Essential Properties Realty Trust, Inc. Q1 FY2026 earnings call

During first quarter, deployed $389 million into 126 properties and raised $419 million of equity. AFFO per share grew 11% y/y. Investment cap rates stable with initial cap rate 7.7% and gap yield 8.8%. Focus on servicing relationships and providing sale-easeback capital to middle market operators. Portfolio ended quarter with 2,417 properties leased to over 400 tenants, weighted average lease term 15 years, 2.8% of annual base rent expiring in next 3 years.

Reported gap net income of $60 million and ASFO of $105.8 million. Grew AFFO per share by 11% year over year. Deployed $389 million into 126 properties and raised $419 million of equity. Have $1.5 billion of available liquidity and low leverage of 3.5 times pro forma net debt to annualized adjusted EBITDA RE.

Increased 2026 AFFO per share guidance to new range of $2 to $2.05. Increased investment volume guidance range by $100 million to $1.1 billion to $1.5 billion. Cash G&A guidance improved by $1 million due to cost discipline.

Macro backdrop with heightened volatility. One restaurant tenant filed for bankruptcy with 7 properties, but identified backfill tenants on 5 sites and two locations under contract for sale, expected recovery rate consistent with historical range of ~80%. Consumer-related cost increases may impact tenants' performance at margins.

Q: Caitlin Burrows with Goldman Sachs asked about acquisition volume, cap rates decline, macro impact.

A: Cap rates in mid to high 7% range, macro volatility impacts future quarters, but as consistent capital provider with liquidity, helps.

Q: John Masoka with B. Reilly Security asked about Denny's transaction.

A: 74 properties, average operating history over 40 years, geographically diversified, combination of corporate-owned and operated stores and multiple franchisees.

Q: John Kilachowski with Wells Fargo asked about larger-scale deals vs one-offs, investment spread to cost of capital.

A: Pipeline remains predominantly small granular deals, investment spread is output, deploying capital accretively with sources in mid fives cost of capital vs deploying in mid to high sevens.

Q: Handel St. Just with Mizuho asked about coverage levels on deals, Chicken and Pickle exposure, car wash exposure.

A: Coverage levels vary due to industry mix, Chicken and Pickle exposure watched but coverage healthy, car wash a compelling industry with soft ceiling at 15%.

Q: Rich Hightower with Barclays asked about impairment charge mechanics, watch list definition.

A: Impairment driven by idiosyncratic events, watch list defined by credit risk single B and unit level coverage risk 1.5, at 1.3% today.

Q: Greg McGinnis with Scotiabank asked about Denny's exposure split, cash G&A guidance reduction.

A: Not disclosing split between corporate and franchisees, cash G&A guidance reduced due to efficiency efforts.

Q: Eric Borden with BMO Capital Markets asked about disposition yields.

A: Pricing idiosyncratic, generally no properties in portfolio trade below mid to high fives cost of capital.

Q: Daniel Guglielmo with Capital One Securities asked about 10-year yields impact.

A: Too quick to glean impact on transaction marks.

Q: Caitlin Burrows with Goldman Sachs asked about 2Q volume, straight line adjustment.

A: Likely lower than first quarter, 1Q straight line adjustment number more in line with trend.