FCPT's Strategic Move: Acquiring a Chuy's Property in Texas for $2.9M

Four Corners Property Trust (FCPT), a REIT focused on net-leased restaurant and retail properties, has expanded its portfolio with the acquisition of a Chuy’s Tex-Mex restaurant in Dallas, Texas, for $2.9 million. This move underscores the company’s disciplined approach to growth, leveraging corporate-backed leases and prime retail locations to bolster its income streams. Let’s dissect the implications of this acquisition and its alignment with FCPT’s broader strategy.

The Acquisition: Key Details and Location

The property, located at 1520 Greenville Avenue in East Dallas, is situated within a strong retail corridor near the Katy Trail. This prime location, previously home to the Desert Racer restaurant, features a large outdoor patio and ample parking—key amenities for Chuy’s to attract diners, especially during peak seasons like Cinco de Mayo. The transaction was structured at a 6.7% cap rate, based on the property’s rent at closing, excluding costs. The lease, which has approximately five years remaining, is a corporate-guaranteed triple net lease, meaning Chuy’s assumes responsibility for property taxes, insurance, and maintenance—a structure that minimizes operational risks for FCPT.

Why This Deal Matters for FCPT

FCPT’s strategy revolves around acquiring high-quality, net-leased assets with long-term leases from creditworthy tenants. The Chuy’s acquisition checks all these boxes:
1. Corporate Backing: Chuy’s, now under Darden Restaurants (owner of brands like Olive Garden and LongHorn Steakhouse), benefits from the parent company’s financial strength. Darden’s acquisition of Chuy’s in July 2024 adds corporate credibility, reducing reliance on individual franchisees.
2. Portfolio Diversification: The deal strengthens FCPT’s presence in Texas, a key market for its restaurant-focused portfolio. Recent acquisitions, such as an Outback Steakhouse in Oklahoma and an automotive service facility in Arkansas, further illustrate the company’s geographic and tenant diversification.
3. Cash Flow Stability: The 6.7% cap rate reflects a balance between risk and return. With a 99.6% portfolio occupancy rate as of Q4 2024 and a 95% lease renewal rate, FCPT’s track record suggests it can sustain such income streams.

Tenant Stability: Darden’s Role

Darden’s Q1 2025 results (ended August 25, 2024) provide insight into Chuy’s operational context. While Darden’s overall sales dipped 1.1% year-over-year, its acquisition of Chuy’s—finalized in July 2024—has yet to impact its financial metrics. Chuy’s performance will factor into same-store sales starting in Q2 2025, but its corporate guarantee already benefits FCPT. Darden’s focus on stabilizing brands like Olive Garden (via relaunched promotions) and its $605 million investment in Chuy’s signal confidence in the Tex-Mex segment.

FCPT’s Financial Position

With $250–$350 million allocated for future acquisitions and a robust balance sheet, FCPT is well-positioned to capitalize on opportunities. Its 5.03% dividend yield and three-year dividend growth streak (up 3.6% annually in AFFO) reflect the stability of its income model. The Chuy’s deal aligns with its target to deploy capital into assets with predictable cash flows, particularly in high-traffic retail corridors.

Conclusion: A Prudent Investment in a Proven Model

FCPT’s acquisition of the Chuy’s property in Dallas is a strategic move that reinforces its core strengths:
- Tenant Quality: Darden’s backing reduces default risk, a critical factor in volatile economic conditions.
- Location: The Greenville Avenue corridor’s foot traffic and amenities position the property to thrive.
- Valuation: The 6.7% cap rate offers a competitive yield relative to other net-leased assets, especially in a rising-rate environment.

With $60.7 million in Q4 2024 revenue and plans to leverage its credit facilities for further growth, FCPT continues to execute its playbook. While Darden’s Q1 sales dip is a minor concern, the Chuy’s acquisition—paired with FCPT’s disciplined approach—positions it to deliver steady returns. Investors seeking reliable income and geographic diversification would be wise to consider this REIT’s resilient model.

In short, this deal isn’t just about acquiring a property; it’s about securing a piece of Darden’s expanding Tex-Mex empire in a prime location—a win for FCPT’s shareholders.