Why One Fund Made a $19 Million Bet on Four Corners Property Trust Even as Shares Fell 15%

Boston-based Callodine Capital Management disclosed a new stake in Four Corners Property Trust (NYSE:FCPT) valued at $18.67 million, according to a November 13 SEC filing.

What Happened

According to a filing with the U.S. Securities and Exchange Commission dated November 13, Callodine Capital Management established a new position in Four Corners Property Trust (NYSE:FCPT) during the third quarter. The fund reported ownership of 765,275 shares valued at $18.67 million as of September 30, marking an initial disclosure of this security in its quarterly 13F report.

What Else to Know

This new position in FCPT represents 1.64% of Callodine’s total reportable 13F assets as of September 30.

Top holdings following the filing:

• NYSE:SPB: $90.09 million (7.89% of AUM)
• NYSE:WWW: $74.13 million (6.49% of AUM)
• NASDAQ:VTRS: $68.72 million (6.02% of AUM)
• NYSE:OWL: $66.07 million (5.79% of AUM)
• NYSE:EQH: $52.95 million (4.64% of AUM)

As of Monday, shares of FCPT were priced at $23.48, down 14.5% over the past year and only slightly underperforming the S&P 500, which is up about 16% in the same period.

Company Overview

Company Snapshot

Four Corners Property Trust owns and leases restaurant and retail properties, generating revenue primarily from long-term net leases. The company operates as a real estate investment trust (REIT), acquiring properties and leasing them to tenants who are responsible for property expenses. It serves national and regional restaurant operators and retail chains as its primary tenant base.

Foolish Take

Four Corners Property Trust sits in a corner of retail real estate that rarely grabs headlines, yet it keeps doing exactly what income investors care about. In the third quarter, the company grew rental revenue more than 12% year over year to $66.5 million, posted adjusted funds from operations (AFFO) of $0.45 per share (up $0.02 from one year prior), and collected 99.9% of contractual rent.

That combination matters more than short-term share price noise -- of which there has been some. The stock has slid roughly 15% over the past year, but the operating story moved in the opposite direction. Management acquired $82 million of properties in the quarter at an initial 6.8% cash yield, pushing trailing 12-month acquisitions to $355 million. Occupancy remained above 99%, leases stretched more than seven years on average, and leverage stayed near the low end of the company’s historical range.

This position sits well outside the fund’s top holdings, which skew toward more cyclical or equity-sensitive names, and adding a net-lease REIT with predictable cash flow and contractual rent growth looks less like a conviction bet and more like ballast. But for long-term investors, this is a reminder that boring balance sheets often age better than exciting narratives.

Glossary

Stake: The ownership interest or investment a person or institution holds in a company.
Assets under management (AUM): The total market value of investments managed by a fund or investment firm.
Net position change: The difference in the value of a holding after buying or selling shares.
13F report: A quarterly filing by institutional investment managers disclosing their equity holdings to the SEC.
Dividend yield: A stock's annual dividend payments divided by its current share price, expressed as a percentage.
Trailing twelve months (TTM): The 12-month period ending with the most recent quarterly report.
Real estate investment trust (REIT): A company that owns, operates, or finances income-producing real estate and distributes most income to shareholders.
Net lease: A lease agreement where the tenant pays property expenses such as taxes, insurance, and maintenance, in addition to rent.
Reportable assets: Investments that must be disclosed in regulatory filings, such as those required by the SEC.
Annualized: Converted to a yearly rate based on data from a shorter period.

Jonathan Ponciano has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Spectrum Brands. The Motley Fool has a disclosure policy.