FVR earnings call transcript, November 5, 2026

Thank you for joining us and welcome to the Frontview third quarter 2026 earnings call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I will now hand the conference over. to Pierre Revol, CFO. Pierre, please go ahead.

Thank you, Operator.

Thank you, Pierre, and good morning, everyone. We had our second anniversary as a public company this October, and our portfolio and prospects could not be stronger. We own exceptional real estate with a diverse tenant base in vibrant markets where the quality of the real estate drives rents and values higher over time. We are small enough that every good investment moves the needle, and we have a low-levered balance sheet and high-retained free cash. to support our growth. These attributes, combined with our experienced team and competitive market advantages, attractively position us to capitalize on growth opportunities, especially in the current environment. Turning to our investor presentation, on page five, we added a... a slide that shows the progress we have made. Since the first quarter as a public company, we have grown annualized base rent by 19% to 69.8 million in the portfolio from 307 to 327 properties, while increasing... occupancy from 97.7% to 99.4%. We reduced casual dining tenancies from 15.6% of rent to 9.1%, grew Texas and Florida from 11.6% to 17.7% of rent. And lowered net debt to adjusted annualized EBITDA from 5.5 times to 5 times or 4.5 times, including our undrawn preferred. Our largest tenants have changed as well. At the end of 2024, our top. Tenants were Fast Pace Urgent Care, Verizon, Adams Auto Group, Oak Street Health, and IHOP. A year ago, Dollar Tree was our largest tenant at 3.6% of rent. And our top 10 tenants comprised 24.3% of rent. Today.

We have reduced Dollar Tree from 14 leases to 8 and Fast Pace from 8 leases to 4. Our top five tenants are Verizon, Raising Cane's, Best Buy, Bank of America, and LA Fitness, three of which are investment grade. Importantly, our exposure. To both Raising Cane's and Bank of America was increased through proactive asset management, either by replacing a weaker existing tenant or unlocking additional value from our frontage. These are just a few examples that demonstrate the opportunity we find by owning great real estate in great locations. with a team that knows how to create value from our existing portfolio. Diversification continues to be a key strength of the portfolio. Our largest tenant, Verizon, is only 2.5% of rent, the lowest amongst net lease peers, and our top 10 stands at only 20.5%. To put that in perspective, Realty Income, the largest net lease reed, owns nearly 16,000 properties compared to our 327, yet has a greater concentration amongst its top 10 tenants. Our diversification. Is intentional. Our real estate first strategy continues to evolve with 79.2% of our rent coming from top 100 MSAs, 92% of our properties near shopping centers, and a median rent of just 176,000 per property. Why does this matter? Because as we outline on page seven of our investor presentation, our strategy starts with great real estate. We target fungible buildings, attractive markets, strong frontage, and replaceable rents.

So if a tenant vacates, our real estate turns the tenant exit into an upgrade, or when we choose to sell, buyers pay up for the real estate and the low rents. Thus far this year, we generated 7 million of gains on the repositioning sales. Are differentiated. Real estate first acquisition strategy drives these structural advantages. Importantly, operating in the public markets has only strengthened our model, providing greater access to capital and allowing us to pursue more opportunities while maintaining our disciplined approach. As we grow. We can continue to compound these advantages, creating long-term shareholder value. Pages eight and nine of our investor presentation shows what this means in practice and captures what makes front view different. Page eight illustrates what happens when a tenant leaves. In net lease, that is the moment of truth. With a specialized building or a weak location or high rents, there are few good alternatives. Downtime is long and the landlord usually ends up accepting lower rent, funding tenant improvements, or selling at a big discount. Our frontage assets attract competitive lease and purchase offers, giving us flexibility to retenant, redevelop, divide a property into multiple leases, or sell depending upon what creates the most value. Look at the results. When Twin Peaks parent went into bankruptcy, we released our Winston-Salem site to Panda Express and Jaggers at a 92% increase in rent. When Tricolor liquidated, we upgraded the site to Avis on a 10-year lease. When Walgreens closed, our Durham store.

We replaced it with Amazon with no tenant improvement allowance. We converted a Miller's Alehouse into a 15-year Raising Cane's ground lease with no landlord capital, and we created a new Bank of America ground lease on unused land in front of our Walmart. And this quarter, we delivered another example of successful proactive management. Our Wendy's in Stone Mountain, Georgia, operated by Meritage, had below market rent, expiring in March of 27. We have already signed a 15-year Chase. Ground lease that would commence upon Wendy's expiration at a 53% increase in rent. Across these six outcomes, we estimate the value of these sites are now approximately $29 million against a combined purchase price of about $19 million. That is nearly 53% increase in rent. In value creation, driven by the quality of the underlying real estate and our ability to capture it. More importantly, these are not isolated examples, as if we have averaged over 117% on new leases. As shown on page 10. Page 9 illustrates the other side of our real estate first strategy, which is what happens when we sell. With weaker real estate, a tenant problem often leads to an auction where recoveries can be less than 30 cents on the dollar. With our real estate, 1031 investors, developers, and end users compete, and across all of our sales, we have sold above our cost, whether the property was occupied, dark, or vacant. In July, we sold our dark hops and drops at 150%.

of our cost, and we sold our sleep number and AT&T property to a developer at 120% of our cost, while sleep number was in Chapter 11. In May, we sold a Friendly's, a shrinking chain with two prior bankruptcies at a 5.35% cap rate and 131% of our cost. Earlier this year, we sold a vacant former Take-5 at 191% of cost. We also got ahead of the Twin Peaks and Meritage bankruptcies. Selling those properties before the filings at 120% and 113% of our cost respectively. The common thread is that buyers are underwriting the real estate, not simply the lease for the tenant. This quarter we sold five. properties, including the hops and drops in the sleep number for 17.1 million at a 6.56 cap rate. Since our IPO, we have sold 56 properties for 128 million, including vacant properties with our 42 occupied properties selling at a 6. 8% cap rate. Over the same period, we acquired 104 properties for 370 million at a 7.7 cap rate. That is approximately 90 basis points of positive spread while simultaneously upgrading the port. This is what we mean by real estate first investing. Protecting the downside through the quality of the real estate, creating upside through active asset management, and recycling capital at attractive spreads to compound growth. According to acquisitions, we acquired 16 properties in Q3 for $50.6 million at a 7.56 average cap rate, with a median purchase price of about $2.65 million and median rent of about $208,000. Our lease term on acquisitions is lower by design.

We selectively buy well-located properties with shorter terms and below market rents when we perceive the opportunity for development-like upside without the risks associated with ground-up development. For example, the Indiana Veterinary Clinic we discussed last when the quarter is at final stages of being extended for 10 years, creating substantial value in the lease. Another example is the 20,000 square foot Spex situated on 1.88 acres on the cover of our investor presentation. Spex is the largest wine and spirits retailer in Texas. Family owned since 1962 with more than 200 stores. Our property is in the Legacy Shopping Center in San Antonio alongside Best Buy and Main Event near US 281 and Loop 1604 which carry more than 238,000 vehicles a day. And across from an HEB Anchorage Center. More than 225,000 people live within a five mile radius with an average household income above 130,000. Spex has been in the center since 2012 and in 2019 more than double. It's footprint by moving into its current 20,000 square foot store. What makes this deal stand out is the rent and the price. Spex pays about $10 per square foot with two five year fixed options at 11 per square foot and then 12 per square foot in a sub market where. Rents are estimated at about $20 today. The seller asked a 6.25% cap rate. We source the property off market through a long standing relationship and work through complications with the center's declaration that frankly kept other buyers away. Ultimately, we acquire.

For $2.6 million, approximately 18% below the asking price at a 7.6% cap rate and just $132 per square foot, roughly half of replacement costs. We fully anticipate specs to renew, pushing the yield on cost to 9.1% at the time. The second option. In the unlikely event that specs leaves, we get a box back at half of market rent. This transaction demonstrates our ability to create value and acquisition through sourcing, asset selection, certainty of execution, and the relationships we have built over the year. across a fragmented marketplace. In August, we also invested $2.7 million in a joint venture with an existing Frontview partner to retenant a well-located property with frontage near downtown Dallas, where in-place rents are significantly below market. The project is income-producing today, and we are targeting a mid-to-high teens IRR on the investment and potentially north of 20% if rents surpass initial estimates. While a relatively small investment, we see meaningful value creation potential. A growing pipeline of opportunities for exactly the type of real estate we want to own long term. Turning to the portfolio, we ended the quarter at 99.4% occupied with only two vacancies, including the former Smokey Bones. which is out for lease execution, and a small gas station, which has now been sold. We had no new additions to our watch list, and our 50 basis point bad debt placeholder for 2026 remains largely unidentified. With the new Chase lease, we have no remaining exposure to Meritage. Looking ahead,

our pipeline remains very active. Recent movements and interest rates have allowed us to source more opportunities at higher yields, while maintaining our focus on high quality real estate and attractive locations with replaceable rents. We currently have a over 40 million under LOI or purchase and sale agreement at yields above those achieved in the third quarter. Depending on closing timing, we are well positioned to meet or exceed our full year net investment guidance of approximately 120 million. In closing, one of Frontview's most important competitive advantages is the depth of our involvement in every aspect of the business. I take as much pride in the details of an individual $2 million acquisition as I do in the broader strategy and direction of our company. We combine their strategic vision. and discipline of an institutional platform with the entrepreneurial intensity and asset level knowledge of a founder led business. That combination is fundamental to how we operate and what makes front view different. Our shareholders aren't simply investing in a port. They're investing in an operating philosophy, disciplined capital allocation, and a team that understands how and where value is created. This combination positions front view to deliver sustainable, sector-leading, long-term shareholder value. Before I turn the call over, I am pleased to announce that our board has appointed Pierre Reval as president of Frontview, in addition to his role as chief financial officer. Pierre has been a true partner to me in building this company, and we share a common vision for Frontview.

our long-term strategy and capital allocation to the details of individual investments. This appointment reflects the strength of the leadership team we've built in our commitment to scaling Frontview while preserving the entrepreneurial culture and attention to detail that define our company. With that, I'll turn the call over to Pierre.

Thank you, Steve, and thank you to the board of directors for your confidence and support. I look forward to continuing to work alongside a talented team to build Frontview into a differentiated net lease platform. As Steve mentioned, a highlight this quarter was our capital deployment, where we generated a hundred basis point spread between our acquisitions and dispositions. We funded close to 100% of our acquisitions this year with dispositions in equity, reducing net debt to adjusted. annualized EBITDA RE from 5.6 times at the beginning of the year to five times at quarter end. Proforma for the final preferred draw on November 10th, leverage declines further to four and a half times, well below our leverage range of five. times to six times. In terms of capacity, this allows us to complete our 2026 investment plan and fund an additional 80 million of net investment in 2027 while maintaining leverage at or below five and a half times. If we repeated our 2026 net investment guidance of approximately 120 million in 2027, leverage would be close to 5.8 times, still comfortably within our targeted range. Turning into quarter, contractual cash rents increased 777,000 sequentially to 16. million, driven by net acquisitions and contractual rent increases, partially offset by dispositions. Percentage rent increased to 131,000, though we expect the run rate to be close to 50,000 quarterly.

investment at a time. With that, I'll turn the call over to the operator to open it up for Q&A. Operator.

We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally... Please remember to unmute your device. Please stand by while we compile the Q&A roster.

Your next question comes from the line of Eric Borden with BMO Capital Markets. Your line is open. Please.

Your next question comes from the line of

Anthony Pellone with J.P. Morgan. Your line is open. Please go ahead. Thanks. And echo the congrats, Pierre, on the title. On the 2020. Seven expirations in six and a half percent. You sound pretty confident in terms of recapture and your rents and so forth. But just trying to think through, should we expect any downtime or how does that net into things just from a. You know, earnings point of view like. Yeah, well, I can just comment globally on sort of where we sit right now for twenty seven and we are we are effectively done for twenty six so far in twenty six one hundred and sixteen point. Four percent recovery. We have three left. One is a very small. It's called a falafel. We're releasing that to a new tenant. We have a T-Mobile that's renewing. We have a Sherman Williams right now. We're negotiating to sell to a bank. So 2026 for history was. Very accretive. And we expect 27 to be the same. And we're about 6.5, 6.7 ABR. 34 total. Of that, 10 are already complete. And we feel like we've got visibility all the way through into Q3 right now. And are expecting very similar results to 26 with recovery rates. So, again, we view these as assets and opportunities. And historically, the data suggests and points to that. Okay. Got it. And then second question, you know, in prior call, you talked about looking at net lease development. And it looks like you have a small venture there. Just any additional color progress towards those?

Goals or what you're seeing on that front? Yes, we actually are looking at a couple of development opportunities on the heels of the joint venture that we just completed in Dallas. And, you know, we like to see that as a great way to access other value add opportunities. And channel additional deal flow. So look to see a couple of those opportunities coming for us in the next quarter. And I think you'll be very happy with what you see and the risks and the relative level of returns and value enhancement and creation that those will bring to the shareholders. Okay, thank you.

Your next question comes from the line of Jana Gallen with Bank of America. Your line is open. Please go ahead.

Your next question comes from the line of...

Hey, good morning, guys.

Thanks for taking the question.

You guys touched on it a little bit already in terms of leverage and that 80-120 kind of range for next year. I guess what would make you guys be willing to increase to that higher end of leverage versus the lower end? So I think on the leverage side, we're comfortable within the five to six times. It's just about the opportunities that we see. We're not shying away from acquisitions. The entire point of that comment is to show how much capacity we do, that we are effectively funded through 2027. We're comfortable. Our target is really to stay around five and a half times. If we want to go a little bit higher, if we find the right opportunities, we will go there. If we're able to raise equity equitably, that would be another component. Right now, just on cost of capital, taking recent stock prices, we're around 6.6, 6.7% cost of capital. So it's not based on our acquisitions. It's close to 90 to 100 basis points spread. It's not too far off. But as highlighted in our presentation, we think that our NAB is a lot higher. So those are considerations. But we are in a, I think it comes down to our cost of capital and the types of acquisitions. I've seen the market that would dictate whether or not we push higher on the acquisition. Got it. Appreciate the comments there. And then, you know, as it relates to investment spreads, you guys had 100 basis points this quarter. You know, I guess as most of the pruning has been done in terms of dispositions, should we expect that number to marginally expand throughout 2027? Or is that 100 point mark kind of, you know, a good idea?

Yeah, I think that, like, look, this quarter 100 base, 100 is pretty strong. I don't think you can factor that in as going forward as a number. I think it would be a little bit less than that. In the fourth quarter, at the same time, I would just highlight, I know a lot of people don't care about impairments and gains, but we had zero impairments this quarter and, you know, close to 4 million in gains. And so there's a, there's a lot. Our, our gains over impairments are like seven times. So we're seeing a lot of benefit in our dispositions. People are buying our properties. There's a lot of demand for our types of properties. And that gives us an additional source of capital if we descend. Ever tried to use that. Yeah, I understand. We have sold about 128 million at a 6.8 cap rate since the IPO. And we think it's healthy to continue to prune and to sell assets. But most of them. That optimization is definitely complete and behind us. Perfect.

Thank you, guys.

Appreciate it.

Your next question comes from the line of John Mazzocca with B. Riley. Your line is open. Please go ahead.

Your next question comes from the line of Rob Simone with Compass Point. Your line.

Your next question comes from the line of Ronald Camden with Morgan Stanley. Your line is open. Please go ahead.

As a reminder, if you would like to ask a question, please press star one to raise your hand.

Can you hear me? Yes. Yes. Can you hear me? Yes. I don't know why I didn't unmute the first time. You know, maybe thinking about the market and kind of, you know, after the interest rate moves, we saw kind of in the August, September, October timeframe, you know, how has that impacted the way you think about investments going into? 2027. I know you have this runway with capital recycling with some of the capital you have on hand to kind of invest without being beholden to the capital markets. But how are you kind of weighing maybe your spot cost of capital as you look? Your return threshold for new investments versus kind of your in-place cost of capital, if you will. Yeah, Pierre can take that. But what I'll just comment on is the market. And I'll just echo that again, that we're seeing spreads widen for us. You know, again, being that buyer. choice in this marketplace going up against that unsophisticated investor. So, you know, as rates continue to remain stubborn, I think you'll see those spreads continue to remain very healthy and wide. So specifically on the market there, there's my contribution here. Yeah. And in terms of cost of capital spot versus long term, I think that at least the way I think about cost of capital, I look at we're going to be in the bank term on market for a period of time, just given our size. I do look at the five year worker spread to that. Obviously, we've made some amendments to to our term loan. So that's looking around five, six, five, seven percent a day on the debt cost. And then you can take our FFL yield using next.

And you'll see kind of roughly where it lies in it. We will be kind of mid to high sixes on a WAC in terms of how we think about buying things. That's that's the most important decision is that where we allocate capital appropriately, we find deals that make sense. For us, we've we're actually if you look at the trajectory, we did go up a little bit in cap rate and the fourth quarter is going higher, not guaranteed we'll do that every quarter, but it's but we do pay attention to our cost of capital quite closely. I make sure that as we deploy. capital that is a creative to on a per share basis, while not diluting the types of real estate that we would feel comfortable putting on our website. And I think that's what that will continue to do that. And I think that that sort of model. It will deliver a lot of growth for us and our shareholders.

Okay. And then on the development side, as that potentially grows as a portion of your kind of investment box, what kind of... Increase in spreads relative to traditional net lease investments or traditional third-party investments. Are you looking for, if at all, are you looking at the same kind of return hurdles? Sure. So... You know, first, when we're looking at development, it's going to be risk mitigated. You know, we're leases signed, entitlements in place, site plan approval, zoning, GC contract, et cetera. And, you know, our partner is going to, you know, take out... The pursuit costs. So there's not a lot of upfront exposure to us. And what we like to see typically historically built in is at minimum 100, but I like to see that 100 to 200 basis point in spread. So there's some real value. And then you're putting a shovel on the ground and then building this asset. And theoretically, in under a year, you're getting that back with 100 to 200 basis point embedded spread. So there's a lot of value in it for us and the shareholders. And as I mentioned, there's a couple of opportunities we're looking. at right now that are specific, and we look forward to sharing those with you in due course. And I would just highlight on the one deal that we did this quarter, that as SRECs increase, you'll be upper eight. And to make closer to 10 cap as it stabilizes for frontage real estate in Dallas. That's pretty remarkable. And just to be able to get access to that with the trends that we're seeing, I think that that makes a ton of sense for our show.

Okay. I appreciate all that detail. That's it for me. Thank you. Good. Thank you.

Your next question comes from the line of Logan Epstein with Wolf Research. Your line is open. Please go ahead.

There are no further questions at this time. I will now turn the call back to Steve Preston for closing remarks.

Yes, thank you everyone for your continued interest in Frontview. We look forward to seeing you all at NARED in Atlanta and of course be safe and be healthy. Thank you. Take care.

This concludes today's call.

Thank you for attending.

You may now disconnect.