by investors as a basis to compare our operating performance with that of other REITs. However, because FFO
excludes depreciation and amortization and captures neither the changes in the value of our properties that result from use or
market conditions, nor the level of capital expenditures and capitalized leasing commissions necessary to maintain the operating
performance of our properties, all of which have real economic effect and could materially impact our financial condition and
results from operations, the utility of FFO as a measure of our performance is limited. 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. Investors in our securities should not rely on these measures as a substitute
for any GAAP measure, including net income
Adjusted Funds From Operations (“AFFO”) is a non-GAAP measure that is used as a supplemental operating measure
specifically for comparing year over year ability to fund dividend distribution from operating activities. AFFO is used by us as a
basis to address our ability to fund our dividend payments. We calculate adjusted funds from operations by adding to or subtracting
from FFO:
1. Transaction costs incurred in connection with the acquisition of real estate investments
2. Non-cash stock-based compensation expense
3. Amortization of deferred financing costs
4. Other non-cash interest expense
5. Non-real estate depreciation
6. Merger, restructuring and other related costs
7.
Impairment charges
8. Amortization of capitalized leasing costs
9. Straight-line rent revenue adjustment
10. Amortization of above and below market leases
11. Debt extinguishment gains and losses
12. Recurring capital expenditures and tenant improvements
AFFO is not intended to represent cash flow from operations for the period, and is only intended to provide an additional
measure of performance by adjusting the effect of certain items noted above included in FFO. 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.
40
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
We are exposed to financial market risks, especially interest rate risk. Interest rates are highly sensitive to many factors,
including governmental monetary policies, domestic and global economic and political conditions, and other factors which are
beyond our control. Our operating results will depend heavily on the difference between the revenue from our assets and the
interest expense incurred on our borrowings. We may incur additional variable rate debt in the future, including amounts that we
may borrow under our revolving credit facility. We consider certain risks associated with the use of variable rate debt, including
those described under “Item 1A. Risk Factors - An increase in market interest rates could increase our interest costs on existing
and future debt and could adversely affect our stock price, and a decrease in market interest rates could lead to additional competition
for the acquisition of real estate, which could adversely affect our results of operations.” The objective of our interest rate risk
management policy is to match fund fixed-rate assets with fixed-rate liabilities and variable-rate assets with variable-rate liabilities.
As of December 31, 2016, 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, 2016, approximately $400 million of our total indebtedness consisted of five-year variable-rate obligations
for which we have entered into swaps that effectively fixed $200 million of our variable rate debt for three years and $200 million
for five years, at a weighted average interest rate, excluding amortization of deferred financing costs and debt discounts/premiums,
of approximately 3.06%. We intend to continue our practice of employing interest rate derivative contracts, such as interest rate
swaps and futures, to reduce our exposure, on specific transactions or on a portfolio basis, to changes in cash flows as a result of
interest rate changes. We do not intend to enter into derivative contracts for speculative or trading purposes. We generally intend
to utilize derivative instruments to hedge interest rate risk on our liabilities and not use derivatives for other purposes, such as
hedging asset-related risks. We consider certain risks associated with the use of derivative instruments, including those described
under “Item 1A. Risk Factors - Hedging transactions could have a negative effect on our results of operations.”
Due to 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, 2016.
41
Item 8. Financial Statements and Supplementary Data.
Financial Statements and Supplementary Data consist of financial statements as indexed on page F-1.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures.
None.
Item 9A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
We have established and maintain disclosure controls and procedures, as such term is defined in Rule 13a-15(e) under the
Securities Exchange Act of 1934 (the “Exchange Act”), that are designed to ensure that information required to be disclosed by
us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time
periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and
procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the
Exchange Act is accumulated and communicated to management, including our principal executive and principal financial officers
as appropriate, to allow timely decisions regarding required disclosure.
Our management, with participation of our principal executive officer and principal financial officer, evaluated the
effectiveness of our disclosure controls and procedures as of December 31, 2016. Based on this evaluation, our principal executive
officer and principal financial officer concluded that our disclosure controls and procedures were effective as of December 31,
2016.
Management Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal
control system is designed to provide reasonable assurance to our management and Board of Directors regarding the preparation
and fair presentation of published financial statements. All internal control systems, no matter how well designed, have inherent
limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial
statement preparation and presentation.
Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2016. In making
this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (2013
framework) in Internal Control-Integrated Framework. Based on its assessment and those criteria, our management concluded
that, as of December 31, 2016 our internal control over financial reporting is effective.
KPMG LLP, an independent registered public accounting firm, has issued an attestation report, included herein, on the
effectiveness of our internal control over financial reporting.
Changes in Internal Control over Financial Reporting
During 2016, the Company enhanced its documentation of certain control activities. The Company has also formalized its
policy for the retention of documentation supporting the performance and review of these controls. There have been no changes
in our internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) during the
three months ended December 31, 2016 that have materially affected, or that are reasonably likely to materially affect, our internal
control over financial reporting.
Item 9B. Other Information.
None.
42
Item 10. Directors, Executive Officers and Corporate Governance.
PART III
The information required by Item 10 is incorporated herein by reference to the definitive Proxy Statement to be filed with the
SEC pursuant to Regulation 14A within 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K.
Item 11. Executive Compensation.
The information required by Item 11 is incorporated herein by reference to the definitive Proxy Statement to be filed with the
SEC pursuant to Regulation 14A within 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K.
Item 12. Security Ownership of Certain Owners and Management and Related Stockholder Matters.
The information required by Item 12 is incorporated herein by reference to the definitive Proxy Statement to be filed with the
SEC pursuant to Regulation 14A within 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
The information required by Item 13 is incorporated herein by reference to the definitive Proxy Statement to be filed with the
SEC pursuant to Regulation 14A within 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K.
Item 14. Principal Accounting Fees and Services.
The information required by Item 14 is incorporated herein by reference to the definitive Proxy Statement to be filed with the
SEC pursuant to Regulation 14A within 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K.
43
PART IV
Item 15. Exhibits, Financial Statement Schedules.
(a) For Financial Statements, see Index to Financial Statements on page F-1.
(b) For Exhibits, see Index to Exhibits on page E-1.
44
FOUR CORNERS PROPERTY TRUST, INC.
INDEX TO FINANCIAL STATEMENTS
Audited Consolidated Financial Statements
Reports of Independent Registered Public Accounting Firm
Consolidated and Combined Balance Sheets as of December 31, 2016 and 2015
Consolidated and Combined Statements of Operations for the Years Ended December 31, 2016, 2015 and 2014
Consolidated and Combined Statements of Comprehensive Income for the Years Ended December 31, 2016,
2015 and 2014
Consolidated and Combined Statement of Changes in Equity for the Years Ended December 31, 2016, 2015,
and 2014
Consolidated and Combined Statements of Cash Flows for the Years Ended December 31, 2016, 2015 and
2014
Notes to Consolidated Financial Statements
F-2
F-4
F-5
F-6
F-7
F-8
F-9
F-1
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
Four Corners Property Trust, Inc.:
We have audited the accompanying consolidated balance sheets of Four Corners Property Trust, Inc. and subsidiaries as of
December 31, 2016 and 2015, and the related consolidated and combined statements of income, comprehensive income, changes
in equity, and cash flows for each of the years in the
period ended December 31, 2016. In connection with our audits
of the consolidated financial statements, we also have audited the financial statement schedule III - Schedule of Real Estate Assets
and Accumulated Depreciation. These consolidated financial statements and financial statement schedule are the responsibility
of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements and financial
statement schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the consolidated and combined financial statements referred to above present fairly, in all material respects,
the financial position of Four Corners Property Trust, Inc. and subsidiaries as of December 31, 2016 and 2015, and the results of
their operations and their cash flows for each of the years in the
period ended December 31, 2016, in conformity with
U.S. generally accepted accounting principles. Also in our opinion, the related financial statement schedule, when considered in
relation to the basic consolidated and combined financial statements taken as a whole, presents fairly, in all material respects, the
information set forth therein.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States),
Four Corners Property Trust, Inc.’s internal control over financial reporting as of December 31, 2016, based on criteria established
in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO), and our report dated February 27, 2017 expressed an unqualified opinion on the effectiveness of the
Company’s internal control over financial reporting.
/s/ KPMG LLP
San Francisco, California
February 27, 2017
F-2
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
Four Corners Property Trust, Inc.:
We have audited Four Corners Property Trust, Inc.’s internal control over financial reporting as of December 31, 2016, based
on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations
of the Treadway Commission (COSO). Four Corners Property Trust, Inc.’s management is responsible for maintaining effective
internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting,
included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express
an opinion on the Company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control
over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control
over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating
effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we
considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that
(1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions
of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation
of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the
company are being made only in accordance with authorizations of management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because
of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, Four Corners Property Trust, Inc. maintained, in all material respects, effective internal control over financial
reporting as of December 31, 2016, based on criteria established in Internal Control - Integrated Framework (2013) issued by the
Committee of Sponsoring Organizations of the Treadway Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States),
the consolidated balance sheets of Four Corners Property Trust, Inc. and subsidiaries as of December 31, 2016 and 2015, and the
related consolidated and combined statements of income, comprehensive income, changes in equity, and cash flows for each of
the years in the three-year period ended December 31, 2016, and our report dated February 27, 2017 expressed an unqualified
opinion on those consolidated and combined financial statements.
/s/ KPMG LLP
San Francisco, California
February 27, 2017
F-3
FOUR CORNERS PROPERTY TRUST, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
December 31,
2016
2015
ASSETS
Real estate investments:
Land and improvements
Buildings, equipment and improvements
Total real estate investments
Less: Accumulated depreciation
Total real estate investments, net
Cash and cash equivalents
Deferred rent
Derivative assets
Other assets
Total Assets
LIABILITIES AND EQUITY
Liabilities:
Notes payable, net of deferred financing costs
Dividends payable
Deferred rental revenue
Derivative liabilities
Deferred tax liabilities
Other liabilities
Total liabilities
Equity:
Preferred stock, par value $0.0001 per share, 25,000,000
authorized, zero shares issued and outstanding.
Common stock, par value $0.0001 per share;
500,000,000 shares authorized, 59,923,557 and
42,741,995 shares issued and outstanding at December
31, 2016 and 2015, respectively
Additional paid-in capital
Retained earnings
Accumulated other comprehensive income (loss)
Noncontrolling interest
Total equity
Total Liabilities and Equity
$
$
$
$
421,941
1,055,624
1,477,565
(583,307)
894,258
26,643
11,594
837
3,819
937,151
$
438,895
$
14,519
7,974
—
196
5,450
467,034
—
6
438,864
25,943
207
5,097
470,117
$
937,151
$
The accompanying notes are an integral part of this financial statement.
F-4
404,812
992,418
1,397,230
(568,539)
828,691
98,073
1,500
165
1,008
929,437
392,302
—
7,940
477
80,881
6,195
487,795
—
4
436,697
5,257
(316)
—
441,642
929,437
FOUR CORNERS PROPERTY TRUST, INC.
CONSOLIDATED AND COMBINED STATEMENTS OF INCOME
(In thousands, except for share and per share data)
Revenues:
Rental revenue
Restaurant revenue
Total revenues
Operating expenses:
General and administrative
Depreciation and amortization
Restaurant expenses
Interest expense
Total operating expenses
Other income
Realized gain on sale, net
Income (loss) before income tax
(Provision for) benefit from income tax
Net income
Net income attributable to noncontrolling interest
Net Income Available to Common Shareholders
Basic net income per share:
Diluted net income per share:
Weighted average number of common shares outstanding:
Basic
Diluted
Dividends declared per common share
NA – not applicable
Year Ended December 31,
2016
2015
2014
$
105,624
$
15,134
$
18,394
124,018
10,977
20,577
17,853
14,828
64,235
97
16,623
76,503
80,347
156,850
(41)
156,809
2.75
2.63
$
$
$
18,322
33,456
1,856
3,758
16,996
2,203
24,813
—
—
8,643
(2,944)
5,699
—
5,699
$
0.92
0.91
56,984,561
59,568,067
0.9700
6,206,375
6,263,921
NA
$
$
$
$
—
17,695
17,695
—
863
16,942
—
17,805
—
—
(110)
142
32
—
32
NA
NA
NA
NA
NA
The accompanying notes are an integral part of this financial statement.
F-5
FOUR CORNERS PROPERTY TRUST, INC.
CONSOLIDATED AND COMBINED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
Year Ended December 31,
2016
2015
2014
Net income
Realized and unrealized loss on hedging instruments
Comprehensive income
Less: comprehensive income attributable to noncontrolling interest
Comprehensive Income Attributable to Common Shareholders
$
$
156,850
$
540
157,390
(58)
157,332
$
5,699
(316)
5,383
—
$
5,383
$
32
—
32
—
32
The accompanying notes are an integral part of this financial statement.
F-6
FOUR CORNERS PROPERTY TRUST, INC.
CONSOLIDATED AND COMBINED STATEMENT OF CHANGES IN EQUITY
(In thousands, except share data)
Common Stock
Shares
Amount
Additional
Paid-in
Capital
Parent
Company
Equity
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Noncontrolling
Interest
Total
— $ — $
— $
9,872
$
— $
— $
— $
9,872
—
—
—
—
—
—
32
(906)
8,998
—
—
—
—
436,697
(8,998)
(442)
4
—
—
4
—
—
—
2
—
—
—
—
—
—
436,697
—
—
(2)
—
640
1,529
—
—
—
—
—
—
—
—
—
—
—
—
5,699
—
5,257
—
156,809
—
(78,076)
(58,047)
—
—
—
—
—
—
—
—
(316)
(316)
—
—
523
—
—
—
—
—
—
—
32
(906)
8,998
—
427,257
—
—
—
—
5,039
41
17
—
—
—
—
4
5,699
(316)
441,642
5,039
156,850
540
(78,076)
(58,047)
640
1,529
Balance at December 31,
2013
Net income
Net transfers to parent
Balance at December 31,
2014
Contribution in
connection with Spin-
Off
Issuance of common
stock in connection with
Spin-Off
Net income
Realized and unrealized
gain (loss) on derivative
instruments
Issuance of OP units
Net income
Realized and unrealized
gain on derivative
instruments
Earnings and profits
distribution
Dividends paid and
declared on common
stock
ATM proceeds, net of
issuance costs
Stock-based
compensation, net
Balance at December
31, 2016
—
—
—
—
42,741,995
—
—
—
—
—
17,085,566
—
32,513
63,483
Balance at December 31,
2015
42,741,995
59,923,557
$
6
$ 438,864
$
— $
25,943
$
207
$
5,097
$
470,117
The accompanying notes are an integral part of this financial statement.
F-7
FOUR CORNERS PROPERTY TRUST, INC.
CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS
(In thousands)
Cash flows - operating activities
Net income attributable to common shareholders
$
156,850
$
5,699
Adjustments to reconcile net income to cash provided by operating activities:
Year Ended December 31,
2016
2015
2014
Depreciation and amortization
Stock based compensation expense
(Gain) loss on sale of real estate, net
Amortization of financing costs
Deferred income taxes
Changes in assets and liabilities:
Deferred rent asset
Deferred rental revenue
Other assets and liabilities
Net cash provided by operating activities
Cash flows - investing activities
Purchases of real estate investments
Proceeds from sale of real estate investments
Advance deposits on acquisition of operating real estate
Net cash used in investing activities
Cash flows - financing activities
Proceeds from term loan borrowings
Proceeds from revolving credit facility
Proceeds from equity issuance (ATM), net of issuance costs
Payment of financing costs
Net distribution to Darden related to the Spin-Off
Predecessor transfers to parent
Payment of dividend to shareholders
Repayment of debt
Net cash (used in) provided by financing activities
Net change in cash
Cash and cash equivalents, beginning of year
Cash and cash equivalents, ending of year
Supplemental cash flow information
Dividend payable
Cash interest paid
Cash paid for income taxes
Non - cash investing and financing activities:
Real estate investments, net acquired through Spin-Off
Debt assumed in purchase of real estate investments
Other assets acquired through Spin-Off at carrying value
Other liabilities assumed through Spin-Off at carrying value
Change in fair value of derivative instruments
Operating partner units issued in exchange for real estate investments
Value of shares issued in connection with E&P distribution
20,577
1,550
(16,623)
1,593
(80,685)
(10,095)
34
(2,262)
70,939
(83,263)
24,091
(150)
(59,322)
—
45,000
640
—
—
—
(121,604)
(7,083)
(83,047)
(71,430)
98,073
26,643
14,519
13,493
2,168
$
$
— $
7,083
—
—
1,149
5,039
277,470
3,758
101
25
265
1,195
(1,500)
7,940
4,210
21,693
(556)
—
—
(556)
400,000
—
—
(7,964)
(314,985)
(122)
—
—
76,929
98,066
7
98,073
$
— $
982
—
$
820,196
—
144
77,972
(316)
—
—
$
$
$
The accompanying notes are an integral part of this financial statement.
F-8
32
863
117
15
—
(194)
—
—
128
961
(55)
—
—
(55)
—
—
—
—
—
(906)
—
—
(906)
—
7
7
—
—
—
—
—
—
—
—
—
—
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
NOTE 1 – ORGANIZATION
Four Corners Property Trust, Inc. (together with its subsidiaries, “FCPT”) is an independent, publicly traded, self-administered
company, primarily engaged in the ownership, acquisition and leasing of restaurant properties. Substantially all of our business
is conducted through Four Corners Operating Partnership, LP (“FCPT OP”), a Delaware limited partnership of which we are the
initial and substantial limited partner. Our wholly owned subsidiary, Four Corners GP, LLC (“FCPT GP”), is its sole general
partner.
FCPT was incorporated as a Maryland corporation on July 2, 2015 as a wholly owned indirect subsidiary of Darden Restaurants,
Inc., (together with its consolidated subsidiaries “Darden”), for the purpose of owning, acquiring and leasing properties on a triple-
net basis, for use in the restaurant and related food service industries. On November 9, 2015, Darden completed a spin-off of FCPT
whereby Darden contributed to us 100% of the equity interest in entities that own 418 properties (the “Properties” or “Property”)
in which Darden operates restaurants, representing five of their brands, and six LongHorn Steakhouse® restaurants located in the
San Antonio, Texas area (the “Kerrow Restaurant Operating Business”) along with the underlying properties or interests therein
associated with the Kerrow Restaurant Operating Business. In exchange, we issued to Darden all of our common stock and paid
to Darden $315.0 million in cash. Subsequently, Darden distributed all of our outstanding shares of common stock pro rata to
holders of Darden common stock whereby each Darden shareholder received one share of our common stock for every three shares
of Darden common stock held at the close of business on the record date, which was November 2, 2015, as well as cash in lieu
of any fractional shares of our common stock which they would have otherwise received (the “Spin-Off”). The Spin-Off is intended
to qualify as tax-free to Darden shareholders for U. S. federal income tax purposes, except for cash paid in lieu of fractional shares.
We intend to elect to be taxed, and have operated and intend to continue to operate in a manner that will allow us to qualify
as a real estate investment trust (“REIT”) for U.S. federal income tax purposes commencing with our taxable year beginning
January 1, 2016. To qualify as a REIT, we must meet a number of organizational and operational requirements, including a
requirement that we distribute at least 90% of our adjusted taxable income to our shareholders, subject to certain adjustments and
excluding any net capital gain. As a REIT, we will not be subject to federal corporate income tax on that portion of net income
that is distributed to our shareholders. However, FCPT’s taxable REIT subsidiaries (“TRS”) will generally be subject to federal,
state, and local income taxes. We will make our REIT election upon the filing of our 2016 tax return.
Any references to “the Company,” “we,” “us,” “our” or “the Successor” refer to FCPT as an independent, publicly traded,
self-administered company. Any references to the Kerrow Restaurant Operating Business refer to it as owned by Darden and for
all periods prior to November 9, 2015 and as owned by us for periods subsequent to November 9, 2015.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation and Basis of Presentation
The accompanying consolidated and combined financial statements include the accounts of FCPT and its subsidiaries. All
intercompany accounts and transactions have been eliminated in consolidation.
The consolidated and combined financial statements reflect all adjustments which are, in the opinion of management, necessary
to a fair statement of the results for the interim periods presented. These adjustments are considered to be of a normal, recurring
nature.
The historical financial statements for the Kerrow Restaurant Operating Business were prepared on a stand-alone basis and
were derived from the consolidated financial statements and accounting records of Darden. These statements reflect the historical
financial condition and results of operations of Kerrow Restaurant Operating Business in accordance with GAAP. The consolidated
and combined financial statements include all revenues and costs allocable to us either through specific identification or allocation,
and all assets and liabilities directly attributable to us as derived from the operations of the restaurants. The consolidated and
combined statements of comprehensive income include allocations of certain costs from Darden incurred on our behalf. See Note
4 - Related Party Transactions for a further description of allocated expenses.
F-9
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (continued)
Noncontrolling Interest
Noncontrolling interest represents the aggregate limited partnership interests in FCPT OP held by third parties. In accordance
with GAAP, the noncontrolling interest of FCPT OP is shown as a component of equity on our consolidated balance sheets, and
the portion of income (loss) allocable to third parties is shown as net income (loss) attributable to noncontrolling interest in our
consolidated and combined statements of operations and consolidated statements of comprehensive income. The Company follows
the guidance issued by the FASB regarding the classification and measurement of redeemable securities. Accordingly, the Company
has determined that the common OP units meet the requirements to be classified as permanent equity. A reconciliation of equity
attributable to noncontrolling interest is disclosed in our consolidated statements of equity.
Reclassifications
Certain amounts previously reported under specific financial statement captions have been reclassified to be consistent with
the current period presentation. For the years ended December 31, 2016 and 2015, we have conformed the prior presentation of
the Kerrow Restaurant Operating Business to the current format for comparability purposes.
Use of Estimates
The preparation of these consolidated and combined financial statements requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements, and the reported amounts of sales and expenses during the reporting period. The estimates and
assumptions used in the accompanying consolidated and combined financial statements are based on management’s evaluation
of the relevant facts and circumstances as of the date of the combination. Actual results may differ from the estimates and
assumptions used in preparing the accompanying financial statements, and such differences could be material.
Real Estate Investments
Real estate investments, net are recorded at cost less accumulated depreciation. Building components are depreciated over
estimated useful lives ranging from seven to fifty-four years using the straight-line method. Leasehold improvements, which are
reflected on our balance sheets as a component of buildings, within land, buildings and equipment, net, are amortized over the
lesser of the non-cancelable lease term or the estimated useful lives of the related assets using the straight-line method. Equipment
is depreciated over estimated useful lives ranging from two to fifteen years also using the straight-line method. Real estate
development and construction costs for newly constructed restaurants are capitalized in the period in which they are incurred.
Gains and losses on the disposal of land, buildings and equipment are included in our accompanying statements of comprehensive
income.
Our accounting policies regarding land, buildings and equipment, including leasehold improvements, include our judgments
regarding the estimated useful lives of these assets, the residual values to which the assets are depreciated or amortized, the
determination of what constitutes a reasonably assured lease term, and the determination as to what constitutes enhancing the
value of or increasing the life of existing assets. These judgments and estimates may produce materially different amounts of
reported depreciation and amortization expense if different assumptions were used. As discussed further below, these judgments
may also impact our need to recognize an impairment charge on the carrying amount of these assets as the cash flows associated
with the assets are realized, or as our expectations of estimated future cash flows change.
Acquisition of Real Estate
Prior to the fourth quarter of 2016, the Company evaluated the inputs, processes and outputs of each asset acquired to determine
if the transaction is a business combination or asset acquisition. As the Company acquired only real estate investments with triple-
net leases, it determined there are no inputs or processes associated with the acquired assets and the investments should be accounted
for as asset acquisitions. Related transaction costs are generally capitalized and amortized over the useful life of the acquired
assets.
In the fourth quarter of 2016, the Company adopted ASU 2017-01, “Business Combinations (Topic 805): Clarifying the
Definition of a Business,” which provided additional guidance for determining whether transactions should be accounted for as
asset acquisitions or business combinations. The Company evaluated the acquisitions and concluded that the land, building, site
improvements, and in-places leases (if any) were a single asset. The building and property improvements are attached to the land
F-10
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (continued)
and cannot be physically removed and used separately from the land without incurring significant costs or reducing their fair value.
As substantially all of the fair value of the gross assets acquired are concentrated in a single identifiable asset, the acquisitions do
not qualify as a business and are accounted for as asset acquisitions. Related transaction costs are generally capitalized and amortized
over the useful life of the acquired assets.
The Company allocates the purchase price (including acquisition and closing costs) of real estate acquisitions to land, building,
and site improvements based on their relative fair values. In making estimates of fair values for this purpose, the Company uses
a third-party specialist that obtains various information about each property, including the pre-acquisition due diligence and leasing
activities of the Company.
Lease Intangibles
Lease intangibles, if any, acquired in conjunction with the purchase of real estate represent the value of in-place leases and
above- or below-market leases. For real estate acquired subject to existing lease agreements, in-place lease intangibles are valued
based on the Company’s estimates of costs related to tenant acquisition and the carrying costs that would be incurred during the
time it would take to locate a tenant if the property were vacant, considering current market conditions and costs to execute similar
leases at the time of the acquisition. Above- and below-market lease intangibles are recorded based on the present value of the
difference between the contractual amounts to be paid pursuant to the leases at the time of acquisition of the real estate and the
Company’s estimate of current market lease rates for the property, measured over a period equal to the remaining initial term of
the lease.
In-place lease intangibles are amortized on a straight-line basis over the remaining initial term of the related lease and included
in depreciation and amortization expense. Above-market lease intangibles are amortized over the remaining initial terms of the
respective leases as a decrease in rental revenue. Below market lease intangibles are generally amortized as an increase to rental
revenue over the remaining initial term of the respective leases, but may be amortized over the renewal periods if the Company
believes it is likely the tenant will exercise the renewal option. Should a lease terminate early, the unamortized portion of any
related lease intangible is immediately recognized in impairment loss in the Company’s consolidated statements of operations.
Impairment of Long-Lived Assets
Land, buildings and site improvements and certain other assets, including definite-lived intangible assets, are reviewed for
impairment whenever events or changes in circumstances indicate that the carrying amount of an asset 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. Identifiable cash flows are measured at the lowest level for
which they are largely independent of the cash flows of other groups of assets and liabilities, generally at the restaurant level. If
these assets are determined to be impaired, the amount of impairment recognized is measured by the amount by which the carrying
amount of the assets exceeds their fair value. Fair value is generally determined by appraisals or sales prices of comparable assets.
The judgments we make related to the expected useful lives of long-lived assets and our ability to realize undiscounted cash
flows in excess of the carrying amounts of these assets are affected by factors such as the ongoing maintenance and improvements
of the assets, changes in economic conditions, changes in usage or operating performance, desirability of the restaurant sites and
other factors, such as our ability to sell our assets held for sale. As we assess the ongoing expected cash flows and carrying amounts
of our long-lived assets, significant adverse changes in these factors could cause us to realize a material impairment loss.
Restaurant sites and certain other assets to be disposed of are reported at the lower of their carrying amount or fair value, less
estimated costs to sell. Restaurant sites and certain other assets to be disposed of are included in assets held for sale when certain
criteria are met. These criteria include the requirement that the likelihood of disposing of these assets within one year is probable.
Assets whose disposal is not probable within one year remain in land, buildings and equipment until their disposal within one year
is probable. Disposals of assets that have a major effect on our operations and financial results or that represent a strategic shift
in our operating businesses are reviewed to determine whether those assets would also meet the requirements to be reported as
discontinued operations.
Exit or disposal activities include the cost of disposing of the assets and are generally expensed as incurred. Upon disposal
of the assets, any gain or loss is recorded in the same caption within our statements of comprehensive income as the original
impairment.
F-11
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (continued)
Cash and Cash Equivalents
We consider all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents.
Cash and cash equivalents can consist of cash and money market accounts.
Derivative Instruments and Hedging Activities
We enter into derivative instruments for risk management purposes only, including derivatives designated as hedging
instruments as required by FASB ASC Topic 815, Derivatives and Hedging, and those utilized as economic hedges. Our use of
derivative instruments is currently limited to interest rate hedges. These instruments are generally structured as hedges of the
variability of cash flows related to forecasted transactions (cash flow hedges). We do not enter into derivative instruments for
trading or speculative purposes, where changes in the cash flows of the derivative are not expected to offset changes in cash flows
of the hedged item. All derivatives are recognized on the balance sheet at fair value. For those derivative instruments for which
we intend to elect hedge accounting, at the time the derivative contract is entered into, we document all relationships between
hedging instruments and hedged items, as well as our risk-management objective and strategy for undertaking the various hedge
transactions. This process includes linking all derivatives designated as cash flow hedges to specific assets and liabilities on the
consolidated balance sheet or to specific forecasted transactions. We also formally assess, both at the hedge’s inception and on an
ongoing basis, whether the derivatives used in hedging transactions are highly effective in offsetting changes in cash flows of
hedged items.
To the extent our derivatives are effective in offsetting the variability of the hedged cash flows, and otherwise meet the cash
flow hedge accounting criteria in accordance with GAAP, changes in the derivatives’ fair value are not included in current earnings
but are included in accumulated other comprehensive income (loss), net of tax. These changes in fair value will be reclassified
into earnings at the time of the forecasted transaction. Ineffectiveness measured in the hedging relationship is recorded in earnings
in the period in which it occurs.
See Note 8 - Derivative Financial Instruments for additional information.
Other Assets and Liabilities
Other assets primarily consist of prepaid assets, inventories, and accounts receivable. Other liabilities primarily consist of
accrued compensation, accrued operating expenses, and deferred rent obligations on certain operating leases.
Notes Payable
Notes payable are carried at their unpaid principal balance, net of deferred financing costs. This long-term debt is unsecured
and interest is paid monthly until it is paid in whole or matures at a future date.
Deferred Financing Costs
Financing costs related to long-term debt are deferred and amortized over the remaining life of the debt using the effective
interest method. These costs are presented as a direct deduction from their related liabilities on the balance sheets.
Revenue Recognition
Rental revenue
For those triple-net leases that provide for periodic and determinable increases in base rent, base rental revenue is recognized
on a straight-line basis over the applicable lease term when collectability is reasonably assured. Recognizing rental income on a
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 straight-line rent receivable. Taxes collected from lessees and remitted to
governmental authorities are presented on a net basis within rental income in our consolidated and combined statements of income.
For those leases that provide for periodic increases in base rent only if certain revenue parameters or other substantive
contingencies are met, the increased rental revenue is recognized as the related parameters or contingencies are met, rather than
on a straight-line basis over the applicable lease term.
F-12
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (continued)
Income from rent, lease termination fees and all other income is recognized when all of the following criteria are met in
accordance with SEC Staff Accounting Bulletin 104: (i) the applicable agreement has been fully executed and delivered; (ii)
services have been rendered; (iii) the amount is fixed or determinable; and (iv) collectability is reasonable assured.
We assess the collectability of our lease receivables, including straight-line receivables. We base our assessment of the
collectability of rent receivables (other than straight-line rent receivables) on several factors, including payment history, the
financial strength of the tenant and any guarantors, the value of the underlying collateral, if any, and current economic conditions.
If our evaluation of these factors indicates it is probable that we will be unable to recover the full value of the receivable, we
provide a reserve against the portion of the receivable that we estimate may not be recovered. We also base our assessment of the
collectability of straight-line rent receivables on several factors, including among other things, the financial strength of the tenant
and any guarantors, the historical operations and operating trends of the property, the historical payment pattern of the tenant and
the type of property. If our evaluation of these factors indicates it is probable that we will be unable to receive the rent payments
due in the future, we provide a reserve against the recognized straight-line rent receivable asset for the portion, up to its full value,
that we estimate may not be recovered. If we change our assumptions or estimates regarding the collectability of future rent
payments required by a lease, we may adjust our reserve or reduce the rental revenue recognized in the period we make such
change in our assumptions or estimates.
Restaurant revenue
Restaurant revenue represents food and beverage product sold and is presented net of the following discounts: coupons,
employee meals, complimentary meals and gift cards. Revenue from restaurant sales is recognized when food and beverage
products are sold. We recognize sales from our gift cards when the gift card is redeemed by the customer. Sales taxes collected
from customers and remitted to governmental authorities are presented on a net basis within restaurant revenue on our consolidated
and combined statements of income.
See Application of New Accounting Standards below for discussion of the application of ASU 2014-09.
Restaurant Expenses
Restaurant expenses include restaurant labor, general and administrative expenses, and food and beverage costs. Food and
beverage costs include inventory, warehousing, related purchasing and distribution costs. Vendor allowances received in connection
with the purchase of a vendor’s products are recognized as a reduction of the related food and beverage costs as earned. For
expenses incurred prior to November 9, 2015, advance payments were made to Darden by the vendors based on estimates of
volume to be purchased from the vendors and the terms of the agreement. As we made purchases from the vendors each period,
Darden allocated the pro rata portion of allowances earned by us. We recorded these allowances as a reduction of food and beverage
costs in the period earned. We considered the allocation methodology and results to be reasonable for the periods prior to November
9, 2015.
Income Taxes
We intend to elect and qualify as a REIT for U.S. federal income tax purposes commencing with the taxable year beginning
January 1, 2016. So long as we qualify as a REIT, we generally will not be subject to U.S. federal income tax on our net income
that we distribute currently to our stockholders. To maintain our qualification as a REIT, we will be required under the Code to
distribute at least 90% of our REIT taxable income (without regard to the deduction for dividends paid and excluding net capital
gains) to our stockholders and meet certain other requirements. If we fail to qualify as a REIT in any taxable year, we will be
subject to U.S. federal income tax on our taxable income at regular corporate rates. Even if we qualify as a REIT, we may also be
subject to certain state, local and franchise taxes. Under certain circumstances, U.S. federal income and excise taxes may be due
on our undistributed taxable income.
We were taxed as a C corporation and paid U.S. federal corporate income taxes for our taxable year ending December 31,
2015 and all prior periods. The Kerrow Restaurant Operating Business is a taxable REIT subsidiary and will continued to be taxed
as a C corporation.
We provide for federal and state income taxes currently payable as well as for those deferred because of temporary differences
between reporting income and expenses for financial statement purposes versus tax purposes. Federal income tax credits are
recorded as a reduction of income taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable
F-13
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (continued)
to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.
Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change
in tax rates is recognized in earnings in the period that includes the enactment date. Interest recognized on reserves for uncertain
tax positions is included in interest, net in our consolidated statements of comprehensive income. A corresponding liability for
accrued interest is included as a component of other liabilities on our consolidated balance sheets. Penalties, when incurred, are
recognized in general and administrative expenses.
We estimate certain components of our provision for income taxes. These estimates include, among other items, depreciation
and amortization expense allowable for tax purposes, allowable tax credits for items such as taxes paid on reported employee tip
income, effective rates for state and local income taxes and the valuation and tax deductibility of certain other items. We adjust
our annual effective income tax rate as additional information on outcomes or events becomes available.
We base our estimates on the best available information at the time that we prepare the provision. We will generally file our
annual income tax returns several months after our year end. Income tax returns are subject to audit by state and local governments,
generally years after the returns are filed. These returns could be subject to material adjustments or differing interpretations of the
tax laws. The major jurisdictions in which we will file income tax returns are the U.S. federal jurisdiction and all states in the U.S.
in which we own properties that have an income tax.
Tax accounting guidance requires that a position taken or expected to be taken in a tax return be recognized (or derecognized)
in the financial statements when it is more likely than not (i.e., a likelihood of more than 50 percent) that the position would be
sustained upon examination by tax authorities. A recognized tax position is then measured at the largest amount of benefit that is
greater than 50 percent likely of being realized upon ultimate settlement.
We include within our current tax provision the balance of unrecognized tax benefits related to tax positions for which it is
reasonably possible that the total amounts could change during the next 12 months based on the outcome of examinations.
Prior to the Spin-Off, our restaurant operations were included in the consolidated federal income tax return of Darden, as well
as certain state tax returns where Darden files on a combined basis. Darden, the predecessor of the Company for accounting
purposes (the “Predecessor”) has applied the provisions of FASB ASC Topic 740, Income Taxes, and computed the provision for
income taxes on a separate return basis. The separate return method applies the accounting guidance for income taxes to the stand-
alone consolidated and combined financial statements as if the Predecessor was a separate taxpayer and a stand-alone enterprise
for the periods presented. The calculation of income taxes for the Predecessor on a separate return basis requires a considerable
amount of judgment and use of both estimates and allocations. We believe that the assumptions and estimates used to compute
these tax amounts are reasonable. However, the Predecessor’s financial statements may not necessarily reflect its income tax
expense or tax payments in the future, or what our tax amounts would have been had the Predecessor been a stand-alone enterprise
during the periods presented.
Federal and state income taxes payable prior to the Spin-Off were settled through the parent company equity account. The
Predecessor provided for taxes that are deferred because of temporary differences between reporting income and expenses for
financial statement purposes versus tax purposes. Federal income tax credits have been recorded as a reduction of income taxes.
Deferred tax assets and liabilities have been recognized for the future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and
liabilities have been measured using enacted tax rates expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates have
been recognized in earnings in the period that includes the enactment date.
In determining the need for a valuation allowance or the need for uncertain tax positions, the Predecessor made certain estimates
and assumptions. These estimates and assumptions were based on, among other things, knowledge of the operations, markets,
historical trends and likely future changes and, when appropriate, the opinion of advisors with knowledge and expertise in relevant
fields. Due to certain risks associated with our estimates and assumptions, actual results could differ.
See Note 9 - Income Taxes for additional information.
F-14
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (continued)
Stock-Based Compensation
The Company’s stock-based compensation plan provides for the grant of restricted stock awards (“RSAs”), deferred stock
units (“DSUs”), performance-based awards (including performance stock units (“PSUs”)), dividend equivalents, restricted stock
units (“RSUs”), and other types of awards to eligible participants. Dividend equivalents rights (“DEUs”) are earned during the
vesting period and received upon vesting of award. Upon forfeiture of an award, DEUs earned during the vesting period are also
forfeited. We classify stock-based payment awards either as equity awards or liability awards based upon cash settlement options.
Equity classified awards are measured based on the fair value on the date of grant. Liability classified awards are remeasured to
fair value each reporting period. We recognize costs resulting from the Company’s stock-based compensation awards on a straight-
line basis over their vesting periods, which range between one and five years, less estimated forfeitures. No compensation cost is
recognized for awards for which employees do not render the requisite services.
See Note 11 - Stock-based Compensation for additional information.
Earnings Per Share
Basic earnings per share (“EPS”) are computed by dividing net income allocated to common shareholders by the weighted-
average number of common shares outstanding for the reporting period. Diluted EPS reflects the potential dilution that could occur
if securities or other contracts to issue common stock were exercised or converted into common stock. No effect is shown for any
securities that are anti-dilutive. Net income allocated to common shareholders represents net income less income allocated to
participating securities. At December 31, 2016, none of the Company’s equity awards qualified as participating securities.
See Note 10 - Equity for additional information.
Fair Value of Financial Instruments
We use a fair value approach to value certain assets and liabilities. Fair value is the price that would be received to sell an
asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair
value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing
an asset or liability. We use a fair value hierarchy, which distinguishes between assumptions based on market data (observable
inputs) and an entity's own assumptions (unobservable inputs). The hierarchy consists of three levels:
•
•
•
Level 1 - Quoted market prices in active markets for identical assets or liabilities;
Level 2 - Inputs other than level one inputs that are either directly or indirectly observable; and
Level 3 - Unobservable inputs developed using estimates and assumptions, which are developed by the reporting entity
and reflect those assumptions that a market participant would use.
Parent Company Equity
Parent company equity in our consolidated and combined statements of changes in equity represents Darden’s historical
investment in us, our accumulated net income after taxes, and the net effect of transactions with, and allocations from Darden.
All intercompany transactions effected through parent company equity in our consolidated balance sheets have been considered
cash receipts and payments for purposes of our consolidated statements of cash flows and are reflected in financing activities in
the accompanying consolidated statements of cash flows. See Note 4 - Related Party Transactions for additional information.
Application of New Accounting Standards
In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers”. The standard outlines a single
comprehensive revenue recognition model for entities to follow in accounting for revenue from contracts with customers and
supersedes most current revenue recognition guidance, including industry-specific guidance. The core principle of the revenue
model is that an entity should recognize revenue for the transfer of promised goods or services to customers in an amount that
reflects the consideration to which the entity expects to be entitled to receive for those goods or services. On July 9, 2015, the
FASB decided to delay the effective date of ASU 2014-09 for one year. The standard is now effective for annual periods beginning
after December 15, 2017 and interim periods within those annual periods. Early adoption for annual periods beginning after
F-15
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (continued)
December 15, 2016 and interim periods within those annual periods is permitted. We do not expect adoption of this guidance to
have a material impact on our consolidated and combined financial statements or related disclosures.
In February 2015, the FASB issued ASU No. 2015-02, “Consolidation (Topic 810): Amendments to the Consolidation
Analysis” which makes certain changes to both the variable interest model and the voting model including changes to (1) the
identification of variable interests (fees paid to a decision maker or service provider), (2) the variable interest entity characteristics
for a limited partnership or similar entity and (3) the primary beneficiary determination. ASU 2015-02 is effective for us beginning
January 1, 2016. Adoption of this guidance has had no material impact on our consolidated and combined financial statements
and related disclosures.
In July 2015, the FASB issued ASU No. 2015-11, “Inventory (Topic 330): Simplifying the Measurement of Inventory,” which
applies to inventory that is measured using first-in, first-out or average cost. Under the updated guidance, an entity should measure
inventory that is within scope at the lower of cost and net realizable value, which is the estimated selling prices in the ordinary
course of business, less reasonably predictable costs of completion, disposal and transportation. Subsequent measurement is
unchanged for inventory that is measured using last-in, first-out. This ASU is effective for annual and interim periods beginning
after December 15, 2016, and should be applied prospectively with early adoption permitted at the beginning of an interim or
annual reporting period. We do not expect adoption of this guidance to have a material impact on our consolidated and combined
financial statements or related disclosures.
In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)”, which supersedes the existing guidance for
lease accounting, Leases (Topic 840). ASU 2016-02 requires lessees to recognize leases on their balance sheets, and leaves lessor
accounting largely unchanged. The amendments in this ASU are effective for fiscal years beginning after December 15, 2018 and
interim periods within those fiscal years. Early application is permitted for all entities. ASU 2016-02 requires a modified
retrospective approach for all leases existing at, or entered into after, the date of initial application, with an option to elect to use
certain transition relief. We are currently evaluating the impact of adopting this guidance.
In March 2016, the FASB issued ASU No. 2016-09, “Compensation—Stock Compensation (Topic 718): Improvements to
Employee Share-Based Payment Accounting,” which amends how companies account for certain aspects of share-based payments
to employees. The new guidance will require all income tax effects of awards to be recognized in the income statement when the
awards vest or are settled. It also will allow an employer to repurchase more of an employee’s shares than it can today for tax
withholding purposes without triggering liability accounting and to make a policy election to account for forfeitures as they occur.
The amendments in this ASU are effective for fiscal years beginning after December 15, 2016 and interim periods within those
fiscal years. We do not expect adoption of this guidance to have a material impact on our consolidated and combined financial
statements or related disclosures.
In August 2016, the FASB issued ASU No. 2016-15, "Statement of Cash Flows - Classification of Certain Cash Receipts and
Cash Payments." ASU 2016-15 provides guidance on certain specific cash flow issues, including, but not limited to, debt prepayment
or extinguishment costs, contingent consideration payments made after a business combination and distributions received from
equity method investees. ASU 2016-15 is effective for periods beginning after December 15, 2017, with early adoption permitted
and shall be applied retrospectively where practicable. We do not expect adoption of this guidance to have a material impact on
our consolidated and combined financial statements or related disclosures.
In January 2017, the FASB issued ASU No. 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a
Business.” ASU 2017-01 effective for fiscal years beginning after December 15, 2017, including interim periods within those
periods. The amendments in this update provide a screen to determine when a set is not a business. The screen requires that when
substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a
group of similar identifiable assets, the set is not a business. We adopted ASU 2017-01 in the fourth quarter of 2016.
NOTE 3 – CONCENTRATION OF CREDIT RISK
Our tenant base and the restaurant brands operating our properties are highly concentrated. With respect to our tenant base,
Darden is the sole tenant of the Properties, which constitute approximately 88% of the properties we own. In addition, Darden
Restaurants, Inc. has guaranteed the obligations of the tenants under substantially all of the Leases entered into in respect of the
Properties. As our revenues predominately consist of rental payments under the Leases, we are dependent on Darden for substantially
F-16
all of our leasing revenues. The audited financial statements for Darden can be found in the Investor Relations section at
www.darden.com.
We also are subject to concentration risk in terms of the restaurant brands that operate the Properties. With 475 locations in
our portfolio, Olive Garden brand restaurants comprise approximately 63% of the Properties and approximately 70% of the revenues
receive under the Leases, based on the total number of locations leased. Our properties are located in 44 states with concentrations
of 10% or greater in two states, Florida (12%) and Texas (11%).
Financial instruments that potentially subject us to significant concentrations of credit risk consist principally of cash and
cash equivalents. We are exposed to credit risk with respect to cash held at various financial institutions, access to our credit
facility, and amounts due or payable under our derivative contracts. At December 31, 2016, our exposure to risk related to our
derivative instruments totaled $837 thousand, and the counterparty to such instruments is an investment grade financial institution.
Our credit risk exposure with regard to our cash and the $305 million available capacity under the revolver portion of our credit
facility is spread among a diversified group of investment grade financial institutions.
NOTE 4 – RELATED PARTY TRANSACTIONS
Allocation of Darden Corporate Expenses to the Predecessor
Prior to the Spin-Off, we were managed in the normal course of business by Darden and its subsidiaries. All direct costs
incurred in connection with our operations for which specific identification was practical have been included in the stand-alone
combined financial statements. Additionally, certain shared costs and certain support functions have been allocated to us and
reflected as expenses in the stand-alone consolidated and combined financial statements. Management considers the allocation
methodologies used to be reasonable and appropriate reflections of the historical Darden expenses allocable to the Predecessor
for purposes of the stand-alone financial statements; however, the expenses reflected in the consolidated and combined financial
statements may not be indicative of the actual expenses that would have been incurred during the periods presented if we had
operated as a separate, stand-alone entity. Management does not believe, however, that it is practicable to estimate what these
expenses would have been had we operated as a separate, stand-alone entity, including any expenses associated with obtaining
any of these services from unaffiliated entities. Actual costs that would have been incurred had we been a stand-alone entity would
depend on multiple factors, including organizational structure and strategic decisions made in various areas, including information
technology and infrastructure. In addition, the expenses reflected in the combined financial statements may not be indicative of
expenses that will be incurred by us in the future.
The costs allocated to us were made on the basis of operating weeks, net sales or other relevant measures. Corporate expense
allocations primarily relate to centralized corporate functions, including advertising, finance, accounting, treasury, tax, legal,
internal audit, human resources, facilities, risk management functions, employee benefits and stock based compensation (except
for specifically identified stock-based compensation benefits discussed in Note 9 - Stock-Based Compensation). In addition,
corporate expenses include, among other costs, maintenance of existing software, technology and websites, development of new
or improved software technology, professional fees for legal, accounting, and financial services, non-income taxes and expenses
related to litigation, investigations, or similar matters. Corporate expenses allocated to us were $0.9 million for the year ended
December 31, 2015 and $1.2 million for the year ended December 31, 2014 and have been included within restaurant expenses
in our combined statements of comprehensive income. All of the corporate allocations of costs are deemed to have been incurred
and settled through parent company equity in the period where the costs were recorded. Following the Spin-Off, we have performed
these functions using our own resources or purchased services. For an interim period, however, some of these functions were
continue to be provided by Darden under transition services agreements. During 2015, Darden earned $110 thousand under the
transition services agreements.
Subsequent to the Spin-Off on November 9, 2015, Darden is no longer a related party.
F-17
NOTE 5 – REAL ESTATE INVESTMENTS, NET
Real Estate Investments
Real estate investments, net, which consist of land, buildings and improvements leased to others subject to triple-net operating
leases and those utilized in the operations of Kerrow Restaurant Operating Business is summarized as follows:
(In thousands)
Land
Buildings and improvements
Equipment
Total gross real estate investments
Less: accumulated depreciation
Total Real Estate Investments, Net
Operating Leases
December 31,
2016
2015
$
$
421,941
$
916,444
139,180
1,477,565
(583,307)
894,258
$
404,812
851,967
140,451
1,397,230
(568,539)
828,691
The following table presents the scheduled minimum future contractual rent to be received under the remaining non-cancelable
term of the operating leases. Because lease renewal periods are exercisable at the option of the lessee, the table presents future
minimum lease payments due during the initial lease term only.
(In thousands)
2017
2018
2019
2020
2021
Thereafter
Total Future Minimum Rentals
December 31,
2016
$
$
100,973
102,369
103,857
105,349
106,797
1,005,191
1,524,536
NOTE 6 – SUPPLEMENTAL DETAIL FOR CERTAIN COMPONENTS OF CONSOLIDATED BALANCE SHEET
Other Assets
The components of other assets were as follows:
(In thousands)
Intangibles lease assets
Prepaid acquisition costs
Prepaid assets
Inventories
Accounts receivable
Other
Total Other Assets
December 31,
2016
2015
1,772
$
717
614
202
162
352
3,819
$
—
—
689
198
70
51
1,008
$
$
F-18
Lease Intangibles, Net
The following table details lease intangible assets, net of accumulated amortization, which are included in Other Assets on
our consolidated balance sheets:
(In thousands)
In-place leases
Less: accumulated amortization
Intangible Lease Assets, Net
December 31,
2016
$
$
1,809
(37)
1,772
The value of in-place leases amortized and included in depreciation and amortization expense was $37 thousand for the year
ended December 31, 2016. There were no above or below market intangible assets or liabilities at December 31, 2016.
Based on the balance of intangible assets at December 31, 2016, the net aggregate amortization expense for the next five years
and thereafter is expected to be as follows:
(In thousands)
2017
2018
2019
2020
2021
Thereafter
Total
Other Liabilities
The components of other liabilities were as follows:
(In thousands)
Accrued compensation
Accrued interest expense
Accrued operating expenses
Accounts payable
Deferred rent
Other
Total Other Liabilities
NOTE 7 – NOTES PAYABLE
December 31,
2016
$
$
December 31,
2016
2015
$
$
1,296
$
1,134
759
726
634
901
5,450
$
204
165
165
160
138
940
1,772
465
959
915
922
580
2,354
6,195
On November 9, 2015, immediately preceding the consummation of the Spin-Off, we entered into the Revolving Credit and
Term Loan Agreement (the “Loan Agreement”) that provides for borrowings of up to $750 million and consists of (1) a $400
million non-amortizing term loan that matures on November 9, 2020 and (2) a $350 million revolving credit facility that provides
for loans and letters of credits and matures on November 9, 2019. The revolving credit facility provides for a letter of credit sub-
limit of $45 million.
The Loan Agreement is a syndicated credit facility that contains an accordion feature such that the aggregate principal amount
of the revolving credit facility or term loan can be increased by an additional $250 million to an amount not to exceed $1.0 billion
F-19
in the aggregate, subject to certain conditions, including one or more new or existing lenders agreeing to provide commitments
for such increased amounts.
The obligations under the Loan Agreement are secured by a pledge of Four Corners OP’s ownership interests in substantially
all of its material subsidiaries, subject to certain exceptions, and are guaranteed, on a joint and several basis, by substantially all
of FCPT OP’s material subsidiaries and FCPT, subject to certain exceptions. The collateral will be released if, as a result of growth
in the value of our assets following the Spin-Off, the aggregate asset growth capitalization value (as defined in the Loan Agreement)
exceeds $300.0 million. The Loan Agreement contains customary affirmative and negative covenants that, among other things,
require customary reporting obligations, contain obligations to maintain REIT status, and restrict, subject to certain exceptions,
the incurrence of debt and liens, the consummation of certain mergers, consolidations and asset sales, the making of distributions
and other restricted payments, and entering into transactions with affiliates. In addition, Four Corners OP will be required to
comply with the following financial covenants (all terms as defined in the Loan Agreement): (1) total indebtedness to consolidated
capitalization value not to exceed 60%; (2) mortgage-secured leverage ratio not to exceed 40%; (3) total secured recourse
indebtedness not to exceed 5% of consolidated capitalization value; (4) minimum fixed charge coverage ratio of 1.75 to 1.00; (5)
minimum consolidated tangible net worth; (6) unhedged floating rate debt not to exceed 50% of all indebtedness; (7) maximum
unencumbered leverage ratio not to exceed 60%; and (8) minimum unencumbered debt service coverage ratio of 1.50 to 1.00.
The Loan Agreement also contains customary events of default including, without limitation, payment defaults, violation of
covenants cross acceleration to material indebtedness, bankruptcy-related defaults, judgment defaults, and the occurrence of certain
change of control events. The occurrence of an event of default will limit the ability of FCPT and FCPT to make distributions and
may result in the termination of the credit facility, acceleration of repayment obligations and the exercise of remedies by the
Lenders under the Loan Agreement with respect to the collateral.
The term loan and revolving credit facility interest rates are based on either (1) a LIBOR rate plus a margin ranging from
1.70% to 2.45% (in the case of the term loan) or 1.75% to 2.50% (in the case of the revolving credit facility) or, (2) at our option,
an alternate base rate (the “ABR Rate”), plus a margin ranging from 0.70% to 1.45% (in the case of the term loan) or 0.75% to
1.50% (in the case of the revolving credit facility). The actual applicable margin is determined on a quarterly basis according to
our total leverage ratio as defined by the Loan Agreement. The unused commitment fee on the revolving credit facility is 0.25%
or 0.35% per year, depending on the amount of the unused portion of the revolving credit facility, is computed based on the average
daily amount of the unused portion of the revolving credit facility, and is payable quarterly. The interest rate will increase by a
rate of 2% per year over the prevailing interest rate on outstanding borrowings and other amounts due and owing following the
occurrence and during the continuation of an event of default. Amounts owing under the Loan Agreement may be prepaid at any
time without premium or penalty, subject to customary breakage costs in the case of borrowings with respect to which a LIBOR
rate election is in effect.
Immediately preceding the Spin-Off, we drew down the full amount of the term loan using a portion of the proceeds to pay
Darden $315 million in connection with the Spin-Off. The remainder of the proceeds has been used to pay all of the cash portion
of the purging distribution required in connection with qualifying as a REIT, for working capital purposes and for general corporate
purposes.
On November 9, 2016, the Company acquired certain real estate investments subject to the assumption of the seller’s mortgage
note of approximately $7.1 million. Contemporaneously with the acquisition, the Company repaid this mortgage obligation. Based
on prevailing rates at the acquisition date, the fair value of the assumed debt approximated its contract value.
At December 31, 2016, the unamortized deferred financing costs were $6.1 million and the weighted average interest rate on
the term loan was 2.36%. At December 31, 2015, the unamortized deferred financing costs were $7.7 million. During the years
ended December 31, 2016 and 2015, amortization of deferred financing costs was $1.59 million and $265 thousand, respectively.
As of December 31, 2016, there was $45 million of outstanding borrowings under the revolving credit facility, with a weighted
average interest rate of 2.46%, and no outstanding letters of credit.
On November 10, 2015, we entered into two interest rate swaps pursuant to an International Swaps and Derivatives Association
Master Agreement with J.P. Morgan Chase Bank, N.A. to economically hedge its exposure in cash flows associated with its variable
rate debt obligations described above. One swap has a fixed notional value of $200 million that matures on November 9, 2018,
F-20
where the fixed rate paid by Four Corners OP is equal to 1.16% and the variable rate received resets monthly to the one month
LIBOR rate. The second swap has a fixed notional value of $200 million that matures on November 9, 2020, where the fixed rate
paid by Four Corners OP is equal to 1.56% and the variable rate received resets monthly to the one month LIBOR rate. These
hedging agreements were not entered into for trading purposes and have been designated as cash flow hedges. Changes in the
effective portion of the fair value of these hedges will be recorded as a component of other comprehensive income and reclassified
into earnings in the same periods during which the hedged transaction affect earnings. Changes in the fair value of the ineffective
portion of these hedges are recorded in earnings.
NOTE 8 – DERIVATIVE FINANCIAL INSTRUMENTS
Risk Management Objective of Using Derivatives
We are exposed to certain risks arising from both our business operations and economic conditions. We principally manage
our exposures to a wide variety of business and operational risks through management of our core business activities. We manage
economic risks, including interest rate, liquidity, and credit risk primarily by managing the amount, sources, and duration of our
debt funding and the use of derivative financial instruments. Specifically, we enter into derivative financial instruments to manage
exposures that arise from business activities that result in our receipt or payment of future cash amounts, the value of which are
determined by interest rates. Our derivative financial instruments are used to manage differences in the amount, timing, and
duration of our known or expected cash payments principally related to our borrowings.
Cash Flow Hedges of Interest Rate Risk
Our objectives in using interest rate derivatives are to add stability to interest expense and to manage our exposure to interest
rate movements. To accomplish these objectives, we primarily use interest rate swaps as part of our interest rate risk management
strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange
for us making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. The
effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded on our
consolidated balance sheet in accumulated other comprehensive income and is subsequently reclassified into earnings in the period
that the hedged forecasted transaction affects earnings. During the period November 9, 2015 through December 31, 2016, such
derivatives were used to hedge the variable cash flows associated with existing variable-rate debt. The ineffective portion of the
change in fair value of the derivatives is recognized directly in earnings. For the years ended December 31, 2016 and 2015, we
recorded approximately $792 thousand and $3 thousand, respectively, of hedge ineffectiveness in earnings attributable to zero-
percent floor and rounding mismatches in the hedging relationships.
Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to interest expense
as interest payments are made on our variable-rate debt. We estimate that during 2017 an additional $1.76 million will be reclassified
to earnings as an increase to interest expense.
As of December 31, 2016, we had the following outstanding interest rate derivatives that were designated as cash flow
hedges of interest rate risk:
Product
Interest Rate Swaps
Number of Instruments
2
Current Notional
$400,000,000
Non-designated Hedges
We do not use derivatives for trading or speculative purposes. During the year ending December 31, 2016 we did not have
any derivatives that were not designated as hedges.
F-21
Tabular Disclosure of Fair Values of Derivative Instruments on the Consolidated Balance Sheet
The table below presents the fair value of our derivative financial instruments as well as their classification on the
consolidated balance sheet as of December 31, 2016 and 2015.
Asset Derivatives
Liability Derivatives
Fair Value at December 31,
Fair Value at December 31,
(Dollars in
thousands)
Derivatives designated as hedging instruments:
Balance Sheet
Location
2016
2015
Balance Sheet
Location
2016
2015
Interest rate swaps
Derivative
assets
Total
$
$
837
837
$
$
165
165
Derivative
liabilities
$
$
— $
— $
477
477
Tabular Disclosure of the Effect of Derivative Instruments on the Statements of Comprehensive Income
The table below presents the effect of our derivative financial instruments on the statements of comprehensive income for
the years ending December 31, 2016 and 2015.
Amount of Gain
or (Loss)
Recognized in
OCI on
Derivative
(Effective
Portion)
Location of Gain
or (Loss)
Reclassified from
Accumulated OCI
into Income
(Effective
Portion)
Amount of Gain
or (Loss)
Reclassified from
Accumulated OCI
into Income
(Effective
Portion)
(Dollars in thousands)
Location of Gain
or (Loss)
Recognized in
Income on
Derivative
(Ineffective
Portion and
Amount Excluded
from
Effectiveness
Testing)
Amount of Gain
or (Loss)
Recognized in
Income on
Derivative
(Ineffective
Portion and
Amounts
Excluded from
Effectiveness
Testing)
Interest rate swaps
Year Ended December
31, 2016
$
Year Ended December
31, 2015
(3,226)
Interest expense
$
(3,765)
Interest expense
$
(938)
Interest expense
(622)
Interest expense
792
3
Tabular Disclosure Offsetting Derivatives
The table below presents a gross presentation, the effects of offsetting, and a net presentation of our derivatives as of December
31, 2016 and 2015. The net amounts of derivative assets or liabilities can be reconciled to the tabular disclosure of fair value. The
tabular disclosure of fair value provides the location that derivative assets and liabilities are presented on the consolidated balance
sheet.
Offsetting of Derivative Assets
Gross Amounts
of Recognized
Assets
Gross Amounts
Offset in the
Consolidated
Balance Sheet
Net Amounts
of Assets
Presented in
the
Consolidated
Balance Sheet
Gross Amounts Not Offset in the
Consolidated Balance Sheet
Financial
Instruments
Cash Collateral
Received
Net Amount
$
837
$
— $
837
$
— $
— $
165
—
165
(165)
—
837
—
(In thousands)
December 31,
2016
December 31,
2015
F-22
Offsetting of Derivative Liabilities
Gross Amounts
of Recognized
Liabilities
Gross Amounts
Offset in the
Consolidated
Balance Sheet
Net Amounts of
Liabilities
Presented in the
Consolidated
Balance Sheet
Gross Amounts Not Offset in the
Consolidated Balance Sheet
Financial
Instruments
Cash Collateral
Posted
Net Amount
$
—
477
— $
— $
— $
— $
—
477
(165)
—
—
312
(In thousands)
December 31,
2016
December 31,
2015
Credit-risk-related Contingent Features
The agreement with our derivative counterparty contains a provision where if we default on any of our indebtedness,
including default where repayment of the indebtedness has not been accelerated by the lender, then we could also be declared in
default on our derivative obligations.
As of December 31, 2016, the fair value of derivatives in an asset position related to these agreements was approximately
$837 thousand. As of December 31, 2016, we have not posted any collateral related to these agreements. If we or our counterparty
had breached any of these provisions at December 31, 2016, we would have received the termination value of approximately $837
thousand.
NOTE 9 – INCOME TAXES
Our operating results, prior to November 9, 2015 were included in Darden’s consolidated U.S. federal and one state income
tax return. For purposes of the consolidated financial statements, income tax expense and benefit, and deferred tax balances have
been recorded as if we filed tax returns on a stand-alone basis separate from Darden. The separate return method applies the
accounting guidance for income taxes to the stand-alone financial statements as if we were a separate taxpayer and a stand-alone
enterprise for the periods presented. Income taxes currently receivable are deemed to have been remitted to Darden, in cash, in
the period the receivable arose had we been a separate taxpayer.
The components of income (loss) before income taxes and the provision for income taxes and benefit thereon were as
follows:
(In thousands)
Income (loss) before income tax
The provision (benefit) for income taxes was as follows:
(In thousands)
Current:
Federal
Current state and local
Total current
Deferred:
Federal deferred
State deferred
Total deferred
Total Income Tax Expense (Benefit)
Year Ended December 31,
2016
2015
2014
$
76,503
$
8,643
$
(110)
Year Ended December 31,
2016
2015
2014
29
$
1,502
$
317
346
(74,876)
(5,817)
(80,693)
(80,347) $
247
1,749
1,133
62
1,195
2,944
$
33
19
52
(194)
—
(194)
(142)
$
$
Income taxes receivable settled through the Predecessor’s parent company equity were as follows:
F-23
(In thousands)
Income taxes receivable settled through parent company equity
$
Income taxes payable
Year Ended December 31,
2015
2014
35
$
1,713
53
—
As we were in a tax receivable position for the year ended December 31, 2014, no income taxes were paid.
The following table is a reconciliation of the U.S. statutory income tax rate to the effective income tax rate included in the
accompanying consolidated statements of operations:
U.S. statutory rate
Current benefit or REIT election (1)
State and local income taxes, net of federal tax benefits
Benefit of federal income tax credits
Valuation allowance
Permanent differences
Effective Income Tax Rate
Year Ended December 31,
2016
2015
2014
35.0 %
(140.4)
0.5
(0.1)
—
—
34.0%
—
2.6
(0.3)
(0.6)
0.2
(105.0)%
35.9%
34.0%
—
(11.4)
177.1
(29.3)
(41.3)
129.1%
(1) The portion of the current benefit attributable to the REIT election is105.4%.
The tax effects of temporary differences that gave rise to deferred tax assets and liabilities were as follows:
(In thousands)
Compensation and employee benefits
Charitable contribution and credit carryforwards
Valuation allowance - carryforward items
Lease payable
UNICAP
Gross deferred tax assets
Prepaid expenses
Straight-line rent
Buildings and equipment (1)
Gross deferred tax liabilities
Net Deferred Tax Liabilities
$
$
December 31,
2016
2015
2014
$
200
$
67
—
—
205
20
292
—
—
(488)
(488)
(196) $
—
—
—
8
208
(252)
(549)
(80,288)
(81,089)
(80,881) $
171
370
(140)
—
4
405
(1,400)
(1,400)
(995)
(1) Theses buildings and equipment relate to the Kerrow Restaurant Operating Business.
NOTE 10 – EQUITY
Preferred Stock
At December 31, 2016, the Company was authorized to issue 25,000,000 shares of $0.0001 par value per share of preferred
stock. There were no shares issued and outstanding.
Common Stock
At December 31, 2016 the Company was authorized to issue 500,000,000 shares of $0.0001 par value per share of common
stock. Each holder of common stock is entitled to vote on all matters and is entitled to one vote for each share held. As of December
F-24
31, 2016, there were 59,923,557 shares of the Company's common stock issued and outstanding.
On January 29, 2016, we paid a cash dividend of $8.5 million, representing our estimated earnings and profits that are required
to be distributed for the period from November 10, 2015 to December 31, 2015. On March 2, 2016, we paid a $347.0 million
dividend in cash and shares of common stock (the “Pre-Spin Dividend”), or $8.12 per share based on approximately 42.7 million
shares outstanding as of January 7, 2016, representing our estimated share of earning and profits that are required to be distributed
for the operating period prior to November 9, 2015. An aggregate of 17,085,566 additional shares of common stock were issued
in connection with the Pre-Spin Dividend, and cash dividends paid related to the Pre-Spin Dividend totaled $69.5 million.
The Company reflects dividends, including those paid in shares, that would otherwise result in negative retained earnings as
a reduction to additional paid-in capital. As a result, approximately $269.5 million was reflected as a charge to additional paid-in
capital related to the distribution above. For calculation of diluted earnings per share, these shares were assumed to have been
issued on January 7, 2016.
On April 15, 2016, we paid a cash dividend of $0.2425 per share, or $14.5 million. On July 15, 2016, we paid a cash dividend
of $0.2425 per share, or $14.5 million. On October 15, 2016 we paid a dividend of $0.2425 per share, or $14.5 million. In December
2016, we declared a dividend of $0.2425 per share, which was paid in January 2017 to common stockholders of record as of
December 30, 2016.
Common Stock Issuance Under the At-The-Market Program
In December 2016, the Company entered into an “At-the-Market” (“ATM”) sales agreement under which the Company could,
at its discretion, sell its common stock with a sales value of up to a maximum of $150.0 million through ATM offerings on the
NYSE Stock Market (the “Sales Agreement”) through broker-dealers. Through December 31, 2016, we sold 32,513 shares under
the ATM offerings at a weighted-average selling price of $20.01 per share, for net proceeds of approximately $641 thousand under
the Sales Agreement.
Noncontrolling Interest
During 2016, FCPT OP issued 274,744 OP units as part of the consideration for the acquisitions of ten properties. Generally,
common OP Units participate in net income allocations and distributions and entitle their holder the right, subject to the terms set
forth in the partnership agreement, to require the Operating Partnership to redeem all or a portion of the Common OP Units held
by such limited partner. At the Company’s option, it may satisfy this redemption with cash or by exchanging non-registered shares
of FCPT common stock on a one-for-one basis. Prior to the redemption of units, the limited partners participate in net income
allocations and distributions.
As of December 31, 2016, FCPT is the owner of approximately 99.5% of FCPT’s OP units. The remaining 0.5%, or 274,744,
of FCPT’s OP units are held by an unaffiliated limited partners. No distributions were paid to limited partners during the year
ended December 31, 2016.
F-25
Earnings Per Share
The following table presents the computation of basic and diluted net earnings per common share for the years ended December
31, 2016 and 2015.
(In thousands except share and per share data)
Average common shares outstanding – basic
Effect of dilutive stock based compensation
Net effect of shares issued with respect to E&P dividend
Average common shares outstanding – diluted
Net income
Basic net earnings per share
Diluted net earnings per share
Year Ended December 31,
2016
2015
56,984,561
16,003
2,567,503
59,568,067
156,850
2.75
2.63
$
$
$
$
$
$
6,206,375
57,546
—
6,263,921
5,699
0.92
0.91
For the year ended December 31, 2016, the number of outstanding equity awards that were anti-dilutive totaled 149,943.
There were no anti-dilutive shares for the year ended December 31, 2015. Income allocated to noncontrolling interests of the
Operating Partnership has been excluded from the numerator and exchangeable Operating Partnership units have been omitted
from the denominator for the purpose of computing diluted earnings per share since the effect of including these amounts in the
numerator and denominator would have no impact. Weighted average exchangeable Operating Partnership units outstanding for
the year ended December 31, 2016 were 39,785.
Spin-Off
On November 9, 2015, in connection with the separation and spin-off of Four Corners from Darden, Darden contributed to
us 100% of the equity interest in entities that held 418 properties in which Darden operates restaurants, representing five of their
brands (the “Four Corners Properties”), and six LongHorn Steakhouse® restaurants located in the San Antonio, Texas area (the
“Kerrow Restaurant Operating Business”) and the underlying properties or interests therein associated with the Kerrow Restaurant
Operating Business. In exchange, we issued to Darden 42,741,995 shares of our common stock, par value $0.0001 per share and
paid to Darden $315.0 million in cash, which we funded from the proceeds of our term loan borrowings under the Loan Agreement.
Subsequently, Darden distributed the 42,741,995 shares of our common stock pro rata to holders of Darden common stock whereby
each Darden shareholder received one share of Four Corners common stock for every three shares of Darden common stock held
at the close of business on the record date, which was November 2, 2015, as well as cash in lieu of any fractional shares of our
common stock which they would have otherwise received (the “Spin-Off”). The Spin-Off is intended to qualify as tax-free to
Darden shareholders for U. S. federal income tax purposes, except for cash paid in lieu of fractional shares.
Darden obtained a private letter ruling from the IRS regarding the tax-free treatment of the Spin-Off. To preserve that tax-
free treatment to Darden, for the two year period following the Spin-Off, we may be prohibited, except in specific circumstances,
from taking certain actions, including: (1) entering into any transaction pursuant to which all or a portion of our stock would be
acquired, whether by merger or otherwise, (2) issuing equity securities beyond certain thresholds, or (3) repurchasing our common
stock. In addition, we will be prohibited from taking or failing to take any other action that prevents the Spin-Off and related
transactions from being tax-free. These restrictions may limit our ability to pursue strategic transactions or engage in new business
or other transactions that may maximize the value of our business. However, these restrictions are inapplicable in the event that
the IRS has granted a favorable ruling to Darden or FCPT or in the event that Darden or FCPT has received an opinion from
counsel that FCPT can take such actions under certain safe harbor exceptions without adversely affecting the tax-free status of
the Spin-Off and related transactions.
NOTE 11 – STOCK-BASED COMPENSATION
On October 20, 2015, the Board of Directors of Four Corners adopted, and Four Corners’ sole shareholder, Rare Hospitality
International, Inc., approved, the Four Corners Property Trust, Inc. 2015 Omnibus Incentive Plan (the “Plan”). The Plan provides
for the grant of awards of nonqualified stock options, stock appreciation rights, RSAs, RSUs, DSUs, unrestricted stock, dividend
equivalent rights, performance shares and other performance-based awards, other equity-based awards, and cash bonus awards
F-26
(each, an “Award” and collectively, the “Awards”) to eligible participants. Subject to adjustment, the maximum number of shares
of stock reserved for issuance under the Plan is equal to 2,100,000 shares.
The Plan will terminate on the first to occur of (a) October 20, 2025, which is the tenth anniversary of the effective date of
the Plan, (b) the date determined in accordance with the Board’s authority to terminate the Plan, or (c) the date determined in
accordance with the provisions of the Plan addressing the effect of a Change in Control (as defined in the Plan). Upon such
termination of the Plan, all outstanding Awards will continue to have full force and effect in accordance with the provisions of the
terminated Plan and the applicable award agreement (or other documents evidencing such Awards).
At December 31, 2016, 1,902,849 shares of common stock were available for award under the Plan. The unamortized
compensation cost of awards issued under the Incentive Plan totaled $3.12 million at December 31, 2016 as shown in the following
table.
Equity Compensation Costs by Award Type
(In thousands)
Unrecognized compensation cost at January 1, 2016
Equity grants
Equity grant forfeitures
Equity compensation expense
Unrecognized Compensation Cost at December 31, 2016
RSUs
Restricted
Stock Units
Restricted
Stock
Awards
Performance
Stock Units
Total
$
$
1,483
$
— $
— $
285
—
(674)
1,094
$
882
—
(257)
625
$
2,020
—
(619)
1,401
$
1,483
3,187
—
(1,550)
3,120
RSUs are granted at a value equal to the five-day average closing market price of our common stock on the date of grant and
will be settled in stock at the end of their vesting periods, which range between one and three years, at the then market price of
our common stock.
The following table summarizes the activities related to RSUs for the years ended December 31, 2016 and 2015.
Outstanding at beginning of period
Units granted
Units vested
Units forfeited
Outstanding at End of Period
Year Ended December 31,
2016
2015
Weighted
Average Grant
Date Fair
Value
Units
Weighted
Average Grant
Date Fair Value
Units
$
57,546
14,285
(6,624)
—
65,207
23.40
19.95
23.40
—
22.64
— $
57,546
—
—
57,546
—
23.40
—
—
23.40
Expenses related to RSUs were $674 thousand and $16 thousand for the years ended December 31, 2016 and 2015, respectively.
This cost will be recognized over a weighted average period of less than two years. Restrictions on shares of restricted stock
outstanding lapse through 2019. The Company expects all RSUs to vest.
F-27
RSAs
The following table summarizes the activities related to RSAs for the years ended December 31, 2016 and 2015.
Outstanding at beginning of period
Units granted
Units vested
Units forfeited
Outstanding at End of Period
Year Ended December 31,
2016
2015
Weighted
Average Grant
Date Fair
Value
Units
Weighted
Average Grant
Date Fair Value
Units
— $
53,589
—
(309)
53,280
—
16.55
—
16.17
16.55
— $
—
—
—
—
—
—
—
—
Expenses related to RSAs were $257 thousand for the year ended December 31, 2016. This cost will be recognized over a
weighted average period of less than two years. Restrictions on shares of RSAs outstanding lapse through 2019. The Company
expects all RSAs to vest.
PSUs
During the year ended December 31, 2016, there were 72,040 PSUs as well as dividend equivalent rights, granted under the
Plan. The performance period of this grant runs from January 1, 2016 through December 31, 2018. Pursuant to the performance
share award agreement, each participant is eligible to vest in and receive shares of the Company's common stock based on the
initial target number of shares granted multiplied by a percentage range between 0% and 200%. The percentage range is based on
the attainment of a total shareholder return of the Company compared to certain specified peer groups of companies during the
performance period. The fair value of the performance shares was estimated on the date of grant using a Monte Carlo Simulation
model.
During the year ended December 31, 2016, PSUs were granted at a weighted average fair values of $28.05 per unit. During
the year ended December 31, 2016, there were no target number of PSUs forfeited due to employee departures. The Company
expects all PSUs to vest.
The grant date fair values of PSUs were determined through Monte-Carlo simulations using the following assumptions: our
common stock closing price at the grant date, the average closing price of our common stock price for the 20 trading days prior
to the grant date and the range of performance-based vesting based on total stockholder return over three years from the grant
date. For the 2016 PSU grant, the Company used an implied volatility assumption of 19.3% (based on historical volatility), risk
free rates of 0.54% and 0.91% (the one-year and three-year Treasury rates on the grant date), and a 0% dividend yield (the
mathematical equivalent to reinvesting the dividends over the three-year performance period as is consistent with the terms of the
PSUs).
Expenses related to PSUs were $619 thousand for the year ended December 31, 2016.
NOTE 12 – FAIR VALUE MEASUREMENTS
The carrying amounts of certain of the Company’s financial instruments including cash equivalents, accounts receivable,
accounts payable, accrued liabilities, and derivative financial instruments approximate fair value due either to length of maturity
or interest rates that approximate prevailing market rates.
Determining which category an asset or liability falls within the hierarchy requires significant judgment. We evaluate hierarchy
disclosures each reporting period. The following table presents the assets and liabilities recorded that are reported at fair value on
our consolidated balance sheets on a recurring basis.
F-28
Assets and Liabilities Measured at Fair Value on a Recurring Basis
December 31, 2016
(In thousands)
Assets
Derivative assets
Total
Liabilities
Derivative liabilities
Total
December 31, 2015
(In thousands)
Assets
Derivative assets
Total
Liabilities
Derivative liabilities
Total
Level 1
Level 2
Level 3
Total
— $
— $
— $
— $
837
837
$
$
— $
— $
— $
— $
— $
— $
Level 1
Level 2
Level 3
Total
— $
— $
— $
— $
165
165
477
477
$
$
$
$
— $
— $
— $
— $
837
837
—
—
165
165
477
477
$
$
$
$
$
$
$
$
Derivative Financial Instruments
Currently, we use interest rate swaps to manage our interest rate risk associated with our note payable. The valuation of these
instruments is determined using widely accepted valuation techniques, including discounted cash flow analysis on the expected
cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and
uses observable market-based inputs, including interest rate curves and implied volatilities. The fair values of interest rate swaps
are determined using the market standard methodology of netting the discounted future fixed cash receipts (or payments) and the
discounted expected variable cash payments (or receipts). The variable cash payments (or receipts) are based on an expectation
of future interest rates (forward curves) derived from observable market interest rate curves.
The fair values of interest rate options are determined using the market standard methodology of discounting the future
expected cash receipts that would occur if variable interest rates rise above the strike rate of the caps. The variable interest rates
used in the calculation of projected receipts on the cap are based on an expectation of future interest rates derived from observable
market interest rate curves and volatilities.
To comply with the provisions of ASC 820, we incorporate credit valuation adjustments to appropriately reflect both our own
nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair
value of our derivative contracts for the effect of nonperformance risk, we have considered the impact of netting and any applicable
credit enhancements, such as collateral postings, thresholds, mutual puts and guarantees.
Although we have determined that the majority of the inputs used to value our derivatives fall within Level 2 of the fair value
hierarchy, the credit valuation adjustments associated with our derivatives utilize Level 3 inputs, such as estimates of current credit
spreads to evaluate the likelihood of default by ourselves and our counterparties. We have determined that the significance of the
impact of the credit valuation adjustments made to our derivative contracts, which determination was based on the fair value of
each individual contract, was not significant to the overall valuation. As a result, all of our derivatives held as of December 31,
2016 were classified as Level 2 of the fair value hierarchy.
F-29
The following table presents the carrying value and fair value of certain financial liabilities that are recorded on our consolidated
balance sheets.
Fair Value of Certain Financial Liabilities
December 31, 2016
(In thousands)
Liabilities
Carrying Value
Fair Value
Note payable, excluding deferred offering costs
$
445,000
$
445,309
The fair value of the note payable is determined using the present value of the contractual cash flows, discounted at the current
market cost of debt.
NOTE 13 – COMMITMENTS AND CONTINGENCIES
Rentals
Rent expense on ground leases, under which our Kerrow subsidiary is lessee to third-party owners, was $466 thousand, $441
thousand, and $441 thousand for the years ended December 31, 2016, 2015, and 2014, respectively. Rent expense at FCPT was
$154 thousand and $18 thousand for the years ended December 31, 2016 and 2015, respectively.
The annual future lease commitments under non-cancelable operating leases for each of the five years subsequent to
December 31, 2016 and thereafter is as follows:
(In thousands)
2017
2018
2019
2020
2021
Thereafter
Total Future Lease Commitments
Litigation
December 31, 2016
$
$
515
518
407
280
97
—
1,817
We are subject to private lawsuits, administrative proceedings and claims that arise in the ordinary course of our business. A
number of these lawsuits, proceedings and claims may exist at any given time. These matters typically involve claims from guests,
employee wage and hour claims and others related to operational issues common to the restaurant industry. We record our best
estimate of a loss when the loss is considered probable. When a liability is probable and there is a range of estimated loss with no
best estimate in the range, we record the minimum estimated liability related to the lawsuits, proceedings or claims. While the
resolution of a lawsuit, proceeding or claim may have an impact on our financial results for the period in which it is resolved, we
believe that the maximum liability related to probable lawsuits, proceedings and claims in which we are currently involved,
individually and in the aggregate, will not have a material adverse effect on our financial position, results of operations or liquidity.
NOTE 14 – SEGMENTS
During 2016 and 2015, we operated in two segments: real estate operations and restaurant operations. Prior to the Spin-Off
transaction on November 9, 2015, we operated in one segment, restaurant operations. Our segments are based on our organizational
and management structure, which aligns with how our results are monitored and performance is assessed. The accounting policies
of the reportable segments are the same as those described in Note 2 - Summary of Significant Accounting Policies.
F-30
The following tables present financial information by segment for the years ended December 31, 2016 and 2015.
For the Year Ended December 31, 2016
(In thousands)
Revenues:
Rental income
Intercompany rental income
Restaurant revenues
Total revenues
Operating expenses:
General and administrative
Depreciation and amortization
Restaurant expenses
Interest expense
Total operating expenses
Other income
Realized gain on sale, net
Income before provision for income taxes
Provision for income taxes
Net income
Net income attributable to noncontrolling interest
Net Income Available to Common Shareholders
For the Year Ended December 31, 2015
(In thousands)
Revenues:
Rental income
Intercompany rental income
Restaurant revenues
Total revenues
Operating expenses:
General and administrative
Depreciation and amortization
Restaurant expenses
Interest expense
Total operating expenses
Other income
Realized gain on sale, net
Real Estate
Operations
Restaurant
Operations
Intercompany
Total
$
105,624
$
389
—
106,013
10,977
19,933
—
14,828
45,738
97
16,623
76,995
80,409
157,404
(41)
157,363
$
$
— $
—
18,394
18,394
—
644
18,242
—
18,886
—
—
(492)
(62)
(554)
—
(554) $
— $
105,624
(389)
—
(389)
—
—
(389)
—
(389)
—
—
—
—
—
—
— $
—
18,394
124,018
10,977
20,577
17,853
14,828
64,235
97
16,623
76,503
80,347
156,850
(41)
156,809
Real Estate
Operations
Restaurant
Operations
Intercompany
Total
$
15,134
$
65
—
15,199
1,856
2,953
—
2,203
7,012
—
—
— $
—
18,322
18,322
—
805
17,061
—
17,866
—
—
456
(2)
454
$
— $
(65)
—
(65)
—
—
(65)
—
(65)
—
—
—
—
— $
15,134
—
18,322
33,456
1,856
3,758
16,996
2,203
24,813
—
—
8,643
(2,944)
5,699
Income before provision for income taxes
Provision for income taxes
Net Income
8,187
(2,942)
5,245
$
$
F-31
The following table presents supplemental information by segment at December 31, 2016 and 2015.
December 31, 2016
(In thousands)
Total real estate investments
Accumulated depreciation
Total real estate investments, net
Cash and cash equivalents
Total assets
Notes payable, net of deferred financing costs
Deferred tax liability
December 31, 2015
(In thousands)
Total real estate investments
Accumulated depreciation
Total real estate investments, net
Cash and cash equivalents
Total assets
Notes payable, net of deferred financing costs
Deferred tax liability
NOTE 15 – SUBSEQUENT EVENTS
Real Estate
Operations
Restaurant
Operations
$
$
1,460,967
(577,392)
883,575
24,412
923,747
438,895
—
16,598
(5,915)
10,683
2,231
13,404
—
196
Real Estate
Operations
Restaurant
Operations
$
$
1,380,663
(563,268)
817,395
95,873
915,543
392,302
80,881
16,567
(5,271)
11,296
2,200
13,894
—
—
$
$
Total
1,477,565
(583,307)
894,258
26,643
937,151
438,895
196
Total
1,397,230
(568,539)
828,691
98,073
929,437
392,302
80,881
On February 14, 2017, FCPT OP, FCPT and certain of its subsidiaries, as guarantors, JPMorgan Chase Bank, N.A., as
administrative agent and the lenders party thereto entered into a second amendment (the “Loan Agreement Amendment”) to the
Loan Agreement, for the purpose of, among other things, permitting an incurrence of additional unsecured debt in an aggregate
principal amount of at least $50 million. The Loan Agreement Amendment further provides that, upon the incurrence of such
additional unsecured debt, (A) all pledges of equity interests that secure the Loan Agreement, and all subsidiary guarantees of the
Loan Agreement, will be released and (B) the financial covenant requirements in relation to maximum leverage and minimum
debt service coverage will be adjusted in the manner set forth in the Loan Agreement Amendment. In addition, the Loan Agreement
Amendment increases the minimum Consolidated Tangible Net Worth requirement from $845.7 million to $868.9 million. The
Loan Agreement Amendment also contains customary representations and warranties by FCPT OP.
In the first quarter through February 27, 2017, the Company invested $14.8 million in acquisitions of eight restaurant properties
located in six states. These properties are 100% occupied under triple-net leases with a weighted average lease term of 12.1 years.
The Company funded the acquisitions with cash on hand and the issuance of 174,576 OP units. The Company anticipates accounting
for these acquisitions as asset acquisitions in accordance with GAAP. There were no contingent liabilities associated with these
transactions at December 31, 2016.
F-32
NOTE 16 – SELECTED QUARTERLY FINANCIAL DATA (Unaudited)
(In thousands, except per share amounts)
Revenues:
Rental revenue
Restaurant revenue
Total revenues
Operating expenses:
General and administrative
Depreciation and amortization
Restaurant expense
Interest expense
Total expenses
Other income
Realized gain on sale, net
Income Before Income Taxes
Earnings per share (1):
Basic
Diluted
Distributions declared per share
January 1,
2016 - March
31, 2016
April 1, 2016
- June 30,
2016
July 1, 2016 -
September 30,
2016
October 1,
2016 -
December 31,
2016
$
26,192
$
26,192
$
26,363
$
4,859
31,051
3,317
5,187
4,698
4,182
17,384
60
—
13,727
1.95
1.61
0.2425
$
$
4,701
30,893
2,508
5,101
4,593
3,858
16,060
18
—
14,851
0.25
0.25
0.2425
$
$
4,443
30,806
2,608
5,059
4,308
3,549
15,524
10
15,292
0.25
0.25
0.2425
$
$
$
$
26,877
4,391
31,268
2,545
5,230
4,254
3,239
15,268
9
16,623
32,632
0.54
0.54
0.2425
(1) Management has adjusted the Company’s first quarter 2016 basic and diluted earnings per share upward from amounts
reported in the first quarter 2016 10-Q for immaterial errors of $0.37 and $0.04, respectively. The errors relate to the
determination of the date shares issued in connection with the Company’s purging distribution were considered ‘outstanding’
for basic and diluted earnings per share calculations.
(In thousands, except per share amounts)
Revenues:
Rental revenue
Restaurant revenue
Total revenues
Operating expenses:
General and administrative
Depreciation and amortization
Restaurant expense
Interest expense
Total expenses
Income Before Income Taxes
Earnings per share:
Basic
Diluted
Distributions declared per share
NA – not applicable
January 1,
2015 - March
31, 2015
April 1, 2015
- June 30,
2015
July 1, 2015
September 30,
2015
October 1,
2015 -
December 31,
2015
$
— $
— $
— $
4,890
4,890
—
212
4,513
—
4,725
4,624
4,624
—
185
4,335
—
4,520
4,413
4,413
—
208
4,088
—
4,296
$
165
$
104
$
117
$
NA
NA
NA
NA
NA
NA
NA $
NA
NA
15,134
4,395
19,529
1,856
3,153
4,060
2,203
11,272
8,257
0.85
0.84
NA
F-33
FOUR CORNERS PROPERTY, TRUST, INC.
SCHEDULE III
SCHEDULE OF REAL EATATE ASSETS AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2016
(Dollars in thousands)
Initial Cost to Company
Cost Capitalized Since Acquisition
Gross Carrying Value (2)
F
-
3
4
Restaurant
Property
(1)
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
Location
Kissimmee, FL
Greenwood, IN
Indianapolis, IN
Las Vegas, NV
Ocala, FL
Huntsville, AL
Granger, IN
Toledo, OH
Bradenton, FL
Clearwater, FL
Lakeland, FL
Mesquite, TX
North Richland
Hills, TX
Fort Worth, TX
Indianapolis, IN
Austin, TX
Morrow, GA
Fort Myers, FL
Tulsa, OK
Mobile, AL
Canton, OH
Bakersfield, CA
Pinellas Park, FL
Duluth, GA
Middleburg
Heights, OH
Fairview Heights,
IL
Orlando, FL
Sterling Heights,
MI
Reno, NV
Akron, OH
Grand Rapids, MI
Montclair, CA
Knoxville, TN
Land
$400
400
333
597
470
317
220
275
207
717
754
721
468
654
526
492
446
289
702
698
275
529
—
675
555
735
—
855
—
577
—
—
375
Buildings and
Improvements Equipment
$710
749
755
557
416
719
650
343
837
593
772
772
1,187
626
82
1,183
813
1,124
637
872
834
861
509
906
882
1,162
894
1,158
639
1,048
959
873
1,397
$2
1
15
12
11
1
15
6
4
17
24
10
19
29
2
6
10
14
23
31
8
54
1
18
18
19
6
32
29
6
14
44
33
Land
$—
Building and
Improvements Equipment
$1,803
$615
Land
$400
Building and
Improvements Equipment
$2,513
$617
Total
$3,530
—
—
—
—
—
—
—
—
—
—
238
—
—
—
—
—
—
—
—
—
—
958
351
—
—
1,585
—
1,215
—
749
1,231
—
1,883
1,839
1,108
2,112
1,092
1,309
1,146
1,779
1,521
1,745
1,650
1,414
1,273
2,534
1,690
1,448
1,786
1,137
1,209
829
1,294
1,511
1,247
1,285
1,163
1,792
984
1,581
879
753
736
700
625
541
316
383
338
348
244
602
446
565
435
342
403
406
440
423
550
291
479
426
264
352
313
400
518
614
403
560
281
288
238
220
400
333
597
470
317
220
275
207
717
754
959
468
654
526
492
446
289
702
698
275
529
958
1,026
555
735
1,585
855
1,215
577
749
1,231
375
2,632
2,594
1,665
2,528
1,811
1,959
1,489
2,616
2,114
2,517
2,422
2,601
1,899
2,616
2,873
2,261
2,910
1,774
2,081
1,663
2,155
2,020
2,153
2,167
2,325
2,686
2,142
2,220
1,927
1,712
1,609
2,097
626
556
328
394
339
363
250
606
463
589
445
361
432
408
446
433
564
314
510
434
318
353
331
418
537
620
435
589
287
302
282
253
3,658
3,483
2,590
3,392
2,467
2,542
2,014
3,429
3,294
3,860
3,826
3,430
2,985
3,550
3,811
3,140
3,763
2,790
3,289
2,372
3,002
3,331
3,510
3,140
3,597
4,891
3,432
4,024
2,791
2,763
3,122
2,725
Accumulated
Depreciation
Construction
Date
Acquisition
Date
Life on
which
Depreciation
in latest
Statement of
Income is
Computed
2 - 42
2 - 49
2 - 49
2 - 42
2 - 48
2 - 36
2 - 42
2 - 35
2 - 48
2 - 47
2 - 47
2 - 46
2 - 42
2 - 46
2 - 49
2 - 46
2 - 42
2 - 48
2 - 42
2 - 42
2 - 40
2 - 36
2 - 48
2 - 42
8/5/1985
7/15/1985
7/15/1985
3/31/1986
7/14/1986
3/3/1986
9/8/1986
9/15/1986
11/3/1986
12/2/1986
3/16/1987
7/20/1987
12/15/1986
5/25/1987
7/20/1987
1/12/1987
3/23/1987
5/25/1987
6/22/1987
5/18/1987
9/21/1987
5/25/1987
9/28/1987
11/2/1987
3/7/1988
2 - 42
5/9/1988
2/1/1988
10/17/1988
1/18/1988
4/4/1988
5/9/1988
9/5/1988
3/14/1988
2 - 35
2 - 42
2 - 37
2 - 35
2 - 40
2 - 35
2 - 40
2 - 40
$2,326
2,088
1,901
1,669
1,920
1,634
1,965
1,522
2,040
1,830
2,133
2,002
2,339
1,769
1,682
2,535
2,168
2,298
1,623
1,818
1,653
1,999
1,591
1,993
2,070
2,245
2,516
2,180
2,276
1,730
1,703
1,643
1,974
1985
1985
1985
1986
1986
1986
1986
1986
1986
1986
1987
1987
1986
1987
1987
1987
1987
1987
1987
1987
1987
1987
1987
1987
1988
1988
1988
1988
1988
1988
1988
1988
1988
FOUR CORNERS PROPERTY, TRUST, INC.
SCHEDULE III
SCHEDULE OF REAL EATATE ASSETS AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2016
(Dollars in thousands)
Initial Cost to Company
Cost Capitalized Since Acquisition
Gross Carrying Value (2)
F
-
3
5
Restaurant
Property
(1)
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
Location
Fairfield, OH
Toledo, OH
Lansing, IL
Bloomington, MN
Vernon Hills, IL
Augusta, GA
Chattanooga, TN
Flint, MI
Plantation, FL
Livonia, MI
Land
325
—
—
525
750
402
604
426
888
—
Sarasota, FL
1,136
Saginaw, MI
Irving, TX
Brandon, FL
Columbus, OH
North Olmsted,
OH
York, PA
Oklahoma City,
OK
West Des Moines,
IA
San Antonio, TX
Kennesaw, GA
Portage, MI
West Dundee, IL
Saint Peters, MO
San Antonio, TX
Corpus Christi,
TX
Houston, TX
Beaumont, TX
Winter Haven, FL
Southgate, MI
Champaign, IL
Orlando, FL
Fort Wayne, IN
828
710
700
740
931
555
280
—
400
754
325
828
697
—
—
616
608
—
476
521
787
700
Buildings and
Improvements Equipment
1,230
891
814
1,779
1,252
803
760
1,089
982
459
725
813
647
967
909
1,060
931
1,043
377
783
824
1,290
1,167
930
720
713
746
721
832
1,138
1,158
998
1,045
15
38
18
20
17
6
19
14
27
25
24
22
33
24
38
63
31
58
24
17
32
32
32
134
1
21
40
33
49
31
26
17
23
Land
—
652
912
—
—
—
—
—
—
890
—
—
—
—
—
—
—
—
1,130
—
—
—
—
—
677
880
—
—
563
—
—
—
—
Building and
Improvements Equipment
Land
Building and
Improvements Equipment
1,303
726
1,200
1,212
1,289
1,118
937
882
1,189
2,624
1,427
787
1,603
1,566
1,057
925
1,048
1,095
2,047
1,458
1,233
892
964
1,034
1,330
1,463
1,228
1,163
1,673
1,103
1,009
1,877
927
276
201
379
393
474
470
405
234
392
331
570
340
309
577
232
343
462
371
338
449
390
266
325
292
395
553
492
375
543
242
343
431
320
325
652
912
525
750
402
604
426
888
890
1,136
828
710
700
740
931
555
280
1,130
400
754
325
828
697
677
880
616
608
563
476
521
787
700
2,533
1,617
2,014
2,991
2,541
1,921
1,697
1,971
2,171
3,083
2,152
1,600
2,250
2,533
1,966
1,985
1,979
2,138
2,424
2,241
2,057
2,182
2,131
1,964
2,050
2,176
1,974
1,884
2,505
2,241
2,167
2,875
1,972
291
239
397
413
491
476
424
248
419
356
594
362
342
601
270
406
493
429
362
466
422
298
357
426
396
574
532
408
592
273
369
448
343
Total
3,149
2,508
3,323
3,929
3,782
2,799
2,725
2,645
3,478
4,329
3,882
2,790
3,302
3,834
2,976
3,322
3,027
2,847
3,916
3,107
3,233
2,805
3,316
3,087
3,123
3,630
3,122
2,900
3,660
2,990
3,057
4,110
3,015
Accumulated
Depreciation
Construction
Date
Acquisition
Date
Life on
which
Depreciation
in latest
Statement of
Income is
Computed
2 - 46
2 - 35
2 - 42
2 - 41
2 - 47
2 - 47
2 - 35
2 - 35
2 - 42
2 - 37
2 - 48
2 - 40
2 - 46
2 - 47
2 - 40
2 - 40
2 - 42
3/21/1988
5/23/1988
6/20/1988
6/28/1988
10/24/1988
7/18/1988
6/6/1988
9/5/1988
5/8/1989
8/1/1988
10/10/1988
7/31/1989
8/22/1988
3/27/1989
11/14/1988
12/5/1988
3/6/1989
1/16/1989
2 - 42
12/12/1988
2/13/1989
5/1/1989
7/31/1989
8/28/1989
7/3/1989
5/22/1989
7/3/1989
7/10/1989
8/14/1989
8/14/1989
1/22/1990
10/30/1989
1/29/1990
12/11/1989
2 - 36
2 - 41
2 - 47
2 - 35
2 - 40
2 - 35
2 - 41
2 - 36
2 - 39
2 - 40
2 - 47
2 - 37
2 - 35
2 - 48
2 - 42
2,240
1,640
1,833
2,901
2,229
1,766
1,646
1,842
1,891
2,850
1,896
1,596
1,888
2,097
1,744
1,805
1,890
1,752
2,081
2,017
1,704
1,990
1,962
1,816
1,804
1,884
1,779
1,723
2,150
1,998
2,017
2,279
1,790
1988
1988
1988
1988
1988
1988
1988
1988
1989
1988
1988
1989
1988
1989
1988
1988
1989
1989
1988
1989
1989
1989
1989
1989
1989
1989
1989
1989
1989
1990
1989
1990
1989
FOUR CORNERS PROPERTY, TRUST, INC.
SCHEDULE III
SCHEDULE OF REAL EATATE ASSETS AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2016
(Dollars in thousands)
Initial Cost to Company
Cost Capitalized Since Acquisition
Gross Carrying Value (2)
Buildings and
Improvements Equipment
F
-
3
6
Restaurant
Property
(1)
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
Location
Fargo, ND
North Little Rock,
AR
Jacksonville, FL
Land
313
—
—
Las Vegas, NV
1,085
Victorville, CA
Naples, FL
603
992
Rochester, NY
1,104
Chesapeake, VA
Maplewood, MN
Fayetteville, NC
Lynnwood, WA
Columbia, MO
Topeka, KS
Wichita, KS
Antioch, TN
Greenfield, WI
Orange City, FL
Terre Haute, IN
Richmond, VA
Columbia, SC
Talleyville, DE
Littleton, CO
Miami, FL
Roseville, MN
Colorado Springs,
CO
Aurora, CO
Boise, ID
Eastpointe, MI
Parkersburg, WV
Clovis, CA
Dallas, TX
Houston, TX
506
556
637
875
602
701
779
—
956
551
560
467
613
737
750
1,059
754
—
803
627
897
454
489
750
723
864
437
755
1,191
985
677
1,113
863
1,009
856
1,132
983
812
802
811
802
727
1,128
1,363
782
1,278
859
879
1,106
690
1,169
839
1,367
1,096
796
776
960
Columbia, MD
1,283
1,199
Land
—
766
905
—
—
—
—
—
—
—
—
—
—
—
892
114
—
—
—
—
—
—
—
—
571
—
—
—
—
—
70
—
—
Building and
Improvements Equipment
680
1,623
1,137
967
888
1,201
1,102
1,046
1,126
879
855
1,070
1,658
1,022
628
1,174
1,163
872
966
1,055
805
1,324
1,413
784
2,173
1,368
858
598
723
787
1,001
1,234
1,020
264
293
487
310
271
526
376
344
250
461
316
327
381
274
241
295
479
355
399
230
377
359
549
178
415
343
386
244
323
300
305
498
297
Land
313
766
905
1,085
603
992
1,104
506
556
637
875
602
701
779
892
1,070
551
560
467
613
737
750
1,059
754
571
803
627
897
454
489
820
723
1,283
Building and
Improvements Equipment
1,544
2,060
1,892
2,158
1,873
1,878
2,215
1,909
2,135
1,735
1,987
2,053
2,470
1,824
1,439
1,976
1,890
2,000
2,329
1,837
2,083
2,183
2,292
1,890
2,863
2,537
1,697
1,965
1,819
1,583
1,777
2,194
2,219
284
387
526
357
302
566
437
388
336
517
382
380
399
354
302
324
495
389
492
265
472
438
638
268
502
357
462
319
383
362
341
585
389
Total
2,141
3,213
3,323
3,600
2,778
3,436
3,756
2,803
3,027
2,889
3,244
3,035
3,570
2,957
2,633
3,370
2,936
2,949
3,288
2,715
3,292
3,371
3,989
2,912
3,936
3,697
2,786
3,181
2,656
2,434
2,938
3,502
3,891
20
94
39
47
31
40
61
44
86
56
66
53
18
80
61
29
16
34
93
35
95
79
89
90
87
14
76
75
60
62
36
87
92
Accumulated
Depreciation
Construction
Date
Acquisition
Date
Life on
which
Depreciation
in latest
Statement of
Income is
Computed
1,453
1,873
1,784
2,029
1,620
1,755
1,980
1,824
2,029
1,682
1,804
1,832
2,045
1,690
1,407
1,777
1,528
1,826
2,165
1,608
2,075
1,977
2,110
1,688
2,585
2,130
1,618
1,841
1,707
1,558
1,580
2,074
2,046
1989
1989
1990
1990
1990
1990
1990
1990
1990
1990
1990
1990
1990
1990
1990
1990
1990
1990
1990
1990
1991
1991
1991
1991
1991
1991
1991
1991
1991
1991
1991
1991
1991
12/11/1989
2 - 40
10/30/1989
4/30/1990
3/26/1990
9/10/1990
3/26/1990
5/14/1990
3/5/1990
4/16/1990
2/26/1990
8/20/1990
6/4/1990
10/22/1990
10/1/1990
10/15/1990
8/13/1990
10/29/1990
12/3/1990
9/17/1990
12/3/1990
4/22/1991
1/21/1991
1/28/1991
3/25/1991
1/21/1991
4/1/1991
4/29/1991
3/25/1991
2/11/1991
2/18/1991
2/25/1991
5/20/1991
11/4/1991
2 - 42
2 - 42
2 - 42
2 - 42
2 - 40
2 - 36
2 - 40
2 - 40
2 - 35
2 - 35
2 - 42
2 - 47
2 - 42
2 - 40
2 - 42
2 - 48
2 - 35
2 - 42
2 - 42
2 - 40
2 - 40
2 - 42
2 - 40
2 - 41
2 - 41
2 - 42
2 - 40
2 - 42
2 - 42
2 - 41
2 - 40
2 - 42
FOUR CORNERS PROPERTY, TRUST, INC.
SCHEDULE III
SCHEDULE OF REAL EATATE ASSETS AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2016
(Dollars in thousands)
Initial Cost to Company
Cost Capitalized Since Acquisition
Gross Carrying Value (2)
Buildings and
Improvements Equipment
Land
Building and
Improvements Equipment
Building and
Improvements Equipment
Accumulated
Depreciation
Construction
Date
Acquisition
Date
F
-
3
7
Restauran
t Property
(1)
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
Location
McAllen, TX
Jacksonville, FL
Boardman, OH
San Bernardino,
CA
West Melbourne,
FL
Houston, TX
Palmdale, CA
Land
803
1,124
675
983
627
679
Woodbridge, VA
1,228
Roanoke, VA
Provo, UT
Omaha, NE
Pittsburgh, PA
Harrisburg, PA
Pineville, NC
Palm Desert, CA
Elkhart, IN
Lafayette, LA
Little Rock, AR
Cincinnati, OH
Myrtle Beach, SC
Louisville, KY
Highlands Ranch,
CO
Novi, MI
Longview, TX
607
702
315
1,125
769
1,018
607
381
555
335
842
520
492
813
866
505
Erie, PA
1,078
Greensburg, PA
Roswell, GA
Clarksville, TN
Green Bay, WI
Cincinnati, OH
Sioux Falls, SD
Yakima, WA
Harlingen, TX
579
838
302
453
917
247
—
453
1,393
1,210
857
863
993
953
947
1,080
1,071
714
714
1,230
1,170
837
972
987
724
751
895
953
872
1,571
980
1,629
816
1,412
1,272
897
771
789
939
1,325
1,296
803
76
74
48
83
22
68
109
56
33
128
51
65
108
71
100
145
69
105
107
51
76
49
31
90
91
143
79
101
97
62
78
124
107
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
409
—
1,160
1,185
1,208
756
1,390
1,084
1,093
1,163
783
805
1,642
1,202
1,117
950
617
683
997
749
986
845
869
1,177
867
1,133
1,129
1,026
764
443
675
1,041
917
568
1,013
476
438
329
301
578
435
315
444
350
284
341
279
328
281
185
281
304
265
344
386
254
380
296
290
408
352
339
207
260
360
217
294
426
Land
803
1,124
675
2,017
2,048
2,201
1,393
1,966
983
627
679
1,228
607
702
315
1,125
769
1,018
607
381
555
335
842
520
492
813
866
505
1,078
579
838
302
453
917
247
409
453
2,343
2,031
2,173
2,234
1,497
1,519
2,872
2,372
1,954
1,922
1,604
1,407
1,748
1,644
1,939
1,717
2,440
2,157
2,496
1,949
2,541
2,298
1,661
1,214
1,464
1,980
2,242
1,864
1,816
552
512
377
384
600
503
424
500
383
412
392
344
436
352
285
426
373
370
451
437
330
429
327
380
499
495
418
308
357
422
295
418
533
Total
3,372
3,684
3,253
3,743
3,926
3,161
3,276
3,962
2,487
2,633
3,579
3,841
3,159
3,292
2,496
2,214
2,676
2,349
3,232
2,674
3,262
3,399
3,689
2,834
4,118
3,372
2,917
1,824
2,274
3,319
2,784
2,691
2,802
1,707
1,796
2,038
1,848
1,949
1,893
1,887
2,018
1,348
1,455
2,161
2,000
1,773
1,802
1,506
1,446
1,627
1,583
1,857
1,566
2,104
1,815
2,188
1,613
2,221
1,792
1,593
1,167
1,461
1,757
1,905
1,895
1,444
1991
1991
1991
1992
1991
1991
1992
1992
1991
1991
1991
1991
1991
1992
1992
1992
1992
1992
1992
1992
1992
1992
1992
1993
1992
1992
1992
1992
1992
1992
1992
1993
1992
Life on
which
Depreciation
in latest
Statement of
Income is
Computed
2 - 42
2 - 42
2 - 38
4/29/1991
8/12/1991
8/5/1991
3/9/1992
2 - 42
8/19/1991
11/11/1991
8/3/1992
2/3/1992
12/9/1991
11/11/1991
10/28/1991
12/9/1991
12/9/1991
1/27/1992
1/27/1992
2/3/1992
1/27/1992
3/9/1992
3/16/1992
3/16/1992
6/15/1992
5/11/1992
5/25/1992
2/22/1993
11/2/1992
8/31/1992
9/14/1992
8/3/1992
9/14/1992
8/17/1992
9/7/1992
3/22/1993
10/19/1992
2 - 47
2 - 40
2 - 39
2 - 41
2 - 42
2 - 40
2 - 42
2 - 38
2 - 35
2 - 42
2 - 40
2 - 40
2 - 42
2 - 40
2 - 38
2 - 42
2 - 42
2 - 41
2 - 42
2 - 45
2 - 42
2 - 40
2 - 40
2 - 38
2 - 40
2 - 38
2 - 40
2 - 40
2 - 42
FOUR CORNERS PROPERTY, TRUST, INC.
SCHEDULE III
SCHEDULE OF REAL EATATE ASSETS AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2016
(Dollars in thousands)
Initial Cost to Company
Cost Capitalized Since Acquisition
Gross Carrying Value (2)
F
-
3
8
Restauran
t Property
(1)
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
Location
Chico, CA
Las Vegas, NV
Laurel, MD
Arlington, TX
Racine, WI
Mesa, AZ
Fort Collins, CO
Raleigh, NC
Dover, DE
Lafayette, IN
Land
984
1,055
1,241
782
608
551
809
855
614
455
Addison, TX
1,221
Appleton, WI
Panama City, FL
Texas City, TX
Muncie, IN
Kenner, LA
Duncanville, TX
Poughkeepsie, NY
Billings, MT
Rochester, NY
Whitehall, PA
Paducah, KY
Dearborn, MI
Bangor, ME
Grand Rapids, MI
Peoria, IL
Newington, NH
Tyler, TX
Janesville, WI
Las Vegas, NV
Middletown, OH
Concord, NH
424
465
732
454
695
835
873
479
974
936
452
542
357
804
668
915
485
370
879
424
469
Branson, MO
1,056
Coon Rapids, MN
Fairfax, VA
514
985
Buildings and
Improvements Equipment
Land
Building and
Improvements Equipment
923
1,005
1,552
766
1,247
888
1,105
877
1,055
875
1,746
956
957
1,093
1,003
969
1,057
1,613
1,107
1,108
1,291
1,083
1,219
1,120
866
1,204
1,051
1,041
1,069
1,344
1,044
1,284
1,893
1,248
1,127
95
108
121
70
140
97
97
76
127
98
79
117
84
97
92
86
91
108
89
101
90
82
59
96
87
81
103
92
86
95
95
115
69
67
69
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
850
849
1,403
795
914
803
1,011
855
656
635
1,032
646
1,082
871
1,065
1,112
945
823
775
824
1,025
700
713
1,027
637
914
803
1,279
712
596
863
594
785
588
1,021
308
297
388
441
198
274
350
318
279
221
374
216
400
319
296
361
370
174
301
243
331
288
242
282
257
323
355
340
287
317
318
194
295
245
406
Land
984
1,055
1,241
782
608
551
809
855
614
455
1,221
424
465
732
454
695
835
873
479
974
936
452
542
357
804
668
915
485
370
879
424
469
1,056
514
985
Building and
Improvements Equipment
1,773
1,854
2,955
1,561
2,161
1,691
2,116
1,732
1,711
1,510
2,778
1,602
2,039
1,964
2,068
2,081
2,002
2,436
1,882
1,932
2,316
1,783
1,932
2,147
1,503
2,118
1,854
2,320
1,781
1,940
1,907
1,878
2,678
1,836
2,148
403
405
509
511
338
371
447
394
406
319
453
333
484
416
388
447
461
282
390
344
421
370
301
378
344
404
458
432
373
412
413
309
364
312
475
Total
3,160
3,314
4,705
2,854
3,107
2,613
3,372
2,981
2,731
2,284
4,452
2,359
2,988
3,112
2,910
3,223
3,298
3,591
2,751
3,250
3,673
2,605
2,775
2,882
2,651
3,190
3,227
3,237
2,524
3,231
2,744
2,656
4,098
2,662
3,608
Accumulated
Depreciation
Construction
Date
1,569
1,773
2,639
1,513
1,907
1,529
2,006
1,661
1,566
1,486
2,470
1,462
1,641
1,737
1,450
1,939
1,758
1,921
1,696
1,570
2,088
1,596
1,680
1,804
1,424
1,772
1,688
1,893
1,501
1,699
1,717
1,580
2,202
1,601
1,892
1992
1992
1993
1993
1993
1993
1993
1993
1993
1993
1993
1993
1993
1993
1993
1993
1993
1993
1993
1993
1993
1993
1994
1993
1994
1994
1994
1994
1994
1994
1994
1994
1994
1994
1994
Life on
which
Depreciation
in latest
Statement of
Income is
Computed
2 - 40
2 - 42
2 - 42
2 - 44
2 - 40
2 - 40
2 - 41
2 - 42
2 - 38
2 - 40
2 - 41
2 - 40
2 - 42
2 - 44
2 - 49
2 - 40
2 - 40
2 - 40
2 - 42
2 - 42
2 - 36
2 - 40
2 - 40
2 - 42
2 - 40
2 - 42
2 - 42
2 - 47
2 - 40
2 - 40
2 - 42
2 - 38
2 - 40
2 - 40
2 - 42
Acquisition
Date
11/9/1992
12/14/1992
1/25/1993
3/29/1993
2/1/1993
4/12/1993
2/8/1993
3/8/1993
4/19/1993
3/22/1993
4/26/1993
5/17/1993
10/11/1993
7/19/1993
8/23/1993
7/5/1993
6/28/1993
11/29/1993
10/18/1993
11/15/1993
11/8/1993
11/8/1993
1/10/1994
12/13/1993
1/24/1994
2/14/1994
1/17/1994
1/17/1994
3/7/1994
3/7/1994
3/7/1994
2/14/1994
5/16/1994
9/26/1994
10/3/1994
FOUR CORNERS PROPERTY, TRUST, INC.
SCHEDULE III
SCHEDULE OF REAL EATATE ASSETS AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2016
(Dollars in thousands)
Initial Cost to Company
Cost Capitalized Since Acquisition
Gross Carrying Value (2)
F
-
3
9
Restauran
t Property
(1)
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
Location
Amherst, NY
Dallas, TX
Asheville, NC
Waldorf, MD
Fairborn, OH
Joplin, MO
Middletown, NY
Cedar Rapids, IA
Eau Claire, WI
Voorhees, NJ
Land
1,215
764
1,031
779
804
654
807
510
600
804
Henderson, NV
1,109
Clay, NY
Norman, OK
Heath, OH
Jackson, MI
782
596
599
699
Hampton, VA
1,074
Tempe, AZ
Waterloo, IA
703
466
Barboursville, WV
1,139
Peoria, AZ
Onalaska, WI
Grapevine, TX
Midland, TX
Spring, TX
Colonie, NY
Fort Smith, AR
Jackson, MS
Lancaster, OH
Lima, OH
Williamsburg, VA
Dubuque, IA
Zanesville, OH
551
603
752
400
780
966
527
641
372
471
673
518
707
Buildings and
Improvements Equipment
Land
Building and
Improvements Equipment
1,394
1,212
1,198
1,152
1,290
1,219
1,581
1,148
1,193
1,696
1,289
1,705
1,246
1,353
1,156
1,061
1,131
891
1,062
1,294
1,283
1,026
1,340
1,329
1,862
893
1,195
846
930
1,268
1,103
1,065
88
55
94
81
82
102
97
105
110
101
74
98
96
65
73
86
75
79
84
81
102
99
88
80
57
113
110
115
67
31
76
25
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
891
811
655
1,258
681
662
592
608
538
600
826
866
449
971
764
674
746
873
731
623
339
793
566
1,289
984
427
846
603
387
743
391
673
307
281
292
357
221
323
345
311
268
303
383
356
172
331
320
225
353
331
203
242
197
404
314
327
273
187
268
284
282
202
221
323
Land
1,215
764
1,031
779
804
654
807
510
600
804
1,109
782
596
599
699
1,074
703
466
1,139
551
603
752
400
780
966
527
641
372
471
673
518
707
Building and
Improvements Equipment
2,285
2,023
1,853
2,410
1,971
1,881
2,173
1,756
1,731
2,296
2,115
2,571
1,695
2,324
1,920
1,735
1,877
1,764
1,793
1,917
1,622
1,819
1,906
2,618
2,846
1,320
2,041
1,449
1,317
2,011
1,494
1,738
395
336
386
438
303
425
442
416
378
404
457
454
268
396
393
311
428
410
287
323
299
503
402
407
330
300
378
399
349
233
297
348
Total
3,895
3,123
3,270
3,627
3,078
2,960
3,422
2,682
2,709
3,504
3,681
3,807
2,559
3,319
3,012
3,120
3,008
2,640
3,219
2,791
2,524
3,074
2,708
3,805
4,142
2,147
3,060
2,220
2,137
2,917
2,309
2,793
Accumulated
Depreciation
Construction
Date
1,926
1,786
1,656
2,094
1,679
1,643
1,865
1,572
1,563
1,964
1,902
1,992
1,451
1,863
1,576
1,482
1,736
1,446
1,479
1,638
1,432
1,722
1,606
2,097
2,106
1,130
1,694
1,246
1,154
1,516
1,056
1,355
1994
1994
1994
1995
1995
1995
1995
1994
1995
1995
1995
1995
1995
1995
1995
1995
1995
1995
1995
1995
1995
1995
1995
1995
1995
1996
1996
1996
1996
1996
1996
1996
Life on
which
Depreciation
in latest
Statement of
Income is
Computed
2 - 38
2 - 44
2 - 40
2 - 42
2 - 40
2 - 40
2 - 40
2 - 40
2 - 40
2 - 38
2 - 42
2 - 42
2 - 38
2 - 46
2 - 42
2 - 40
2 - 40
2 - 42
2 - 40
2 - 38
2 - 38
2 - 40
2 - 40
2 - 40
2 - 42
2 - 38
2 - 42
2 - 40
2 - 38
2 - 40
2 - 38
2 - 40
Acquisition
Date
12/12/1994
10/10/1994
10/31/1994
5/22/1995
2/20/1995
1/9/1995
1/30/1995
12/5/1994
1/23/1995
2/20/1995
2/20/1995
4/24/1995
3/7/1995
5/22/1995
3/20/1995
3/13/1995
5/15/1995
5/22/1995
2/27/1995
5/22/1995
4/24/1995
5/8/1995
10/16/1995
9/11/1995
11/27/1995
2/19/1996
3/25/1996
5/6/1996
5/20/1996
8/19/1996
5/20/1996
8/5/1996
FOUR CORNERS PROPERTY, TRUST, INC.
SCHEDULE III
SCHEDULE OF REAL EATATE ASSETS AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2016
(Dollars in thousands)
Initial Cost to Company
Cost Capitalized Since Acquisition
Gross Carrying Value (2)
F
-
4
0
Restauran
t Property
(1)
Location
Land
Buildings and
Improvements Equipment
Land
Building and
Improvements Equipment
Land
Building and
Improvements Equipment
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
Frederick, MD
Westminster, MD
Hyannis, MA
Wyomissing, PA
Eugene, OR
Savannah, GA
Mentor, OH
Douglasville, GA
Buford, GA
Maple Grove, MN
Olathe, KS
Austin, TX
Coeur D’Alene, ID
Frisco, TX
Bolingbrook, IL
Muskegon, MI
Memphis, TN
Kennewick, WA
Round Rock, TX
Killeen, TX
Los Angeles, CA
Omaha, NE
Bloomington, IN
Dayton, OH
Fayetteville, AR
Oklahoma City,
OK
Lithonia, GA
Rochester, MN
Newport News, VA
Albuquerque, NM
Fort Gratiot, MI
Denton, TX
Lynchburg, VA
Duluth, MN
638
595
664
963
761
952
—
1,189
1,493
807
796
1,239
681
1,029
1,006
691
1,142
763
953
806
1,701
1,202
947
677
849
925
1,403
829
796
771
604
869
771
886
1,276
1,741
2,097
1,926
1,486
1,781
1,955
1,978
1,688
1,924
2,121
2,295
1,661
2,038
2,424
1,704
1,790
1,980
2,090
1,705
2,558
1,778
1,747
1,675
1,845
2,053
1,872
1,889
1,989
1,716
2,246
1,946
2,304
2,043
79
124
90
109
91
189
138
144
179
176
109
154
131
139
147
168
100
149
149
187
202
120
150
172
160
158
174
192
172
179
186
177
125
173
—
—
—
—
—
—
1,474
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
787
452
665
498
356
660
288
406
542
227
489
168
278
279
253
108
246
259
335
322
170
217
419
210
138
128
306
146
88
131
132
182
103
123
344
204
175
206
200
147
241
248
203
124
256
96
305
218
129
41
171
158
153
118
70
147
94
72
79
43
122
140
63
104
57
94
54
58
638
595
664
963
761
952
1,474
1,189
1,493
807
796
1,239
681
1,029
1,006
691
1,142
763
953
806
1,701
1,202
947
677
849
925
1,403
829
796
771
604
869
771
886
2,063
2,193
2,762
2,424
1,842
2,441
2,243
2,384
2,230
2,151
2,610
2,463
1,939
2,317
2,677
1,812
2,036
2,239
2,425
2,027
2,728
1,995
2,166
1,885
1,983
2,181
2,178
2,035
2,077
1,847
2,378
2,128
2,407
2,166
423
328
265
315
291
336
379
392
382
300
365
250
436
357
276
209
271
307
302
305
272
267
244
244
239
201
296
332
235
283
243
271
179
231
Total
3,124
3,116
3,691
3,702
2,894
3,729
4,096
3,965
4,105
3,258
3,771
3,952
3,056
3,703
3,959
2,712
3,449
3,309
3,680
3,138
4,701
3,464
3,357
2,806
3,071
3,307
3,877
3,196
3,108
2,901
3,225
3,268
3,357
3,283
Accumulated
Depreciation
Construction
Date
1,606
1,598
2,140
1,838
1,495
1,720
1,654
1,773
1,624
1,517
1,776
1,595
1,389
1,695
1,795
1,236
1,346
1,572
1,505
1,458
1,666
1,304
1,372
1,203
1,288
1,270
1,371
1,354
1,322
1,182
1,426
1,423
1,351
1,321
1996
1998
1997
1998
1998
2000
2000
2000
2000
2000
2001
2002
2001
2001
2001
2001
2001
2001
2002
2002
2003
2002
2002
2003
2002
2005
2002
2002
2003
2003
2003
2003
2004
2003
Life on
which
Depreciation
in latest
Statement of
Income is
Computed
2 - 40
2 - 38
2 - 35
2 - 38
2 - 38
2 - 35
2 - 35
2 - 35
2 - 35
2 - 35
2 - 36
2 - 37
2 - 36
2 - 36
2 - 36
2 - 36
2 - 36
2 - 36
2 - 37
2 - 37
2 - 38
2 - 37
2 - 37
2 - 38
2 - 37
2 - 40
2 - 37
2 - 37
2 - 38
2 - 38
2 - 38
2 - 38
2 - 39
2 - 38
Acquisition
Date
10/21/1996
4/20/1998
11/17/1997
5/11/1998
5/11/1998
4/10/2000
5/22/2000
5/1/2000
5/22/2000
5/22/2000
3/12/2001
9/3/2002
1/29/2001
6/25/2001
7/23/2001
10/8/2001
10/8/2001
5/14/2001
3/25/2002
8/5/2002
3/24/2003
10/7/2002
11/18/2002
5/1/2003
12/11/2002
3/14/2005
11/18/2002
12/16/2002
5/5/2003
5/19/2003
11/17/2003
6/9/2003
2/16/2004
11/10/2003
FOUR CORNERS PROPERTY, TRUST, INC.
SCHEDULE III
SCHEDULE OF REAL EATATE ASSETS AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2016
(Dollars in thousands)
Initial Cost to Company
Cost Capitalized Since Acquisition
Gross Carrying Value (2)
F
-
4
1
Restauran
t Property
(1)
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
Location
Tucson, AZ
Columbia, SC
Visalia, CA
San Antonio, TX
Anderson, SC
Lake Charles, LA
Houma, LA
Tupelo, MS
Jackson, TN
College Station,
TX
Newnan, GA
Owensboro, KY
Mesa, AZ
Land
1,019
1,119
1,151
932
903
806
736
823
874
581
829
762
598
Southaven, MS
1,048
Yuma, AZ
Oakdale, MN
Garland, TX
842
956
903
Tarentum, PA
1,119
Texarkana, TX
Hot Springs, AR
Florence, SC
Victoria, TX
Dothan, AL
San Angelo, TX
New Braunfels, TX
Grove City, OH
Opelika, AL
871
797
—
782
850
360
1,049
1,200
878
West Wichita, KS
1,227
Pueblo, CO
Sioux City, IA
Detroit, MI
Phoenix, AZ
Jacksonville, NC
Columbus, OH
770
1,304
1,400
753
1,174
995
Buildings and
Improvements Equipment
Land
Building and
Improvements Equipment
2,073
2,175
1,830
2,582
1,841
2,070
2,190
2,102
1,964
2,236
2,239
2,134
1,844
2,209
2,037
2,355
2,271
2,482
2,279
2,415
1,817
2,327
2,242
2,020
2,162
2,271
2,255
1,801
2,330
2,114
2,956
2,153
2,287
2,286
104
161
151
191
133
161
150
193
151
173
157
173
132
158
160
185
156
148
151
186
169
240
131
157
147
140
154
154
212
137
234
246
239
184
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
1,503
—
—
—
—
—
—
—
—
—
—
—
—
—
121
110
133
190
181
174
185
127
175
42
152
70
110
117
62
30
115
179
90
84
119
39
62
74
32
63
54
84
51
89
81
97
32
61
135
85
46
103
111
87
148
82
36
44
55
57
129
50
87
35
94
47
87
73
84
30
92
104
83
55
43
86
76
99
87
72
81
27
Land
1,019
1,119
1,151
932
903
806
736
823
874
581
829
762
598
1,048
842
956
903
1,119
871
797
1,503
782
850
360
1,049
1,200
878
1,227
770
1,304
1,400
753
1,174
995
Building and
Improvements Equipment
2,194
2,285
1,963
2,772
2,022
2,244
2,375
2,229
2,139
2,278
2,391
2,204
1,954
2,326
2,099
2,385
2,386
2,661
2,369
2,499
1,936
2,366
2,304
2,094
2,194
2,334
2,309
1,885
2,381
2,203
3,037
2,250
2,319
2,347
239
246
197
294
244
248
298
275
187
217
212
230
261
208
247
220
250
195
238
259
253
270
223
261
230
195
197
240
288
236
321
318
320
211
Total
3,452
3,650
3,311
3,998
3,169
3,298
3,409
3,327
3,200
3,076
3,432
3,196
2,813
3,582
3,188
3,561
3,539
3,975
3,478
3,555
3,692
3,418
3,377
2,715
3,473
3,729
3,384
3,352
3,439
3,743
4,758
3,321
3,813
3,553
Accumulated
Depreciation
Construction
Date
Acquisition
Date
Life on
which
Depreciation
in latest
Statement of
Income is
Computed
1,241
1,295
1,133
1,509
1,258
1,387
1,369
1,328
1,214
1,354
1,312
1,335
1,117
1,230
1,131
1,297
1,364
1,321
1,292
1,220
1,077
1,281
1,166
1,158
1,124
1,184
1,156
943
1,259
1,125
1,381
1,211
1,201
1,087
2004
2005
2004
2005
2004
2004
2005
2005
2005
2005
2005
2005
2005
2005
2005
2005
2005
2006
2006
2006
2006
2007
2006
2006
2006
2006
2006
2006
2007
2006
2007
2007
2007
2007
9/20/2004
4/5/2005
3/15/2004
6/27/2005
3/29/2004
4/5/2004
2/14/2005
1/31/2005
2/7/2005
1/24/2005
5/23/2005
5/23/2005
10/3/2005
11/21/2005
12/5/2005
12/5/2005
10/31/2005
2/20/2006
3/27/2006
10/23/2006
8/21/2006
1/15/2007
8/28/2006
9/11/2006
9/25/2006
9/25/2006
11/13/2006
11/6/2006
2/5/2007
12/11/2006
5/21/2007
4/23/2007
11/19/2007
12/17/2007
2 - 39
2 - 40
2 - 39
2 - 40
2 - 39
2 - 39
2 - 40
2 - 40
2 - 40
2 - 40
2 - 40
2 - 40
2 - 40
2 - 40
2 - 40
2 - 40
2 - 40
2 - 41
2 - 41
2 - 41
2 - 41
2 - 42
2 - 41
2 - 41
2 - 41
2 - 41
2 - 41
2 - 41
2 - 42
2 - 41
2 - 42
2 - 42
2 - 42
2 - 42
FOUR CORNERS PROPERTY, TRUST, INC.
SCHEDULE III
SCHEDULE OF REAL EATATE ASSETS AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2016
(Dollars in thousands)
Initial Cost to Company
Cost Capitalized Since Acquisition
Gross Carrying Value (2)
F
-
4
2
Restauran
t Property
(1)
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
Location
Mount Juliet, TN
Triadelphia, WV
Reynoldsburg, OH
Florence, KY
Cincinnati, OH
Bismarck, ND
Spring Hill, TN
San Antonio, TX
Michigan City, IN
Broken Arrow, OK
Bossier City, LA
Jacksonville, FL
Richmond, KY
Ankeny, IA
Kingsport, TN
Las Cruces, NM
Manhattan, KS
Pleasant Prairie,
WI
Morehead City, NC
Louisville, KY
Wilson, NC
Council Bluffs, IA
Queen Creek, AZ
Utica, NY
Land
873
970
1,208
1,007
1,072
1,156
1,295
1,359
762
1,461
1,006
1,006
1,054
704
1,071
839
791
1,101
853
—
528
955
875
908
Niagara Falls, NY
1,057
Gainesville, GA
Cleveland, TN
Katy, TX
Beckley, WV
Chicago, IL
Oklahoma City,
OK
985
962
1,602
1,013
942
1,204
Buildings and
Improvements Equipment
Land
Building and
Improvements Equipment
2,294
2,342
2,183
2,099
2,170
2,319
2,269
2,492
2,646
2,261
2,405
2,001
1,974
2,218
1,840
2,201
2,253
2,134
1,864
2,072
1,948
2,051
2,377
2,728
2,187
1,915
1,941
2,170
2,105
2,626
2,370
212
225
242
155
236
263
228
230
238
231
264
263
236
248
282
297
237
303
315
266
268
254
307
362
327
274
324
285
314
337
403
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
904
—
—
—
—
—
—
—
—
—
—
—
76
58
48
52
57
31
29
23
17
73
51
21
14
9
11
15
33
36
62
12
24
4
30
(470)
38
—
14
—
25
(484)
(221)
47
76
37
88
43
38
45
33
39
57
32
30
32
17
22
34
69
—
23
38
29
32
(1)
—
15
5
6
5
1
—
—
Land
873
970
1,208
1,007
1,072
1,156
1,295
1,359
762
1,461
1,006
1,006
1,054
704
1,071
839
791
1,101
853
904
528
955
875
908
1,057
985
962
1,602
1,013
942
1,204
Building and
Improvements Equipment
2,370
2,400
2,231
2,151
2,227
2,350
2,298
2,515
2,663
2,334
2,456
2,022
1,988
2,227
1,851
2,216
2,286
2,170
1,926
2,084
1,972
2,055
2,407
2,258
2,225
1,915
1,955
2,170
2,130
2,142
2,149
259
301
279
243
279
301
273
263
277
288
296
293
268
265
304
331
306
303
338
304
297
286
306
362
342
279
330
290
315
337
403
Total
3,502
3,671
3,718
3,401
3,578
3,807
3,866
4,137
3,702
4,083
3,758
3,321
3,310
3,196
3,226
3,386
3,383
3,574
3,117
3,292
2,797
3,296
3,588
3,528
3,624
3,179
3,247
4,062
3,458
3,421
3,756
Accumulated
Depreciation
Construction
Date
1,188
1,193
1,088
1,062
1,108
1,110
992
1,029
1,086
980
991
859
848
766
713
863
914
807
782
819
760
748
742
513
725
637
654
632
551
736
527
2007
2007
2008
2008
2008
2008
2009
2009
2009
2009
2009
2009
2009
2011
2010
2010
2010
2010
2010
2010
2010
2010
2011
2013
2011
2011
2011
2012
2012
2012
2013
Life on
which
Depreciation
in latest
Statement of
Income is
Computed
2 - 42
2 - 42
2 - 43
2 - 43
2 - 43
2 - 43
2 - 44
2 - 44
2 - 44
2 - 44
2 - 44
2 - 44
2 - 44
2 - 46
2 - 45
2 - 45
2 - 45
2 - 45
2 - 45
2 - 45
2 - 45
2 - 45
2 - 46
2 - 48
2 - 46
2 - 46
2 - 46
2 - 47
2 - 47
2 - 47
Acquisition
Date
10/22/2007
12/17/2007
4/21/2008
8/4/2008
4/28/2008
11/24/2008
2/16/2009
3/30/2009
7/13/2009
5/25/2009
7/27/2009
10/5/2009
9/14/2009
1/10/2011
5/3/2010
5/10/2010
4/26/2010
9/27/2010
7/19/2010
11/1/2010
10/11/2010
10/25/2010
1/10/2011
8/12/2013
9/19/2011
6/20/2011
11/28/2011
4/9/2012
10/1/2012
3/26/2012
4/29/2013
2 - 48
FOUR CORNERS PROPERTY, TRUST, INC.
SCHEDULE III
SCHEDULE OF REAL EATATE ASSETS AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2016
(Dollars in thousands)
Initial Cost to Company
Cost Capitalized Since Acquisition
Gross Carrying Value (2)
F
-
4
3
Restauran
t Property
(1)
OG
BB
BB
BB
BB
BB
BB
BB
BB
BB
BB
S52
S52
LH
LH
LH
LH
LH
LH
LH
LH
LH
LH
LH
LH
LH
LH
LH
LH
LH
LH
LH
LH
LH
Location
Columbus, OH
Orlando, FL
Raleigh, NC
Duluth, GA
Miami, FL
Fort Myers, FL
Pembroke Pines,
FL
Livonia, MI
Sunrise, FL
Jacksonville, FL
Orlando, FL
Naples, FL
Jacksonville, FL
Tucker, GA
Snellville, GA
Macon, GA
Augusta, GA
Ocala, FL
Altamonte Springs,
FL
Florence, KY
Gainesville, GA
Peachtree City, GA
Lawrenceville, GA
Jensen Beach, FL
Destin, FL
Albany, GA
Dublin, OH
Columbia, SC
Pineville, NC
Johns Creek, GA
Greensboro, NC
Huntsville, AL
Hickory, NC
Tampa, FL
Land
954
2,356
2,507
2,006
1,731
1,914
1,808
2,105
1,515
2,235
1,659
2,912
2,216
1,407
1,911
1,249
1,631
1,210
1,649
—
1,537
1,485
1,865
1,322
2,053
1,500
1,572
1,677
1,262
1,694
1,438
1,443
1,333
1,488
Buildings and
Improvements Equipment
Land
Building and
Improvements Equipment
2,236
2,453
3,230
2,362
3,427
2,863
2,999
3,856
3,251
2,295
2,340
3,619
2,729
923
925
718
845
1,100
974
741
965
1,080
1,116
1,082
793
988
1,205
1,291
879
1,089
1,017
983
1,029
1,078
324
62
155
254
222
186
207
286
138
344
356
447
416
10
76
30
46
17
22
52
19
9
17
33
16
34
18
23
11
18
16
7
7
6
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
1,191
—
—
—
—
—
—
—
—
—
—
—
—
—
—
4
2,691
918
1,378
1,162
916
1,039
362
450
50
324
7
6
339
422
420
300
579
450
347
348
457
451
347
357
422
510
495
495
203
270
350
313
297
—
750
314
274
422
398
382
138
224
13
41
37
3
214
147
204
103
112
135
165
140
159
117
153
224
126
259
176
195
123
152
194
166
189
Land
954
2,356
2,507
2,006
1,731
1,914
1,808
2,105
1,515
2,235
1,659
2,912
2,216
1,407
1,911
1,249
1,631
1,210
1,649
1,191
1,537
1,485
1,865
1,322
2,053
1,500
1,572
1,677
1,262
1,694
1,438
1,443
1,333
1,488
Building and
Improvements Equipment
2,240
5,144
4,148
3,740
4,589
3,779
4,038
4,218
3,701
2,345
2,664
3,626
2,735
1,262
1,347
1,138
1,145
1,679
1,424
1,088
1,313
1,537
1,567
1,429
1,150
1,410
1,715
1,786
1,374
1,292
1,287
1,333
1,342
1,375
324
812
469
528
644
584
589
424
362
357
397
484
419
224
223
234
149
129
157
217
159
168
134
186
240
160
277
199
206
141
168
201
173
195
Total
3,518
8,312
7,124
6,274
6,964
6,277
6,435
6,747
5,578
4,937
4,720
7,022
5,370
2,893
3,481
2,621
2,925
3,018
3,230
2,496
3,009
3,190
3,566
2,937
3,443
3,070
3,564
3,662
2,842
3,127
2,893
2,977
2,848
3,058
Accumulated
Depreciation
Construction
Date
Acquisition
Date
Life on
which
Depreciation
in latest
Statement of
Income is
Computed
493
3,523
2,866
2,797
3,038
2,379
2,488
2,852
2,104
948
727
1,152
919
919
948
989
883
1,284
890
749
893
1,037
979
965
841
852
1,029
1,088
803
760
694
719
667
813
2013
1996
1999
1999
2000
2000
2000
2001
2002
2010
2012
2011
2011
1986
1992
1992
1993
1993
1994
1994
1995
1995
1996
1996
1996
1997
1997
1997
1998
1998
1999
1999
1999
2000
3/18/2013
2/19/1996
5/17/1999
5/24/1999
4/4/2000
5/16/2000
12/18/2000
2/6/2001
10/22/2002
3/29/2010
2/27/2012
10/10/2011
10/24/2011
10/1/2007
10/1/2007
10/1/2007
10/1/2007
10/1/2007
10/1/2007
10/1/2007
10/1/2007
10/1/2007
10/1/2007
10/1/2007
10/1/2007
10/1/2007
10/1/2007
10/1/2007
10/1/2007
10/1/2007
10/1/2007
10/1/2007
10/1/2007
10/1/2007
2 - 48
2 - 49
2 - 38
2 - 38
2 - 35
2 - 35
2 - 35
2 - 36
2 - 37
2 - 45
2 - 47
2 - 46
2 - 46
2 - 43
2 - 43
2 - 44
2 - 42
2 - 42
2 - 44
2 - 47
2 - 43
2 - 43
2 - 42
2 - 42
2 - 42
2 - 42
2 - 42
2 - 42
2 - 44
2 - 42
2 - 44
2 - 44
2 - 44
2 - 35
FOUR CORNERS PROPERTY, TRUST, INC.
SCHEDULE III
SCHEDULE OF REAL EATATE ASSETS AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2016
(Dollars in thousands)
Initial Cost to Company
Cost Capitalized Since Acquisition
Gross Carrying Value (2)
F
-
4
4
Restauran
t Property
(1)
LH
LH
LH
LH
LH
LH
LH
LH
LH
LH
LH
LH
LH
LH
LH
LH
LH
LH
LH
LH
LH
LH
LH
LH
LH
LH
LH
LH
LH
LH
LH
LH
LH
LH
Location
Clarksville, TN
Orlando, FL
Concord, NH
Orlando, FL
Medina, OH
Hoover, AL
Boardman, OH
Prattville, AL
Bensalem, PA
Lee’s Summit, MO
Germantown, MD
Independence, OH
Hiram, GA
Louisville, KY
Bowie, MD
Waldorf, MD
West Palm Beach,
FL
Columbia, MD
East Point, GA
Lexington, KY
Winter Haven, FL
Jacksonville, FL
Daphne, AL
Anderson, SC
Palm Harbor, FL
West Chester, OH
Jefferson City, MO
Chantilly, VA
Dawsonville, GA
Opelika, AL
Indianapolis, IN
Grove City, OH
Springfield, IL
Covington, GA
Land
1,662
1,165
1,329
1,492
1,189
1,401
954
1,481
1,645
1,705
1,439
1,241
1,639
1,405
1,871
1,929
1,781
1,918
1,052
1,251
1,285
795
1,130
1,445
1,406
1,371
1,342
1,568
1,084
1,427
1,298
1,566
1,573
887
Buildings and
Improvements Equipment
Land
Building and
Improvements Equipment
1,097
749
935
1,277
820
966
673
1,016
600
1,219
1,069
686
1,033
980
1,230
1,167
1,228
1,439
1,232
874
1,149
1,302
757
990
917
927
875
882
1,321
1,244
854
1,067
1,451
1,212
15
21
7
52
12
17
17
27
17
34
27
26
25
18
21
26
27
40
21
16
39
32
30
41
32
31
60
50
51
36
55
53
65
70
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
449
264
359
297
268
350
285
336
346
285
306
231
374
238
257
245
297
268
291
238
276
210
308
240
263
248
196
262
188
202
211
191
182
45
112
137
172
150
168
160
151
134
160
88
138
106
130
113
147
162
132
161
143
162
124
128
111
111
93
79
68
66
100
58
51
61
79
49
Land
1,662
1,165
1,329
1,492
1,189
1,401
954
1,481
1,645
1,705
1,439
1,241
1,639
1,405
1,871
1,929
1,781
1,918
1,052
1,251
1,285
795
1,130
1,445
1,406
1,371
1,342
1,568
1,084
1,427
1,298
1,566
1,573
887
Building and
Improvements Equipment
1,546
1,013
1,294
1,574
1,088
1,316
958
1,352
946
1,504
1,375
917
1,407
1,218
1,487
1,412
1,525
1,707
1,523
1,112
1,425
1,512
1,065
1,230
1,180
1,175
1,071
1,144
1,509
1,446
1,065
1,258
1,633
1,257
127
158
179
202
180
177
168
161
177
122
165
132
155
131
168
188
159
201
164
178
163
160
141
152
125
110
128
116
151
94
106
114
144
119
Total
3,335
2,336
2,802
3,268
2,457
2,894
2,080
2,994
2,768
3,331
2,979
2,290
3,201
2,754
3,526
3,529
3,465
3,826
2,739
2,541
2,873
2,467
2,336
2,827
2,711
2,656
2,541
2,828
2,744
2,967
2,469
2,938
3,350
2,263
Accumulated
Depreciation
Construction
Date
Acquisition
Date
Life on
which
Depreciation
in latest
Statement of
Income is
Computed
754
599
582
801
574
683
484
690
475
654
684
445
677
550
682
667
692
774
710
557
655
670
573
582
596
574
518
520
668
660
526
581
747
570
1999
2000
2000
2000
2000
2001
2001
2001
2001
2002
2002
2002
2002
2002
2002
2002
2002
2003
2003
2003
2003
2003
2003
2004
2004
2004
2004
2004
2004
2004
2005
2005
2005
2005
10/1/2007
10/1/2007
10/1/2007
10/1/2007
10/1/2007
10/1/2007
10/1/2007
10/1/2007
10/1/2007
10/1/2007
10/1/2007
10/1/2007
10/1/2007
10/1/2007
10/1/2007
10/1/2007
10/1/2007
10/1/2007
10/1/2007
10/1/2007
10/1/2007
10/1/2007
10/1/2007
10/1/2007
10/1/2007
10/1/2007
10/1/2007
10/1/2007
10/1/2007
10/1/2007
10/1/2007
10/1/2007
10/1/2007
10/1/2007
2 - 43
2 - 35
2 - 35
2 - 35
2 - 35
2 - 36
2 - 36
2 - 36
2 - 36
2 - 37
2 - 37
2 - 37
2 - 37
2 - 37
2 - 37
2 - 37
2 - 37
2 - 38
2 - 38
2 - 42
2 - 38
2 - 38
2 - 38
2 - 39
2 - 39
2 - 39
2 - 39
2 - 39
2 - 39
2 - 39
2 - 40
2 - 40
2 - 40
2 - 40
FOUR CORNERS PROPERTY, TRUST, INC.
SCHEDULE III
SCHEDULE OF REAL EATATE ASSETS AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2016
(Dollars in thousands)
Initial Cost to Company
Cost Capitalized Since Acquisition
Gross Carrying Value (2)
Restauran
t Property
(1)
LH
LH
LH
LH
LH
LH
LH
LH
LH
LH
LH
LH
LH
LH
LH
LH
LH
LH
LH
LH
LH
LH
LH
LH
LH
LH
LH
LH
LH
LH
Location
West Homestead,
PA
Carrollton, GA
Tarentum, PA
Commerce, GA
East Ellijay, GA
Acworth, GA
Peoria, IL
Hixson, TN
Fredericksburg, VA
Morgantown, WV
Florence, SC
Portage, IN
Macon, GA
Panama City
Beach, FL
LaGrange, GA
Calhoun, GA
Dublin, GA
Monroe, GA
Denham Springs,
LA
Cornelia, GA
Richmond, VA
Hanover, MD
Orlando, FL
San Antonio, TX
Conyers, GA
Land
1,418
1,192
1,414
1,335
1,126
1,941
1,299
1,676
1,734
1,223
1,628
901
1,052
1,379
979
765
389
966
1,306
106
1,442
1,437
1,406
907
589
San Antonio, TX
1,206
Thomasville, GA
San Antonio, TX
Whitehall, PA
Fort Smith, AR
730
947
1,307
953
F
-
4
5
Buildings and
Improvements Equipment
Land
Building and
Improvements Equipment
947
1,227
931
1,466
1,272
1,255
848
1,263
1,174
812
1,352
1,652
1,840
1,736
1,527
1,760
1,910
1,549
2,049
1,542
1,758
2,258
1,701
1,504
1,797
1,583
1,688
1,436
1,901
1,610
79
75
91
65
70
70
81
84
89
89
90
105
97
99
111
109
140
164
283
281
207
252
253
—
198
—
229
—
270
252
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
282
—
—
—
—
—
—
—
—
—
—
33
15
84
57
21
23
143
40
42
27
28
59
135
47
36
(4)
27
30
35
52
24
45
23
698
30
245
19
444
24
23
91
49
46
84
82
82
46
44
35
44
35
26
38
95
52
36
23
13
12
8
9
2
6
758
21
754
5
811
7
10
Land
1,418
1,192
1,414
1,335
1,126
1,941
1,299
1,676
1,734
1,223
1,628
901
1,052
1,379
979
765
389
966
1,306
388
1,442
1,437
1,406
907
589
1,206
730
947
1,307
953
Building and
Improvements Equipment
980
1,242
1,015
1,523
1,293
1,278
991
1,303
1,216
839
1,380
1,711
1,975
1,783
1,563
1,756
1,937
1,579
2,084
1,594
1,782
2,303
1,724
2,202
1,827
1,828
1,707
1,880
1,925
1,633
170
124
137
149
152
152
127
128
124
133
125
131
135
194
163
145
163
177
295
289
216
254
259
758
219
754
234
811
277
262
Total
2,568
2,558
2,566
3,007
2,571
3,371
2,417
3,107
3,074
2,195
3,133
2,743
3,162
3,356
2,705
2,666
2,489
2,722
3,685
2,271
3,440
3,994
3,389
3,867
2,635
3,788
2,671
3,638
3,509
2,848
Accumulated
Depreciation
Construction
Date
Acquisition
Date
Life on
which
Depreciation
in latest
Statement of
Income is
Computed
474
582
494
628
588
565
503
574
603
458
568
707
852
818
719
770
764
652
1,041
782
771
675
649
1,155
672
1,049
684
1,119
689
620
2005
2005
2005
2006
2006
2006
2006
2006
2006
2006
2006
2006
2007
2007
2007
2007
2008
2008
2008
2008
2009
2011
2010
2010
2010
2010
2010
2010
2010
2010
10/1/2007
10/1/2007
10/1/2007
10/1/2007
10/1/2007
10/1/2007
10/1/2007
10/1/2007
10/1/2007
10/1/2007
10/1/2007
10/1/2007
10/1/2007
10/1/2007
10/1/2007
10/1/2007
1/14/2008
4/28/2008
8/25/2008
12/1/2008
2/23/2009
5/16/2011
3/8/2010
1/18/2010
8/2/2010
7/5/2010
4/19/2010
5/10/2010
12/6/2010
11/1/2010
2 - 40
2 - 40
2 - 40
2 - 41
2 - 41
2 - 41
2 - 41
2 - 41
2 - 41
2 - 41
2 - 41
2 - 41
2 - 42
2 - 42
2 - 42
2 - 42
2 - 43
2 - 43
2 - 43
2 - 43
2 - 44
2 - 46
2 - 45
2 - 40
2 - 45
2 - 40
2 - 45
2 - 40
2 - 45
2 - 45
FOUR CORNERS PROPERTY, TRUST, INC.
SCHEDULE III
SCHEDULE OF REAL EATATE ASSETS AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2016
(Dollars in thousands)
Initial Cost to Company
Cost Capitalized Since Acquisition
Gross Carrying Value (2)
Buildings and
Improvements Equipment
Land
Building and
Improvements Equipment
1,257
1,382
1,330
278
1,564
1,704
1,600
1,827
1,717
1,725
1,869
1,858
1,744
1,803
1,694
1,775
2,227
1,941
1,993
2,027
2,135
1,758
1,776
2,230
1,684
—
890
533
581
611
942
1,016
1,327
777
204
735
681
383
236
234
284
236
236
267
252
266
289
327
287
319
278
340
256
263
288
291
337
314
286
8
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
34
—
—
—
—
—
—
—
—
—
—
—
16
248
146
35
13
15
13
31
13
4
2
4
35
—
3
3
6
2
4
—
—
—
—
15
—
2,790
2,069
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
8
52
42
(12)
5
1
13
7
1
3
3
3
13
2
(2)
12
—
1
4
2
(3)
3
1
17
—
69
—
—
—
—
—
—
—
—
Land
1,398
—
—
—
849
902
1,128
869
771
1,499
965
1,144
970
1,122
1,799
1,339
859
975
1,155
1,081
953
1,205
1,054
887
936
2,790
173
248
200
258
243
330
822
590
Building and
Improvements Equipment
1,273
1,630
1,476
313
1,577
1,719
1,613
1,858
1,730
1,729
1,871
1,862
1,779
1,803
1,697
1,778
2,233
1,943
1,997
2,027
2,135
1,758
1,776
2,245
1,684
2,069
890
533
581
611
942
1,016
1,327
777
212
787
723
371
241
235
297
243
237
270
255
269
302
329
285
331
278
341
260
265
285
294
338
331
286
77
—
—
—
—
—
—
—
—
Total
2,883
2,417
2,199
684
2,667
2,856
3,038
2,970
2,738
3,498
3,091
3,275
3,051
3,254
3,781
3,448
3,370
3,259
3,412
3,373
3,373
3,257
3,168
3,463
2,906
4,936
1,063
781
781
869
1,185
1,346
2,149
1,367
Accumulated
Depreciation
Construction
Date
507
1,024
893
680
525
581
576
595
502
533
608
564
443
588
489
547
370
462
418
428
450
351
396
412
284
379
9
9
9
10
12
14
18
5
2010
2010
2011
2011
2011
2011
2011
2011
2011
2011
2011
2011
2012
2012
2012
2012
2014
2013
2013
2013
2013
2013
2013
2013
2014
2008
1970
1972
1976
1978
1975
2002
1995
1991
Life on
which
Depreciation
in latest
Statement of
Income is
Computed
2 - 45
2 - 40
2 - 40
2 - 40
2 - 46
2 - 46
2 - 46
2 - 46
2 - 46
2 - 46
2 - 46
2 - 46
2 - 47
2 - 47
2 - 47
2 - 47
2 - 49
2 - 48
2 - 48
2 - 48
2 - 48
2 - 48
2 - 48
2 - 48
2 - 49
2 - 43
5 - 45
5 - 40
5 - 40
5 - 40
5 - 40
5 - 40
10 - 45
10 - 40
Acquisition
Date
7/19/2010
10/11/2010
1/24/2011
6/20/2011
4/25/2011
4/25/2011
3/28/2011
5/31/2011
8/29/2011
10/10/2011
10/10/2011
11/21/2011
10/29/2012
2/6/2012
3/26/2012
2/27/2012
1/27/2014
1/14/2013
2/18/2013
4/22/2013
5/13/2013
8/26/2013
5/13/2013
9/23/2013
1/20/2014
11/14/2011
7/18/2016
7/18/2016
7/18/2016
7/18/2016
7/18/2016
7/18/2016
8/2/2016
11/9/2016
869
771
1,499
965
1,144
970
1,088
1,799
1,339
859
975
1,155
1,081
953
1,205
1,054
887
936
—
173
248
200
258
243
330
822
590
Restauran
t Property
(1)
LH
LH
LH
LH
LH
LH
LH
LH
LH
LH
LH
LH
LH
LH
LH
LH
LH
LH
LH
LH
LH
LH
LH
LH
LH
F
-
4
6
Location
Jackson, TN
San Antonio, TX
New Braunfels, TX
San Antonio, TX
Kingsland, GA
Jonesboro, AR
Land
1,398
—
—
—
849
902
McAllen, TX
1,128
Council Bluffs, IA
Tupelo, MS
Champaign, IL
Rapid City, SD
West Melbourne,
FL
Athens, GA
Flowood, MS
Deptford, NJ
McAllen, TX
Wilkes Barre, PA
Morehead City, NC
Columbus, MS
Sandusky, OH
Coralville, IA
Cincinnati, OH
Cleveland, TN
Minot, ND
Bethlehem, GA
WFG
San Antonio, TX
PH
PH
PH
PH
PH
PH
WEN
ARB
Joliet, IL
Morris, IL
Yorkville, IL
Lowell, IN
Schereville, IN
Portage, IN
Odessa, TX
Birch Run, MI
FOUR CORNERS PROPERTY, TRUST, INC.
SCHEDULE III
SCHEDULE OF REAL EATATE ASSETS AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2016
(Dollars in thousands)
Initial Cost to Company
Cost Capitalized Since Acquisition
Gross Carrying Value (2)
Buildings and
Improvements Equipment
Land
Building and
Improvements Equipment
990
1,257
998
522
813
930
467
946
1,168
1,424
2,089
1,892
1,549
2,159
1,611
1,873
1,354
1,101
1,405
1,563
916
925
732
635
2,530
2,510
2,528
1,606
1,069
1,714
893
1,045
924
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Land
456
1,071
460
244
560
435
453
323
859
571
601
449
460
570
429
397
481
683
261
288
294
98
75
323
137
157
138
797
139
195
216
215
167
Building and
Improvements Equipment
990
1,257
998
522
813
930
467
946
1,168
1,424
2,089
1,892
1,549
2,159
1,611
1,873
1,354
1,101
1,405
1,563
916
925
732
635
2,530
2,510
2,528
1,606
1,069
1,714
893
1,045
924
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Total
1,446
2,328
1,458
766
1,373
1,365
920
1,269
2,027
1,995
2,690
2,341
2,009
2,729
2,040
2,270
1,835
1,784
1,666
1,851
1,210
1,023
807
958
2,667
2,667
2,666
2,403
1,208
1,909
1,109
1,260
1,091
460
244
560
435
453
323
859
571
601
449
460
570
429
397
481
683
261
288
294
98
75
323
137
157
138
797
139
195
216
215
167
Location
Brighton, MI
Madisonville, KY
Land
456
1,071
Restauran
t Property
(1)
ARB
BK
DEN
FAZ
SNS
SNS
WEN
WEN
ZAX
BK
BK
BK
BK
BK
BK
BK
BK
BK
F
-
4
7
Amherst, OH
Lafayette, IN
Peru, IL
Vero Beach, FL
Wheat Ridge, CO
Warren, MI
Snellville, GA
Keysville, VA
Roxboro, NC
Oxford, NC
Huntsville, AL
Amory, MS
Monterey, TN
Crossville, TN
Livingston, TN
Mount Juliet, TN
ARB
Rocky Mount, NC
ARB
KFC
KFC
KFC
KFC
BWW
BWW
BWW
DQ
TB
KFC
KFC
KFC
KFC
Roanoke Rapids,
NC
Detroit, MI
Auburn Hills, MI
Detroit, MI
Detroit, MI
Burlington, IA
Galesburg, IL
Macomb, IL
Tulsa, OK
Newburgh, IN
Altoona, WI
LaCrosse, WI
Rice Lake, WI
Chippewa Falls,
WI
Accumulated
Depreciation
Construction
Date
Acquisition
Date
Life on
which
Depreciation
in latest
Statement of
Income is
Computed
10 - 40
10 - 45
10 - 40
5 - 40
5 - 40
10 - 40
5 - 40
10 - 40
10 - 45
10 - 50
10 - 50
10 - 50
10 - 50
14 - 54
10 - 50
10 - 50
13 - 53
7 - 40
10 - 45
11/9/2016
11/9/2016
11/9/2016
11/9/2016
11/9/2016
11/9/2016
11/9/2016
11/9/2016
11/9/2016
10/28/2016
10/28/2016
10/28/2016
10/28/2016
10/28/2016
12/28/2016
12/28/2016
12/28/2016
12/28/2016
9/6/2016
9/6/2016
10 - 45
9/14/2016
9/14/2016
9/14/2016
9/14/2016
9/15/2016
9/15/2016
9/15/2016
10/20/2016
11/15/2016
11/10/2016
11/10/2016
11/10/2016
5 - 43
5 - 43
5 - 40
5 - 40
10 - 49
10 - 46
10 - 48
14 - 54
14 - 53
10 - 45
5 - 40
5 - 40
11/10/2016
5 - 40
5
7
6
4
6
6
4
5
6
6
9
8
7
8
—
—
—
—
12
15
8
9
8
8
21
23
22
7
4
8
6
6
5
1987
1986
1971
1996
1996
1998
1978
2003
2003
1996
1989
1982
2000
2016
2000
1987
2015
1988
2004
2003
1997
2002
1984
1984
2010
2009
2009
2015
1994
1993
1979
1991
2003
FOUR CORNERS PROPERTY, TRUST, INC.
SCHEDULE III
SCHEDULE OF REAL EATATE ASSETS AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2016
(Dollars in thousands)
Initial Cost to Company
Cost Capitalized Since Acquisition
Gross Carrying Value (2)
Restauran
t Property
(1)
KFC
KFC
KFC
KFC
KFC
KFC
KFC
KFC
KFC
KFC
KFC
KFC
ARB
ARB
HAR
HAR
HAR
HAR
N/A
Total
F
-
4
8
Location
Land
Buildings and
Improvements Equipment
Land
Building and
Improvements Equipment
Land
Building and
Improvements Equipment
LaCrosse, WI
Stevens Point, WI
Wisconsin Rapids,
WI
Wausau, WI
Escanaba, MI
Menominee, MI
Goshen, IN
South Bend, IN
South Bend, IN
Mishawaka, IN
Kokomo, IN
Kokomo, IN
South Hill, VA
Wake Forest, NC
Gadsden, AL
Baxley, GA
Vidalia, GA
Hazlehurst, GA
Mill Valley, CA
245
92
179
126
143
93
95
141
155
72
118
141
538
805
464
644
364
461
—
1,042
697
1,928
1,387
1,362
862
1,041
868
774
1,510
1,093
1,798
1,283
1,344
1,064
1,258
1,232
1,516
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
28
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
25
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
245
92
179
126
143
93
95
141
155
72
118
141
538
805
464
644
364
461
—
1,042
697
1,928
1,387
1,362
862
1,041
868
774
1,510
1,093
1,798
1,283
1,344
1,064
1,258
1,232
1,516
25
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
28
Total
1,287
789
2,107
1,513
1,505
955
1,136
1,009
929
1,582
1,211
1,939
1,821
2,149
1,528
1,902
1,596
1,977
53
Accumulated
Depreciation
Construction
Date
6
4
8
6
6
5
6
6
5
6
5
8
6
7
3
4
3
3
8
1972
1984
1991
1979
1985
1995
1976
1970
1973
1978
1994
1994
2002
2005
1985
1983
2007
2013
N/A
$398,009
$663,675
$48,217
$23,932
$252,797
$90,935
$421,941
$916,472
$139,152
$1,477,565
$583,307
Life on
which
Depreciation
in latest
Statement of
Income is
Computed
5 - 40
5 - 40
10 - 45
10 - 45
10 - 43
10 - 40
5 - 40
5 - 40
5 - 40
10 - 45
10 - 40
10 - 45
10 - 50
9 - 49
10 - 40
10 - 40
10 - 50
12 - 52
2 - 7
Acquisition
Date
11/10/2016
11/10/2016
11/10/2016
11/10/2016
11/10/2016
11/10/2016
11/10/2016
11/10/2016
11/10/2016
11/10/2016
11/10/2016
11/10/2016
11/3/2016
11/3/2016
12/15/2016
12/15/2016
12/15/2016
12/15/2016
N/A
(1) OG refers to Olive Garden® properties.
BB refers to Bahama Breeze® properties.
S52 refers to Seasons 52® properties.
LH refers to LongHorn Steakhouse® properties.
WFG refers to the Wildfish Seafood Grille® property.
PH refers to the Pizza Hut® properties.
WEN refers to the Wendy’s® properties.
ARB refers to the Arby’s® properties.
BK refers to the Burger King® properties.
DEN refers to the Denny’s® property.
FAZ refers to the Fazoli’s® property.
SNS refers to the Steak N’ Shake® properties.
ZAX refers to the Zaxby’s® property.
KFC refers to the KFC® properties.
BWW refers to the Buffalo Wild Wings® properties.
DQ refers to the Dairy Queen® property.
TB refers to the Taco Bell® property.
HAR refers to the Hardee’s® properties.
(2) Aggregate cost for income tax purposes is $1.42 billion (unaudited) with a net book value of $0.65 billion (unaudited)
F
-
4
9
SCHEDULE III
REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION
(Dollars in thousands)
Carrying Costs
Balance - beginning of period
Additions placed in service
Dispositions
Balance - end of year
Accumulated Depreciation
Balance - beginning of year
2016 depreciation expense
Dispositions
Balance - end of year
December 31, 2016
$
$
$
$
1,397,230
93,576
(13,240)
1,477,566
(568,539)
(20,540)
5,772
(583,307)
F-50
Exhibit Number
3.1
3.2
4.1
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.9
10.10
10.11
10.12
10.13
10.13
10.14
INDEX TO EXHIBITS
Description
Articles of Amendment and Restatement of Four Corners Property Trust, Inc. (incorporated by
reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on October 27, 2015).
Amended and Restated Bylaws of Four Corners Property Trust, Inc. (incorporated by reference to
Exhibit 3.2 to the Company’s Current Report on Form 8-K filed on October 27, 2015).
Specimen Stock Certificate of Four Corners Property Trust, Inc. (incorporated by reference to
Exhibit 4.1 to the Company Registration Statement on Form 10/A filed on October 5, 2015).
Limited Partnership Agreement of Four Corners Operating Partnership, LP dated August 11, 2015
(incorporated by reference to Exhibit 10.6 to the Company’s Registration Statement on Form 10/A
filed on October 5, 2015).
Amended and Restated Agreement of Limited Partnership of Four Corners Operating Partnership,
L.P., dated November 7, 2016 (incorporated by reference to Exhibit 10.1 to the Company’s Current
Report on Form 8-K filed on November 10, 2016).
Offer Letter for William H. Lenehan, President and Chief Executive Officer, dated August 5, 2015†
(incorporated by reference to Exhibit 10.8 to the Company’s Registration Statement on Form 10/A
filed on October 5, 2015).
Offer Letter for Gerald R. Morgan, Chief Financial Officer, dated September 21, 2015†
(incorporated by reference to Exhibit 10.9 to the Company’s Registration Statement on Form 10/A
filed on October 5, 2015).
Offer Letter for James L. Brat, General Counsel, dated September 17, 2015† (incorporated by
reference to Exhibit 10.10 to the Company’s Registration Statement on Form 10/A filed on October
5, 2015).
Tax Matters Agreement, dated as of November 9, 2015, by and between Darden Restaurants, Inc.
and Four Corners Property Trust, Inc. (incorporated by reference to Exhibit 10.1 to the Company’s
Current Report on Form 8-K filed on November 10, 2015).
Revolving Credit and Term Loan, dated as of November 9, 2015, among Four Corners Operating
Partnership, LP, Four Corners Property Trust, Inc., the lenders party thereto and JPMorgan Chase
Bank, N.A., as Administrative Agent (incorporated by reference to Exhibit 10.4 to the Company’s
Current Report on Form 8-K filed on November 10, 2015).
Omnibus Amendment and Waiver, dated as of August 2, 2016, among Four Corners Operating
Partnership, L.P., the Guarantors party thereto, the Lenders party thereto and JPMorgan Chase
Bank, N.A., as Administrative Agent (incorporated by reference to Exhibit 10.1 to the Company’s
Current Report on Form 8-K filed on August 4, 2016).
Four Corners Property Trust, Inc. 2015 Omnibus Incentive Plan† (incorporated by reference to
Exhibit 10.5 to the Company’s Current Report on Form 8-K filed on November 10, 2015).
Amendment No. 1 to the Four Corners Property Trust, Inc. 2015 Omnibus Incentive Plan†
(incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed
December 24, 2015).
Form of Lease (incorporated by reference to Exhibit 10.1 to the Company’s Registration Statement
on Form 10/A filed on October 5, 2015).
Form of Guaranty by Darden Restaurants, Inc. in respect of certain Leases (incorporated by
reference to Exhibit 10.2 to the Company’s Registration Statement on Form 10/A filed on October
5, 2015).
Guaranty, dated August 2, 2016, by Four Corners Property Trust, Inc. and Four Corners GP, LLC,
for the benefit of JP Morgan Chase Bank, N.A., as Administrative Agent (incorporated by reference
to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on August 4, 2016).
Form of Franchise Agreement (incorporated by reference to Exhibit 10.1 to the Company’s
Registration Statement on Form 10/A filed on October 5, 2015).
Form of Restricted Stock Unit Award Agreement for Non-Employee Directors (incorporated by
reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on December 24,
2015).
E-1
10.15
10.16
10.17
21.1
23.1
31 (a)
31 (b)
32 (a)
32 (b)
99.1
Form of FY 2015 Restricted Stock Unit Award Agreement (incorporated by reference to Exhibit
10.2 to the Company’s Current Report on Form 8-K filed on December 24, 2015).
Form of Performance-based Restricted Stock Award Agreement (incorporated by reference to
Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on February 9, 2016).
Form of Restricted Stock Award Agreement (incorporated by reference to Exhibit 10.2 to the
Company’s Current Report on Form 8-K filed on February 9, 2016).
List of Subsidiaries of Four Corners Property Trust, Inc.
Consent of Independent Accountants
Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the
Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the
Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Form of Lease (incorporated by reference to Exhibit 99.1 to the Company’s Current Report on
Form 10-K filed on March 22, 2016).
101.INS
101.SCH
101.CAL
101.DEF
101.LAB
101.PRE
XBRL Instance Document
XBRL Taxonomy Extension Schema Document
XBRL Taxonomy Extension Calculation Linkbase Document
XBRL Taxonomy Extension Definition Linkbase Document
XBRL Taxonomy Extension Label Linkbase Document
XBRL Taxonomy Extension Presentation Linkbase Document
† Denotes a management contract or compensatory plan, contract or arrangement.
E-2
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURE
FOUR CORNERS PROPERTY TRUST, INC.
Dated:
February 27, 2017
By:
/s/ William H. Lenehan
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the Registrant and in the capacities and on the dates indicated.
Signature
Title
Date
/S/ WILLIAM H. LENEHAN
William H. Lenehan
Director and Chief Executive Officer
(Principal Executive Officer)
February 27, 2017
/S/ GERALD R. MORGAN
Gerald R. Morgan
Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
February 27, 2017
/S/ JOHN MOODY
John Moody
Director and Chairman of the Board of
Directors
February 27, 2017
/S/ DOUGLAS B. HANSEN, JR.
Douglas B. Hansen, Jr.
/S/ MARRAN H. OGILVIE
Marran H. Ogilvie
Director
February 27, 2017
Director
February 27, 2017
/S/ PAUL E. SZUREK
Paul E. Szurek
Director
February 27, 2017
E-3
Subsidiaries of Four Corners Property Trust, Inc. (a Maryland corporation)
Exhibit 21.1
Name of Subsidiary
Jurisdiction of Incorporation/Formation
Four Corners GP, LLC
FCPT TRS, LLC
FCPT OP Holdings, LP
Four Corners Operating Partnership, LP
Kerrow Holdings, LLC
Kerrow Restaurants, LLC
FCPT Garden Properties, LLC
FCPT Hospitality Properties, LLC
FCPT International Drive, LLC
FCPT Keystone Properties 11, LLC
FCPT Keystone Properties, LLC
FCPT PA Hospitality Properties 11, LLC
FCPT PA Hospitality Properties, LLC
FCPT Remington Properties, LLC
FCPT Restaurant Properties, LLC
FCPT Sunshine Properties, LLC
FCPT SW Properties, LLC
FCPT Acquisitions, LLC
FCPT Holdings, LLC
Delaware
Delaware
Delaware
Delaware
Texas
Texas
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Texas
Texas
Delaware
Delaware
Delaware
Delaware
EXHIBIT 23.1
Consent of Independent Registered Public Accounting Firm
The Board of Directors of
Four Corners Property Trust, Inc.:
We consent to the incorporation by reference in the registration statements on Form S-3ASR (No. 333-214908) of
Four Corners Property Trust, Inc. of our reports dated February 27, 2017, with respect to the consolidated balance
sheets of Four Corners Property Trust, Inc. as of December 31, 2016 and 2015, and the related consolidated and
combined statements of income, comprehensive income, changes in equity, and cash flows for each of the years in the
three-year period ended December 31, 2016, and the related financial statement schedule, and the effectiveness of
internal control over financial reporting as of December 31, 2016, which reports appear in the December 31, 2016
annual report on Form 10-K of Four Corners Property Trust, Inc.
/s/ KPMG LLP
San Francisco, California
February 27, 2017
EXHIBIT 31(a)
CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002
I, William H. Lenehan, certify that:
1.
I have reviewed this annual report on Form 10-K of Four Corners Property Trust, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly
present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and
for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period
in which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles;
c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation; and
d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred
during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control
over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or
persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process,
summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role
in the registrant’s internal control over financial reporting.
Date:
February 27, 2017
/s/ William H. Lenehan
President and Chief Executive Officer
EXHIBIT 31(b)
CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002
I, Gerald R. Morgan, certify that:
1.
I have reviewed this annual report on Form 10-K of Four Corners Property Trust, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly
present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and
for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period
in which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles;
c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation; and
d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred
during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control
over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or
persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process,
summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role
in the registrant’s internal control over financial reporting.
Date:
February 27, 2017
/s/ Gerald R. Morgan
Chief Financial Officer
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
EXHIBIT 32(a)
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Four Corners Property Trust, Inc. (“Company”) on Form 10-K for the year ended December
31, 2016, as filed with the Securities and Exchange Commission on the date hereof (“Report”), I, William H. Lenehan, President
and Chief Executive Officer of the Company, certify, to my knowledge, pursuant to 18 U.S.C. §1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, that:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as
amended; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of the Company.
Date:
February 27, 2017
/s/ William H. Lenehan
President and Chief Executive Officer
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
EXHIBIT 32(b)
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Four Corners Property Trust, Inc. (“Company”) on Form 10-K for the year ended December
31, 2016, as filed with the Securities and Exchange Commission on the date hereof (“Report”), I, Gerald R. Morgan, Chief Financial
Officer of the Company, certify, to my knowledge, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002, that:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as
amended; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of the Company.
Date:
February 27, 2017
/s/ Gerald R. Morgan
Chief Financial Officer
Board of Directors
John S. Moody (Chairman of the Board)
Principal Occupation: President of Parkside
Capital, LLC
Douglas B. Hansen, Jr. (Director)
Principal Occupation:
Properties, LLC
CEO of Atria
Marran H. Ogilvie (Director)
Principal Occupation: Committee for the
Lehman Brothers
(Europe)
Administration
International
Executive Officers
William H. Lenehan
Chief Executive Officer
Gerald R. Morgan
Chief Financial Officer
James L. Brat
General Counsel
Investor Contact Information
Phone:
415.965.8030
Email: investorrelations@fcpt.com
Legal Counsel
Hogan Lovells US LLP
Independent Auditors
KPMG LLP
Transfer Agent
Wells Fargo Shareowner Services
1110 Centre Pointe Curve
Paul E. Szurek (Director)
Principal Occupation: CEO of CoreSite
Realty Corporation
William H. Lenehan (Director)
Principal Occupation: CEO of Four Corners
Property Trust, Inc.
Suite 101
Mendota Heights, MN 55120-4100
Phone: 800.468.9716
www.shareowneronline.com
Available Information
A copy of our 2016 Annual Report on Form
10-K including the financial statements and
schedules (excluding exhibits), as filed with
the Securities and Exchange Commission,
can be obtained without charge through our
website at fcpt.com or by writing to our
office address.
Four Corners Property Trust
591 Redwood Hwy
Suite 1150
Mill Valley, CA 94941
www.fcpt.com
415.965.8030
BR35086T-0517-AR