Activism, REITs, capital allocation and Four Corners Property Trust with Bill Lenehan | S06 E46
Dec 16, 2024
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Bill Lenehan, CEO of Four Corners Property Trust, discusses the unique landscape of REITs, highlighting how capital allocation and shareholder value drive success. He shares insights on navigating investment strategies during COVID-19, emphasizing patience and disciplined judgment. Lenehan also explores balancing innovation in business models with user acceptance, diversifying investments effectively, and improving investor relations. The conversation delves into the role of stock buybacks in market perception and the importance of transparency in communication with investors.
Four Corners Property Trust emphasizes disciplined capital allocation strategies to effectively manage investments and protect shareholder value during market fluctuations.
The company's adaptable acquisition strategy focuses on a diverse portfolio and effective tenant management, contributing to a high rent collection rate even during economic downturns.
Transparent communication with investors is a cornerstone of Four Corners' approach, fostering trust and engaging stakeholders with detailed updates on company performance and strategies.
Deep dives
Role of Four Corners Property Trust
Four Corners Property Trust operates as a real estate investment trust (REIT), managing approximately 1,200 properties, including a significant number of restaurant locations such as Olive Garden. The company focuses on acquiring small to mid-sized buildings, generally valued between $2 and $10 million. Its business strategy is highly adaptable, allowing it to purchase properties frequently or to pause acquisitions depending on market conditions. The emphasis is on managing a portfolio that generates consistent income while minimizing operational obligations related to properties.
Capital Allocation as a Core Principle
Effective capital allocation is central to the operations at Four Corners, with an informed approach to assessing stock prices and acquisition strategies. The management team has established mental models to guide decision-making, framing situations as opportunities to acquire assets at attractive valuations. In times of high stock prices, the company focuses on seizing opportunities to issue equity and finance future acquisitions effectively, while during downturns, it prioritizes protecting shareholder value. This disciplined approach to investment has allowed the company to navigate fluctuations in market prices successfully.
Resilience during COVID-19
During the COVID-19 pandemic, Four Corners displayed resilience, particularly due to its robust tenant roster mainly comprised of financially stable clients like Darden. The management anticipated potential challenges but remained confident in their ability to collect rent, resulting in a high collection rate of roughly 99.9% by June 2020. By maintaining open communication with tenants and closely monitoring the situation, the company proactively addressed concerns without compromising long-term shareholder interests. This strategic foresight and adaptability allowed Four Corners to resume acquisitions relatively quickly, with its stock price rebounding by year-end.
Understanding Investment Complexity
The discussion highlights the importance of recognizing the complexity of capital allocation and the investment landscape. With a shift in focus from simple acquisitions to a more nuanced understanding of asset quality, the company evaluates potential purchases through a comprehensive scorecard approach. This analytical method enables the REIT to make informed decisions based on a thorough understanding of each asset's economic viability. Such evaluations help navigate the often confusing market conditions that can lead to mispricing, ensuring that the firm only pursues high-quality investments aligned with its strategic objectives.
The Art of Communication with Investors
Transparent communication is emphasized as a vital aspect of investor relations at Four Corners. The management team endeavors to provide timely updates regarding company activities, acquisitions, and financial performance, fostering a sense of trust and engagement with stakeholders. By differentiating its approach from traditional practices, the firm adopts a proactive stance in sharing detailed information, allowing investors to better understand the company's strategies and the rationale behind their decisions. This commitment not only enhances accountability but also supports the long-term growth of shareholder value.
Value: After Hours is a podcast about value investing, Fintwit, and all things finance and investment by investors Tobias Carlisle, and Jake Taylor. See our latest episodes at https://acquirersmultiple.com/podcast
We are live every Tuesday at 1.30pm E / 10.30am P.
About Jake
Jake's Twitter: https://twitter.com/farnamjake1
Jake's book: The Rebel Allocator https://amzn.to/2sgip3l
ABOUT THE PODCAST
Hi, I'm Tobias Carlisle. I launched The Acquirers Podcast to discuss the process of finding undervalued stocks, deep value investing, hedge funds, activism, buyouts, and special situations.
We uncover the tactics and strategies for finding good investments, managing risk, dealing with bad luck, and maximizing success.
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ABOUT TOBIAS CARLISLE
Tobias Carlisle is the founder of The Acquirer’s Multiple®, and Acquirers Funds®.
He is best known as the author of the #1 new release in Amazon’s Business and Finance The Acquirer’s Multiple: How the Billionaire Contrarians of Deep Value Beat the Market, the Amazon best-sellers Deep Value: Why Activists Investors and Other Contrarians Battle for Control of Losing Corporations (2014) (https://amzn.to/2VwvAGF), Quantitative Value: A Practitioner’s Guide to Automating Intelligent Investment and Eliminating Behavioral Errors (2012) (https://amzn.to/2SDDxrN), and Concentrated Investing: Strategies of the World’s Greatest Concentrated Value Investors (2016) (https://amzn.to/2SEEjVn). He has extensive experience in investment management, business valuation, public company corporate governance, and corporate law.
Prior to founding the forerunner to Acquirers Funds in 2010, Tobias was an analyst at an activist hedge fund, general counsel of a company listed on the Australian Stock Exchange, and a corporate advisory lawyer. As a lawyer specializing in mergers and acquisitions he has advised on transactions across a variety of industries in the United States, the United Kingdom, China, Australia, Singapore, Bermuda, Papua New Guinea, New Zealand, and Guam.
He is a graduate of the University of Queensland in Australia with degrees in Law (2001) and Business (Management) (1999).
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