QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
(Address of principal executive offices) |
Title of each class | Trading Symbol | Name of Exchange on Which Registered |
☒ | Accelerated filer | ☐ | Non-accelerated filer | ☐ | |
Smaller reporting company | Emerging growth company |
Page | ||
Part I | FINANCIAL INFORMATION | |
Item 1. | Financial Statements: | |
Item 2. | ||
Item 3. | ||
Item 4. | ||
Part II | OTHER INFORMATION | |
Item 1. | ||
Item 1A. | ||
Item 2. | ||
Item 3. | ||
Item 4. | ||
Item 5. | ||
Item 6. | ||
June 30, 2019 (Unaudited) | December 31, 2018 | |||||||
ASSETS | ||||||||
Real estate investments: | ||||||||
Land | $ | $ | ||||||
Buildings, equipment and improvements | ||||||||
Total real estate investments | ||||||||
Less: Accumulated depreciation | ( | ) | ( | ) | ||||
Total real estate investments, net | ||||||||
Intangible lease assets, net | ||||||||
Total real estate investments and intangible lease assets, net | ||||||||
Cash and cash equivalents | ||||||||
Straight-line rent adjustment | ||||||||
Derivative assets | ||||||||
Other assets | ||||||||
Total Assets | $ | $ | ||||||
LIABILITIES AND EQUITY | ||||||||
Liabilities: | ||||||||
Long-term debt, net of deferred financing costs | $ | $ | ||||||
Dividends payable | ||||||||
Rent received in advance | ||||||||
Derivative 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, 68,418,243 and 68,204,045 shares issued and outstanding, respectively | ||||||||
Additional paid-in capital | ||||||||
Retained earnings | ||||||||
Accumulated other comprehensive (loss) income | ( | ) | ||||||
Noncontrolling interest | ||||||||
Total equity | ||||||||
Total Liabilities and Equity | $ | $ |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Revenues: | ||||||||||||||||
Rental revenue | $ | $ | $ | $ | ||||||||||||
Restaurant revenue | ||||||||||||||||
Total revenues | ||||||||||||||||
Operating expenses: | ||||||||||||||||
General and administrative | ||||||||||||||||
Depreciation and amortization | ||||||||||||||||
Property expenses | ||||||||||||||||
Restaurant expenses | ||||||||||||||||
Total operating expenses | ||||||||||||||||
Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Other income | ||||||||||||||||
Realized gain on sale, net | ||||||||||||||||
Income tax expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
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 | $ | $ | $ | $ |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Net income | $ | $ | $ | $ | ||||||||||||
Other comprehensive (loss) income: | ||||||||||||||||
Effective portion of change in fair value of derivative instruments | ( | ) | ( | ) | ||||||||||||
Reclassification adjustment of derivative instruments included in net income | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Other comprehensive (loss) income | ( | ) | ( | ) | ||||||||||||
Comprehensive income | ||||||||||||||||
Less: comprehensive income attributable to noncontrolling interest | ||||||||||||||||
Net income attributable to noncontrolling interest | ||||||||||||||||
Other comprehensive income (loss) attributable to noncontrolling interest | ( | ) | ( | ) | ||||||||||||
Comprehensive income attributable to noncontrolling interest | ||||||||||||||||
Comprehensive Income Attributable to Common Shareholders | $ | $ | $ | $ |
Common Stock | Additional Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Noncontrolling Interest | Total | ||||||||||||||||||||||
Shares | Par Value | ||||||||||||||||||||||||||
Balance at March 31, 2019 | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
Net income | — | — | — | — | |||||||||||||||||||||||
Other comprehensive income | — | — | — | — | ( | ) | ( | ) | ( | ) | |||||||||||||||||
Redemption of OP units | — | — | — | ( | ) | ( | ) | ||||||||||||||||||||
ATM proceeds, net of issuance costs | — | — | — | — | |||||||||||||||||||||||
Dividends and distributions to equity holders | — | — | — | ( | ) | — | ( | ) | ( | ) | |||||||||||||||||
Stock-based compensation, net | — | — | — | — | |||||||||||||||||||||||
Balance at June 30, 2019 | $ | $ | $ | $ | ( | ) | $ | $ |
Common Stock | Additional Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Noncontrolling Interest | Total | ||||||||||||||||||||||
Shares | Par Value | ||||||||||||||||||||||||||
Balance at December 31, 2018 | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
Net income | — | — | — | — | |||||||||||||||||||||||
Other comprehensive income | — | — | — | — | ( | ) | ( | ) | ( | ) | |||||||||||||||||
Redemption of OP units | — | ( | ) | — | — | ( | ) | ( | ) | ||||||||||||||||||
ATM proceeds, net of issuance costs | — | — | — | — | |||||||||||||||||||||||
Dividends and distributions to equity holders | — | — | — | ( | ) | — | ( | ) | ( | ) | |||||||||||||||||
Stock-based compensation, net | — | ( | ) | — | — | — | ( | ) | |||||||||||||||||||
Balance at June 30, 2019 | $ | $ | $ | $ | ( | ) | $ | $ |
Common Stock | Additional Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Income | Noncontrolling Interest | Total | ||||||||||||||||||||||
Shares | Par Value | ||||||||||||||||||||||||||
Balance at March 31, 2018 | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
ASU 2017-12 cumulative effect adjustment | — | — | — | — | — | — | |||||||||||||||||||||
Net income | — | — | — | — | |||||||||||||||||||||||
Other comprehensive income | — | — | — | — | |||||||||||||||||||||||
ATM proceeds, net of issuance costs | — | — | — | — | |||||||||||||||||||||||
Dividends and distributions to equity holders | — | — | — | ( | ) | — | ( | ) | ( | ) | |||||||||||||||||
Stock-based compensation, net | — | — | — | — | |||||||||||||||||||||||
Balance at June 30, 2018 | $ | $ | $ | $ | $ | $ |
Common Stock | Additional Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Income | Noncontrolling Interest | Total | ||||||||||||||||||||||
Shares | Par Value | ||||||||||||||||||||||||||
Balance at December 31, 2017 | |||||||||||||||||||||||||||
ASU 2017-12 cumulative effect adjustment | — | — | — | ( | ) | — | |||||||||||||||||||||
Net income | — | — | — | — | |||||||||||||||||||||||
Other comprehensive income | — | — | — | — | |||||||||||||||||||||||
ATM proceeds, net of issuance costs | — | — | — | — | |||||||||||||||||||||||
Dividends and distributions to equity holders | — | — | — | ( | ) | — | ( | ) | ( | ) | |||||||||||||||||
Stock-based compensation, net | — | — | — | — | |||||||||||||||||||||||
Balance at June 30, 2018 | $ | $ | $ | $ | $ | $ |
Six Months Ended June 30, | ||||||||
2019 | 2018 | |||||||
Cash flows - operating activities | ||||||||
Net income | $ | $ | ||||||
Adjustments to reconcile net income to cash provided by operating activities: | ||||||||
Depreciation and amortization | ||||||||
Gain on disposal of land, building, and equipment | ( | ) | ||||||
Gain on exchange of non-financial assets | ( | ) | ||||||
Amortization of financing costs | ||||||||
Stock-based compensation expense | ||||||||
Changes in assets and liabilities: | ||||||||
Derivative assets and liabilities | ( | ) | ( | ) | ||||
Straight-line rent adjustment | ( | ) | ( | ) | ||||
Rent received in advance | ||||||||
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 | ||||||||
Net proceeds from ATM equity issuance | ||||||||
Payment of dividends to shareholders | ( | ) | ( | ) | ||||
Distributions to non-controlling interests | ( | ) | ( | ) | ||||
Redemption of non-controlling interests | ( | ) | ||||||
Employee shares withheld for taxes | ( | ) | ||||||
Net cash (used in) provided by financing activities | ( | ) | ||||||
Net (decrease) increase in cash and cash equivalents, including restricted cash | ( | ) | ||||||
Cash and cash equivalents, including restricted cash, at beginning of period | ||||||||
Cash and cash equivalents, including restricted cash, at end of period | $ | $ | ||||||
Supplemental disclosures: | ||||||||
Interest paid | $ | $ | ||||||
Income taxes paid | $ | $ | ||||||
Operating lease payments received (lessor) | $ | $ | ||||||
Operating lease payments remitted (lessee) | $ | $ | ||||||
Non-cash investing and financing activities: | ||||||||
Dividends declared but not paid | $ | $ | ||||||
Change in fair value of derivative instruments | $ | ( | ) | $ |
June 30, | December 31, | |||||||
(In thousands) | 2019 | 2018 | ||||||
Cash and cash equivalents | $ | $ | ||||||
Restricted cash (included in Other assets) | ||||||||
Total Cash, Cash Equivalents, and Restricted Cash | $ | $ |
• | 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. |
June 30, | December 31, | |||||||
(In thousands) | 2019 | 2018 | ||||||
Land | $ | $ | ||||||
Buildings and improvements | ||||||||
Equipment | ||||||||
Total gross real estate investments | ||||||||
Less: Accumulated depreciation | ( | ) | ( | ) | ||||
Total real estate investments, net | ||||||||
Intangible lease assets, net | ||||||||
Total Real Estate Investments and Intangible Lease Assets, Net | $ | $ |
June 30, | December 31, | |||||||
(In thousands) | 2019 | 2018 | ||||||
Acquired in-place lease intangibles | $ | $ | ||||||
Above-market leases | ||||||||
Total | ||||||||
Less: Accumulated amortization | ( | ) | ( | ) | ||||
Intangible Lease Assets, Net | $ | $ |
June 30, | December 31, | |||||||
(In thousands) | 2019 | 2018 | ||||||
Below-market leases | $ | $ | ||||||
Less: Accumulated amortization | ( | ) | ( | ) | ||||
Intangible Lease Liabilities, Net | $ | $ |
(In thousands) | June 30, 2019 | |||
2019 (six months) | $ | |||
2020 | ||||
2021 | ||||
2022 | ||||
2023 | ||||
Thereafter | ||||
Total Future Amortization | $ |
(In thousands) | December 31, 2018 | Upon Adoption (January 1, 2019) | As Adjusted | |||||||||
Operating lease right-of-use asset (included in other assets) | $ | — | $ | $ | ||||||||
Operating lease liability (included in other liabilities) | — | |||||||||||
Deferred rent payable | ( | ) | — |
(In thousands) | June 30, 2019 | |||
2019 (six months) | $ | |||
2020 | ||||
2021 | ||||
2022 | ||||
2023 | ||||
Thereafter | ||||
Total Payments | ||||
Less: Interest | ( | ) | ||
Operating Lease Liability | $ |
(In thousands) | December 31, 2018 | |||
2019 | $ | |||
2020 | ||||
2021 | ||||
2022 and thereafter | ||||
Total Future Lease Commitments | $ |
(In thousands) | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2019 | ||||||
Lease revenue - operating leases | $ | $ | ||||||
Variable lease revenue (tenant reimbursements) | ||||||||
Total Rental Revenue | $ | $ |
(In thousands) | June 30, 2019 | |||
2019 (six months) | $ | |||
2020 | ||||
2021 | ||||
2022 | ||||
2023 | ||||
Thereafter | ||||
Total Future Minimum Lease Payments | $ |
June 30, | December 31, | |||||||
(In thousands) | 2019 | 2018 | ||||||
Operating lease right-of-use asset | $ | $ | — | |||||
Prepaid acquisition costs and deposits | ||||||||
Prepaid assets | ||||||||
Accounts receivable | ||||||||
Food and beverage inventories | ||||||||
Escrow deposits | ||||||||
Other | ||||||||
Total Other Assets | $ | $ |
June 30, | December 31, | |||||||
(In thousands) | 2019 | 2018 | ||||||
Operating lease liability | $ | $ | — | |||||
Accrued interest expense | ||||||||
Accrued compensation | ||||||||
Accounts payable | ||||||||
Intangible lease liabilities, net | ||||||||
Accrued operating expenses | ||||||||
Other | ||||||||
Total Other Liabilities | $ | $ |
Outstanding Balance | |||||||||||||
Maturity | Interest | June 30, | December 31, | ||||||||||
(Dollars in thousands) | Date | Rate | 2019 | 2018 | |||||||||
Term Loans: | |||||||||||||
Term Loan 2022, amended and restated October 2017 & December 2018 | Nov 2022 | % | (a) | $ | $ | ||||||||
Term Loan 2023, extended December 2018 | Nov 2023 | % | (a) | ||||||||||
Term Loan 2024, extended December 2018 | Mar 2024 | % | (a) | ||||||||||
Total Term Loans | $ | $ | |||||||||||
(a) Loan is a variable‑rate loan which resets monthly at one-month LIBOR + the applicable credit spread which was 1.25-1.35% at June 30, 2019. |
Outstanding Balance | |||||||||||||
Maturity | Interest | June 30, | December 31, | ||||||||||
(Dollars in thousands) | Date | Rate | 2019 | 2018 | |||||||||
Notes Payable: | |||||||||||||
Senior unsecured fixed rate note, issued June 2017 | Jun 2024 | % | $ | $ | |||||||||
Senior unsecured fixed rate note, issued June 2017 | Jun 2027 | % | |||||||||||
Senior unsecured fixed rate note, issued December 2018 | Dec 2026 | % | |||||||||||
Senior unsecured fixed rate note, issued December 2018 | Dec 2028 | % | |||||||||||
Total Notes | $ | $ |
Derivative Assets | Derivative Liabilities | |||||||||||||||||||
Balance Sheet Location | Fair Value at | Balance Sheet Location | Fair Value at | |||||||||||||||||
(Dollars in thousands) | June 30, 2019 | December 31, 2018 | June 30, 2019 | December 31, 2018 | ||||||||||||||||
Derivatives designated as hedging instruments: | ||||||||||||||||||||
Interest rate swaps | Derivative assets | $ | $ | Derivative liabilities | $ | $ | ||||||||||||||
Total | $ | $ | $ | $ |
(Dollars in thousands) | 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) | Total Amount of Interest expense Presented in the Consolidated Statements of Income | ||||||||||
Three months ended June 30, 2019 | $ | ( | ) | Interest expense | $ | $ | ( | ) | ||||||
Three months ended June 30, 2018 | $ | Interest expense | $ | $ | ( | ) | ||||||||
Six months ended June 30, 2019 | $ | ( | ) | Interest expense | $ | $ | ( | ) | ||||||
Six months ended June 30, 2018 | $ | Interest expense | $ | $ | ( | ) |
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 | |||||||||||||||||||||
(In thousands) | Financial Instruments | Cash Collateral Received | Net Amount | |||||||||||||||||||||
June 30, 2019 | $ | $ | $ | $ | ( | ) | $ | $ | ||||||||||||||||
December 31, 2018 |
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 | |||||||||||||||||||||
(In thousands) | Financial Instruments | Cash Collateral Posted | Net Amount | |||||||||||||||||||||
June 30, 2019 | $ | $ | $ | $ | ( | ) | $ | $ | ||||||||||||||||
December 31, 2018 |
(In thousands except for shares and per share data) | Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Average common shares outstanding – basic | ||||||||||||||||
Net effect of dilutive equity awards | ||||||||||||||||
Average common shares outstanding – diluted | ||||||||||||||||
Net income available to common shareholders | $ | $ | $ | $ | ||||||||||||
Basic net earnings per share | $ | $ | $ | $ | ||||||||||||
Diluted net earnings per share | $ | $ | $ | $ |
(In thousands) | Restricted Stock Units | Restricted Stock Awards | Performance Stock Awards | Total | ||||||||||||
Unrecognized compensation cost at January 1, 2019 | $ | $ | $ | $ | ||||||||||||
Equity grants | ||||||||||||||||
Equity grant forfeitures | ||||||||||||||||
Equity compensation expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Unrecognized Compensation Cost at June 30, 2019 | $ | $ | $ | $ |
June 30, 2019 | ||||||||||||||||
(In thousands) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Assets | ||||||||||||||||
Derivative assets | $ | $ | $ | $ | ||||||||||||
Liabilities | ||||||||||||||||
Derivative liabilities | $ | $ | $ | $ |
December 31, 2018 | ||||||||||||||||
(In thousands) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Assets | ||||||||||||||||
Derivative assets | $ | $ | $ | $ | ||||||||||||
Liabilities | ||||||||||||||||
Derivative liabilities | $ | $ | $ | $ |
June 30, 2019 | ||||||||
(In thousands) | Carrying Value(1) | Fair Value | ||||||
Term loan due 2022 | $ | $ | ||||||
Term loan due 2023 | ||||||||
Term loan due 2024 | ||||||||
Senior fixed note due June 2024 | ||||||||
Senior fixed note due June 2027 | ||||||||
Senior fixed note due June 2026 | ||||||||
Senior fixed note due June 2028 |
December 31, 2018 | ||||||||
(In thousands) | Carrying Value(1) | Fair Value | ||||||
Term loan due 2022 | $ | $ | ||||||
Term loan due 2023 | ||||||||
Term loan due 2024 | ||||||||
Senior fixed note due June 2024 | ||||||||
Senior fixed note due June 2027 | ||||||||
Senior fixed note due June 2026 | ||||||||
Senior fixed note due June 2028 |
(In thousands) | Real Estate Operations | Restaurant Operations | Intercompany | Total | ||||||||||||
Revenues: | ||||||||||||||||
Rental revenue | $ | $ | $ | $ | ||||||||||||
Intercompany rental revenue | ( | ) | ||||||||||||||
Restaurant revenue | ||||||||||||||||
Total revenues | ( | ) | ||||||||||||||
Operating expenses: | ||||||||||||||||
General and administrative | ||||||||||||||||
Depreciation and amortization | ||||||||||||||||
Property expenses | ||||||||||||||||
Restaurant expenses | ( | ) | ||||||||||||||
Total operating expenses | ( | ) | ||||||||||||||
Interest expense | ( | ) | ( | ) | ||||||||||||
Other income | ||||||||||||||||
Realized gain on sale, net | ||||||||||||||||
Income tax expense | ( | ) | ( | ) | ( | ) | ||||||||||
Net Income (Loss) | $ | $ | ( | ) | $ | $ |
(In thousands) | Real Estate Operations | Restaurant Operations | Intercompany | Total | ||||||||||||
Revenues: | ||||||||||||||||
Rental revenue | $ | $ | $ | $ | ||||||||||||
Intercompany rental revenue | ( | ) | ||||||||||||||
Restaurant revenue | ||||||||||||||||
Total revenues | ( | ) | ||||||||||||||
Operating expenses: | ||||||||||||||||
General and administrative | ||||||||||||||||
Depreciation and amortization | ||||||||||||||||
Property expenses | ||||||||||||||||
Restaurant expenses | ( | ) | ||||||||||||||
Total operating expenses | ( | ) | ||||||||||||||
Interest expense | ( | ) | ( | ) | ||||||||||||
Other income | ||||||||||||||||
Realized gain on sale, net | ||||||||||||||||
Income tax expense | ( | ) | ( | ) | ( | ) | ||||||||||
Net Income | $ | $ | $ | $ |
(In thousands) | Real Estate Operations | Restaurant Operations | Intercompany | Total | ||||||||||||
Revenues: | ||||||||||||||||
Rental revenue | $ | $ | $ | $ | ||||||||||||
Intercompany rental revenue | ( | ) | ||||||||||||||
Restaurant revenue | ||||||||||||||||
Total revenues | ( | ) | ||||||||||||||
Operating expenses: | ||||||||||||||||
General and administrative | ||||||||||||||||
Depreciation and amortization | ||||||||||||||||
Property expenses | ||||||||||||||||
Restaurant expenses | ( | ) | ||||||||||||||
Total operating expenses | ( | ) | ||||||||||||||
Interest expense | ( | ) | ( | ) | ||||||||||||
Other income | ||||||||||||||||
Realized gain on sale, net | ||||||||||||||||
Income tax expense | ( | ) | ( | ) | ( | ) | ||||||||||
Net Income | $ | $ | $ | $ |
(In thousands) | Real Estate Operations | Restaurant Operations | Intercompany | Total | ||||||||||||
Revenues: | ||||||||||||||||
Rental revenue | $ | $ | $ | $ | ||||||||||||
Intercompany rental revenue | ( | ) | ||||||||||||||
Restaurant revenue | ||||||||||||||||
Total revenues | ( | ) | ||||||||||||||
Operating expenses: | ||||||||||||||||
General and administrative | ||||||||||||||||
Depreciation and amortization | ||||||||||||||||
Property expenses | ||||||||||||||||
Restaurant expenses | ( | ) | ||||||||||||||
Total operating expenses | ( | ) | ||||||||||||||
Interest expense | ( | ) | ( | ) | ||||||||||||
Other income | ||||||||||||||||
Realized gain on sale, net | ||||||||||||||||
Income tax expense | ( | ) | ( | ) | ( | ) | ||||||||||
Net Income | $ | $ | $ | $ |
(In thousands) | Real Estate Operations | Restaurant Operations | Total | |||||||||
Total real estate investments | $ | $ | $ | |||||||||
Accumulated depreciation | ( | ) | ( | ) | ( | ) | ||||||
Total real estate investments, net | ||||||||||||
Cash and cash equivalents | ||||||||||||
Total assets | ||||||||||||
Long-term debt, net of deferred financing costs |
(In thousands) | Real Estate Operations | Restaurant Operations | Total | |||||||||
Total real estate investments | $ | $ | $ | |||||||||
Accumulated depreciation | ( | ) | ( | ) | ( | ) | ||||||
Total real estate investments, net | ||||||||||||
Cash and cash equivalents | ||||||||||||
Total assets | ||||||||||||
Long-term debt, net of deferred financing costs |
• | 642 free-standing properties located in 45 states and representing an aggregate leasable area of 4.3 million square feet; |
• | 99.9% occupancy (based on leasable square footage); |
• | An average remaining lease term of 11.8 years (weighted by annualized base rent); |
• | An average annual rent escalation of 1.5% through December 31, 2029 (weighted by annualized base rent); and |
• | 75% investment grade tenancy (weighted by annualized base rent). |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
(In thousands) | 2019 | 2018 | 2019 | 2018 | ||||||||||||
Revenues: | ||||||||||||||||
Rental revenue | $ | 34,415 | $ | 29,596 | $ | 68,623 | $ | 59,186 | ||||||||
Restaurant revenue | 5,153 | 5,079 | 10,546 | 10,293 | ||||||||||||
Total revenues | 39,568 | 34,675 | 79,169 | 69,479 | ||||||||||||
Operating expenses: | ||||||||||||||||
General and administrative | 3,431 | 3,109 | 7,377 | 6,692 | ||||||||||||
Depreciation and amortization | 6,518 | 5,225 | 12,879 | 10,569 | ||||||||||||
Property expenses | 417 | 95 | 725 | 181 | ||||||||||||
Restaurant expenses | 4,954 | 4,786 | 9,937 | 9,656 | ||||||||||||
Total operating expenses | 15,320 | 13,215 | 30,918 | 27,098 | ||||||||||||
Interest expense | (6,557 | ) | (4,877 | ) | (13,304 | ) | (9,733 | ) | ||||||||
Other income | 306 | 231 | 719 | 588 | ||||||||||||
Realized gain on sale, net | — | 10,879 | — | 10,879 | ||||||||||||
Income tax expense | (61 | ) | (66 | ) | (129 | ) | (125 | ) | ||||||||
Net income | 17,936 | 27,627 | 35,537 | 43,990 | ||||||||||||
Net income attributable to noncontrolling interest | (68 | ) | (182 | ) | (166 | ) | (291 | ) | ||||||||
Net Income Attributable to Common Shareholders | $ | 17,868 | $ | 27,445 | $ | 35,371 | $ | 43,699 |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
(In thousands, except share and per share data) | 2019 | 2018 | 2019 | 2018 | ||||||||||||
Net income | $ | 17,936 | $ | 27,627 | $ | 35,537 | $ | 43,990 | ||||||||
Depreciation and amortization on real estate investments | 6,501 | 5,209 | 12,845 | 10,540 | ||||||||||||
Realized gain on sales of real estate | — | (10,879 | ) | — | (10,879 | ) | ||||||||||
Realized gain on exchange of real estate (1) | — | — | — | (228 | ) | |||||||||||
FFO (as defined by NAREIT) | $ | 24,437 | $ | 21,957 | $ | 48,382 | $ | 43,423 | ||||||||
Straight-line rent | (2,234 | ) | (2,280 | ) | (4,593 | ) | (4,563 | ) | ||||||||
Stock-based compensation | 776 | 924 | 1,989 | 2,107 | ||||||||||||
Non-cash amortization of deferred financing costs | 514 | 455 | 1,027 | 910 | ||||||||||||
Other non-cash interest expense | (1 | ) | (1 | ) | (5 | ) | (6 | ) | ||||||||
Non-real estate investment depreciation | 17 | 16 | 34 | 29 | ||||||||||||
Amortization of above and below market leases | 12 | 15 | 24 | 31 | ||||||||||||
Adjusted Funds from Operations (AFFO) | $ | 23,521 | $ | 21,086 | $ | 46,858 | $ | 41,931 | ||||||||
Fully diluted shares outstanding (2) | 68,795,687 | 62,321,019 | 68,797,156 | 62,070,880 | ||||||||||||
FFO per diluted share | $ | 0.36 | $ | 0.35 | $ | 0.70 | $ | 0.70 | ||||||||
AFFO per diluted share | $ | 0.34 | $ | 0.34 | $ | 0.68 | $ | 0.68 |
1. | Transaction costs incurred in connection with business combinations |
2. | Straight-line rent revenue adjustment |
3. | Stock-based compensation expense |
4. | Non-cash amortization of deferred financing costs |
5. | Other non-cash interest expense (income) |
6. | Non-real estate investment depreciation |
7. | Merger, restructuring and other related costs |
8. | Impairment charges |
9. | Amortization of above and below market leases |
10. | Amortization of capitalized leasing costs |
11. | Debt extinguishment gains and losses |
12. | Recurring capital expenditures and tenant improvements |
Exhibit Number | Description | |
3.1 | ||
3.2 | ||
31 (a) | ||
31 (b) | ||
32 (a) | ||
32 (b) | ||
101* | The following materials from Four Corners Property Trust, Inc.’s Quarterly Report on Form 10-Q for the six months ended June 30, 2019 formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Income, (iii) the Consolidated Statements of Comprehensive Income, (iv) the Consolidated Statement of Equity, (v) the Consolidated Statements of Cash Flows, and (vi) related notes to these consolidated financial statements. |
FOUR CORNERS PROPERTY TRUST, INC. | |||
Dated: | July 31, 2019 | By: | /s/ William H. Lenehan |
William H. Lenehan | |||
President and Chief Executive Officer | |||
(Principal Executive Officer) | |||
Dated: | July 31, 2019 | By: | /s/ Gerald R. Morgan |
Gerald R. Morgan | |||
Chief Financial Officer | |||
(Principal Financial Officer) | |||
Dated: | July 31, 2019 | By: | /s/ Niccole M. Stewart |
Niccole M. Stewart | |||
Chief Accounting Officer | |||
(Principal Accounting Officer) | |||
1. | I have reviewed this quarterly report on Form 10-Q 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: | July 31, 2019 |
/s/ William H. Lenehan | |
William H. Lenehan | |
President and Chief Executive Officer |
1. | I have reviewed this quarterly report on Form 10-Q 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: | July 31, 2019 |
/s/ Gerald R. Morgan | |
Gerald R. Morgan | |
Chief Financial Officer |
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: | July 31, 2019 |
/s/ William H. Lenehan | |
William H. Lenehan | |
President and Chief Executive Officer |
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: | July 31, 2019 |
/s/ Gerald R. Morgan | |
Gerald R. Morgan | |
Chief Financial Officer |
CONSOLIDATED BALANCE SHEETS (PARENTHETICAL) - $ / shares |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Preferred stock, par value (in USD per share) | $ 0.0001 | $ 0.0001 |
Preferred stock, shares authorized | 25,000,000 | 25,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value (in USD per share) | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized | 500,000,000 | 500,000,000 |
Common stock, shares issued | 68,418,243 | 68,204,045 |
Common stock, shares outstanding | 68,418,243 | 68,204,045 |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Statement of Comprehensive Income [Abstract] | ||||
Net income | $ 17,936 | $ 27,627 | $ 35,537 | $ 43,990 |
Other comprehensive (loss) income: | ||||
Effective portion of change in fair value of derivative instruments | (5,937) | 2,719 | (8,964) | 8,102 |
Reclassification adjustment of derivative instruments included in net income | (580) | (575) | (1,189) | (814) |
Other comprehensive (loss) income | (6,517) | 2,144 | (10,153) | 7,288 |
Comprehensive income | 11,419 | 29,771 | 25,384 | 51,278 |
Less: comprehensive income attributable to noncontrolling interest | ||||
Net income attributable to noncontrolling interest | 68 | 182 | 166 | 291 |
Other comprehensive income (loss) attributable to noncontrolling interest | (27) | 14 | (48) | 48 |
Comprehensive income attributable to noncontrolling interest | 41 | 196 | 118 | 339 |
Comprehensive Income Attributable to Common Shareholders | $ 11,378 | $ 29,575 | $ 25,266 | $ 50,939 |
Organization |
6 Months Ended |
---|---|
Jun. 30, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Organization | ORGANIZATION Four Corners Property Trust, Inc. (together with its consolidated 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 other retail 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 owned 418 properties 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”). We believe that we have been organized and have operated in conformity with the requirements for qualification and taxation as a real estate investment trust (a “REIT”) for federal income tax purposes commencing with our taxable year ended December 31, 2016, and we intend to continue to operate in a manner that will enable us to maintain our qualification as a REIT. 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 made our REIT election upon the filing of our 2016 tax return. Any references to “the Company,” “we,” “us,” or “our” refer to FCPT as an independent, publicly traded, self-administered company.
|
Summary of Significant Accounting Policies |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Significant Accounting Policies | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation and Basis of Presentation The accompanying consolidated financial statements (the “Consolidated Financial Statements”) include the accounts of Four Corners Property Trust, Inc. and its consolidated subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. The Consolidated Financial Statements reflect all adjustments which are, in the opinion of management, necessary to a fair presentation of the results for the interim periods presented. These adjustments are considered to be of a normal, recurring nature. Use of Estimates The preparation of these Consolidated 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 revenue and expenses during the reporting period. The estimates and assumptions used in the accompanying Consolidated Financial Statements are based on management’s evaluation of the relevant facts and circumstances. Actual results may differ from the estimates and assumptions used in preparing the accompanying Consolidated Financial Statements, and such differences could be material. Real Estate Investments, Net Real estate investments, net are recorded at cost less accumulated depreciation. Building components are depreciated over estimated useful lives ranging from seven to fifty-five years using the straight-line method. Leasehold improvements, which are reflected on our Consolidated Balance Sheets as a component of buildings, equipment, and improvements, 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 realized gain on sale, net, in our accompanying Consolidated Statements of Income (“Income Statements”). Our accounting policies regarding land, buildings, equipment, and 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 The Company evaluates acquisitions to determine whether transactions should be accounted for as asset acquisitions or business combinations in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2017-01. The Company has determined the land, building, site improvements, and in-places leases (if any) of assets acquired were each single assets as 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. Additionally, the Company has not acquired a substantive process used to generate outputs. As substantially all of the fair value of the gross assets acquired are concentrated in a single identifiable asset and there were no processes acquired, the acquisitions do not 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 improvements based on their relative fair values. The determination of the building fair value is on an ‘as-if-vacant’ basis. Value is allocated to acquired lease intangibles (if any) based on the costs avoided and revenue recognized by acquiring the property subject to lease and avoiding an otherwise ‘dark period’. In making estimates of fair values for this purpose, the Company uses a third-party specialist that obtains various information about each property, as well as the pre-acquisition due diligence of the Company and prior leasing activities at the site. 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, acquired lease intangibles are valued based on the Company’s estimates of costs related to tenant acquisition and the asset carrying costs, including lost revenue, 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-market 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 as an impairment loss included in depreciation and amortization expense. To date, the Company has not had significant early terminations. 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. 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 Income Statements as the original impairment. Provisions for impairment are included in depreciation and amortization expense. We did not record impairment expense during the six months ended June 30, 2019 or 2018. Real Estate Held for Sale Real estate is classified as held for sale when the sale is probable, will be completed within one year, purchase agreements are executed, the buyer has a significant deposit at risk, and no financing contingencies exist which could prevent the transaction from being completed in a timely manner. Restaurant sites and certain other assets to be disposed of are included in assets held for sale when 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, equipment and improvements 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 meet the requirements to be reported as discontinued operations. Real estate held for sale is reported at the lower of carrying amount or fair value, less estimated costs to sell. There was no real estate held for sale at June 30, 2019 or December 31, 2018. Cash, Cash Equivalents, and Restricted Cash 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. Restricted cash consists of 1031 tax deferred real estate exchange proceeds and is included in Other assets on our Consolidated Balance Sheets. The following table provides a reconciliation of cash, cash equivalents, and restricted cash in our Consolidated Balance Sheets to the total amount shown in our Consolidated Statements of Cash Flows:
Long-term Debt Long-term debt is carried at unpaid principal balance, net of deferred financing costs. All of our long-term debt is currently unsecured and interest is paid monthly on our non-amortizing term loans and revolving credit facility and semi-annually on our senior fixed rate notes. 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 Consolidated Balance Sheets. See Note 7 - Long-term Debt, Net of Deferred Financing Costs for additional information. 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 United States generally accepted accounting principles (“U.S. GAAP”), changes in the derivatives’ fair value are not included in current earnings but are included in accumulated other comprehensive income, 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 right of use operating lease assets, pre-acquisition costs, prepaid assets, food and beverage inventories for use by our Kerrow operating subsidiary, escrow deposits, and accounts receivable. Other liabilities primarily consist of accrued compensation, accrued interest, accrued operating expenses, and operating lease liabilities. See Note 6 - Supplemental Detail for Certain Components of Consolidated Balance Sheets for additional information. Leases Effective January 1, 2019, the Company adopted ASU 2016-02, Leases (“ASC 842”), using the effective date method. Consolidated Financial Statements for reporting periods beginning on or after January 1, 2019, are presented under the new guidance, while prior periods amounts are not adjusted and continue to be reported in accordance with previous guidance. We elected the package of practical expedients which permits us to not reassess (1) whether any expired or existing contracts are or contain leases, (2) the lease classification for any expired or existing leases, and (3) any initial direct costs for any existing leases as of the effective date. We did not elect the hindsight practical expedient which permits entities to use hindsight in determining the lease term and assessing impairment. The adoption of the lease standard did not change our previously reported Consolidated Financial Statements and did not result in a cumulative adjustment to equity. All significant lease arrangements are generally recognized at lease commencement. For leases where the Company is the lessee upon adoption of ASC 842, operating lease right-of-use (“ROU”) assets and lease liabilities are recognized at commencement based on the present value of lease payments over the lease term. ROU assets represent our right to use an underlying asset during the reasonably certain lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense is recognized on a straight-line basis over the lease term. For leases where Company is the lessor, we determine the classification upon commencement. At June 30, 2019, all leases are classified as operating leases. These operating leases may contain both lease and non-lease components. The Company accounts for lease and non-lease components as a single component. Prior to adoption of ASC 842, lease origination fees were deferred and amortized over the related lease term as an adjustment to depreciation expense. Subsequent to the adoption of ASC 842 on January 1, 2019, the Company expenses certain initial direct costs that are not incremental in obtaining a lease. See Note 5 - Leases for additional information. Revenue Recognition Rental Revenue For those 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 probable. Recognizing rental revenue 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 deferred rent receivable. We assess the collectability of our lease receivables, including deferred rents receivable, on several factors, including payment history, the financial strength of the tenant and any guarantors, historical operations and operating trends of the property, and current economic conditions. If our evaluation of these factors indicates it is not probable that we will be to recover substantially all of the receivable, we derecognize the deferred rent receivable asset and record as a reduction in rental revenue. 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. Prior to the adoption of ASC 842, lessor costs reimbursed by the lessee were presented on a net basis in our Consolidated Financial Statements. Subsequent to the adoption of ASC 842 on January 1, 2019, costs paid by the lessor and reimbursed by the lessees will be included in variable lease payments and presented on a gross basis within rental revenue. Sales taxes collected from lessees and remitted to governmental authorities are presented on a net basis within rental revenue. Restaurant Revenue Restaurant revenue represents food, beverage, and other products sold and is presented net of the following discounts: coupons, employee meals, complimentary meals and gift cards. Revenue from restaurant sales, whether received in cash or by credit card, is recognized when food and beverage products are sold. At both June 30, 2019, and December 31, 2018, credit card receivables, included in other assets, totaled $84 thousand and $82 thousand, respectively. 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 Income Statements. Restaurant Expenses Restaurant expenses include restaurant labor, general and administrative expenses, rent expense, 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. Income Taxes We believe that we have been organized and have operated in conformity with the requirements for qualification and taxation as a REIT commencing with our taxable year ended December 31, 2016, and we intend to continue to operate in a manner that will enable us to maintain our qualification as a REIT. So long as we qualify as a REIT, we generally will not be subject to federal income tax on our net income that we distribute currently to our shareholders. To maintain our qualification as a REIT, we are 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 shareholders and meet certain other requirements. If we fail to qualify as a REIT in any taxable year, we will be subject to 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, federal income and excise taxes may be due on our undistributed taxable income. The Kerrow Restaurant Operating Business is a TRS and is taxed as a C corporation. See Note 9 - Income Taxes 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 and non-controlling interests. None of the Company’s equity awards are participating securities. See Note 10 - Equity for additional information. 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 (“DEUs”), restricted stock units (“RSUs”), and other types of awards to eligible participants. 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. 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:
Application of New Accounting Standards We consider the applicability and impact of all ASUs issued by the FASB. ASUs not yet adopted were assessed and determined to be either not applicable or are expected to have minimal impact on our consolidated result of operations, financial position and cash flows.
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Concentration of Credit Risk |
6 Months Ended |
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Jun. 30, 2019 | |
Concentration of Credit Risk [Abstract] | |
Concentration of Credit Risk | CONCENTRATION OF CREDIT RISK Our tenant base and the restaurant brands operating our properties are highly concentrated. With respect to our tenant base, Darden leases represent approximately 75% of the scheduled base rents from the properties we own. As our revenues predominately consist of rental payments, we are dependent on Darden for a significant portion of our leasing revenues. The audited and unaudited financial statements for Darden are included in its filings with the SEC, which can be found on the SEC’s internet website at www.sec.gov. Reference to Darden’s filings with the SEC is solely for the information of investors. We do not intend this website to be an active link or to otherwise incorporate the information contained on such website (including Darden’s filings with the SEC) into this report or our other filings with the SEC. We also are subject to concentration risk in terms of the restaurant brands that operate our properties. As of June 30, 2019, FCPT had 301 Olive Garden branded locations in our portfolio, which comprise approximately 47% of our leased properties and approximately 56% of the revenues received under leases. Our properties, including the Kerrow Restaurant Operating Business, are located in 45 states, with concentrations of 10% or greater of total rental revenue in two states: Texas (12.1%) and Florida (11.2%). 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 June 30, 2019, our exposure to risk related to our derivative instruments totaled $4.2 million including accrued interest, and the counterparty to such instruments are investment grade financial institutions. Our credit risk exposure with regard to our cash and the $250.0 million available capacity under the revolver portion of our credit facility is spread among a diversified group of investment grade financial institutions.
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Real Estate Investments, Net and Intangible Assets and Liabilities, Net |
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Real Estate [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Real Estate Investments, Net and Intangible Assets and Liabilities, Net | REAL ESTATE INVESMENTS, NET AND INTANGIBLE ASSETS AND LIABILITIES, NET Real Estate Investments, Net Real estate investments, net, which consist of land, buildings and improvements leased to others subject to net operating leases and those utilized in the operations of Kerrow Restaurant Operating Business are summarized as follows:
During the six months ended June 30, 2019, the Company invested $64.6 million, including transaction costs, in 32 restaurant properties located in fifteen states, and allocated the investment as follows: $34.0 million to land, $22.2 million to buildings and improvements, and $8.4 million to intangible assets principally related to the value of the in-place leases acquired. There was no contingent consideration associated with these acquisitions. These properties are 100% occupied under net leases, with a weighted average remaining lease term of 11.8 years as of June 30, 2019. The Company did not dispose of any properties during the six months ended June 30, 2019. During the six months ended June 30, 2018, the Company invested $37.9 million, including transaction costs, in 21 restaurant properties located in ten states, and allocated the investment as follows: $24.7 million to land, $8.7 million to buildings and improvements, and $4.5 million to intangible assets principally related to the value of the in-place leases acquired. During the six months ended June 30, 2018, the Company sold one property with a net book value of $4.6 million for a realized gain on sale of $10.9 million. Intangible Lease Assets and Liabilities, Net Acquired in-place lease intangibles are amortized over the remaining lease term as depreciation and amortization expense. Above-market and below-market leases are amortized over the initial term of the respective leases as an adjustment to rental revenue. Intangible lease liabilities are included in Other liabilities on our Consolidated Balance Sheets. The following tables detail intangible lease assets and liabilities.
The value of acquired in-place leases amortized and included in depreciation and amortization expense was $704 thousand and $123 thousand for the three months ended June 30, 2019 and 2018, respectively, and $1.3 million and $245 thousand for the six months ended June 30, 2019 and 2018, respectively. The value of above-market and below-market leases amortized as an adjustment to revenue was $12 thousand and $15 thousand for the three months ended June 30, 2019 and 2018, respectively, and $24 thousand and $31 thousand for the six months ended June 30, 2019 and 2018, respectively. At June 30, 2019, the total weighted average amortization period remaining for our intangible lease assets and liabilities was 13.2 years, and the individual weighted average amortization period remaining for acquired in-place lease intangibles, above-market leases, and below-market leases was 12.9 years, 15.2 years, and 8.6 years, respectively. Amortization of Above-Market and Below-Market Lease Intangibles The following table presents the estimated impact during the next five years and thereafter related to the amortization of in-place lease intangibles, and above-market and below-market lease intangibles for properties held for investment at June 30, 2019.
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Leases |
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Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leases | LEASES Operating Leases as Lessee Upon adoption of ASC 842, as a lessee we recorded ROU assets and lease liabilities for the three ground leases at our Kerrow Restaurant Operating Business. These ground leases have extension options, which we believe will be exercised and are included in the calculation of our lease liabilities and right-of-use assets. In calculating the lease obligations under the ground leases, we used discount rates estimated to be equal to what the Company would have to pay to borrow on a collateralized basis over a similar term, for an amount equal to the lease payments, in a similar economic environment. Impact of Adoption The table below presents the impact of adoption of the lease standard on our Consolidated Balance Sheet as of January 1, 2019.
Operating Lease Liability As of June 30, 2019, maturities of operating lease liabilities were as follows:
The weighted-average discount rate for operating leases at June 30, 2019 was 4.52%. The weighted-average remaining lease term was 21.7 years. As previously disclosed in our 2018 Annual Report on Form 10-K and under the previous lease accounting standard, the following table presents future minimum lease commitments under non-cancelable operating leases. The table does not reflect available operating lease extensions.
Rental expense was $165 thousand and $178 thousand for the three months ended June 30, 2019 and 2018, respectively, and $333 thousand and $354 thousand for the six months ended June 30, 2019 and 2018, respectively. Operating Leases as Lessor Our leases consist primarily of single-tenant, net leases, in which the tenants are responsible for making payments to third parties for operating expenses such as property taxes, insurance, and other costs associated with the properties leased to them. In leases where costs are paid by the Company and reimbursed by lessees, such payments are considered variable lease payments and recognized in rental revenue. The following table shows the components of rental revenue for the three and six months ended June 30, 2019.
Future Minimum Lease Payments to be Received The following table presents the scheduled minimum future contractual rent to be received under the remaining non-cancelable term of the operating leases. The table presents future minimum lease payments due during the initial lease term only as lease renewal periods are exercisable at the option of the lessee.
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Leases | LEASES Operating Leases as Lessee Upon adoption of ASC 842, as a lessee we recorded ROU assets and lease liabilities for the three ground leases at our Kerrow Restaurant Operating Business. These ground leases have extension options, which we believe will be exercised and are included in the calculation of our lease liabilities and right-of-use assets. In calculating the lease obligations under the ground leases, we used discount rates estimated to be equal to what the Company would have to pay to borrow on a collateralized basis over a similar term, for an amount equal to the lease payments, in a similar economic environment. Impact of Adoption The table below presents the impact of adoption of the lease standard on our Consolidated Balance Sheet as of January 1, 2019.
Operating Lease Liability As of June 30, 2019, maturities of operating lease liabilities were as follows:
The weighted-average discount rate for operating leases at June 30, 2019 was 4.52%. The weighted-average remaining lease term was 21.7 years. As previously disclosed in our 2018 Annual Report on Form 10-K and under the previous lease accounting standard, the following table presents future minimum lease commitments under non-cancelable operating leases. The table does not reflect available operating lease extensions.
Rental expense was $165 thousand and $178 thousand for the three months ended June 30, 2019 and 2018, respectively, and $333 thousand and $354 thousand for the six months ended June 30, 2019 and 2018, respectively. Operating Leases as Lessor Our leases consist primarily of single-tenant, net leases, in which the tenants are responsible for making payments to third parties for operating expenses such as property taxes, insurance, and other costs associated with the properties leased to them. In leases where costs are paid by the Company and reimbursed by lessees, such payments are considered variable lease payments and recognized in rental revenue. The following table shows the components of rental revenue for the three and six months ended June 30, 2019.
Future Minimum Lease Payments to be Received The following table presents the scheduled minimum future contractual rent to be received under the remaining non-cancelable term of the operating leases. The table presents future minimum lease payments due during the initial lease term only as lease renewal periods are exercisable at the option of the lessee.
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Supplemental Detail for Certain Components of Consolidated Balance Sheets |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Supplemental Detail for Certain Components of Consolidated Balance Sheets | SUPPLEMENTAL DETAIL FOR CERTAIN COMPONENTS OF CONSOLIDATED BALANCE SHEETS Other Assets The components of other assets were as follows:
Other Liabilities The components of other liabilities were as follows:
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Long-Term Debt, Net of Deferred Financing Costs |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Long-Term Debt, Net of Deferred Financing Costs | LONG-TERM DEBT, NET OF DEFERRED FINANCING COSTS At June 30, 2019, and December 31, 2018, our long-term debt consisted of (1) $400 million of non-amortizing term loans and (2) $225 million of senior, unsecured, fixed rate notes. The following table presents the Term Loan balances as of June 30, 2019 and December 31, 2018.
The following table presents the senior unsecured fixed rate notes balance as of June 30, 2019 and December 31, 2018.
At June 30, 2019, and December 31, 2018, net unamortized deferred financing costs were approximately $8.1 million and $9.1 million, respectively. During the three months ended June 30, 2019 and 2018, amortization of deferred financing costs was $512 thousand and $455 thousand, respectively. During the six months ended June 30, 2019 and 2018, amortization of deferred financing costs was $1.0 million and $910 thousand, respectively. The weighted average interest rate on the term loans before consideration of the interest rate hedge described below was 3.76% and 3.68% at June 30, 2019 and December 31, 2018, respectively. At June 30, 2019 and December 31, 2018, there was no balance outstanding under the $250 million revolving credit facility nor any outstanding letters of credit. The Company was in compliance with all debt covenants at June 30, 2019.
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Derivative Financial Instruments |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Financial Instruments | 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 change 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 six months ended June 30, 2019 and 2018, such derivatives were used to hedge the variable cash flows associated with existing variable-rate debt. As of June 30, 2019 and December 31, 2018, $300 million of our variable-rate debt is hedged by swaps with notional values totaling $300 million. 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 over the next twelve months an additional $0.5 million will be reclassified to earnings as a decrease to interest expense. Non-designated Hedges We do not use derivatives for trading or speculative purposes. During the six months ended June 30, 2019 and 2018, we did not have any derivatives that were not designated as cash flow hedges for accounting purposes. Tabular Disclosure of Fair Values of Derivative Instruments on the Consolidated Balance Sheets The table below presents the fair value of our derivative financial instruments as well as their classification on the consolidated balance sheet as of June 30, 2019 and December 31, 2018.
Tabular Disclosure of the Effect of Derivative Instruments on the Statements of Comprehensive Income The table below presents the effect of our interest rate swaps on the statements of comprehensive income for the three and six months ended June 30, 2019 and 2018.
Tabular Disclosure Offsetting Derivatives The table below presents a gross presentation, the effects of offsetting, and a net presentation of our derivatives at June 30, 2019 and December 31, 2018. 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 sheets.
Credit-risk-related Contingent Features The agreement with our derivative counterparty provides that if we default on any of our indebtedness, including default for which repayment of the indebtedness has not been accelerated by the lender, then we could also be declared in default on our derivative obligations. At June 30, 2019 and December 31, 2018, the fair value of derivatives related to these agreements was approximately $4.2 million in net liabilities and $6.0 million in net assets, respectively. As of June 30, 2019, we have not posted any collateral related to these agreements. If we or our counterparty had breached any of these provisions at June 30, 2019, we could have been required to settle our obligations under the agreements at their termination value of approximately $4.2 million.
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Income Taxes |
6 Months Ended |
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Jun. 30, 2019 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | INCOME TAXES We believe that we have been organized and have operated in conformity with the requirements for qualification and taxation as a REIT commencing with our taxable year ended December 31, 2016, and we intend to continue to operate in a manner that will enable us to maintain our qualification as a REIT. So long as we qualify as a REIT, we generally will not be subject to federal income tax on our net income that we distribute currently to our stockholders. Accordingly, no provision for federal income taxes has been included in the accompanying consolidated financial statements for the six months ended June 30, 2019 related to the REIT. Income tax expense consists of federal, state, and local income taxes incurred by FCPT’s TRS, and state and local income taxes incurred by FCPT on its lease portfolio. During the three months ended June 30, 2019 and 2018, we recorded income tax expense of $61 thousand and $66 thousand, respectively. During the six months ended June 30, 2019 and 2018, we recorded income tax expense of $129 thousand and $125 thousand, respectively. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts for income tax purposes, as well as operating loss and tax credit carryforwards. The Company evaluates the realizability of its deferred tax assets and recognizes a valuation allowance if, based on the available evidence, both positive and negative, it is more likely than not that some portion or all of its deferred tax assets will not be realized. When evaluating the realizability of its deferred tax assets, the Company considers, among other matters, estimates of expected future taxable income, nature of current and cumulative losses, existing and projected book/tax differences, tax planning strategies available, and the general and industry specific economic outlook. This realizability analysis is inherently subjective, as it requires the Company to forecast its business and general economic environment in future periods. Based on an assessment of all factors, including historical losses of the Kerrow Restaurants Operating Business, it was determined that full valuation allowances were required on the net deferred tax assets as of June 30, 2019. Changes in estimates of deferred tax asset realizability are included in "Income tax expense" in the Consolidated Statements of Income.
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Equity |
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Equity [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity | EQUITY Preferred Stock At June 30, 2019 and December 31, 2018, the Company was authorized to issue 25,000,000 shares, $0.0001 par value per share of preferred stock. There were no shares issued and outstanding at June 30, 2019 and December 31, 2018. Common Stock At June 30, 2019 and December 31, 2018, the Company was authorized to issue 500,000,000 shares, $0.0001 par value per share of common stock. On March 5, 2019, we declared a dividend of $0.2875 per share, which was paid in April 2019 to common stockholders of record as of March 29, 2019. On June 10, 2019, we declared a dividend of $0.2875 per share, which was paid in July 2019 to common stockholders of record as of June 28, 2019. At June 30, 2019, there were 68,418,243 shares of the Company's common stock issued and outstanding. Common Stock Issuance Under the At-The-Market Program In December 2016, the Company established an “At-the-Market” (“ATM”) equity issuance program under which the Company may, at its discretion, issue and sell its common stock with a sales value of up to a maximum of $150.0 million through ATM offerings on the New York Stock Exchange through broker-dealers. As of December 31, 2018 there was approximately $50.0 million left on the ATM offerings. On March 22, 2019, the Company amended its ATM program and increased the maximum sales under ATM offerings to $210.0 million, thus adding an additional $160.0 million to the maximum sales under ATM offerings. In connection with the amended ATM program, the Company may enter into forward sale agreements with certain financial institutions acting as forward purchasers whereby, at the Company's discretion, the forward purchasers may borrow and sell shares of common stock under the amended ATM program. The use of forward sale agreements allows the Company to lock in a share price on the sale of shares of common stock at the time the respective forward sale agreements are executed but defer settling the forward sale agreements and receiving the proceeds from the sale of shares until a later date. During the three months ended June 30, 2019, we sold 34,183 shares under the ATM program at a weighted-average selling price of $29.45 per share, for net proceeds of approximately $992 thousand. During the six months ended June 30, 2019, we sold 59,638 shares under the ATM program at a weighted-average selling price of $29.49 per share, for net proceeds of approximately $1.7 million. In addition, during the three and six months ended June 30, 2019, we executed a forward sale agreement with a financial institution acting as forward purchaser under the ATM program to sell 1,603,478 shares of common stock at a sales price of $29.30 per share before sales commissions and offering expenses. The Company did not receive any proceeds from the sale of shares of common stock by the forward purchaser. The Company currently expects to fully physically settle the forward sale agreement with the forward purchaser on one or more dates specified by the Company on or prior to January 1, 2020, in which case the Company expects to receive aggregate net cash proceeds at settlement equal to the number of shares of common stock multiplied by the relevant forward price per share at such time. The forward price per share that the Company will receive upon physical settlement of the forward sale agreement, which was initially $29.30, will be subject to adjustment for (i) a floating interest rate factor equal to a specified daily rate less a spread, (ii) the forward purchaser's stock borrowing costs and (iii) scheduled dividends during the term of the forward sale agreement. As of June 30, 2019, the Company had not settled any portion of the forward sale agreement. At June 30, 2019, there was $208.2 million available for issuance under the ATM program, subject to share issuances pursuant to the forward described above. Noncontrolling Interest At June 30, 2019, there were 289,392 FCPT Operating Partnership Units (“OP units”) outstanding held by third parties. During the six months ended June 30, 2019, FCPT OP did not issue any OP units for consideration in real estate transactions. Generally, 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 FCPT OP to redeem all or a portion of the OP units held by such limited partner. At FCPT OP’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 OP units, the limited partners participate in net income allocations and distributions in a manner equivalent to the common stock holders. The redemption value of outstanding non-controlling interest OP units was $8.1 million and $10.8 million as of June 30, 2019 and December 31, 2018, respectively. At June 30, 2019, FCPT is the owner of approximately 99.58% of FCPT’s OP units. The remaining 0.42%, or 289,392 of FCPT’s OP units are held by unaffiliated limited partners. During the three months ended June 30, 2019, FCPT OP distributed $83 thousand to its limited partners and settled a redemption of 5,966 OP units for shares of common stock. During the six months ended June 30, 2019, FCPT OP distributed $183 thousand to its limited partners and settled redemptions of 119,928 OP units; 113,962 OP units for cash, at a weighted average price per unit of $27.78 for $3.2 million; and 5,966 OP units for shares of common stock. Earnings Per Share The following table presents the computation of basic and diluted net earnings per common share for the three and six months ended June 30, 2019 and 2018.
For the three months ended June 30, 2019 and 2018, the number of outstanding equity awards that were anti-dilutive totaled 126,178 and 314,050, respectively. For the six months ended June 30, 2019 and 2018, the number of outstanding equity awards that were anti-dilutive totaled 102,133 and 317,313, respectively. Exchangeable OP units have been omitted from the denominator for the purpose of computing diluted earnings per share since FCPT OP, at its option, may satisfy a redemption with cash or by exchanging non-registered shares of FCPT common stock. The weighted average exchangeable OP units outstanding for the three months ended June 30, 2019 and 2018 was 294,506 and 409,320, respectively. The weighted average exchangeable OP units outstanding for the six months ended June 30, 2019 and 2018 was 321,378 and 409,320, respectively.
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Stock-Based Compensation |
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Share-based Payment Arrangement [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-Based Compensation | STOCK-BASED COMPENSATION On October 20, 2015, the Board of Directors of FCPT adopted, and FCPT’s sole stockholder at such time, 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, restricted stock, restricted stock units, deferred stock units, unrestricted stock, dividend equivalent rights, performance shares and other performance-based awards, other equity-based awards, and cash bonus 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. At June 30, 2019, 1,480,298 shares of common stock were available for award under the Plan. The unamortized compensation cost of awards issued under the Plan totaled approximately $4.7 million at June 30, 2019 as shown in the following table.
At June 30, 2019, the weighted average amortization period remaining for all of our equity awards was 2.1 years. Restricted Stock Units RSUs have been granted at a value equal to the five-day average or day of 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 five years. At June 30, 2019 and December 31, 2018, there were 90,608 and 33,592 RSUs outstanding, respectively. During the six months ended June 30, 2019, there were 66,503 shares of restricted stock granted, 9,487 restrictions on RSUs lapsed, and no RSUs were forfeited. Restrictions on these RSUs lapse through 2024. Restricted Stock Awards RSAs have been 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 June 30, 2019 and December 31, 2018, there were 102,328 and 100,402 RSAs outstanding, respectively. During the six months ended June 30, 2019 there were 69,547 shares of restricted stock granted, restrictions on 67,621 RSAs lapsed and those shares were distributed of which 24,699 RSAs were designated for tax withholdings and returned to the Plan. Restrictions on these RSAs lapse through 2022. The Company expects all RSAs to vest. Performance-Based Restricted Stock Awards At June 30, 2019 and December 31, 2018, the target number of PSUs that were unvested was 201,398 and 204,068, respectively. During the six months ended June 30, 2019, PSUs with a target number of 69,370 shares were granted and PSUs with a target number of 72,040 shares vested. The total shareholder return calculated for these PSUs resulted in a distribution of 200% of target shares, resulting in the distribution of 144,080 shares, of which 75,390 were withheld for tax and returned to the Plan. The performance period of the unvested grants run from January 1, 2019 through December 31, 2021, from January 1, 2018 through December 31, 2020, and from January 1, 2017 through December 31, 2019. Pursuant to the PSU 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 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 a range of performance-based vesting based on estimated total stockholder return over a three year performance period. For the 2019 PSU grant, the Company used an implied volatility assumption of 20.6% (based on historical volatility), risk free rates of 2.55% (the 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), which resulted in a grant date fair value of zero. Based on the grant date fair value, the Company expects to recognize $1.0 million in compensation expense on a straight-line basis over the remaining requisite service period associated with the unvested PSU awards.
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Fair Value Measurements |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements | FAIR VALUE MEASUREMENTS The carrying amounts of certain of the Company’s financial instruments including cash equivalents, accounts receivable, accounts payable, and accrued liabilities approximate fair value due either to length of maturity or interest rates that approximate prevailing market rates. The carrying value of derivative financial instruments equal fair value in accordance with U.S. GAAP. Determining which category an asset or liability falls within the hierarchy requires significant judgment. We evaluate hierarchy disclosures each reporting period. Assets and Liabilities Measured at Fair Value on a Recurring Basis The following table presents the assets and liabilities recorded that are reported at fair value on our Consolidated Balance Sheets on a recurring basis.
Derivative Financial Instruments Currently, we use interest rate swaps to manage our interest rate risk associated with our notes 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 at June 30, 2019, and December 31, 2018 were classified as Level 2 of the fair value hierarchy. Fair Value of Certain Financial Liabilities The following table presents the carrying value and fair value of certain financial liabilities that are recorded on our consolidated balance sheets.
(1) Carrying values exclude deferred financing costs The fair value of the long-term debt (Level 2) is determined using the present value of the contractual cash flows, discounted at the current market cost of debt.
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Commitments and Contingencies |
6 Months Ended |
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Jun. 30, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | COMMITMENTS AND CONTINGENCIES Litigation We are subject to private lawsuits, administrative proceedings and claims that arise in the ordinary course of our business from time to time. 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.
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Segments |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segments | SEGMENTS During the three and six months ended June 30, 2019 and 2018, we operated 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. Expenses incurred at our corporate office are allocated to real estate operations. The accounting policies of the reportable segments are the same as those described in Note 2 - Summary of Significant Accounting Policies. The following tables present financial information by segment for the three months ended June 30, 2019 and 2018 Three Months Ended June 30, 2019
Three Months Ended June 30, 2018
Six Months Ended June 30, 2019
Six Months Ended June 30, 2018
The following tables present supplemental information by segment at June 30, 2019 and December 31, 2018. Supplemental Segment Information at June 30, 2019
Supplemental Segment Information at December 31, 2018
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Subsequent Events |
6 Months Ended |
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Jun. 30, 2019 | |
Subsequent Events [Abstract] | |
Subsequent Events | SUBSEQUENT EVENTS The Company reviewed its subsequent events and transactions that have occurred after June 30, 2019, the date of the consolidated balance sheet, through July 31, 2019 and noted the following: Through July 31, 2019, the Company invested $1.4 million in the acquisition of one net lease property located in Wisconsin, with an investment yield of approximately 6.7%, and approximately 8 years of lease term remaining. The Company funded the acquisition with cash on hand. The Company anticipates accounting for this transaction as an asset acquisition in accordance with U.S. GAAP. There were no contingent liabilities associated with this transaction at June 30, 2019. There were no other material subsequent events or transactions.
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Summary of Significant Accounting Policies (Policies) |
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Jun. 30, 2019 | |||||||||
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||
Principles of Consolidation and Basis of Presentation | Principles of Consolidation and Basis of Presentation The accompanying consolidated financial statements (the “Consolidated Financial Statements”) include the accounts of Four Corners Property Trust, Inc. and its consolidated subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. The Consolidated Financial Statements reflect all adjustments which are, in the opinion of management, necessary to a fair presentation of the results for the interim periods presented. These adjustments are considered to be of a normal, recurring nature.
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Use of Estimates | Use of Estimates The preparation of these Consolidated 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 revenue and expenses during the reporting period. The estimates and assumptions used in the accompanying Consolidated Financial Statements are based on management’s evaluation of the relevant facts and circumstances. Actual results may differ from the estimates and assumptions used in preparing the accompanying Consolidated Financial Statements, and such differences could be material.
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Real Estate Investments, Net | Real Estate Investments, Net Real estate investments, net are recorded at cost less accumulated depreciation. Building components are depreciated over estimated useful lives ranging from seven to fifty-five years using the straight-line method. Leasehold improvements, which are reflected on our Consolidated Balance Sheets as a component of buildings, equipment, and improvements, 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 realized gain on sale, net, in our accompanying Consolidated Statements of Income (“Income Statements”). Our accounting policies regarding land, buildings, equipment, and 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 The Company evaluates acquisitions to determine whether transactions should be accounted for as asset acquisitions or business combinations in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2017-01. The Company has determined the land, building, site improvements, and in-places leases (if any) of assets acquired were each single assets as 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. Additionally, the Company has not acquired a substantive process used to generate outputs. As substantially all of the fair value of the gross assets acquired are concentrated in a single identifiable asset and there were no processes acquired, the acquisitions do not 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 improvements based on their relative fair values. The determination of the building fair value is on an ‘as-if-vacant’ basis. Value is allocated to acquired lease intangibles (if any) based on the costs avoided and revenue recognized by acquiring the property subject to lease and avoiding an otherwise ‘dark period’. In making estimates of fair values for this purpose, the Company uses a third-party specialist that obtains various information about each property, as well as the pre-acquisition due diligence of the Company and prior leasing activities at the site. 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, acquired lease intangibles are valued based on the Company’s estimates of costs related to tenant acquisition and the asset carrying costs, including lost revenue, 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-market 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 as an impairment loss included in depreciation and amortization expense.
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Impairment of Long-Lived Assets | 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. 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 Income Statements as the original impairment. Provisions for impairment are included in depreciation and amortization expense.
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Real Estate Held for Sale | Real Estate Held for Sale Real estate is classified as held for sale when the sale is probable, will be completed within one year, purchase agreements are executed, the buyer has a significant deposit at risk, and no financing contingencies exist which could prevent the transaction from being completed in a timely manner. Restaurant sites and certain other assets to be disposed of are included in assets held for sale when 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, equipment and improvements 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 meet the requirements to be reported as discontinued operations. Real estate held for sale is reported at the lower of carrying amount or fair value, less estimated costs to sell. There was no real estate held for sale at June 30, 2019 or December 31, 2018.
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Cash, Cash Equivalents, and Restricted Cash | Cash, Cash Equivalents, and Restricted Cash 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. Restricted cash consists of 1031 tax deferred real estate exchange proceeds and is included in Other assets on our Consolidated Balance Sheets.
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Long-term Debt and Deferred Financing Costs | Long-term Debt Long-term debt is carried at unpaid principal balance, net of deferred financing costs. All of our long-term debt is currently unsecured and interest is paid monthly on our non-amortizing term loans and revolving credit facility and semi-annually on our senior fixed rate notes. 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 Consolidated Balance Sheets.
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Derivative Instruments and Hedging Activities | 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 United States generally accepted accounting principles (“U.S. GAAP”), changes in the derivatives’ fair value are not included in current earnings but are included in accumulated other comprehensive income, 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.
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Other Assets and Liabilities | Other Assets and Liabilities Other assets primarily consist of right of use operating lease assets, pre-acquisition costs, prepaid assets, food and beverage inventories for use by our Kerrow operating subsidiary, escrow deposits, and accounts receivable. Other liabilities primarily consist of accrued compensation, accrued interest, accrued operating expenses, and operating lease liabilities.
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Leases, Lessee | Leases Effective January 1, 2019, the Company adopted ASU 2016-02, Leases (“ASC 842”), using the effective date method. Consolidated Financial Statements for reporting periods beginning on or after January 1, 2019, are presented under the new guidance, while prior periods amounts are not adjusted and continue to be reported in accordance with previous guidance. We elected the package of practical expedients which permits us to not reassess (1) whether any expired or existing contracts are or contain leases, (2) the lease classification for any expired or existing leases, and (3) any initial direct costs for any existing leases as of the effective date. We did not elect the hindsight practical expedient which permits entities to use hindsight in determining the lease term and assessing impairment. The adoption of the lease standard did not change our previously reported Consolidated Financial Statements and did not result in a cumulative adjustment to equity. All significant lease arrangements are generally recognized at lease commencement. For leases where the Company is the lessee upon adoption of ASC 842, operating lease right-of-use (“ROU”) assets and lease liabilities are recognized at commencement based on the present value of lease payments over the lease term. ROU assets represent our right to use an underlying asset during the reasonably certain lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense is recognized on a straight-line basis over the lease term.
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Leases, Lessor | For leases where Company is the lessor, we determine the classification upon commencement. At June 30, 2019, all leases are classified as operating leases. These operating leases may contain both lease and non-lease components. The Company accounts for lease and non-lease components as a single component. Prior to adoption of ASC 842, lease origination fees were deferred and amortized over the related lease term as an adjustment to depreciation expense. Subsequent to the adoption of ASC 842 on January 1, 2019, the Company expenses certain initial direct costs that are not incremental in obtaining a lease.
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Revenue Recognition | Revenue Recognition Rental Revenue For those 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 probable. Recognizing rental revenue 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 deferred rent receivable. We assess the collectability of our lease receivables, including deferred rents receivable, on several factors, including payment history, the financial strength of the tenant and any guarantors, historical operations and operating trends of the property, and current economic conditions. If our evaluation of these factors indicates it is not probable that we will be to recover substantially all of the receivable, we derecognize the deferred rent receivable asset and record as a reduction in rental revenue. 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. Prior to the adoption of ASC 842, lessor costs reimbursed by the lessee were presented on a net basis in our Consolidated Financial Statements. Subsequent to the adoption of ASC 842 on January 1, 2019, costs paid by the lessor and reimbursed by the lessees will be included in variable lease payments and presented on a gross basis within rental revenue. Sales taxes collected from lessees and remitted to governmental authorities are presented on a net basis within rental revenue. Restaurant Revenue Restaurant revenue represents food, beverage, and other products sold and is presented net of the following discounts: coupons, employee meals, complimentary meals and gift cards. Revenue from restaurant sales, whether received in cash or by credit card, is recognized when food and beverage products are sold. At both June 30, 2019, and December 31, 2018, credit card receivables, included in other assets, totaled $84 thousand and $82 thousand, respectively. 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 Income Statements.
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Restaurant Expenses | Restaurant Expenses Restaurant expenses include restaurant labor, general and administrative expenses, rent expense, 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.
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Income Taxes | Income Taxes We believe that we have been organized and have operated in conformity with the requirements for qualification and taxation as a REIT commencing with our taxable year ended December 31, 2016, and we intend to continue to operate in a manner that will enable us to maintain our qualification as a REIT. So long as we qualify as a REIT, we generally will not be subject to federal income tax on our net income that we distribute currently to our shareholders. To maintain our qualification as a REIT, we are 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 shareholders and meet certain other requirements. If we fail to qualify as a REIT in any taxable year, we will be subject to 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, federal income and excise taxes may be due on our undistributed taxable income. The Kerrow Restaurant Operating Business is a TRS and is taxed as a C corporation.
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Earnings Per Share | 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 and non-controlling interests. None of the Company’s equity awards are participating securities.
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Stock-Based Compensation | 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 (“DEUs”), restricted stock units (“RSUs”), and other types of awards to eligible participants. 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.
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Fair Value of Financial Instruments | 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 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.
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Application of New Accounting Standards | Application of New Accounting Standards We consider the applicability and impact of all ASUs issued by the FASB. ASUs not yet adopted were assessed and determined to be either not applicable or are expected to have minimal impact on our consolidated result of operations, financial position and cash flows.
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Fair Value Measurement | The carrying amounts of certain of the Company’s financial instruments including cash equivalents, accounts receivable, accounts payable, and accrued liabilities approximate fair value due either to length of maturity or interest rates that approximate prevailing market rates. The carrying value of derivative financial instruments equal fair value in accordance with U.S. GAAP. Determining which category an asset or liability falls within the hierarchy requires significant judgment. We evaluate hierarchy disclosures each reporting period.
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Summary of Significant Accounting Policies Summary of Significant Accounting Policies (Tables) |
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Jun. 30, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reconciliation of Cash, Cash Equivalents, and Restricted Cash | The following table provides a reconciliation of cash, cash equivalents, and restricted cash in our Consolidated Balance Sheets to the total amount shown in our Consolidated Statements of Cash Flows:
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Reconciliation of Cash, Cash Equivalents, and Restricted Cash | The following table provides a reconciliation of cash, cash equivalents, and restricted cash in our Consolidated Balance Sheets to the total amount shown in our Consolidated Statements of Cash Flows:
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Real Estate Investments, Net and Intangible Assets and Liabilities, Net (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Real Estate [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Real Estate Investments, Net | Real estate investments, net, which consist of land, buildings and improvements leased to others subject to net operating leases and those utilized in the operations of Kerrow Restaurant Operating Business are summarized as follows:
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Schedule of Intangible Assets | The following tables detail intangible lease assets and liabilities.
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Schedule of Intangible Liabilities |
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Schedule of Finite-Lived Intangible Assets, Future Amortization Expense | The following table presents the estimated impact during the next five years and thereafter related to the amortization of in-place lease intangibles, and above-market and below-market lease intangibles for properties held for investment at June 30, 2019.
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Leases Leases (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Impact of Adoption | The table below presents the impact of adoption of the lease standard on our Consolidated Balance Sheet as of January 1, 2019.
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Summary of Operating Lease Liability Maturities | As of June 30, 2019, maturities of operating lease liabilities were as follows:
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Future Minimum Lease Commitments Under Previous Accounting Standard | As previously disclosed in our 2018 Annual Report on Form 10-K and under the previous lease accounting standard, the following table presents future minimum lease commitments under non-cancelable operating leases. The table does not reflect available operating lease extensions.
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Components of Rental Revenue | The following table shows the components of rental revenue for the three and six months ended June 30, 2019.
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Future Minimum Lease Payments to be Received | The table presents future minimum lease payments due during the initial lease term only as lease renewal periods are exercisable at the option of the lessee.
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Supplemental Detail for Certain Components of Consolidated Balance Sheets (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Components of Other Assets | The components of other assets were as follows:
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Schedule of Components of Other Liabilities | The components of other liabilities were as follows:
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Long-Term Debt, Net of Deferred Financing Costs (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Term Loans and Notes Payable | The following table presents the Term Loan balances as of June 30, 2019 and December 31, 2018.
The following table presents the senior unsecured fixed rate notes balance as of June 30, 2019 and December 31, 2018.
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Derivative Financial Instruments (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Derivative Instruments in Statement of Financial Position, Fair Value | The table below presents the fair value of our derivative financial instruments as well as their classification on the consolidated balance sheet as of June 30, 2019 and December 31, 2018.
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Derivative Instruments, Gain (Loss) | The table below presents the effect of our interest rate swaps on the statements of comprehensive income for the three and six months ended June 30, 2019 and 2018.
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Equity (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Earnings Per Share, Basic and Diluted | The following table presents the computation of basic and diluted net earnings per common share for the three and six months ended June 30, 2019 and 2018.
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Stock-Based Compensation (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-based Payment Arrangement [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disclosure of Share-based Compensation Arrangements by Share-based Payment Award | The unamortized compensation cost of awards issued under the Plan totaled approximately $4.7 million at June 30, 2019 as shown in the following table.
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Fair Value Measurements (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value, Assets Measured on Recurring Basis | Assets and Liabilities Measured at Fair Value on a Recurring Basis The following table presents the assets and liabilities recorded that are reported at fair value on our Consolidated Balance Sheets on a recurring basis.
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Fair Value Measurements, Nonrecurring | The following table presents the carrying value and fair value of certain financial liabilities that are recorded on our consolidated balance sheets.
(1) Carrying values exclude deferred financing costs
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Segments (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Segment Reporting Information, by Segment | The following tables present financial information by segment for the three months ended June 30, 2019 and 2018 Three Months Ended June 30, 2019
Three Months Ended June 30, 2018
Six Months Ended June 30, 2019
Six Months Ended June 30, 2018
The following tables present supplemental information by segment at June 30, 2019 and December 31, 2018. Supplemental Segment Information at June 30, 2019
Supplemental Segment Information at December 31, 2018
|
Organization (Details) - Darden [Member] $ in Millions |
Nov. 09, 2015
USD ($)
property
brand
|
---|---|
Separation And Spin-Off [Line Items] | |
Equity interest contributed, percentage | 1 |
Number of real estate properties | property | 418 |
Number of brands | 5 |
Stockholder's equity, conversion ratio | 3 |
Revolving Credit and Term Loan [Member] | Secured Debt [Member] | |
Separation And Spin-Off [Line Items] | |
Payment from issuance of long-term debt | $ | $ 315.0 |
Longhorn San Antonio Business [Member] | |
Separation And Spin-Off [Line Items] | |
Number of brands | 6 |
Operations (Details) - USD ($) |
6 Months Ended | ||
---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Dec. 31, 2018 |
|
Property, Plant and Equipment [Line Items] | |||
Property expense | $ 9,937,000 | $ 9,656,000 | |
Assets held for sale disposal period | 1 year | ||
Impairment expense | $ 0 | $ 0 | |
Real estate held for sale | $ 0 | $ 0 | |
Building and Building Improvements [Member] | Minimum [Member] | |||
Property, Plant and Equipment [Line Items] | |||
Useful life (in years) | 7 years | ||
Building and Building Improvements [Member] | Maximum [Member] | |||
Property, Plant and Equipment [Line Items] | |||
Useful life (in years) | 55 years | ||
Equipment [Member] | Minimum [Member] | |||
Property, Plant and Equipment [Line Items] | |||
Useful life (in years) | 2 years | ||
Equipment [Member] | Maximum [Member] | |||
Property, Plant and Equipment [Line Items] | |||
Useful life (in years) | 15 years |
Summary of Significant Accounting Policies Cash, Cash Equivalents, and Restricted Cash (Details) - USD ($) $ in Thousands |
Jun. 30, 2019 |
Dec. 31, 2018 |
Jun. 30, 2018 |
Dec. 31, 2017 |
---|---|---|---|---|
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||||
Cash and cash equivalents | $ 39,289 | $ 92,041 | ||
Restricted cash (included in Other assets) | 0 | 1,201 | ||
Total Cash, Cash Equivalents, and Restricted Cash | $ 39,289 | $ 93,242 | $ 88,649 | $ 69,371 |
Summary of Significant Accounting Policies Revenue (Details) - USD ($) $ in Thousands |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Credit card receivables | $ 84 | $ 82 |
Restricted Stock (Details) - Restricted Stock Units (RSUs) [Member] |
6 Months Ended |
---|---|
Jun. 30, 2019 | |
Minimum [Member] | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
RSU vesting period (in years) | 1 year |
Maximum [Member] | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
RSU vesting period (in years) | 5 years |
Real Estate Investments, Net and Intangible Assets and Liabilities, Net Intangible Lease Assets, Net (Details) - USD ($) $ in Thousands |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Finite-Lived Intangible Assets [Line Items] | ||
Intangible lease assets, gross | $ 29,058 | $ 20,397 |
Less: Accumulated amortization | (2,805) | (1,399) |
Intangible Lease Assets, Net | 26,253 | 18,998 |
Leases, Acquired-in-Place [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Intangible lease assets, gross | 27,133 | 19,079 |
Above-Market Leases [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Intangible lease assets, gross | $ 1,925 | $ 1,318 |
Real Estate Investments, Net and Intangible Assets and Liabilities, Net Intagngible Lease Liabilities, Net (Details) - USD ($) $ in Thousands |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Schedule Of Finite-Lived Intangible Liabilities [Line Items] | ||
Less: Accumulated amortization | $ (85) | $ (33) |
Intangible lease liabilities, net | 768 | 577 |
Below-Market Leases [Member] | ||
Schedule Of Finite-Lived Intangible Liabilities [Line Items] | ||
Intangible lease liabilities, gross | $ 853 | $ 610 |
Real Estate Investments, Net and Intangible Assets and Liabilities, Net Amortization Expense (Details) $ in Thousands |
Jun. 30, 2019
USD ($)
|
---|---|
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
2019 (six months) | $ 1,606 |
2020 | 3,003 |
2021 | 2,738 |
2022 | 2,562 |
2023 | 2,162 |
Thereafter | 13,414 |
Total Future Amortization | $ 25,485 |
Leases - Impact of Adoption (Details) $ in Thousands |
6 Months Ended | ||
---|---|---|---|
Jun. 30, 2019
USD ($)
ground_lease
|
Jan. 01, 2019
USD ($)
|
Dec. 31, 2018
USD ($)
|
|
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||
Number of ground leases | ground_lease | 3 | ||
Operating lease right-of-use asset (included in other assets) | $ 5,647 | $ 5,723 | |
Operating lease liability (included in other liabilities) | $ 6,372 | 6,425 | |
Deferred rent payable | $ 702 | ||
Accounting Standards Update 2016-02 [Member] | |||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||
Operating lease right-of-use asset (included in other assets) | 5,723 | ||
Operating lease liability (included in other liabilities) | 6,425 | ||
Deferred rent payable | $ (702) |
Supplemental Detail for Certain Components of Consolidated Balance Sheets Other Assets (Details) - USD ($) $ in Thousands |
Jun. 30, 2019 |
Jan. 01, 2019 |
Dec. 31, 2018 |
---|---|---|---|
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||
Operating lease right-of-use asset | $ 5,647 | $ 5,723 | |
Prepaid acquisition costs and deposits | 1,140 | $ 1,802 | |
Prepaid assets | 533 | 815 | |
Accounts receivable | 251 | 782 | |
Food and beverage inventories | 155 | 183 | |
Escrow deposits | 0 | 1,201 | |
Other | 970 | 456 | |
Total Other Assets | $ 8,696 | $ 5,239 |
Leases - Operating Lease Liability (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||||
---|---|---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
Jan. 01, 2019 |
Dec. 31, 2018 |
|
Operating Leases, After Adoption of 842 | ||||||
2019 | $ 198 | $ 198 | ||||
2020 | 397 | 397 | ||||
2021 | 418 | 418 | ||||
2022 | 427 | 427 | ||||
2023 | 427 | 427 | ||||
Thereafter | 8,407 | 8,407 | ||||
Total Payments | 10,274 | 10,274 | ||||
Less: Interest | (3,902) | (3,902) | ||||
Operating Lease Liability | $ 6,372 | $ 6,372 | $ 6,425 | |||
Weighted average discount rate (percentage) | 4.52% | 4.52% | ||||
Weighted average remaining lease term | 21 years 8 months 12 days | 21 years 8 months 12 days | ||||
Rent expense | $ 165 | $ 333 | ||||
Operating Leases, Before Adoption of 842 | ||||||
2019 | $ 550 | |||||
2020 | 400 | |||||
2021 | 103 | |||||
2022 and thereafter | 0 | |||||
Total Future Lease Commitments | $ 1,053 | |||||
Rent expense | $ 178 | $ 354 |
Supplemental Detail for Certain Components of Consolidated Balance Sheets Other Liabilities (Details) - USD ($) $ in Thousands |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Operating lease liability | $ 6,372 | |
Accrued interest expense | 1,530 | $ 1,586 |
Accounts payable | 680 | 986 |
Accrued compensation | 1,212 | 1,714 |
Intangible lease liabilities, net | 768 | 577 |
Accrued operating expenses | 368 | 486 |
Other | 1,343 | 1,704 |
Total Other Liabilities | $ 12,273 | $ 7,053 |
Leases - Operating Leases as Lessor (Details) $ in Thousands |
3 Months Ended | 6 Months Ended |
---|---|---|
Jun. 30, 2019
USD ($)
|
Jun. 30, 2019
USD ($)
|
|
Leases [Abstract] | ||
Lease revenue - operating leases | $ 34,249 | $ 68,259 |
Variable lease revenue (tenant reimbursements) | 166 | 364 |
Total Rental Revenue | 34,415 | 68,623 |
Lessor, Operating Lease, Payments, Fiscal Year Maturity [Abstract] | ||
2019 (six months) | 65,226 | 65,226 |
2020 | 131,701 | 131,701 |
2021 | 133,155 | 133,155 |
2022 | 134,586 | 134,586 |
2023 | 135,713 | 135,713 |
Thereafter | 1,093,057 | 1,093,057 |
Total Future Minimum Lease Payments | $ 1,693,438 | $ 1,693,438 |
Long-Term Debt, Net of Deferred Financing Costs - Summary of Notes Payable (Details) - Unsecured Debt [Member] - USD ($) |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Senior Fixed Note Due June 2024 [Member] | ||
Debt Instrument [Line Items] | ||
Interest rate, stated percentage | 4.68% | |
Notes payable, net of deferred financing costs | $ 50,000,000 | $ 50,000,000 |
Senior Fixed Note Due June 2027 [Member] | ||
Debt Instrument [Line Items] | ||
Interest rate, stated percentage | 4.93% | |
Notes payable, net of deferred financing costs | $ 75,000,000 | 75,000,000 |
Notes Maturing On December 2026 [Member] | ||
Debt Instrument [Line Items] | ||
Interest rate, stated percentage | 4.63% | |
Notes payable, net of deferred financing costs | $ 50,000,000 | 50,000,000 |
Notes Maturing On December 2028 [Member] | ||
Debt Instrument [Line Items] | ||
Interest rate, stated percentage | 4.76% | |
Notes payable, net of deferred financing costs | $ 50,000,000 | 50,000,000 |
The Notes [Member] | ||
Debt Instrument [Line Items] | ||
Notes payable, net of deferred financing costs | $ 225,000,000 | $ 225,000,000 |
Derivative Financial Instruments - Narrative (Details) - USD ($) $ in Millions |
6 Months Ended | |
---|---|---|
Jun. 30, 2019 |
Dec. 31, 2018 |
|
Derivative [Line Items] | ||
Estimated reclass to earnings from AOCI | $ 0.5 | |
Derivative fair value | 4.2 | $ 6.0 |
Credit Risk Contract [Member] | ||
Derivative [Line Items] | ||
Derivative, net liability position, aggregate fair value | 4.2 | |
Designated as Hedging Instrument [Member] | ||
Derivative [Line Items] | ||
Variable-rate debt | 300.0 | 300.0 |
Notional amount | $ 300.0 | $ 300.0 |
Derivatives Balance Sheet (Details) - Designated as Hedging Instrument [Member] - USD ($) $ in Thousands |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Other Assets [Member] | ||
Derivatives, Fair Value [Line Items] | ||
Derivative asset, fair value, gross asset | $ 552 | $ 5,982 |
Other Assets [Member] | Interest Rate Swap [Member] | ||
Derivatives, Fair Value [Line Items] | ||
Derivative asset, fair value, gross asset | 552 | 5,982 |
Other Liabilities [Member] | ||
Derivatives, Fair Value [Line Items] | ||
Derivative liability, fair value, gross liability | 4,718 | 0 |
Other Liabilities [Member] | Interest Rate Swap [Member] | ||
Derivatives, Fair Value [Line Items] | ||
Derivative liability, fair value, gross liability | $ 4,718 | $ 0 |
Derivatives Income Statement (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Total Amount of Interest expense Presented in the Consolidated Statements of Income | $ (6,557) | $ (4,877) | $ (13,304) | $ (9,733) |
Interest Rate Contract [Member] | Designated as Hedging Instrument [Member] | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Amount of Gain or (Loss) Recognized in OCI on Derivative (Effective Portion) | (5,937) | 2,719 | (8,964) | 8,102 |
Interest Rate Contract [Member] | Designated as Hedging Instrument [Member] | Interest Expense [Member] | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Amount of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) | 580 | 575 | 1,189 | 814 |
Total Amount of Interest expense Presented in the Consolidated Statements of Income | $ (6,557) | $ (4,877) | $ (13,304) | $ (9,733) |
Income Taxes (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Income Tax Disclosure [Abstract] | ||||
Provision for (benefit) from income tax | $ (61) | $ (66) | $ (129) | $ (125) |
Equity (Details) - USD ($) $ / shares in Units, $ in Thousands |
1 Months Ended | 3 Months Ended | 6 Months Ended | ||||
---|---|---|---|---|---|---|---|
Mar. 05, 2019 |
Apr. 30, 2019 |
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
Dec. 31, 2018 |
|
Equity [Abstract] | |||||||
Preferred stock, shares authorized | 25,000,000 | 25,000,000 | 25,000,000 | ||||
Preferred stock, par value (in USD per share) | $ 0.0001 | $ 0.0001 | $ 0.0001 | ||||
Preferred stock, shares issued | 0 | 0 | 0 | ||||
Preferred stock, shares outstanding | 0 | 0 | 0 | ||||
Common stock, shares authorized | 500,000,000 | 500,000,000 | 500,000,000 | ||||
Common stock, par value (in USD per share) | $ 0.0001 | $ 0.0001 | $ 0.0001 | ||||
Proceeds from issuance of stock | $ 1,652 | $ 34,609 | |||||
Dividends declared per common share (in USD per share) | $ 0.2875 | $ 0.2875 | $ 0.2750 | $ 0.5750 | $ 0.5500 | ||
Common stock, dividends paid per share (in USD per share) | $ 0.2875 | ||||||
Common stock, shares issued | 68,418,243 | 68,418,243 | 68,204,045 | ||||
Common stock, shares outstanding | 68,418,243 | 68,418,243 | 68,204,045 |
Equity At the Market Offering (Details) - USD ($) |
1 Months Ended | 3 Months Ended | 6 Months Ended | ||||
---|---|---|---|---|---|---|---|
Mar. 22, 2019 |
Oct. 20, 2015 |
Dec. 31, 2016 |
Jun. 30, 2019 |
Jun. 30, 2019 |
Jun. 30, 2018 |
Dec. 31, 2018 |
|
Subsidiary, Sale of Stock [Line Items] | |||||||
Shares, new issues | 2,100,000 | ||||||
Proceeds from issuance of stock | $ 1,652,000 | $ 34,609,000 | |||||
At-The-Market Offering [Member] | |||||||
Subsidiary, Sale of Stock [Line Items] | |||||||
Stock issuance, sales agreement, authorized offering price, maximum | $ 160,000,000.0 | $ 150,000,000.0 | |||||
Shares, new issues | 34,183 | 59,638 | |||||
Share price (in USD per share) | $ 29.45 | $ 29.49 | |||||
Share Price | $ 29.30 | $ 29.30 | |||||
Proceeds from issuance of stock | $ 992,000 | $ 1,700,000 | |||||
Stock issuance, sales agreement, value available for issuance | $ 210,000,000.0 | $ 208,200,000 | $ 208,200,000 | $ 50,000,000.0 | |||
At-The-Market Offering - Forward Purchaser [Member] | |||||||
Subsidiary, Sale of Stock [Line Items] | |||||||
Shares, new issues | 1,603,478 | 1,603,478 |
Equity Noncontrolling Interest (Details) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2019 |
Jun. 30, 2018 |
Dec. 31, 2018 |
|
Equity [Abstract] | ||||
Units of partnership interest, amount | 289,392 | 289,392 | ||
Redemption value | $ 8,100 | $ 8,100 | $ 10,800 | |
Noncontrolling interest, ownership percentage by parent | 99.58% | 99.58% | ||
Noncontrolling interest, ownership percentage by noncontrolling owners | 0.42% | 0.42% | ||
Redemption settled, number of OP units for shares | 5,966 | 5,966 | ||
Distribution to limited partners | $ 83 | $ 183 | ||
Redemption settled, number of units | 119,928 | 119,928 | ||
Redemption settled, number of OP units for cash | 113,962 | |||
Weighted average price per unit (in dollars per share) | $ 27.78 | |||
Cash consideration | $ 3,167 | $ 0 |
Equity Earnings Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Equity [Abstract] | ||||
Weighted average common shares outstanding – basic (in shares) | 68,302,395 | 61,751,530 | 68,252,947 | 61,511,183 |
Effect of dilutive shares underlying stock-based compensation | 198,786 | 160,169 | 222,831 | 150,377 |
Weighted average common shares outstanding – diluted (in shares) | 68,501,181 | 61,911,699 | 68,475,778 | 61,661,560 |
Net income available to common shareholders | $ 17,868 | $ 27,445 | $ 35,371 | $ 43,699 |
Basic net income per share (in USD per share) | $ 0.26 | $ 0.44 | $ 0.52 | $ 0.71 |
Diluted net income per share (in USD per share) | $ 0.26 | $ 0.44 | $ 0.52 | $ 0.71 |
Antidilutive securities excluded from computation of earnings per share, amount | 126,178 | 314,050 | 102,133 | 317,313 |
Weighted average units of partnership interest, amount | 294,506 | 409,320 | 321,378 | 409,320 |
Stock-Based Compensation Narrative (Details) - USD ($) $ in Thousands |
6 Months Ended | ||
---|---|---|---|
Oct. 20, 2015 |
Jun. 30, 2019 |
Dec. 31, 2018 |
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Issuance of common stock in connection with Spin-Off, shares | 2,100,000 | ||
Shares available for issuance | 1,480,298 | ||
Unrecognized compensation cost | $ 4,738 | $ 3,068 | |
Period for recognition (in years) | 2 years 1 month 6 days | ||
Restricted Stock Units (RSUs) [Member] | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Unrecognized compensation cost | $ 1,673 | $ 188 |
Fair Value Measurements Assets and Liabilities at Fair Value (Details) - USD ($) $ in Thousands |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Assets | ||
Derivative assets | $ 552 | $ 5,982 |
Liabilities | ||
Derivative liabilities | 4,718 | 0 |
Fair Value, Recurring [Member] | ||
Assets | ||
Derivative assets | 552 | 5,982 |
Liabilities | ||
Derivative liabilities | 0 | |
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 1 [Member] | ||
Assets | ||
Derivative assets | 0 | 0 |
Liabilities | ||
Derivative liabilities | 0 | 0 |
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] | ||
Assets | ||
Derivative assets | 552 | 5,982 |
Liabilities | ||
Derivative liabilities | 4,718 | 0 |
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 3 [Member] | ||
Assets | ||
Derivative assets | 0 | 0 |
Liabilities | ||
Derivative liabilities | $ 0 | $ 0 |
Segments (Details) - segment |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Segment Reporting [Abstract] | ||||
Number of operating segments | 2 | 2 | 2 | 2 |
Subsequent Events - Narrative (Details) |
1 Months Ended | |
---|---|---|
Jul. 31, 2019
USD ($)
property
|
Jun. 30, 2019
USD ($)
|
|
Subsequent Event [Line Items] | ||
Operating leases, term of contract (in years) | 11 years 9 months 18 days | |
Contingent liabilities | $ 0 | |
Subsequent Event [Member] | ||
Subsequent Event [Line Items] | ||
Consideration transferred | $ 1,400,000 | |
Number of real estate properties | property | 1 | |
Investment yield | 6.70% | |
Operating leases, term of contract (in years) | 8 years |
Label | Element | Value |
---|---|---|
Accounting Standards Update 2017-12 [Member] | ||
Cumulative Effect of New Accounting Principle in Period of Adoption | us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption | $ 0 |
Accounting Standards Update 2017-12 [Member] | Retained Earnings [Member] | ||
Cumulative Effect of New Accounting Principle in Period of Adoption | us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption | (467,000) |
Accounting Standards Update 2017-12 [Member] | AOCI Attributable to Parent [Member] | ||
Cumulative Effect of New Accounting Principle in Period of Adoption | us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption | $ 467,000 |
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