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Date
Thursday, August 14, 2025 at 11 a.m. ET
Call participants
Chief Executive Officer — Stephen Preston
Chief Financial Officer — Pierre Revolt
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Takeaways
Portfolio occupancy-- 97.8%, up from approximately 96% in fiscal Q1 2025 (ended March 31, 2025), reflecting improved tenant stability.
Resolution of troubled assets-- Nine out of twelve previously disclosed troubled properties resolved, with three sold (plus one post-quarter) for $11.8 million and over 89% recovery on original purchase price; five re-leased, recovering approximately 65% of aggregate prior rent on these nine assets.
Second-quarter acquisitions-- Five properties acquired for $17.8 million at an average cash cap rate of 8.17%, with average economic yield of 9.35% and average annual escalators of approximately 2.4% for properties acquired.
Dispositions-- Nine properties sold for $22.7 million; five occupied assets (average cash cap rate 6.75%, average lease term eight years) and four vacant properties (approximately 90% recovery of original purchase price).
Top tenant concentration-- No single tenant accounts for more than 3.3% of Annualized Base Rent (ABR), indicating high portfolio diversification.
Total revenue-- Total revenue was $17.6 million, up $1.3 million sequentially, driven by prior acquisitions and increased percentage rents.
Cash rents-- $15.7 million, a $600,000 or 4% increase from the prior quarter, with $15.5 million base rent and $163,000 percentage rent.
General & Administrative (G&A) expenses-- $3.3 million, which includes $1.1 million in non-recurring legal/investigation fees; adjusted cash G&A was $2 million, down $200,000 from fiscal Q1 2025.
Adjusted Funds From Operations (AFFO) per share-- AFFO per share increased 2¢, or 6.7% quarter over quarter, to 32¢; dividend declared at 21.5¢ per share for a 66% payout ratio.
Leverage-- Net debt to annualized adjusted EBITDAre was 5.5 times, a 0.2 turn improvement from fiscal Q1 2025; loan-to-value (LTV) slightly below 35% using a consensus-applied cap rate of 7.1%.
Liquidity position-- Approximately $140 million available as of June 30, 2025, including $131.5 million in revolving credit facility capacity and $8.4 million in cash.
Interest rates-- Term loan fully hedged to initial maturity at 4.96%; revolving credit facility effective rate 5.63% as of June 30.
Guidance revisions-- Capital recycling plan raised the disposition target to $60 million–$75 million (midpoint $67.5 million) for the remainder of 2025, reduced the acquisition target to $110 million–$130 million (midpoint $120 million) for the full year 2025.
AFFO per share guidance-- AFFO per share guidance range narrowed to $1.22–$1.24 for the year, unchanged at the midpoint of AFFO per share (non-GAAP) guidance for the year.
Capital markets flexibility-- Revolving facility and term loan both offer two twelve-month extension options, with facility featuring a $200 million accordion feature.
Disclosure enhancements-- Supplemental materials now include NAV breakdown, adjusted cash NOI, and expanded tenant data for top 60 tenants.
Cap rate environment-- Expected acquisition cap rates near 7.5% in fiscal Q3 2025 (ending September 30, 2025); anticipated disposition cap rates expected to be 50–75 basis points lower than acquisitions for the remainder of the year.
Stephen Preston-- "negligible credit loss and no material additions to our watch list."
Historical leasing retention-- Since the business was founded in February 2016, 47 lease expirations have occurred, with 40 renewals to the same tenant and three to new tenants, representing an over 90% renewal rate and a 104% recovery rate for new tenant leases since February 2016.
Mortgage loan receivables-- Two loans made on recently sold assets at approximately 8% interest, providing yield and basis protection should issues arise.
Full-year cash G&A guidance-- Management projects $8.8 million in full-year cash G&A, excluding non-recurring items, a $200,000 reduction from previous full-year guidance due to improved cash NOI and cost controls.
Summary
FrontView REIT(FVR 3.74%) reported sequential growth in revenue and AFFO per share, complemented by successful execution on previously troubled assets and refined capital allocation plans favoring higher dispositions over acquisitions. Management expects further portfolio optimization through disciplined capital recycling, while maintaining leverage within a five to six times net debt to annualized adjusted EBITDAre target for the remainder of the year. Expanded disclosures, including a top-60 tenant roster and detailed NAV components, were introduced to provide added transparency for investors.
Chief Financial Officer Pierre Revolt said, For fiscal Q3 and Q4 2025, "we can probably achieve between 30¢ and 32¢ of AFFO per share per quarter, and targeting 31¢ seems very reasonable."
Stephen Preston, CEO, stated the executive team is now "complete and optimized to operate and scale our business," referencing recent leadership changes.
"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," CEO Stephen Preston said, outlining capital strategy for the remainder of the year.
Stephen Preston remains "active" with real estate assets described as liquid and desirable relative to current market implied cap rates.
Industry glossary
WALT: Weighted average lease term, a measure of portfolio lease duration reflecting the average remaining lease term weighted by rental income.
NOI: Net operating income, a property’s income from operations after deducting operating expenses but before interest and depreciation.
ABR: Annualized base rent, the total base rental revenue of the property portfolio projected over a twelve-month period.
Cap rate: Capitalization rate, the net operating income produced by a property divided by its acquisition cost or current market value, used to evaluate return.
EBITDAre: Earnings before interest, taxes, depreciation, amortization, and real estate gains/losses, tailored for real estate businesses.
AFFO: Adjusted funds from operations, a performance measure for REITs that adjusts funds from operations by excluding non-recurring items and capital expenditures.
Full Conference Call Transcript
Stephen Preston: 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, with no tenant representing more than 3.3% of ABR. Before providing an update on our operations, I would like to formally welcome Pierre Revolt 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 his 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 troubled tenancy. This is now resolved and behind us.
We sold three during the quarter of the 12 properties, 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 WALTs 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 retenant, 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 and an average cash cap rate of 8.17%. The weighted average remaining lease term for these properties is approximately eleven 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 WALTs or less optimal concepts. Additionally, we sold four 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 highlight the meaningful spread between our implied cap rate of approximately 10% versus where our assets are transacting in the market. Looking at net investment, we were net sellers this quarter, and our net debt to annualized adjusted EBITDAR fell to 5.5 times, with an LTV of less than 40% using consensus estimates for NAV. 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 and 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 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 WALTs, 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 WALTs 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,
Pierre Revolt: Thank you, Steve. I appreciate the warm introduction. It's a privilege to join the FrontView team and contribute to enhancing the platform's 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, a 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 costs or leakage is $275,000 or approximately 1.8% of base rent. This includes some recoveries in expenses, and we'd expect normal leakage should 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 in 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&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&A excluding non-recurring charges to be approximately $8.8 million, lasting a $200,000 reduction from prior guidance to both the high and low end, driven mostly by improved cash NOI and lower cash G&A.
AFFO per share increased 2¢ or 6.7% quarter over quarter to 32¢. We declared a quarterly dividend of 21.5¢, representing a 66% payout ratio on AFFO per share. Turning to the balance sheet, we ended the quarter with $118.5 million drawn on our revolving credit facility and $200 million on our term loan. We currently have approximately $140 million of liquidity, 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 one-month SOFR plus 1.2%, with an effective rate of 5.63% as of June 30. Both the revolver and the term loan include two twelve-month extension options subject to customary conditions, which can extend final maturity to 2029. From a leverage standpoint, we ended the quarter at 5.5 times net debt to annualized adjusted EBITDAre, a 0.2 turn reduction from Q1, primarily driven by increased disposition activity and lower operating costs. Our fixed charge coverage ratio remained 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, we do not expect a meaningful increase in leverage, staying between five times and six times net debt to adjusted annualized EBITDAre. Turning to guidance, as Steve highlighted, we're lowering the acquisition range to $110 million to $130 million, with the midpoint of $120 million, and raising our disposition range from $60 million to $75 million, with the midpoint of $67.5 million. At the midpoint, this represents a $15 million reduction in acquisitions and a $37.5 million increase in dispositions. While we continue to maintain an active pipeline on both fronts, this shift reflects a deliberate capital recycling strategy, observing 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.
Stephen Preston: 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 investor presentation, providing investors 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&A. Operator?
Operator: Thank you very much. Ladies and gentlemen, we will now begin the question and answer session. 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&A session. Your first question comes from the line of John Kilichowski from Wells Fargo. Please go ahead.
John Kilichowski: Hi. I'm Cheryl on for John. Good morning, and thank you for taking my question. You narrowed the AFFO per share guidance range, but 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 Revolt: Sure. I'll take that one. Essentially, in the quarter, as you saw, the operations were pretty strong at 32¢. And so for the first half of the year, you know, we are at 62¢. And when we look at the resolutions on the 12 properties discussed before, performance of the existing tenants, we believe that for the back half of the year, we can probably do between, you know, between 30 to 32¢ a quarter, and targeting 31 seems very reasonable given what we see on the existing portfolio.
John Kilichowski: 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 Revolt: 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. As Steve commented in on his remark that for 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, and we look forward to resolving the remaining three properties with the responses from Steve, and the portfolio is actually, you know, pretty healthy.
That's why despite reducing our net capital deployment meaningfully, you can still produce a very strong quarter third or fourth, and that's why we were able to increase the low end to $1.22.
John Kilichowski: Very helpful. Thank you.
Operator: Your next question comes from the line of Anthony Paolone from JPMorgan. Please go ahead.
Anthony Paolone: 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. I'm just wondering if that's something you think can continue. And then also, any incremental color on the acquisitions in the quarter, you know, cap rates north of an eight and also bumps north of two, which is, you know, higher than what we'll typically see in net lease. So just wondering kind of how you're achieving those.
Pierre Revolt: Yeah. Sure. I'll take that. Thank you. Yeah. No. We expect to see, as we mentioned earlier, 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 kind of what we're buying, you know, 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 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 to, you know, to echo a couple of examples of a few of the assets. So La-Z-Boy, you know, we bought that roughly at about a seven and a cap with about ten years left remaining. We bought a Strickland Brothers as an example, with fifteen years left at about a seven and a half cap rate. And a Range USA with about eighteen years left and eight cap rates. So these are all great assets, great corporate credits, and it's just a testament to how we continue to be able to buy in at the marketplace.
And with respect to the escalators, you know, those are built into the leases, and, you know, we typically average about one 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 of assets that we acquired that had more than sort of that average one to 2% built into their lease.
Anthony Paolone: Okay. Got it. Thanks. And then just one other one, just maybe more of a clarifying item in your NAV buildup 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, know, what I'm missing there.
Pierre Revolt: But, yeah, there's other income as well that's not part of the APR. There's some interest income on loans that's also not part of the ABR. And so that was it. It's essentially just some of that net other income that was picked up in the NOI that's outside of this round.
Anthony Paolone: I see. Okay. Thank you.
Operator: Your next question is from the line of Daniel Guglielmo from Capital One Securities. Please go ahead.
Daniel Guglielmo: Hi, everyone. Thank you for taking my questions. So as mentioned in the commentary, you all are in an elevated recycling mode. Execution. But shared prices change fast with the right strategy. 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 math.
Pierre Revolt: 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 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 seven and a half percent, what Steve talked about in the call, you would want to make sure that 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 implied cap rate is, you know, cost of capital, I think the most prudent way to manage your balance sheet is to execute on this recycling plan. We've seen that work for some of our peers. I think that it could work for us just given the quality of our portfolio and maintaining leverage on the level is important.
Daniel Guglielmo: That's really helpful. Thank you. And then a big part of the IPO pitch was the strength 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?
Stephen Preston: Yeah. That's good. Thanks. Let's just start with, you know, that this is behind us too with respect to Randy and the CFO and with respect to the acquisition and dispositions, I think as we've 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: Thanks. Appreciate it.
Operator: The next question is from the line of Ronald Kamdem from Morgan Stanley. Please go ahead.
Ronald Kamdem: Hey. Just staying on the investments a little bit. I think you said 7.5% on the cap rates. Maybe just talk a little bit more about is that just cap rate compression? Is there a mix? And then anytime we could sort of quantify the pipeline, is $50 million? Is it $100 million? Like, when you're ready to ramp, just how big do you think you can get? Thanks.
Stephen Preston: 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 cap rates sometime in Q3 somewhere in that 7.5% range. Inside a little bit from where we've been acquiring. And, you know, 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 of these smaller banks, but there is still an 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 '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 Kamdem: Great. Helpful. And then just going back on the TenantHealth conversation, obviously, good progress on those 12 assets, and, you know, I can appreciate that. Bad debt is sort of de minimis outside of those. But just on a long-term basis, are you 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?
Stephen Preston: Yes. So what I would say is really no material changes or everything, you know, is very healthy. You know, as we look to see going forward, you know, what I would highlight is that, you know, since we founded this business in February 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 a 104% recovery rate, which is over a 90% renewal rate. So when we look forward, you know, we feel very good. And, you know, I'll just, you know, 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 to 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 expect that's going to be something that continues with this portfolio more in line with the historicals and not that anomaly we were just dealing with.
Ronald Kamdem: Thanks so much.
Operator: You bet. The last question comes from the line of Daniel Ginn from Bank of America. Please go ahead.
Daniel Ginn: Hi, thanks for taking my question. Could you provide a little bit more context behind the new mortgage loan receivables found in the balance sheet?
Stephen Preston: Yeah, sure. So what I would say is 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 Ginn: Got it. Thanks for the color. And then just elaborate on your decision to expand your top 10 list by another 20 tenants to 60? Because I know it's going to be pretty difficult to take that back in the future if needed. We got nothing to hide, but payroll taken. We love the extra disclosure.
Pierre Revolt: 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 looked at that list from 40 to 60, some really interesting tenants there. Like, you have a Starbucks. You have a couple other IGs. There's a very high-quality tenant roster. And I think that added disclosure, I hope, will provide investors more confidence in terms of, you know, the quality of the tenant mix that supports these properties.
Daniel Ginn: Got it. Thank you very much.
Operator: Thank you very much. There are no further questions at this time. I would like to turn the call back over to Mr. Stephen Preston for closing comments. Sir, please go ahead.
Stephen Preston: 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 September 8 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: Ladies and gentlemen, this concludes today's conference call. Thank you very much for your participation. You may now disconnect.