FrontView’s AFFO Surges — But Why Cap Rates Matter More Than Earnings

Date of Call: Feb 25, 2026

Financials Results

• Revenue: $64M annualized cash revenue, up sequentially from $64M (based on $16M quarterly run rate)
• EPS: AFFO per share of $1.25 for full year, achieving high end of guidance; Q4 AFFO of $0.31
• Gross Margin: 96% annualized adjusted cash NOI margin in Q4; expected to expand to 97% in 2026
• Operating Margin: Net debt to annualized adjusted EBITDA of 5.6x at quarter end; expected to end 2026 below 5.5x

Guidance:

• AFFO per share guidance for 2026 revised upwards to $1.27 to $1.32, representing 4% growth at the midpoint and 6% at the high end.
• Acquisition cap rates for Q1 2026 expected to settle around 7.5%, with volumes generally in line with guidance.
• NOI cash margin expected to expand to 97% and roughly $62 million on a normalized basis in 2026.
• Net debt to adjusted annualized EBITDA expected to end 2026 below 5.5x.
• Expect to continue optimizing the portfolio through 2026, with pace of dispositions expected to decline materially.

Business Commentary:

Portfolio Optimization and Growth:

• FrontView REIT sold 36 properties for $78 million in 2025, achieving an average cash cap rate of 6.79%. They acquired 32 properties for $124.1 million, with an average cash cap rate of 7.74%.
• The company focused on optimizing its portfolio by divesting less optimal concepts and acquiring assets with higher growth potential, which enhanced overall portfolio quality.

Strategic Acquisitions and Capital Deployment:

• FrontView REIT acquired properties at an average cap rate of 7.5% in Q4 and 7.74% for the year, with a focus on assets like 7-Eleven and Dick's House of Sports.
• The acquisition strategy was bolstered by secured capital, including a $75 million convertible preferred investment, enabling the company to grow its asset base by nearly 30% since the IPO.

Operational Performance and Affordability Growth:

• The company reported an annualized adjusted cash NOI of $61.2 million with a margin of 96%, expecting an improvement to 97% in 2026.
• Enhanced operational performance was driven by higher occupancy, strong recoveries on insurance, and lower property costs, contributing to AFFO per share growth.

Dividend and Leverage Management:

• FrontView maintains a low dividend payout ratio below 70% and low leverage, with a net debt to EBITDA ratio of 5.6x.
• The company prioritizes a conservative balance sheet and plans to delever further, aiming for a ratio below 5.5x by year-end 2026.

Shareholder Value and Market Positioning:

• The company’s AFFO per share guidance was raised to a range of $1.27 to $1.32, reflecting faster-than-expected resolutions of credit issues.
• FrontView emphasizes its real estate-first strategy and experienced management team to maximize long-term shareholder value and drive outsized returns.

Sentiment Analysis:

Overall Tone: Positive

• "FrontView is operationally stronger, financially more resilient and strategically better positioned than at any point since becoming public." "We believe that our real estate focused strategy, coupled with our developer DNA, will deliver AFFO growth and drive outsized returns for our shareholders." "We beat earnings and raised guidance throughout 2025..." "FrontView is stronger today than at any point since our IPO."

Q&A:

• Question from John Kochalski (Wells Fargo): Could you help us understand what gets us to that $1.32 versus that $1.27 [AFFO guidance]?
  Response: The high end of guidance depends on continued strong portfolio performance and the timing/cap rates of acquisitions and dispositions, with mid-7s cap rates currently aiding.

• Question from John Kochalski (Wells Fargo): Given the persistent discount to NAV, have you received any outside interest?
  Response: Discount is evident from sale prices, but inbound interest has been quiet; execution and detailed disclosures aim to demonstrate portfolio quality and value.

• Question from Anthony Paolone (JPMorgan): How do you think about incremental capital in terms of AFFO yield versus NAV for accretive opportunities?
  Response: Company is fully funded for 2026 with preferred equity; weighted average cost of capital is now attractive (75-125bps below acquisition cap rates), enabling growth even at current stock price, with deleveraging planned for 2026.

• Question from Anthony Paolone (JPMorgan): How are you prioritizing deal aspects like initial yield, contractual bumps, and lease length?
  Response: Focus is on location, land tract size, market rent replaceability, credit, and escalations; escalations are in line with historical 1-2% annual bumps.

• Question from Ronald Kamdem (Morgan Stanley): Could you talk about the acquisition pipeline, cap rates, and deal sizes?
  Response: Expect Q1 2026 cap rates around 7.5%, with pipeline in a highly fragmented market; competitive advantages include quick closing and problem-solving, enabling acquisition of assets like 7 Brew at elevated cap rates.

• Question from Ronald Kamdem (Morgan Stanley): Is 50 basis points of bad debt the right run rate going forward?
  Response: Yes, 50bps is in line with historical experience; watch list is minimal and not expected to change materially, with proactive replacements for tenants like Wendy's and Advance Auto.

• Question from Jana Galan (Bank of America): Can you provide expectations for nonreimbursed property expenses and cash G&A for the year?
  Response: Nonreimbursed property expenses elevated in Q4 but expected to decline, driving NOI margin up ~100 bps to 97% in 2026; cash G&A run rate is approximately $2.4M per quarter.

• Question from Jana Galan (Bank of America): Could you talk about potential for more preferred convertible capital raising?
  Response: Current mandate is to deploy existing preferred equity; conversion price is now under 10% premium; plan is to return to more traditional funding once stock price improves.

• Question from Daniel Google (Capital One Securities): Are you seeing rent catch-up benefits with older vintage leases expiring in 2026?
  Response: Yes, historical recovery rate on renewals has been over 105%, and portfolio diversification/strong real estate position supports similar outcomes, with additional tailwinds from retenanting properties like Twin Peaks.

• Question from Daniel Google (Capital One Securities): Have you seen less consumer spending on older concepts continue into 2026?
  Response: Consumer strength is mixed with inflationary pressures; company focuses on essential/service tenants, which are well-represented in the diversified portfolio.

• Question from Matthew Edner (Jefferies): What are you expecting for gross/net investment and disposition levels in 2026?
  Response: Expect $30-40M in dispositions in 2026 to continue pruning the portfolio; focus remains on selling suboptimal concepts, not high-quality assets like Walmarts or Chipotles.

• Question from Matthew Edner (Jefferies): What is the expected pace of capital deployment across the year?
  Response: First quarter expected to be ~$35M net acquisitions; second quarter forecast near $25M net, with potential for deals to adjust timing; earlier deployment drives high end of AFFO guidance.

Contradiction Point 1

Drivers of AFFO Guidance Range

It involves differing factors cited for achieving the high end of AFFO guidance, impacting financial expectations.

John Kochalski (Wells Fargo), what are your key takeaways from the earnings report? - John Kochalski (Wells Fargo)

20260225-2025 Q4: The high end of the AFFO per share guidance range depends on... and if more transactions occur in the front half of the year. It also benefits from higher-than-expected resolutions of credit issues and acquisitions at favorable cap rates. - [Pierre Revol](CFO)

What factors could drive AFFO to the higher end ($1.32) versus the lower end ($1.27) of the guide? - William John Kilichowski (Wells Fargo Securities, LLC)

2025Q3: The high end ($1.30) would be driven by favorable credit resolutions, earlier acquisitions, and higher cap rates. - [Pierre Revol](CFO)

Contradiction Point 2

Funding for Capital Deployment in 2026

It presents the availability of funding for acquisitions as a certainty in Q4 but is not mentioned in Q3, indicating a shift in financial strategy.

What are your key takeaways from JPMorgan's recent earnings report? - Anthony Paolone (JPMorgan)

20260225-2025 Q4: For 2026, the company is fully funded with $75 million of convertible preferred equity, allowing it to execute its $100 million net acquisition target regardless of the stock price. - [Pierre Revol](CFO)

How does the company approach incremental capital allocation given the difference between AFFO and NAV yields? - Anthony Paolone (JPMorgan Chase & Co)

2025Q3: The 2026 AFFO guidance of $1.26–$1.30 assumes no additional equity, with the new preferred equity capital fully funding the $100 million in net acquisitions. - [Pierre Revol](CFO)

Contradiction Point 3

Expected Bad Debt Run Rate for 2026

It shifts the characterization of the 50 bps bad debt estimate from conservative to being in line with history, affecting risk assessment.

What is your outlook for the next quarter? - Ronald Kamdem (Morgan Stanley)

20260225-2025 Q4: Yes, 50 bps is in line with historical experience and the current watch list is minimal... - [Stephen Preston](CEO)

Is the 50 basis points expected bad debt for 2026 the new run rate with enhanced asset management and watch list activity? - Jana Galan (BofA Securities)

2025Q3: The 50 bps estimate for 2026 is considered conservative. - [Stephen Preston](CEO)

Contradiction Point 4

Capital Deployment Strategy and Funding Sources

It contradicts the reliance for future capital and the conversion premium, indicating a strategic shift.

What are your thoughts on the quarterly results? - Daniel Beaton (Bank of America, on for Jana Galan)

20260225-2025 Q4: The plan is to return to more traditional funding sources going forward, assuming the stock price improves. - [Pierre Revol](CFO)

Will there be more preferred convertible capital raising in the future? - Daniel Guglielmo (Capital One Securities)

2025Q2: The decision to pivot to more acquisitions depends on achieving an attractive spread over the cost of capital. With a cap rate around 7.5%, if the cost of capital is inside that, acceleration is possible. - [Pierre Revol](CFO)

Contradiction Point 5

Disposition and Capital Deployment Expectations

It shifts guidance on the pace and scale of property sales from a strategic, capitalizing approach to a more consistent, run-rate expectation, changing operational strategy.

What is your outlook for the company's growth strategy? - Matthew Edner (Jefferies)

20260225-2025 Q4: The company expects a run rate of $30-40 million in sales for 2026 to continue pruning the portfolio. - [Stephen Preston](CEO)

What are the expected gross and net investment and disposition levels for 2026, following 2025's optimization? - Daniel Guglielmo (Capital One Securities)

2025Q1: The increased disposition guidance... targets properties for sale to be replaced with longer-term, better-capped assets. - [Stephen Preston](CEO) and [Randall Starr](CFO)