Front View REIT reports improved portfolio metrics, boosts disposition guidance to $60-$75 million while maintaining AFFO per share expectations amid capital recycling strategy.

OPERATOR - (00:00:57)

Good morning ladies and gentlemen and welcome to the Front View REIT Incorporated second quarter 2025 earnings conference call. At this time all lines are in listen only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Thursday, August 14, 2025. I would now like to turn the conference over to Pierre Revol, cfo.

Pierre Revol - (00:01:27)

Please go ahead sir. Thank you Operator and thank you everyone for joining us for Front View's second quarter 2025 earnings call. I will be joined on the call by Steve Preston, Chairman and CEO. Drew Ryland, Our Chief Operating Officer will be available for Q and A. Before we get started, I would like. To remind everyone that this presentation includes forward looking statements. Although we believe these forward looking statements are based on reasonable assumptions, they are subject to known and unknown risks and uncertainties that can cause actual results to differ materially from those currently anticipated due to a number of factors. I refer you to the Safe Harbor Statement and our most recent filing with the SEC. A detailed discussion of risk factors relating to these forward looking statements. This presentation also contains certain non-GAAP financial metrics. Reconciliation of non-GAAP financial metrics and most directly comparable GAAP metrics. are included in the exhibits furnished to the SEC under Form 8-K which include our earnings release and supplemental package. These materials are also available on the Investor Relations page of our company's website along with our investor presentation. I'm now pleased to introduce Steve Preston.

Steve Preston - Chairman and CEO - (00:02:48)

Steve thank you Pierre and good morning everyone. As a reminder for our new investors, FrontView is a diversified net lease REIT that primarily focuses on high visibility frontage properties typically with smaller box sizes which are leased to household name tenants. As of June 30, our portfolio consisted of 319 properties leased to 334 tenants operating across 16 industries. Our portfolio maintains excellent diversification, no tenant representing more than 3.3% of ABR before providing an update on our operations, I would like to formally welcome Pierre Revol as our Chief Financial Officer. Pierre brings extensive experience within REITs having led corporate finance, investor relations and capital markets for both public and private REITs. As well as being a former buy side REIT investor, Pierre's expertise will bolster FrontView's financial strategy including capital markets execution, balance sheet management, communications and operational excellence. I am thrilled to have him on the team. With this addition, our executive team is complete and optimized to operate and scale our business. Turning to the portfolio, we ended the quarter with occupancy of 97.8% up from approximately 96% last quarter. We made exceptional progress in a remarkably short time frame on the 12 previously disclosed properties with trouble tenancies. This is now resolved and behind us. Of the 12 properties we sold three during the quarter and one post quarter for 11.8 million and over 89% recovery on the original purchase price. We released five properties for 687,000 in annualized base rent with a Weighted Average Lease Term (WALT) of 10.8 years. By combining the value of the new leases with the reinvestment of disposed properties, we have already recovered approximately 65% of the aggregate prior rent from just these nine assets. Only three assets remain with one under contract to sell, one with buyer interest and one with national tenant interest. The successful resolution highlights the strength of our underlying high quality real estate which is characterized by high visibility frontage locations appealing to various users, allowing us to re tenant, repurpose or sell assets in order to maximize value for each location. Outside of these assets, the tenants in our portfolio are performing as expected with negligible credit loss and no material additions to our watch list. During the second quarter we acquired five properties for approximately 17.8 million at an average cash cap rate of 8.17%. The weighted average remaining lease term for these properties was approximately 11 years with average annual escalators of approximately 2.4% and an economic yield of 9.35%. From an industry perspective, we continue to add diversification including adding financial, medical, discount, retail, automotive and logistics distribution. In terms of property dispositions, we sold nine properties for 22.7 million during the quarter. Five were occupied properties generating proceeds of 11.6 million and an average cash cap rate of approximately 6.75%. These properties had an average weighted lease term of eight years. Our current target dispositions are assets with lower wallets or less optimal concepts. Additionally, we sold 4 vacant properties during the quarter recovering approximately 90% of the original purchase price with these funds being redeployed into income producing properties. These asset sales demonstrate the continued desirability and liquidity of our real estate assets and highlights a meaningful spread between our implied cap rate of approximately 10% versus where our assets are transacting in the market. Looking at net investments, we were net sellers this quarter and our net debt to annualized adjusted EBITDA fell to 5.5 times with an LTV of less than 40%. Using consensus estimates for now, as we look forward to the remainder of the year, we've adjusted our net capital deployment Guidance on the capital front, we are increasing our capital recycling by raising our disposition guidance to 60 million to 75 million and reducing our acquisition target to a range of between 110 million and 130 million. On the acquisition front, we will remain selective pursuing high visibility properties with strong credits at attractive valuations. Our pipeline of opportunities remains strong and. We believe we will be able to. Accelerate acquisitions if supported by our capital recycling plan or an improved cost of capital. Going into the third quarter we see cap rates trending around 7.5%. On the disposition front, we have an active pipeline of assets with less optimal concepts and or lower waltz where we currently anticipate that the cap rates. Should be 50 to 75 basis points. Lower than those in our acquisitions while improving key portfolio metrics including Weighted Average Lease Term (WALT) and industry composition. In summary, we have a strong team of real estate and capital markets professionals in place to lead us forward a high quality portfolio of liquid real estate assets and a pipeline of investments and dispositions that will further enhance our portfolio. Finally, we are well equipped with a strong balance sheet to execute on a pipeline of opportunities to accelerate external growth when there is an attractive spread to our cost of capital. With that, I'll turn the call to Pierre to go through the quarterly numbers and guidance.

Pierre Revol - (00:09:13)

Pierre thank you Steve. I appreciate the warm introduction. It is a privilege to join the FrontView team and contribute to enhancing the platform for long term value creation. Before diving into the quarterly update and guidance, I want to highlight a few new disclosures that we believe will be beneficial to shareholders. In our supplemental materials, we are providing more detailed information for both our investments and dispositions, breakdown of our NAV components and annualized adjusted cash NOI. Additionally, we have also expanded our tenant disclosures to include our top 60 tenants, offering greater insight into the portfolio. As Steve highlighted, it was a very positive quarter on several fronts including accretive net capital deployment and portfolio performance. Our cash rents in the second quarter were 15.7 million which includes 15.5 million in base rent and 163,000 in percentage rent, an increase of 600,000 or 4% from last quarter, primarily driven by the acquisitions completed in the first quarter and increased percentage rents. Our total revenue increased 1.3 million sequentially to 17.6 million which includes straight line rent, other income and other non cash revenue. Our non reimbursable property cost for leakage is 275,000 or approximately 1.8% of base rent. This includes some recoveries and expenses and would expect normal leakage to be closer to 500,000 on a quarterly basis. Turning to G&A, we reported 3.3 million in expenses this quarter which included approximately 1.1 million non recurring costs primarily related to one time legal expenses pertaining to the former CFO investigation along with other non recurring fees. Excluding non recurring items, our G and A for the quarter was approximately 2.2 million compared to 2.8 million in Q1. Adjusted cash G&A for the quarter totaled 2 million, a reduction of roughly 200,000 from Q1. Looking ahead we see full year cash G and A excluding non recurring charges to be approximately 8.8 million reflecting a $200,000 reduction from prior guidance for both the high and low end driven mostly by improved cash NOI. Lower cash GMA AFFO per share increased $0.02 or 6.7% quarter over quarter to $0.32. We declared a quarterly dividend of 21 and a half cents representing a 66% payout ratio on AFFO per share. Turning to the balance sheet ended the quarter with 1:18.5 million drawn on our revolving credit facility and 200 million on our term limit. We currently have approximately 140 million of liquid comprised of 131.5 million revolver capacity and 8.4 million of cash on hand. In addition, our revolving credit facility includes a 200 million accordion feature which we may elect to exercise at our discretion subject to customary conditions. Our $200 million term loan is fully hedged through initial maturity at a rate of 4.96%. The revolving credit facility bears interest at a floating rate of adjusted 1 month SOFR plus 1.2% with an effective rate of 5.63% as of June 30th. Both the revolver and the term loan include two 12 month extension options subject to customary conditions which can extend final maturity to 2029. From a leverage standpoint, we ended the quarter at 5 and a half times net debt to annualized adjusted EBITDA REIT 0.2 turn reduction from Q1 primarily driven by increased disposition activity and lower operating costs. Our fixed charge coverage ratio remains strong at 3.3 times and our balance sheet is conservatively positioned with LTV slightly below 35% utilizing consensus applied cap rates of 7.1%. With our revised net capital deployment guidance, do not expect a meaningful increase in leverage, staying between 5 times and 6 times net debt to adjusted annualized EBITDA. Already turning to guidance as Steve highlighted, we're lowering acquisition range to 110 million to 130 million with a midpoint of 129, raising our disposition range from 60 million to 75 million at the midpoint of 67.5 million at the midpoint. This represents a $15 million reduction in acquisitions, a $37.5 million increase in this position. While we continue to maintain an active pipeline of both fronts, this shift reflects a deliberate capital recycling strategy, preserving liquidity, managing leverage and enhancing portfolio quality. Additionally, we're narrowing our AFFO per share guidance range to $1.22 to $1.24, driven primarily by the revised capital allocation plan. Looking ahead, we remain focused on continually enhancing the portfolio and maintaining balance sheet discipline. Steve, back to you for closing remarks.

Steve Preston - Chairman and CEO - (00:15:05)

Thanks, Pierre. As I mentioned earlier, we have the right team to execute bringing both real estate and capital markets expertise. Our portfolio consists of high quality frontage real estate in strong demand, allowing us to proactively manage and maximize value. We've enhanced our disclosure with a refreshed supplemental and investor presentation, providing investors with more relevant data as we move into the second half. We'll remain disciplined capital allocators, expanding our capital recycling program to deliver accretive financial and portfolio gains while maintaining a strong and flexible balance sheet. With that, I'll turn the call back to the operator to begin Q and A operator.

OPERATOR - (00:15:51)

Thank you very much, ladies and gentlemen. We will now begin the question and answer session. Should you have a question, please press Star followed by the number one. On your touchstone phone, you will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press Star followed by the number two. If you are using a speakerphone, please make sure to lift your handset before pressing any keys. Please be reminded that we will only be taking one question and one follow up per participant for today's Q and A session. Your first question comes from the line of John Kieliszowski from Wells Fargo. Please go ahead.

Cheryl - (00:16:30)

Hi, Hi, I'm Cheryl speaking for John. Good morning and thank you for taking my question. You narrowed the AFFO per share guidance range. The midpoint remains unchanged despite another reduction in net investment volume. Can you walk us through what gives you the confidence in holding the midpoint flat?

Pierre Revol - (00:16:52)

Sure, I'll take that one. Essentially, in the quarter as you saw that the operations were pretty strong at 32 cents. And so for the first half of the year, we are at 62 cents. And when we look at the resolutions on the on the 12 properties discussed. Before the performance of these 12 tenants. We believe that for the back half the year we can probably do between 30 to 32 cents a quarter and targeting 31 seems very reasonable. Given what we see on the existing portfolio.

Cheryl - (00:17:29)

Okay, thank you, that's helpful. And one, follow up on the nine resolved properties of the 12. Should we expect any adjustments to bad debt guidance going forward, given the improved visibility on the leasing progress?

Pierre Revol - (00:17:46)

Sure, I'll take that as well. So on the bad debt guidance, we did not include it this quarter. It was essentially part of the original guide which was reflecting those 12 properties. Steve commented on his remark. The portfolio outside these 12 has had de minimis credit losses. So at this point we're just not providing an update on bad debt guidance. We think that for the remainder of this year, what we see is a very healthy portfolio. We look forward to resolving the remaining three properties with the responses from Steve. And the portfolio is actually pretty healthy. And that's why, despite reducing our net capital deployment meaningfully, you can still produce a very strong quarter third and fourth. And that's why we were able to increase the low end to $1.22.

Cheryl - (00:18:32)

Very helpful, thank. You.

OPERATOR - (00:18:39)

Your next question comes from the line of Anthony Pallone from JP Morgan. Please go ahead.

Anthony Pallone - Equity Analyst - (00:18:46)

Thanks. Welcome, Pierre, and appreciate the incremental disclosure as well. First question is, as we think about acquisitions and dispositions over the balance of the year, how should we think about just the spread and cap rates between the two? I mean, you're able to produce a positive spread in the quarter and just wondering if that's something you think can continue. And then also any incremental color on the acquisitions in the quarter. Cap rates greater than 8% and also bumps north of 2, which is higher than what we'll typically see in net lease. So just wondering kind of how you're achieving those.

Pierre Revol - (00:19:29)

Yeah, sure, I'll take that. Thank you. Yeah, no, we expect to see, as we mentioned early, you know, about a 50 to 75 basis point differential between where we're selling assets and then where we're transacting into the marketplace. And we expect that hopefully to continue throughout the year. You know, with respect to what we're. Buying, you know, we're, we're continuing to buy great assets with frontage from, you know, very motivated sellers. We achieve typically these outsized cap rates because, you know, we're not typically competing with institutions in the space. And if you remember, we've got that fragmented market where the buyers are typically. Small and they're unsophisticated. You know, we've got great credit on these assets as well. They're solid corporate credit, large operations with long term operating businesses. And just, you know, to echo a couple of examples of a few of the assets of La Z Boy, you know, we bought that roughly at about a 7 1/2 cap with about 10 years left remaining. What A Strickland Brothers as an example, with 15 years left at about a 7 1/2 cap rate and a range USA with about 18 years left and a cap rate. So these are all great assets, great corporate credits, and just a testament to how we continue to be able to. Buy into the marketplace. And with respect to the escalators, you know, those are. Those are just. Those are built into the leases. And, you know, we typically average about 1 to 2% across the portfolio. And it just so happened amongst this mix that the escalators, you know, came in a little bit higher. There were a couple assets that we acquired that had more than sort of. That average 1 to 2% built into the lease.

Anthony Pallone - Equity Analyst - (00:21:09)

Okay, got it, thanks. And then just one other one, just maybe more of a clarifying item in your nav build up in the supplemental. The NOI number is higher than the base rent number. And I guess I would have just intuitively assumed that would be flipped given sort of some normalized leakage. But just wondering, like, you know, what I'm missing there.

Pierre Revol - (00:21:32)

Well, yeah, there's other income as well that's not part of the ABR. There's some interest income on loans that's also not part of the ABR. And so that was. It's essentially just some of that net other income that was picked up in Indiana. Yes, that's outside of his rent.

Anthony Pallone - Equity Analyst - (00:21:51)

I see. Okay, thank you.

OPERATOR - (00:21:58)

Your next question is from the line of Daniel Guglielmo from Capital One Securities. Please go ahead.

Daniel Guglielmo - Equity Analyst - (00:22:05)

Hi, everyone. Thank you for taking my questions. So, as mentioned in the commentary, you all are in an elevated recycling mode, but share prices change fast at the right strategy and execution. So is there a certain share price level where you all would feel comfortable kind of flipping the switch and starting to become a more meaningful acquirer? Just curious how you all think about that, Matt.

Pierre Revol - (00:22:31)

Sure. So there's actually a page in the investor presentation where we highlighted that if we were to get a positive spread on our acquisitions, I think that this platform could really grow. There's not. We have a robust pipeline for acquisitions, and our assets are sought after by. By several investors. And I think that the opportunity to accelerate is certainly on the table, but. We want to achieve an attractive spread. So if you're looking at a cap rate of roughly 7.5%, what Steve talked about in the call, you would want to make sure that the Whatever cost of capital is inside of that, and that really is what's driving where we'll start to pivot more towards acquisitions. At this point, though, just given where our applied cap rate is, you know, cost of capital, I think the most prudent way to manage a balance sheet. Is to execute on this recycling plan. We've seen that work for some of our peers, and I think that it could work for us, just given the quality of our portfolio. And maintaining leverage at the level is important.

Daniel Guglielmo - Equity Analyst - (00:23:35)

That's really helpful. Thank you. And then a big part of the IPO pitch was the strength, the team's broker relationships and how those connections really helped funnel frontage properties to you all. I know Randy was focused there in the co CEO role. So can you just talk about how you all are continuing to foster those broker relationships with a slower acquisition cadence and then who's taking on that kind of liaison role now?

Pierre Revol - (00:24:05)

Yeah, that's good. Thanks. Let's just start with, you know, that this is behind us, too, with respect to Randy and the CEO and with respect to the acquisitions and dispositions. I think, as we mentioned before, you know, our team has been in place since the IPO and was really handling a bulk, if not almost all of the acquisitions since the ipo. So they are in place and ready to meet our guidance.

Daniel Guglielmo - Equity Analyst - (00:24:34)

Thanks. Appreciate it.

OPERATOR - (00:24:40)

The next question is from the line of Ronald Camden from Morgan Stanley. Please go ahead.

Ronald Camden - Equity Analyst - (00:24:46)

Hey, just staying on the investments a little bit. I think you said seven and a. Half on the cap rates. Maybe just talk a little bit more about. Is that just cap rate compression? Is there a mix? And then any time we could sort of quantify the pipeline. Is it. Is it 50 million? Is it 100 million? Like, when you're ready to ramp, just. How big do you think you can get?

Pierre Revol - (00:25:06)

Thanks. Sure. You bet. You know, I would just say, you. Know, with respect to kind of that. State of the acquisition market, you know, the market is fluid, you know, and as we had mentioned, that we do expect, you know, cap rate sometime in Q3, somewhere in that 7.5% range, inside a little bit from where we've been acquiring. And I think that's a little bit of a testament to leverage being a little bit easier for buyers to obtain now, a little bit less noise in the marketplace. So for some of these smaller properties from some. Some of these smaller banks, but there is still a unbelievable amount of opportunity for us. We've got a strong pipeline and, you know, we can increase that pace of acquisition at any point in time. I Think we had originally guided to, you know, roughly about $200 million for the year. You know, in Q4, 24, we did over or about $100 million of acquisitions. And if we get that cost of capital back, we've got the team in place that I see no reason why we can't meet or exceed that prior guidance.

Ronald Camden - Equity Analyst - (00:26:06)

Great, helpful. And then just going back on the tenant health conversation, obviously good progress on those 12 assets and I can appreciate that bad debt is sort of de minimis outside of those, but just on a long term basis, when you're thinking about sort of the watch list and how things are trending, how should we think about what the long term bad debt number we should be baking in?

Pierre Revol - (00:26:33)

Yeah. So what I would say is really no material changes or additions to the watch list. You know, we've, you know, as we mentioned before, we've, you know, we watch pharmacy just like everybody else, car wash like everybody else. You know, we prior mentioned that we had, you know, two Applebee's and a couple of Burger Kings that we're watching. Those are open and operating, you know, a pair of gas stations. But overall everything, you know, is, is very healthy. You know, as we look to see going forward. You know, what I would highlight is. That since we founded this business in 2016, we have had 47 lease expirations and only seven have expired, with 40 renewing to the same tenant, three renewing to a new tenant at 104% recovery rate, which is over a 90% renewal rate. So when we look forward, we feel very good and you know, I'll just leave you with one other sort of tidbit here. You know, if the 12 were stabilized. In 2025 that we've been talking about, you know, bad debt, expense, you know, as Pierre mentioned, would be negligible. And you know, we'd be looking at somewhere in the, you know, 25 basis point, maybe, you know, 50 on the high side. So I think we feel like this portfolio is humming. You know, it's very strong right now. Performance is good. You know, collections are great and you know, we, we expect that that's going to be something that continues with this portfolio. More in line with historicals and not that anomaly we were just dealing with.

Ronald Camden - Equity Analyst - (00:27:57)

Thanks so much. You bet.

OPERATOR - (00:28:04)

The last question comes from the line of Daniel Bien from Bank of America.

Daniel Bien - Equity Analyst - (00:28:08)

Please go ahead. All right, thanks for taking my question. Could you provide a little bit more context behind the new mortgage loan receivables found in the balance sheet?

Pierre Revol - (00:28:23)

Yeah, sir, sure. So what I would Say is that that's not a business that we were in. We actually made two loans on two assets that we sold. And it's a good way for us to achieve some good yield. We had about 8% interest rate baked into those. And we actually, of course, know those properties pretty well. So it's a good way, if something were to ever happen that we certainly don't expect it to, that you get an asset back at a very good basis. So. Good way to get some extra income.

Daniel Bien - Equity Analyst - (00:28:58)

Got it. Thanks for the color. And then could you also elaborate on. Your decision to expand your top tenant list by another 20 to 60? Because I know it could be pretty. Difficult to take that back in the future if needed.

Pierre Revol - (00:29:09)

We got nothing to hide, but Pierre will take it. And we love the extra disclosure. Yeah, I mean, look, I've noticed that for companies that have had issues with the cost of capital, transparency is helpful. And so I know that from history. And like my previous company used to disclose 100 tenants. And this top 60, when you actually look down at that list from 40 to 60, there's some really interesting tenants there. Like, you have a Starbucks, you have a couple other IGs. There's. It's very high quality tenant roster. And I think that that added disclosure, I hope, will provide investors more confidence in terms of the quality of the tenant base that supports these properties.

Daniel Bien - Equity Analyst - (00:29:49)

Got it. Thank you very much. Thank you.

OPERATOR - (00:29:55)

Thank you very much. There are no further questions at this time. I'd like to turn the call back over to Mr. Steve Preston for closing comments. Sir, please go ahead.

Steve Preston - Chairman and CEO - (00:30:04)

Yes, thank you. Thank you, everyone, for joining. We look forward to continuing to build from here. We've got a great team and a great portfolio and a very conservative balance sheet. We will be at the Wells Fargo. Conference coming up on September 8th and. Look forward to sitting down and visiting with anyone that would wish to do so. And that's in New York. Be well and be safe and healthy.

OPERATOR - (00:30:28)

Ladies and gentlemen, this concludes today's conference call. Thank you very much for your participation. You may now disconnect.