Core Insights - The Zacks REIT and Equity Trust - Retail industry is benefiting from strong consumer spending, limited new supply, and the importance of physical stores, particularly in top-tier locations [1][3] - The industry is experiencing a rebound due to renewed consumer interest in in-store shopping, despite challenges from e-commerce and high interest rates [2][6] Industry Overview - The industry includes REITs that manage various retail properties, with performance influenced by economic conditions, employment levels, and consumer spending trends [2] - The shift towards experiential retail and mixed-use developments is revitalizing urban areas and enhancing customer engagement [3] Market Dynamics - Resilient consumer spending and limited new construction are key drivers for retail REITs, with a focus on prime locations and experiential retail [3][4] - High construction costs and labor constraints are limiting new development, leading to increased competition for well-located properties [5] E-commerce Impact - E-commerce growth is pressuring brick-and-mortar retailers, reducing the need for physical store expansion and impacting retail space demand [6] - Macroeconomic policies, including tariffs and inflation, are straining retailers' margins and increasing the risk of store closures [6] Industry Performance - The Zacks REIT and Equity Trust - Retail industry has underperformed the broader Zacks Finance sector and the S&P 500 over the past year, with a 6.5% increase compared to 11.4% for the S&P 500 [11] - The industry is currently trading at a forward price-to-FFO ratio of 15.25X, below the S&P 500's P/E of 21.83X and the Finance sector's P/E of 16.21X [14] Company Highlights - Realty Income Corporation focuses on acquiring and managing freestanding commercial properties, with a stable cash flow supported by a diversified tenant base [19] - Kimco Realty is well-positioned with a portfolio of grocery-anchored shopping centers in prime locations, benefiting from high employment and spending power [21] - Essential Properties Realty Trust specializes in single-tenant properties leased to service-oriented businesses, providing stable rental cash flows [25]

Core Insights - Essential Properties Realty Trust (EPRT) has been analyzed multiple times, with significant developments occurring over the past four years, particularly influenced by high inflation and interest rates [1]. Group 1: Company Characteristics - The company is of interest if it demonstrates growth in revenue, earnings, and free cash flow [1]. - EPRT is characterized by excellent growth prospects, making it an attractive investment option [1]. - Favorable valuations are a key criterion for considering EPRT as a potential investment [1]. Group 2: Investment Preferences - Preference is given to companies with steadily growing revenue and high free cash flow margins [1]. - Dividend stocks and those with generous share repurchase programs are favored for inclusion in an investment portfolio [1].

Financial Data and Key Metrics Changes - The company reported an AFFO per share of $0.45, representing a 7% increase compared to Q1 2024 [23] - Total AFFO for the quarter was $85.7 million, up $14.6 million or 21% year-over-year [24] - General and administrative expenses increased to $11.5 million from $9.4 million in the same period last year [24] - The company declared a cash dividend of $0.295, resulting in an AFFO payout ratio of 66% [25] - The balance sheet showed income-producing gross assets reaching $6.3 billion at quarter-end [26] Business Line Data and Key Metrics Changes - The company invested $308 million through 21 transactions at a weighted average cash yield of 7.8% [13] - The weighted average lease term for the portfolio remained at 14 years, with only 5.4% of annual base rent expiring in the next five years [12] - The weighted average unit level coverage ratio was 3.5 times, indicating strong tenant profitability [12] Market Data and Key Metrics Changes - The investment pipeline supports an upper guidance range of $900 million to $1.1 billion for 2025 [11] - Same-store rent growth was reported at 1.5%, slightly up from the previous quarter [17] - The company’s carwash industry exposure was reduced to 13.9% of annual base rent, below the soft ceiling of 15% [20] Company Strategy and Development Direction - The company continues to focus on middle market sale leasebacks with growing operators in targeted industries [8] - The management expects investment cap rates in 2025 to be slightly lower than in 2024, but competition has been less than anticipated due to market volatility [10] - The company aims to maintain a well-capitalized balance sheet with low leverage and significant liquidity to support growth [29] Management's Comments on Operating Environment and Future Outlook - The operating environment remains favorable despite a choppy capital markets backdrop [7] - Management reaffirmed the 2025 AFFO per share guidance range of $1.85 to $1.89, indicating over 7% growth at the midpoint [31] - The company is optimistic about its investment opportunities and the overall health of its portfolio [32] Other Important Information - The company sold 11 properties for $24.3 million in net proceeds during the quarter [20] - The company’s liquidity was bolstered by a $2.3 billion senior unsecured credit facility [30] Q&A Session Summary Question: Impact of ongoing tariff situation on tenant health - Management believes the impact will be minimal as 93% of their portfolio is service and experience-based [35] Question: Competition levels across target industries - Competition is more pronounced in larger transactions, while smaller transactions remain less competitive [37] Question: Factors for not raising acquisition guidance - Management indicated it is still early in the year and visibility on the pipeline is limited to 60-90 days [45] Question: Details on Dave and Buster's acquisition - The investment was based on a long-standing relationship and favorable terms due to reduced competition [49][50] Question: Current watch list and tenant dynamics - The watch list is down 50 basis points quarter-over-quarter, indicating stable tenant health [62] Question: Transaction environment and competition - The company is seeing less competition currently, but expects it to normalize as the market stabilizes [76] Question: Leverage and potential scenarios for increase - Management anticipates remaining conservative on leverage, with sufficient liquidity to support operations [90] Question: Trends in car wash tenant performance - Coverage and average unit volumes for car wash operators remained flat during the quarter [117] Question: Overall economic outlook and tenant resilience - The company believes its tenants are well-positioned to handle economic pressures, with strong rent coverage ratios [165]

April 2025 Disclaimer This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. These forward-looking statements can be identified by the use of words such as "expect," "plan," "will," "estimate," "project," "intend," "believe," "guidance," and other similar expressions that do not relate to historical matters. These forward-looking statements are subject to known and unknown risks and uncertainties tha ...

Financial Data and Key Metrics Changes - The company reported an AFFO per share of $0.45, representing a 7% increase compared to Q1 2024 [23] - Total AFFO for the quarter was $85.7 million, up $14.6 million or 21% year-over-year [24] - The company declared a cash dividend of $0.295, resulting in an AFFO payout ratio of 66% [25] - Pro forma net debt to annualized adjusted EBITDAre was 3.4 times at quarter-end [29] Business Line Data and Key Metrics Changes - The company invested $308 million through 21 transactions at a weighted average cash yield of 7.8% [13] - The weighted average lease term was 14 years, with only 5.4% of annual base rent expiring over the next five years [12] - The weighted average unit level coverage ratio was 3.5 times, indicating strong tenant profitability [12] Market Data and Key Metrics Changes - The company ended the quarter with investments in 2,138 properties leased to 423 tenants across 16 industries [11] - Same-store rent growth was 1.5%, slightly up from the previous quarter [17] - The carwash industry exposure was reduced to 13.9% of annual base rent, below the soft ceiling of 15% [20] Company Strategy and Development Direction - The company continues to focus on middle market sale leasebacks with growing operators in targeted industries [8] - The investment pipeline supports the upper half of the guidance range of $900 million to $1.1 billion for 2025 [11] - The company aims to maintain a well-capitalized balance sheet with low leverage and significant liquidity to support growth [29] Management's Comments on Operating Environment and Future Outlook - The operating environment remains favorable despite a choppy capital markets backdrop [7] - The company expects modest cap rate compression in 2025, but competition has been less than anticipated due to market volatility [10] - Management reaffirmed the 2025 AFFO per share guidance range of $1.85 to $1.89, indicating over 7% growth at the midpoint [31] Other Important Information - The company issued over $300 million of equity and upsized its credit facility, resulting in liquidity of $1.5 billion [9] - The company sold 11 properties for $24.3 million in net proceeds during the quarter [20] - The company has a strong focus on tenant relationships, with 90% of investments being sale leaseback transactions [14] Q&A Session Summary Question: Impact of ongoing tariff situation on tenant health - Management believes the impact will be minimal as 93% of their portfolio is service and experience-based [35] Question: Competition levels across target industries - Competition is more pronounced in larger transactions, while smaller transactions remain less competitive [37] Question: Factors for not raising acquisition guidance - Management indicated it is still early in the year and visibility on the pipeline is limited to 60-90 days [45] Question: Details on Dave and Buster's acquisition - The investment was based on a long-standing relationship and favorable terms due to less competition [49][50] Question: Current watch list and evolving dynamics - The watch list is down 50 basis points quarter-over-quarter, indicating a stable credit environment [62] Question: Transaction environment and competition - Management noted that while competition has decreased, there is still active dialogue with new relationships [108] Question: Leverage and potential scenarios for increase - Management anticipates remaining conservative on leverage, with sufficient liquidity to avoid increasing leverage [90] Question: Trends in car wash tenants - Coverage and average unit volumes were flat across car wash operators [117] Question: Overall economic outlook and tenant base resilience - Management expressed confidence in the tenant base's ability to withstand economic pressures due to strong rent coverage [165]

Core Insights - Essential Properties (EPRT) reported a revenue of $129.35 million for the quarter ended March 2025, reflecting a 25% increase year-over-year [1] - The earnings per share (EPS) was $0.45, up from $0.28 in the same quarter last year, although it fell short of the consensus estimate of $0.46 [1] - The revenue exceeded the Zacks Consensus Estimate of $126.61 million, resulting in a positive surprise of +2.17% [1] Revenue Breakdown - Rental revenue reached $121.79 million, surpassing the average estimate of $117.26 million by analysts, marking a year-over-year increase of +23.6% [4] - Interest on loans and direct financing lease receivables amounted to $7.53 million, slightly above the average estimate of $7.38 million, with a significant year-over-year growth of +58.8% [4] - Other revenue was reported at $0.04 million, which was below the estimated $0.18 million, indicating a substantial decline of -85.3% compared to the previous year [4] Stock Performance - Over the past month, shares of Essential Properties have returned -0.5%, while the Zacks S&P 500 composite experienced a decline of -6.6% [3] - The stock currently holds a Zacks Rank 4 (Sell), suggesting potential underperformance relative to the broader market in the near term [3]

Portfolio Overview - As of March 31, 2025, the company had a portfolio of 2,138 properties with an annualized base rent of $484.3 million, achieving a 99.7% occupancy rate[214]. - The occupancy level of the portfolio is high at 99.7% as of March 31, 2025, with only six properties vacant, significantly less than 1% of the portfolio[242]. - The company had a diversified portfolio of 2,138 properties with an annualized base rent of $484.3 million as of March 31, 2025[276]. - As of March 31, 2025, the company has 2,138 properties across 49 states, with an annualized base rent of $484.3 million[286]. - The top ten tenants represented 17.3% of the annualized base rent, with none exceeding 3.9%[277]. - The company’s tenants operated across 604 concepts, with the top ten concepts contributing 18.4% of the annualized base rent[281]. Lease and Rent Details - 93.3% of the annualized base rent was derived from properties leased to tenants in service-oriented and experience-based businesses[212]. - The weighted average remaining lease term was 14.0 years, with only 5.4% of annualized base rent attributable to leases expiring before January 1, 2030[215]. - 98.6% of leases provided for future base rent increases at a weighted average rate of 1.7% per year[217]. - The portfolio's weighted average rent coverage ratio was 3.5x, with 99.0% of leases requiring periodic tenant financial reporting[219][228]. - The weighted average remaining term of leases is 14.0 years, with only 5.4% of annualized base rent attributable to leases expiring before January 1, 2030[287]. - The weighted average rent coverage ratio of the portfolio is 3.5x, with 69.8% of properties having a coverage ratio of ≥ 2.00x[289]. - As of March 31, 2025, the weighted average rent coverage ratio for service-oriented businesses was 3.5x, while experience-based businesses had a ratio of 2.5x[284]. - 96.7% of leases were triple-net, reducing potential capital expenditures and inflation impact on operating expenses[279]. Financial Performance - Total revenues for the three months ended March 31, 2025, were $129.4 million, up from $103.5 million in the same period in 2024[292]. - Net income attributable to stockholders for the three months ended March 31, 2025, was $56.1 million, compared to $47.0 million in 2024, reflecting an increase of $9.1 million[292]. - Net income for the three months ended March 31, 2025, was $56.281 million, up from $47.123 million in 2024[312]. - Funds from operations (FFO) attributable to stockholders and non-controlling interests was $92.130 million for the three months ended March 31, 2025, compared to $77.848 million in 2024[312]. - NOI attributable to stockholders and non-controlling interests for Q1 2025 is $127,097, up from $102,508 in Q1 2024, reflecting a 24.0% increase[323]. - Cash NOI attributable to stockholders and non-controlling interests for Q1 2025 is $116,648, compared to $92,747 in Q1 2024, indicating a 25.8% increase[323]. - The company reported a gain on dispositions of real estate of $5.0 million for the three months ended March 31, 2025, a significant increase of 229.6% compared to the prior year[292]. Investment and Growth Strategy - 90% of the company's investments during the three months ended March 31, 2025, were sale-leaseback transactions[216]. - The company plans to continue disciplined growth by originating sale-leaseback transactions, with 90% of new investments in real estate attributable to these transactions during the three months ended March 31, 2025[231]. - The average investment per property was $3.0 million, allowing for diversification and reduced risk exposure[218]. - The management team has significant experience in the net lease industry, with 86% of new investments involving parties previously engaged with the team[226]. - The company aims to maintain no more than 5% of annualized base rent from any single tenant and no more than 1% from any single property[214]. - The company targets a portfolio that derives no more than 5% of its annualized base rent from any single tenant and no more than 1% from any single property[234]. Debt and Financing - The total principal outstanding debt as of March 31, 2025, was $2.13 billion, with a weighted average interest rate of 4.1%[253]. - The company has a Revolving Credit Facility with a limit of $1.0 billion, maturing on February 6, 2030[255]. - The 2027 Term Loan has a principal amount of $430 million, maturing in February 2027, with an interest rate of 2.4%[253]. - The company issued $400 million of senior unsecured notes due 2031, with a coupon rate of 2.950%[264]. - As of March 31, 2025, the company's weighted average debt maturity was 3.9 years[249]. - The company actively manages its balance sheet to maintain net debt generally less than six times its annualized adjusted EBITDAre[236]. - The company intends to manage long-term debt maturities to avoid significant amounts maturing in any single year[249]. - The company is in compliance with all covenants under its Amended Credit Agreement as of March 31, 2025[258]. - The company is exposed to interest rate risk, particularly when refinancing long-term debt, which may lead to higher interest expenses[329]. - The company aims to match expected cash inflows from long-term leases with cash outflows for long-term debt to manage market risk[324]. - The company may incur variable-rate debt in the future, which could impact earnings if not hedged appropriately[330]. Cash Flow and Distributions - As of March 31, 2025, the company declared total cash distributions of $0.295 per share, totaling $58.7 million[247]. - For the three months ended March 31, 2025, net cash provided by operating activities was $77.2 million, with a net income of $56.3 million[267]. - Net cash used in investing activities was $284.1 million, primarily reflecting investments in real estate totaling $309.5 million[268]. - Net cash provided by financing activities was $209.0 million, including $278.6 million from common stock issuance and $155.0 million from borrowings[270]. - The company expects to fund remaining commitments of approximately $131.9 million by March 31, 2026[244]. - As of March 31, 2025, the company had $47.0 million in cash and cash equivalents, down from $79.2 million a year earlier[266]. Expenses and Impairments - General and administrative expenses increased by $2.2 million for the three months ended March 31, 2025, mainly due to higher salary expenses and professional fees[296]. - Property expenses rose by $1.3 million for the three months ended March 31, 2025, attributed to increased reimbursable property taxes and operating costs[297]. - Depreciation and amortization expenses increased by $6.5 million for the three months ended March 31, 2025, in line with the growth of the real estate investment portfolio[298]. - Impairment charges on real estate investments were $5.9 million for the three months ended March 31, 2025, compared to $3.8 million in 2024, with provisions recorded for seven and four investments, respectively[299]. - Interest expense rose by $8.2 million for the three months ended March 31, 2025, primarily due to an increase in outstanding debt and interest rates[302].

Financial Performance - First Quarter 2025 net income per share was $0.29, representing a 4% increase compared to the same period in 2024[2] - Adjusted Funds from Operations (AFFO) per share for Q1 2025 was $0.45, reflecting a 7% increase year-over-year[2] - Total revenues for the three months ended March 31, 2025, increased to $129,354,000, up 25.0% from $103,501,000 in the same period of 2024[27] - Net income attributable to stockholders for Q1 2025 was $56,108,000, representing a 19.0% increase compared to $46,975,000 in Q1 2024[27] - Basic net income per share rose to $0.30 in Q1 2025, up from $0.28 in Q1 2024, reflecting a 7.1% increase[27] - Funds from Operations (FFO) for Q1 2025 were $92,130,000, a 18.4% increase from $77,848,000 in Q1 2024[32] - Adjusted Funds from Operations (AFFO) per share for Q1 2025 was $0.45, compared to $0.42 in Q1 2024, indicating a 7.1% growth[32] Investment Activity - The company closed investments totaling $307.7 million at a weighted average cash cap rate of 7.8% during the first quarter[2] - The investment volume for 2025 is estimated to be between $900 million and $1.1 billion[13] - The company reported net proceeds of $24.3 million from the disposition of 11 properties during the first quarter[7] Portfolio and Asset Management - As of March 31, 2025, the investment portfolio consisted of 2,138 properties with a weighted average lease term of 14.0 years and a weighted average rent coverage ratio of 3.5x[5] - The weighted average occupancy rate of the portfolio was 99.7%[5] - Total assets as of March 31, 2025, increased to $6,056,913,000, compared to $5,798,682,000 as of December 31, 2024, marking a 4.5% increase[30] - The company’s total equity increased to $3,823,237,000 as of March 31, 2025, up from $3,572,127,000 at the end of 2024, a growth of 7.0%[30] - The company reported a total of 197,512,316 common shares outstanding and 553,847 OP units held by non-controlling interests as of March 31, 2025[41] Liquidity and Capital Structure - Total available liquidity as of March 31, 2025, was $1.5 billion, including $47.0 million in cash and cash equivalents[10] - The company raised $292.3 million through a follow-on offering at $31.00 per share and $20.6 million through its ATM program at $32.43 per share[2] - Total liabilities stood at $2,233,676,000 as of March 31, 2025, slightly up from $2,226,555,000 at the end of 2024[30] - The company’s net debt as of March 31, 2025, was $2,082,997,000, with a Net Debt to Annualized Adjusted EBITDAre ratio of 4.3x[39] Non-GAAP Financial Measures - The company utilizes non-GAAP financial measures such as FFO, Core FFO, and AFFO to provide insights into its operating performance, which are commonly used in the REIT industry[43] - FFO is defined as GAAP net income adjusted for extraordinary items, net gains or losses from sales of depreciable real estate assets, and real estate-related depreciation and amortization[44] - Core FFO excludes infrequent and unusual GAAP income and expense amounts, providing a clearer view of the company's core operations[45] - AFFO further adjusts Core FFO by including non-cash items and other adjustments, offering a supplemental measure for assessing operating performance[46] - The company calculates net debt by subtracting cash and cash equivalents from its gross debt, providing a clearer picture of its borrowed capital obligations[51] Operational Metrics - The company reported an annualized Adjusted EBITDAre of $488,428,000 for Q1 2025, reflecting strong operational performance[35] - NOI is computed as total revenues minus property expenses, while Cash NOI excludes non-cash items, reflecting property-level performance[52] - Adjusted EBITDAre, NOI, and Cash NOI are annualized estimates based on quarterly investment and disposition activity, providing insights into the company's current run rate[54] - Cash ABR represents the annualized contractually specified cash base rent for all leases as of the end of the current quarter[55] - The company defines the Rent Coverage Ratio as the ratio of tenant-reported annual EBITDA to the annualized base rental obligation, indicating financial health of tenants[58]

Group 1 - The investment approach has received over 500 five-star reviews from members, indicating high satisfaction and perceived benefits [1] - The company invests significant resources, over $100,000 annually, into researching profitable investment opportunities, particularly in real estate strategies [1] - The leader of the investing group, High Yield Landlord, shares real-time transactions and maintains three distinct portfolios: core, retirement, and international [2] Group 2 - Jussi Askola, the President of Leonberg Capital, is recognized for his expertise in REIT investing and has authored award-winning academic papers on the subject [2] - The investing group offers features such as buy/sell alerts and direct access to analysts for member inquiries [2]

Group 1 - Essential Properties (NYSE: EPRT) has been recognized for its stable tenant portfolio, which focuses on long-term leases [1] - The investment thesis emphasizes the attractiveness of high-quality stocks and businesses led by disciplined capital allocators [1] Group 2 - The company is noted for its ability to generate exceptional returns on capital and compound invested capital over extended periods [1]