FCPT
#Thank you, Rachel.
During the course of this call, we will make forward-looking statements, which are based on beliefs and assumptions made by us and information currently available to us.
Our actual results will be affected by known and unknown risks, uncertainties and factors that are beyond our control or ability to predict.
Our assumptions are not a guarantee of future performance and some will prove to be inaccurate.
For a more detailed description of some potential risks, please refer to our SEC filings, which can be found on the Investor Relations section of our website at www.fcpt.com.
All the information presented on this call is current as of today, February 21, 2018.
And in addition, reconciliation to non-GAAP financial measures presented on this call, such as FFO and AFFO, can be found in the company's supplemental report available on our website.
And with that, I'll turn the call over to our CEO, Bill <UNK>.
Bill.
Thanks, Bill.
First, a few comments on our operating results for the fourth quarter.
We generated $26.8 million of cash rental income after excluding noncash, straight-line rental adjustments.
On a run rate basis, the current annual cash base rent for leases in place as of the end of the year is $108 million.
Our weighted average annual rent escalator remains at approximately 1.5%.
Cash interest expense, excluding amortization of deferred financing costs and other noncash interest, was $4.5 million, reflecting a full quarter of lower margins on our $400 million term loan and lower unused fees on our revolver from the recasting of our credit facility in early October.
There were no borrowings on our revolving facility during the quarter as we maintained a net cash position, which was $64.4 million at quarter-end.
Our net income FFO and AFFO per share results were impacted in the quarter by the short-term dilutive effect of the balance sheet cash, but we were pleased to have the capital available to fund the Washington Prime transaction and other transactions in our pipeline before the movement in interest rates over the past several months.
As we mentioned in the press release, the FFO per share results were impacted by $0.01 due to noncash interest expense in connection with the credit facility recasting in October and a noncash credit that benefited our results in 2016 related to hedge ineffectiveness.
On an AFFO per share basis, which we remind everybody we believe best represents the cash flow generated from the business, we reported 6.5% growth in quarter-over-quarter results.
In the quarter, we reported $2.3 million of cash, general and administrative expenses after excluding noncash, stock-based compensation, and $9.6 million for the full year of 2017.
This result was comparable to our cash overhead in 2016 even though we've added 5 great new members to the team since we've achieved savings in professional fees and our second year of operations, insurance and other third-party expenses.
We are providing guidance for 2018 of an annual cash G&A rate of approximately $11 million, again excluding noncash, stock-based compensation and acquisition transaction costs.
Turning to the balance sheet, and as mentioned by Bill, we ended the quarter well capitalized for 2018 with net debt to EBITDA of 4.6x, $64 million of cash and full availability on our $250 million, 4-year revolving credit facility.
We remain committed to maintaining a conservative balance sheet with financial flexibility.
With that, we'll turn it back over to Rachel for Q&A.
Great question, <UNK>.
I think, incrementally, with higher borrowing costs and a less advantageous cost to capital, we still think it's advantageous, just less than it was.
I think we're being a little bit more conservative, but I would generally say that we are not overreacting, it's not a knee-jerk type change in philosophy.
I think we've refrained from commenting on that, and I think we're going to continue to refrain from commenting on that.
I think there's always been ample competition in the one-off 1031 exchange markets.
But no, I don't think we're seeing much in the way from other folks.
It's an awful lot of work as you can ---+ if you trace the time of the WPG deal, it started approximately this time last year.
We worked diligently to get it signed up in September, 41 assets to due diligence.
And again, only some have closed so far, the rest will close in the middle of this year.
It's an awful lot of work.
So I think we're uniquely suited to do it given our specialized nature and the experience we've learned.
Learnings we have had from the WPG deal positions us well, and we're putting our back into it to replicate it.
Other than the competition that was already there on the one-off sales I don't think we've noticed any change.
We actually expected that there would be wrinkles and ---+ anything times 41 is a lot, right.
So we knew it going in, I don't think there've been any real meaningful surprises.
I think it's too soon to tell.
You would expect the tax rate and the ability to more quickly depreciate improvements to benefit our business.
We haven't seen it yet though.
We have said consistently 5.5 to 6x is where we view the ceiling.
That's been very consistent with our communications with Fitch.
We view that as an investment-grade balance sheet, and we feel like we have financial flexibility to close what we have in our near-term sighted and still be within that level.
I guess, <UNK>
J.
, the distinction I'm making is what's possible mathematically.
We've tended to be conservative.
We set that target over ---+ close to 2.5 years ago, and as you mentioned, we haven't gotten there.
We think it's really advantageous to maintain low leverage.
But we haven't put ourselves in a situation where we're backed into a corner having to raise equity at prices we don't find favorable.
I think we have seen some signs of that, <UNK>, but it hasn't been a dramatic effect.
Well, we have seen a strong interest in our properties, and we've historically done the 1031 exchanges so it's exactly the dynamic you discussed We still see strong interest on the property so that's, obviously, always an option for us with very compelling spreads between the price in which we sell and the price in which we exchange.
As you saw recently, we sold an asset at 4.7% and exchanged in properties with a 6.7%.
So we've continued to see that sort of dynamic.
But as far as accelerating that, I think it's too soon to have a significant change in our strategy.
We are monitoring this closely, it's been a couple of weeks.
Well, thank you, everyone, for joining.
I appreciate the support.
And we're always here to answer questions off-line.
With that, thank you very much.
Thank you.
