EPRT Essential Properties Realty Trust Inc

- Second Quarter Net Income per Share of $0.29 and AFFO per Share of $0.43 - - Closed Investments of $333.9 million at an 8.0% Weighted Average Cash Cap Rate - - Reiterates 2024 AFFO Guidance range of $1.72 to $1.75 per Share -

Essential Properties Realty Trust, Inc. (NYSE: EPRT; “Essential Properties” or the “Company”) today announced operating results for the three and six months ended June 30, 2024.

Second Quarter 2024 Financial and Operating Highlights:

Operating Results (compared to Second Quarter 2023):

 

 

·Investments (83 properties)

$ Invested

$333.9 million

Weighted Avg Cash Cap Rate

8.0%

·Dispositions (6 properties)

Net Proceeds

$4.8 million

Weighted Avg Cash Cap Rate

7.3%

·Net Income per Share

Decreased by 17%

$0.29

·Funds from Operations ("FFO") per Share

Increased by 9%

$0.47

·Core Funds from Operations ("Core FFO") per Share

Increased by 7%

$0.47

·Adjusted Funds from Operations ("AFFO") per Share

Increased by 5%

$0.43

Debt, Equity & Leverage Update:

 

 

·Equity Raised (Gross) - ATM Program (1)

$27.15/share

$137.0 million

·Pro Forma Net Debt to Annualized Adjusted EBITDAre (2)

As of Quarter End

3.8x

Year to Date 2024 Financial and Operating Highlights:

Operating Results (compared to YTD Second Quarter 2023):

 

 

·Investments (162 properties)

$ Invested

$582.7 million

Weighted Avg Cash Cap Rate

8.0%

·Dispositions (13 properties)

Net Proceeds

$16.7 million

Weighted Avg Cash Cap Rate

6.7%

·Net Income per share

Decreased by 11%

$0.57

·FFO per share

Increased by 8%

$0.93

·Core FFO per share

Increased by 8%

$0.93

·AFFO per share

Increased by 5%

$0.85

Debt & Equity Activity:

 

 

·Equity Raised (Gross) - Follow-On Offering (March 14, 2024) (1)

$24.75/share

$256.2 million

·Equity Raised (Gross) - ATM Program (1)

$26.24/share

$190.4 million

1. All shares were sold on a forward basis and 12,876,300 shares remain unsettled for estimated net proceeds of $318.7 million.
2. See page 11 for detailed calculation.

Activity Subsequent to Second Quarter 2024:

·Investments

$ Invested

$13.3 million

·Dispositions

$ Gross Proceeds

$4.9 million

Debt Activity:

 

 

·New 2030 Term Loan (Delayed Draw)

5.5 Year Tenor; Adjusted Term SOFR + 105bps

$450.0 million

·Initial Draw

Fully Swapped to Fixed Rate - 4.99% All In Rate

$320.0 million

CEO Comments

Commenting on the second quarter 2024 results, the Company's President and Chief Executive Officer, Pete Mavoides, said, “Our company continued to execute at a high level in the second quarter, raising and deploying capital accretively into attractive investments against the backdrop of a growing opportunity set. With our debt and equity capital needs met for the year, our focus remains on responsibly deploying our dry powder to drive earnings growth into 2025."

Portfolio Highlights

The Company’s investment portfolio as of June 30, 2024 is summarized as follows:

 

 

June 30, 2024

Number of properties

 

2,009

Weighted average lease term (WALT)

 

14.1 years

Weighted average rent coverage ratio

 

3.7x

Number of tenants

 

395

Number of industries

 

16

Weighted average occupancy

 

99.8%

Total square feet of rentable space

 

20,094,363

Cash ABR - service-oriented or experience-based

 

93.3%

Cash ABR - properties subject to master lease

 

70.2%

Portfolio Update

Investments

The Company’s investment activity during the three and six months ended June 30, 2024 is summarized as follows:

 

 

Quarter Ended

June 30, 2024

 

Year to Date

June 30, 2024

Investments:

 

 

 

 

Investment volume

 

$333.9 million

 

$582.7 million

Number of transactions

 

35

 

71

Property count

 

83

 

162

Weighted average cash / GAAP cap rate

 

8.0%/9.1%

 

8.0%/9.2%

Weighted average lease escalation

 

1.9%

 

1.9%

% Subject to master lease

 

76%

 

79%

% Sale-leaseback transactions

 

100%

 

100%

% Existing relationship

 

82%

 

84%

% Required financial reporting (tenant/guarantor)

 

100%

 

100%

WALT

 

17.8 years

 

17.5 years

Dispositions

The Company’s disposition activity during the three and six months ended June 30, 2024 is summarized as follows:

 

 

Quarter Ended

June 30, 2024

 

Year to Date

June 30, 2024

Dispositions:

 

 

 

 

Net proceeds

 

$4.8 million

 

$16.7 million

Number of properties sold

 

6

 

13

Net gain / (loss)

 

$0.1 million

 

$1.6 million

Weighted average cash cap rate

(excluding vacant properties and sales subject to a tenant purchase option )

 

7.3%

 

6.7%

Loan Repayments

Loan repayments to the Company during the three and six months ended June 30, 2024 are summarized as follows:

 

 

Quarter Ended

June 30, 2024

 

Year to Date

June 30, 2024

Loan Repayments:

 

 

 

 

Proceeds—Principal

 

$2.0 million

 

$4.7 million

Number of properties

 

4

 

10

Weighted average interest rate

 

7.3%

 

7.1%

Leverage and Liquidity

The Company's leverage and liquidity as of June 30, 2024 are summarized in the following table.

 

 

June 30, 2024

 

Pro Forma (1) June 30, 2024

Leverage:

 

 

 

 

Net debt to Annualized Adjusted EBITDAre

 

4.6x

 

3.8x

 

 

 

 

 

Liquidity:

 

 

 

 

Cash and cash equivalents and restricted cash

 

$24.5 million

 

$418.2 million

Unused revolving credit facility capacity

 

$355.0 million

 

$600.0 million

2030 Term Loan - remaining availability

 

—

 

$130.0 million

Forward equity sales - unsettled

 

$318.7 million

 

—

Total available liquidity

 

$698.2 million

 

$1.1 billion

1. Pro forma adjustments have been made to reflect the 12,876,300 unsettled shares sold on a forward basis through the Company's March 2024 follow-on offering and through its ATM Program as if they had been physically settled for cash on June 30, 2024 and to adjust for the Company's new $450 million 2030 Term Loan (see below for details). A portion of the $320.0 million initial draw on the 2030 Term Loan was used to repay the full amount outstanding on the Company's revolving credit facility.

Equity Activity

The Company's equity activity during the three months ended June 30, 2024 is summarized in the following table.

 

 

Primary Offerings

 

ATM Program

 

Total

 

 

Shares

 

Price

(Net) (1)

 

Shares

 

Price

(Net) (1)

 

Shares

 

Price

(Net) (1)

 

Net Proceeds (000s)

Forward Shares Unsettled - March 31, 2024

 

7,828,852

 

$23.51

 

—

 

$—

 

7,828,852

 

$23.51

 

$184,017

Shares Sold

 

—

 

—

 

5,047,448

 

26.68

 

5,047,448

 

26.68

 

134,643

Shares Settled

 

—

 

—

 

—

 

—

 

—

 

—

 

—

Forward Shares Unsettled - June 30, 2024

 

7,828,852

 

 

 

5,047,448

 

 

 

12,876,300

 

$24.75

 

$318,660

1. All prices are inclusive of forward price adjustments as of June 30, 2024.

In June 2024, the Company established a new $500 million ATM Program and simultaneously terminated its previous 2022 ATM Program. The following table summarizes the Company's sales under the 2024 ATM Program through June 30, 2024.

 

 

June 30, 2024

ATM Program:

 

 

2024 ATM Program initial availability

 

$500.0 million

Aggregate gross sales under the 2024 ATM Program

 

$27.6 million

Availability remaining under the 2024 ATM Program

 

$472.4 million

Average price per share of gross sales since inception in June 2024

 

$27.11

Subsequent Debt Activity

In July 2024, the Company entered into a new term loan permitting up to $450.0 million of borrowings. The below table provides a summary of this new debt agreement.

 

 

2030 Term Loan

Maturity Date (1)

 

January 2030

Initial Principal Drawn

 

$320.0 million

Maximum Available Principal

 

$450.0 million

Delayed Draw Period

 

180 Days

Interest Rate

 

Adjusted Term SOFR + 105 bps(2)

Floating Rate Swapped to Fixed Rate for Initial Draw

 

4.99% All-In Rate

1. After giving effect to extension options exercisable at the Company's election.
2. Includes 10 bps SOFR premium adjustment.

Guidance

2024 Guidance

The Company reiterates its previously issued expectation that 2024 AFFO per share on a fully diluted basis will be within a range of $1.72 to $1.75. The guidance range includes an estimate for the dilutive effect of unsettled shares under the Company's outstanding forward sale agreements as calculated under the treasury stock method.

Note: The Company does not provide guidance for the most comparable GAAP financial measure, net income, or a reconciliation of the forward-looking non-GAAP financial measure of AFFO to net income computed in accordance with GAAP, because it is unable to reasonably predict, without unreasonable efforts, certain items that would be contained in the GAAP measure, including items that are not indicative of the Company's ongoing operations, such as, without limitation, potential impairments of real estate assets, net gain/loss on dispositions of real estate assets, changes in allowance for credit losses and stock-based compensation expense. These items are uncertain, depend on various factors, and could have a material impact on the Company's GAAP results for the guidance period.

Dividend Information

As previously announced, on May 31, 2024, Essential Properties' board of directors declared a cash dividend of $0.29 per share of common stock for the quarter ended June 30, 2024. The second quarter 2024 dividend represents an annualized dividend of $1.16 per share of common stock. The dividend was paid on July 12, 2024 to stockholders of record as of the close of business on June 28, 2024.

Conference Call Information

In conjunction with the release of Essential Properties’ operating results, the Company will host a conference call on Thursday, July 25, 2024 at 10:00 a.m. EDT to discuss the results. To access the conference, dial 877-407-9208 (International: 201-493-6784). A live webcast will also be available in listen-only mode by clicking on the webcast link in the Investor Relations section at www.essentialproperties.com.

A telephone replay of the conference call can also be accessed by calling 844-512-2921 (International: 412-317-6671) and entering the access code: 13747626. The telephone replay will be available through August 8, 2024.

A replay of the conference call webcast will be available on our website approximately two hours after the conclusion of the live broadcast. The webcast replay will be available for 90 days. No access code is required for this replay.

Supplemental Materials

The Company’s Supplemental Operating & Financial Data—Second Quarter Ended June 30, 2024 is available on Essential Properties’ website at investors.essentialproperties.com.

About Essential Properties Realty Trust, Inc.

Essential Properties Realty Trust, Inc. is an internally managed REIT that acquires, owns and manages primarily single- tenant properties that are net leased on a long-term basis to companies operating service-oriented or experience-based businesses. As of June 30, 2024, the Company’s portfolio consisted of 2,009 freestanding net lease properties with a weighted average lease term of 14.1 years and a weighted average rent coverage ratio of 3.7x. In addition, as of June 30, 2024, the Company’s portfolio was 99.8% leased to 395 tenants operating 568 different concepts in 16 industries across 49 states.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the federal securities laws. When used in this press release, the words “estimate,” “anticipate,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “seek,” “approximately” or “plan,” or the negative of these words and phrases or similar words or phrases that are predictions of or indicate future events or trends and that do not relate solely to historical matters are intended to identify forward-looking statements. You can also identify forward-looking statements by discussions of strategy, plans or intentions of management. Forward-looking statements involve numerous risks and uncertainties and you should not rely on them as predictions of future events. Forward-looking statements depend on assumptions, data or methods that may be incorrect or imprecise and the Company may not be able to realize them. The Company does not guarantee that the transactions and events described will happen as described (or that they will happen at all). You are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of this press release. While forward-looking statements reflect the Company’s good faith beliefs, they are not guarantees of future performance. The Company undertakes no obligation to publicly release the results of any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date of this press release or to reflect the occurrence of unanticipated events, except as required by law. In light of these risks and uncertainties, the forward-looking events discussed in this press release might not occur as described, or at all.

Additional information concerning factors that could cause actual results to differ materially from these forward-looking statements is contained in the company’s Securities and Exchange Commission (the "Commission”) filings, including, but not limited to, the Company’s most recent Annual Report on Form 10-K. Copies of each filing may be obtained from the Company or the Commission. Such forward-looking statements should be regarded solely as reflections of the Company’s current operating plans and estimates. Actual operating results may differ materially from what is expressed or forecast in this press release.

The results reported in this press release are preliminary and not final. There can be no assurance that these results will not vary from the final results reported in the Company’s Quarterly Report on Form 10-Q for the year ended June 30, 2024 that it will file with the Commission.

Essential Properties Realty Trust, Inc. Consolidated Statements of Operations

 

 

Three months ended June 30,

 

Six months ended June 30,

(in thousands, except share and per share data)

 

 

2024

 

 

 

2023

 

 

 

2024

 

 

 

2023

 

 

 

(Unaudited)

 

(Unaudited)

 

(Unaudited)

 

(Unaudited)

Revenues:

 

 

 

 

 

 

 

 

Rental revenue1,2

 

$

104,369

 

 

$

81,819

 

 

$

202,880

 

 

$

159,991

 

Interest on loans and direct financing lease receivables

 

 

4,858

 

 

 

4,534

 

 

 

9,598

 

 

 

8,981

 

Other revenue

 

 

41

 

 

 

163

 

 

 

292

 

 

 

1,232

 

Total revenues

 

 

109,268

 

 

 

86,516

 

 

 

212,770

 

 

 

170,204

 

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

General and administrative

 

 

8,710

 

 

 

7,585

 

 

 

18,068

 

 

 

16,169

 

Property expenses2

 

 

1,155

 

 

 

1,144

 

 

 

2,148

 

 

 

1,987

 

Depreciation and amortization

 

 

29,927

 

 

 

24,742

 

 

 

58,453

 

 

 

48,567

 

Provision for impairment of real estate

 

 

2,812

 

 

 

802

 

 

 

6,564

 

 

 

1,479

 

Change in provision for credit losses

 

 

1

 

 

 

8

 

 

 

3

 

 

 

(22

)

Total expenses

 

 

42,605

 

 

 

34,281

 

 

 

85,236

 

 

 

68,180

 

Other operating income:

 

 

 

 

 

 

 

 

Gain on dispositions of real estate, net

 

 

134

 

 

 

12,547

 

 

 

1,645

 

 

 

17,461

 

Income from operations

 

 

66,797

 

 

 

64,782

 

 

 

129,179

 

 

 

119,485

 

Other (expense)/income:

 

 

 

 

 

 

 

 

Interest expense

 

 

(17,361

)

 

 

(12,071

)

 

 

(32,958

)

 

 

(24,204

)

Interest income

 

 

847

 

 

 

448

 

 

 

1,340

 

 

 

1,086

 

Other income

 

 

1,548

 

 

 

—

 

 

 

1,548

 

 

 

—

 

Income before income tax expense

 

 

51,831

 

 

 

53,159

 

 

 

99,109

 

 

 

96,367

 

Income tax expense

 

 

155

 

 

 

159

 

 

 

311

 

 

 

311

 

Net income

 

 

51,676

 

 

 

53,000

 

 

 

98,798

 

 

 

96,056

 

Net income attributable to non-controlling

 

 

(159

)

 

 

(198

)

 

 

(307

)

 

 

(358

)

Net income attributable to stockholders

 

$

51,517

 

 

$

52,802

 

 

$

98,491

 

 

$

95,698

 

 

 

 

 

 

 

 

 

 

Basic weighted-average shares outstanding

 

 

175,319,270

 

 

 

150,492,454

 

 

 

171,304,986

 

 

 

147,466,087

 

Basic net income per share

 

$

0.29

 

 

$

0.35

 

 

$

0.57

 

 

$

0.65

 

 

 

 

 

 

 

 

 

 

Diluted weighted-average shares outstanding

 

 

177,583,989

 

 

 

151,522,350

 

 

 

173,219,295

 

 

 

148,776,458

 

Diluted net income per share

 

$

0.29

 

 

$

0.35

 

 

$

0.57

 

 

$

0.64

 

1. Includes contingent rent (based on a percentage of the tenant's gross sales at the leased property) of $96, $144, $334 and $320 for the three and six months ended June 30, 2024 and 2023, respectively.
2. Includes reimbursable income or reimbursable expenses from the Company’s tenants of $613, $750, $1,161 and $1,341 for the three and six months ended June 30, 2024 and 2023, respectively.

Essential Properties Realty Trust, Inc. Consolidated Balance Sheets

(in thousands, expect share and per share amounts)

 

June 30, 2024

 

December 31, 2023

 

 

(Unaudited)

 

(Audited)

ASSETS

 

 

 

 

Investments:

 

 

 

 

Real estate investments, at cost:

 

 

 

 

Land and improvements

 

$

1,730,117

 

 

$

1,542,302

 

Building and improvements

 

 

3,162,052

 

 

 

2,938,012

 

Lease incentive

 

 

17,918

 

 

 

17,890

 

Construction in progress

 

 

169,844

 

 

 

96,524

 

Intangible lease assets

 

 

87,734

 

 

 

89,209

 

Total real estate investments, at cost

 

 

5,167,665

 

 

 

4,683,937

 

Less: accumulated depreciation and amortization

 

 

(421,486

)

 

 

(367,133

)

Total real estate investments, net

 

 

4,746,179

 

 

 

4,316,804

 

Loans and direct financing lease receivables, net

 

 

294,982

 

 

 

223,854

 

Real estate investments held for sale, net

 

 

8,677

 

 

 

7,455

 

Net investments

 

 

5,049,838

 

 

 

4,548,113

 

Cash and cash equivalents

 

 

23,557

 

 

 

39,807

 

Restricted cash

 

 

935

 

 

 

9,156

 

Straight-line rent receivable, net

 

 

127,210

 

 

 

107,545

 

Derivative assets

 

 

36,049

 

 

 

30,980

 

Rent receivables, prepaid expenses and other assets, net

 

 

29,608

 

 

 

32,660

 

Total assets

 

$

5,267,197

 

 

$

4,768,261

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

Unsecured term loans, net of deferred financing costs

 

$

1,273,958

 

 

$

1,272,772

 

Senior unsecured notes, net

 

 

396,125

 

 

 

395,846

 

Revolving credit facility

 

 

245,000

 

 

 

—

 

Intangible lease liabilities, net

 

 

10,762

 

 

 

11,206

 

Dividend payable

 

 

51,124

 

 

 

47,182

 

Derivative liabilities

 

 

7,018

 

 

 

23,005

 

Accrued liabilities and other payables

 

 

30,939

 

 

 

31,248

 

Total liabilities

 

 

2,014,926

 

 

 

1,781,259

 

Commitments and contingencies

 

 

—

 

 

 

—

 

Stockholders' equity:

 

 

 

 

Preferred stock, $0.01 par value; 150,000,000 authorized; none issued and outstanding as of June 30, 2024 and December 31, 2023

 

 

—

 

 

 

—

 

Common stock, $0.01 par value; 500,000,000 authorized; 175,330,314 and 164,635,150 issued and outstanding as of June 30, 2024 and December 31, 2023, respectively

 

 

1,753

 

 

 

1,646

 

Additional paid-in capital

 

 

3,328,082

 

 

 

3,078,459

 

Distributions in excess of cumulative earnings

 

 

(111,373

)

 

 

(105,545

)

Accumulated other comprehensive income

 

 

25,336

 

 

 

4,019

 

Total stockholders' equity

 

 

3,243,798

 

 

 

2,978,579

 

Non-controlling interests

 

 

8,473

 

 

 

8,423

 

Total equity

 

 

3,252,271

 

 

 

2,987,002

 

Total liabilities and equity

 

$

5,267,197

 

 

$

4,768,261

 

Essential Properties Realty Trust, Inc. Reconciliation of Non-GAAP Financial Measures

 

 

Three months ended June 30,

 

Six months ended June 30,

(unaudited, in thousands except per share amounts)

 

 

2024

 

 

 

2023

 

 

 

2024

 

 

 

2023

 

Net income

 

$

51,676

 

 

$

53,000

 

 

$

98,798

 

 

$

96,056

 

Depreciation and amortization of real estate

 

 

29,887

 

 

 

24,717

 

 

 

58,372

 

 

 

48,515

 

Provision for impairment of real estate

 

 

2,812

 

 

 

802

 

 

 

6,564

 

 

 

1,479

 

Gain on dispositions of real estate, net

 

 

(134

)

 

 

(12,547

)

 

 

(1,645

)

 

 

(17,461

)

Funds from Operations

 

 

84,241

 

 

 

65,972

 

 

 

162,089

 

 

 

128,589

 

Non-core expense (income)1

 

 

—

 

 

 

172

 

 

 

—

 

 

 

(704

)

Core Funds from Operations

 

 

84,241

 

 

 

66,144

 

 

 

162,089

 

 

 

127,885

 

Adjustments:

 

 

 

 

 

 

 

 

Straight-line rental revenue, net

 

 

(10,180

)

 

 

(6,710

)

 

 

(20,159

)

 

 

(13,548

)

Non-cash interest

 

 

934

 

 

 

615

 

 

 

1,884

 

 

 

1,434

 

Non-cash compensation expense

 

 

2,642

 

 

 

2,157

 

 

 

5,587

 

 

 

4,878

 

Other amortization expense

 

 

257

 

 

 

254

 

 

 

475

 

 

 

535

 

Other non-cash adjustments

 

 

568

 

 

 

2

 

 

 

561

 

 

 

(33

)

Capitalized interest expense

 

 

(1,345

)

 

 

(582

)

 

 

(2,203

)

 

 

(1,015

)

Adjusted Funds from Operations

 

$

77,117

 

 

$

61,880

 

 

$

148,234

 

 

$

120,136

 

 

 

 

 

 

 

 

 

 

Net income per share2:

 

 

 

 

 

 

 

 

Basic

 

$

0.29

 

 

$

0.35

 

 

$

0.57

 

 

$

0.65

 

Diluted

 

$

0.29

 

 

$

0.35

 

 

$

0.57

 

 

$

0.64

 

FFO per share2:

 

 

 

 

 

 

 

 

Basic

 

$

0.48

 

 

$

0.44

 

 

$

0.94

 

 

$

0.87

 

Diluted

 

$

0.47

 

 

$

0.43

 

 

$

0.93

 

 

$

0.86

 

Core FFO per share2:

 

 

 

 

 

 

 

 

Basic

 

$

0.48

 

 

$

0.44

 

 

$

0.94

 

 

$

0.86

 

Diluted

 

$

0.47

 

 

$

0.44

 

 

$

0.93

 

 

$

0.86

 

AFFO per share2:

 

 

 

 

 

 

 

 

Basic

 

$

0.44

 

 

$

0.41

 

 

$

0.86

 

 

$

0.81

 

Diluted

 

$

0.43

 

 

$

0.41

 

 

$

0.85

 

 

$

0.81

 

1. During the three and six months ended June 30, 2023, includes $0.2 million of severance expense and accelerated non-cash compensation expense; during the six months ended June 30, 2023, includes $0.9 million of insurance recovery income related to two properties.
2. Calculations exclude $118, $102, $234 and $203 from the numerator for the three and six months ended June 30, 2024 and 2023, respectively, related to dividends paid on unvested restricted share awards and restricted share units.

    

Essential Properties Realty Trust, Inc. Reconciliation of Non-GAAP Financial Measures

(in thousands)

 

Three months ended June 30, 2024

Net income

 

$

51,676

 

Depreciation and amortization

 

 

29,927

 

Interest expense

 

 

17,361

 

Interest income

 

 

(847

)

Income tax expense

 

 

155

 

EBITDA

 

 

98,272

 

Provision for impairment of real estate

 

 

2,812

 

Gain on dispositions of real estate, net

 

 

(134

)

EBITDAre

 

 

100,950

 

Adjustment for current quarter re-leasing, acquisition and disposition activity1

 

 

5,446

 

Adjustment to exclude other non-core or non-recurring activity2

 

 

(2,196

)

Adjustment to exclude termination/prepayment fees and certain percentage rent3

 

 

(19

)

Adjusted EBITDAre - Current Estimated Run Rate

 

 

104,181

 

General and administrative expense

 

 

8,822

 

Adjusted net operating income ("NOI")

 

 

113,003

 

Straight-line rental revenue, net1

 

 

(10,697

)

Other amortization expense

 

 

257

 

Adjusted Cash NOI

 

$

102,563

 

 

 

 

Annualized EBITDAre

 

$

403,800

 

Annualized Adjusted EBITDAre

 

$

416,724

 

Annualized Adjusted NOI

 

$

452,012

 

Annualized Adjusted Cash NOI

 

$

410,252

 

1. Adjustment is made to reflect EBITDAre, NOI and Cash NOI as if all re-leasing activity, investments in and dispositions of real estate and loan repayments completed during the three months ended June 30, 2024 had occurred on April 1, 2024.
2. Adjustment is made to i) exclude non-core adjustments made in computing Core FFO, ii) exclude changes in the Company's provision for credit losses and iii) eliminate the impact of seasonal fluctuation in certain non-cash compensation expense recorded in the period.
3. Adjustment excludes lease termination or loan prepayment fees and contingent rent (based on a percentage of the tenant's gross sales at the leased property) where payment is subject to exceeding a sales threshold specified in the lease, if any.

Essential Properties Realty Trust, Inc. Reconciliation of Non-GAAP Financial Measures

(dollars in thousands, except share and per share amounts)

 

June 30, 2024

 

Rate

 

Wtd. Avg. Maturity

 

 

 

 

 

 

 

Unsecured debt:

 

 

 

 

 

 

February 2027 term loan1

 

$

430,000

 

 

2.4

%

 

2.6 years

January 2028 term loan1

 

 

400,000

 

 

4.6

%

 

3.6 years

February 2029 term loan1,2

 

 

450,000

 

 

5.4

%

 

4.7 years

Senior unsecured notes due July 2031

 

 

400,000

 

 

3.1

%

 

7.0 years

Revolving credit facility3

 

 

245,000

 

 

6.2

%

 

1.6 years

Total unsecured debt

 

 

1,925,000

 

 

4.2

%

 

4.1 years

Gross debt

 

 

1,925,000

 

 

 

 

 

Less: cash & cash equivalents

 

 

(23,557

)

 

 

 

 

Less: restricted cash available for future investment

 

 

(935

)

 

 

 

 

Net debt

 

 

1,900,508

 

 

 

 

 

 

 

 

 

 

 

 

Equity:

 

 

 

 

 

 

Preferred stock

 

 

—

 

 

 

 

 

Common stock & OP units (175,884,161 shares @ $27.71/share as of 6/30/24)4

 

 

4,873,750

 

 

 

 

 

Total equity

 

 

4,873,750

 

 

 

 

 

Total enterprise value ("TEV")

 

$

6,774,258

 

 

 

 

 

 

 

 

 

 

 

 

Pro forma adjustments to Net debt and TEV:5

 

 

 

 

 

 

Net debt

 

$

1,900,508

 

 

 

 

 

Less: Unsettled forward equity (12,876,300 shares @ $24.75/share as of 6/30/24)

 

 

(318,660

)

 

 

 

 

Pro forma net debt

 

 

1,581,848

 

 

 

 

 

Total equity

 

 

4,873,750

 

 

 

 

 

Common stock — unsettled forward equity (12,876,300 shares @ $27.71/share as of 6/30/24)

 

 

356,802

 

 

 

 

 

Pro forma TEV

 

$

6,812,400

 

 

 

 

 

 

 

 

 

 

 

 

Gross Debt / Undepreciated Gross Assets

 

 

33.8

%

 

 

 

 

Net Debt / TEV

 

 

28.1

%

 

 

 

 

Net Debt / Annualized Adjusted EBITDAre

 

4.6x

 

 

 

 

 

 

 

 

 

 

 

Pro Forma Gross Debt / Undepreciated Gross Assets

 

 

32.0

%

 

 

 

 

Pro Forma Net Debt / Pro Forma TEV

 

 

23.2

%

 

 

 

 

Pro Forma Net Debt / Annualized Adjusted EBITDAre

 

3.8x

 

 

 

 

1. Rates presented for the Company's term loans are fixed at the stated rates after giving effect to its interest rate swaps plus applicable margin and SOFR premium of 95bps (for 2027 and 2028 Term Loans) or 105bps (for 2029 Term Loan).
2. Weighted average maturity calculation is made after giving effect to extension options exercisable at the Company's election.
3. The Company's revolving credit facility provides a maximum aggregate initial original principal amount of up to $600 million. Borrowings bear interest at Term SOFR plus applicable margin and SOFR premium of 87.5bps.
4. Common stock & OP units as of June 30, 2024, based on 175,330,314 common shares outstanding and 553,847 OP units held by non-controlling interests.
5. Pro forma adjustments have been made to reflect the unsettled portion of shares sold on a forward basis through the Company's March 2024 follow-on offering and through its ATM Program as if they had been physically settled on June 30, 2024.

Non-GAAP Financial Measures and Certain Definitions

The Company’s reported results are presented in accordance with GAAP. The Company also discloses the following non-GAAP financial measures: FFO, Core FFO, AFFO, earnings before interest, taxes, depreciation and amortization (“EBITDA”), EBITDA further adjusted to exclude gains (or losses) on sales of depreciable property and real estate impairment losses (“EBITDAre”), adjusted EBITDAre, annualized adjusted EBITDAre, net debt, net operating income (“NOI”) and cash NOI (“Cash NOI”). The Company believes these non-GAAP financial measures are industry measures used by analysts and investors to compare the operating performance of REITs.

FFO, Core FFO and AFFO

The Company computes FFO in accordance with the definition adopted by the Board of Governors of the National Association of Real Estate Investment Trusts ("NAREIT"). NAREIT defines FFO as GAAP net income or loss adjusted to exclude extraordinary items (as defined by GAAP), net gain or loss from sales of depreciable real estate assets, impairment write-downs associated with depreciable real estate assets and real estate-related depreciation and amortization (excluding amortization of deferred financing costs and depreciation of non-real estate assets), including the pro rata share of such adjustments of unconsolidated subsidiaries. FFO is used by management, and may be useful to investors and analysts, to facilitate meaningful comparisons of operating performance between periods and among the Company’s peers primarily because it excludes the effect of real estate depreciation and amortization and net gains and losses on sales (which are dependent on historical costs and implicitly assume that the value of real estate diminishes predictably over time, rather than fluctuating based on existing market conditions).

The Company computes Core FFO by adjusting FFO, as defined by NAREIT, to exclude certain GAAP income and expense amounts that it believes are infrequent and unusual in nature and/or not related to its core real estate operations. Exclusion of these items from similar FFO-type metrics is common within the equity REIT industry, and management believes that presentation of Core FFO provides investors with a metric to assist in their evaluation of our operating performance across multiple periods and in comparison to the operating performance of our peers, because it removes the effect of unusual items that are not expected to impact our operating performance on an ongoing basis.

Core FFO is used by management in evaluating the performance of our core business operations. Items included in calculating FFO that may be excluded in calculating Core FFO include certain transaction related gains, losses, income or expenses or other non-core amounts as they occur.

To derive AFFO, the Company modifies its computation of Core FFO to include other adjustments to GAAP net income related to certain items that it believes are not indicative of the Company’s operating performance, including straight-line rental revenue, non-cash interest expense, non-cash compensation expense, other amortization expense, other non-cash charges (including changes to our provision for loan losses following the adoption of ASC 326), capitalized interest expense and transaction costs. Such items may cause short-term fluctuations in net income but have no impact on operating cash flows or long-term operating performance. The Company believes that AFFO is an additional useful supplemental measure for investors to consider when assessing the Company’s operating performance without the distortions created by non-cash items and certain other revenues and expenses.

FFO, Core FFO and AFFO do not include all items of revenue and expense included in net income, they do not represent cash generated from operating activities and they are not necessarily indicative of cash available to fund cash requirements; accordingly, they should not be considered alternatives to net income as a performance measure or cash flows from operations as a liquidity measure and should be considered in addition to, and not in lieu of, GAAP financial measures. Additionally, our computation of FFO, Core FFO and AFFO may differ from the methodology for calculating these metrics used by other equity REITs and, therefore, may not be comparable to similarly titled measures reported by other equity REITs.

EBITDA and EBITDAre

The Company computes EBITDA as earnings before interest, income taxes and depreciation and amortization. In 2017, NAREIT issued a white paper recommending that companies that report EBITDA also report EBITDAre. The Company computes EBITDAre in accordance with the definition adopted by NAREIT. NAREIT defines EBITDAre as EBITDA (as defined above) excluding gains (or losses) from the sales of depreciable property and real estate impairment losses. The Company presents EBITDA and EBITDAre as they are measures commonly used in its industry and the Company believes that these measures are useful to investors and analysts because they provide supplemental information concerning its operating performance, exclusive of certain non-cash items and other costs. The Company uses EBITDA and EBITDAre as measures of its operating performance and not as measures of liquidity.

EBITDA and EBITDAre do not include all items of revenue and expense included in net income, they do not represent cash generated from operating activities and they are not necessarily indicative of cash available to fund cash requirements; accordingly, they should not be considered alternatives to net income as a performance measure or cash flows from operations as a liquidity measure and should be considered in addition to, and not in lieu of, GAAP financial measures. Additionally, the Company’s computation of EBITDA and EBITDAre may differ from the methodology for calculating these metrics used by other equity REITs and, therefore, may not be comparable to similarly titled measures reported by other equity REITs.

Net Debt

The Company calculates its net debt as its gross debt (defined as total debt plus net deferred financing costs on its secured borrowings) less cash and cash equivalents and restricted cash available for future investment. The Company believes excluding cash and cash equivalents and restricted cash available for future investment from gross debt, all of which could be used to repay debt, provides an estimate of the net contractual amount of borrowed capital to be repaid, which it believes is a beneficial disclosure to investors and analysts.

NOI and Cash NOI

The Company computes NOI as total revenues less property expenses. NOI excludes all other items of expense and income included in the financial statements in calculating net income or loss. Cash NOI further excludes non-cash items included in total revenues and property expenses, such as straight-line rental revenue and other amortization and non-cash charges. The Company believes NOI and Cash NOI provide useful information because they reflect only those revenue and expense items that are incurred at the property level and present such items on an unlevered basis.

NOI and Cash NOI are not measures of financial performance under GAAP. You should not consider the Company’s NOI and Cash NOI as alternatives to net income or cash flows from operating activities determined in accordance with GAAP. Additionally, the Company’s computation of NOI and Cash NOI may differ from the methodology for calculating these metrics used by other equity REITs and, therefore, may not be comparable to similarly titled measures reported by other equity REITs.

Adjusted EBITDAre / Adjusted NOI / Adjusted Cash NOI

The Company further adjusts EBITDAre, NOI and Cash NOI i) based on an estimate calculated as if all investment and disposition activity that took place during the quarter had occurred on the first day of the quarter, ii) to exclude certain GAAP income and expense amounts that the Company believes are infrequent and unusual in nature and iii) to eliminate the impact of lease termination or loan prepayment fees and contingent rental revenue from its tenants which is subject to sales thresholds specified in the lease. The Company then annualizes these estimates for the current quarter by multiplying them by four, which it believes provides a meaningful estimate of the Company’s current run rate for all investments as of the end of the current quarter. You should not unduly rely on these measures, as they are based on assumptions and estimates that may prove to be inaccurate. The Company’s actual reported EBITDAre, NOI and Cash NOI for future periods may be significantly less than these estimates of current run rates.

Cash ABR

Cash ABR means annualized contractually specified cash base rent in effect as of the end of the current quarter for all of the Company’s leases (including those accounted for as direct financing leases) commenced as of that date and annualized cash interest on its mortgage loans receivable as of that date.

Cash Cap Rate

Cash Cap Rate means annualized contractually specified cash base rent for the first full month after investment or disposition divided by the purchase or sale price, as applicable, for the property.

GAAP Cap Rate

GAAP Cap Rate means annualized rental income computed in accordance with GAAP for the first full month after investment divided by the purchase price, as applicable, for the property.

Rent Coverage Ratio

Rent coverage ratio means the ratio of tenant-reported or, when unavailable, management’s estimate based on tenant-reported financial information, annual EBITDA and cash rent attributable to the leased property (or properties, in the case of a master lease) to the annualized base rental obligation as of a specified date.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240724566912/en/

Investor/Media: Essential Properties Realty Trust, Inc. Robert W. Salisbury, CFA Senior Vice President, Head of Capital Markets 609-436-0619 investors@essentialproperties.com