PART I. FINANCIAL INFORMATION [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) The company's financial statements for June 30, 2025, reflect significant growth in assets, revenues, and net income, primarily driven by portfolio expansion [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) Consolidated Balance Sheets (in thousands) | Account | June 30, 2025 (Unaudited) | December 31, 2024 | | :--- | :--- | :--- | | **Total Assets** | **$6,289,589** | **$5,798,682** | | Net Investments | $6,051,213 | $5,552,606 | | Cash and cash equivalents | $20,777 | $40,713 | | **Total Liabilities** | **$2,451,603** | **$2,226,555** | | Unsecured term loans, net | $1,723,074 | $1,721,114 | | Revolving credit facility | $200,000 | $0 | | **Total Equity** | **$3,837,986** | **$3,572,127** | - Total assets grew by **8.5%** to **$6.29 billion** as of June 30, 2025, from **$5.80 billion** at the end of 2024, primarily due to an increase in net real estate investments Total liabilities increased by **10.1%** to **$2.45 billion**, largely driven by a **$200 million** draw on the revolving credit facility[8](index=8&type=chunk) [Consolidated Statements of Operations](index=4&type=section&id=Consolidated%20Statements%20of%20Operations) Consolidated Statements of Operations (in thousands, except per share) | Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | **Total Revenues** | **$137,062** | **$109,268** | **$266,416** | **$212,770** | | Rental Revenue | $129,108 | $104,369 | $250,900 | $202,880 | | **Net Income Attributable to Stockholders** | **$63,212** | **$51,517** | **$119,320** | **$98,491** | | Diluted Net Income Per Share | $0.32 | $0.29 | $0.61 | $0.57 | - Total revenues for Q2 2025 increased **25.4%** YoY to **$137.1 million**, and for the first six months of 2025, revenues grew **25.2%** YoY to **$266.4 million** This growth was primarily driven by an increase in rental revenue from portfolio expansion[12](index=12&type=chunk) - Net income attributable to stockholders for Q2 2025 rose **22.7%** YoY to **$63.2 million** For the six-month period, it increased **21.1%** YoY to **$119.3 million**[12](index=12&type=chunk) [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :--- | :--- | :--- | | **Net cash provided by operating activities** | **$176,939** | **$147,888** | | **Net cash used in investing activities** | **($570,976)** | **($560,906)** | | Investment in real estate | ($548,275) | ($408,823) | | **Net cash provided by financing activities** | **$370,128** | **$388,547** | | Proceeds from issuance of common stock, net | $298,809 | $244,735 | | Borrowings under revolving credit facility | $355,000 | $255,000 | | Repayments under revolving credit facility | ($155,000) | ($10,000) | | Dividends paid | ($114,263) | ($97,418) | | **Net decrease in cash** | **($23,909)** | **($24,471)** | [Notes to Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) - The company operates in one reportable segment, focusing on single-tenant properties net leased on a long-term basis to middle-market companies in service-oriented or experience-based businesses[30](index=30&type=chunk)[36](index=36&type=chunk) Investment Activity (in thousands) | Investment Activity | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :--- | :--- | :--- | | Number of properties acquired | 121 | 141 | | Total investments (including acquisition costs) | $605,000 | $506,857 | Debt Summary (in thousands) | Debt Summary | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Unsecured term loans | $1,730,000 | $1,730,000 | | Senior unsecured notes | $400,000 | $400,000 | | Revolving Credit Facility | $200,000 | $0 | | **Total principal outstanding** | **$2,330,000** | **$2,130,000** | - In March 2025, the company completed a follow-on offering of **9,430,000 shares** via forward sale agreements, with expected net proceeds of **$285.2 million** As of June 30, 2025, no shares under these agreements have been settled[167](index=167&type=chunk) - As of June 30, 2025, the company had future commitments to fund **$149.1 million** for development, construction, and renovation costs at its properties[189](index=189&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=41&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes strong performance to a disciplined investment strategy, portfolio expansion, and prudent capital management [Overview and Portfolio Characteristics](index=42&type=section&id=Overview%20and%20Portfolio%20Characteristics) - The company focuses on single-tenant properties net leased to middle-market companies in service-oriented or experience-based businesses, which are considered less susceptible to e-commerce pressures[217](index=217&type=chunk) Portfolio Characteristics | Portfolio Metric | As of June 30, 2025 | | :--- | :--- | | Number of Properties | 2,190 | | Annualized Base Rent | $507.8 million | | Occupancy | 99.6% | | Weighted Average Lease Term | 14.3 years | | Weighted Average Rent Coverage | 3.4x | | Average Investment per Property | $3.0 million | [Business and Growth Strategies](index=44&type=section&id=Business%20and%20Growth%20Strategies) - The company's growth strategy is centered on originating sale-leaseback transactions with middle-market companies, leveraging its management team's extensive relationships During the first six months of 2025, **92%** of new real estate investments were from sale-leasebacks[236](index=236&type=chunk) - A key strategic focus is maintaining a diversified portfolio, with a long-term goal that no single tenant exceeds **5%** of annualized base rent and no single property exceeds **1%**[234](index=234&type=chunk) [Liquidity and Capital Resources](index=47&type=section&id=Liquidity%20and%20Capital%20Resources) - Primary liquidity needs include funding investment activities, servicing debt, and paying dividends The company expects to meet short-term needs with cash on hand, operating cash flow, borrowings under its **$1.0 billion** Revolving Credit Facility, and proceeds from its ATM program[248](index=248&type=chunk)[251](index=251&type=chunk) - The company targets a net debt level of less than **six times** its annualized adjusted EBITDAre As of June 30, 2025, all long-term debt was either fixed-rate or effectively fixed through hedging strategies[241](index=241&type=chunk)[255](index=255&type=chunk) - As of June 30, 2025, the company had a remaining commitment of approximately **$149.1 million** for tenant construction financing and reimbursements, expected to be funded by June 30, 2026[249](index=249&type=chunk) [Results of Operations](index=59&type=section&id=Results%20of%20Operations) - For Q2 2025 vs Q2 2024, rental revenue increased by **$24.7 million (23.7%)** primarily due to the growth in the real estate portfolio Net income attributable to stockholders grew by **$11.7 million (22.7%)**[301](index=301&type=chunk)[302](index=302&type=chunk) - For the six months ended June 30, 2025 vs 2024, rental revenue increased by **$48.0 million (23.7%)**, and net income attributable to stockholders grew by **$20.8 million (21.1%)**, driven by acquisitions made in 2024 and early 2025[315](index=315&type=chunk)[316](index=316&type=chunk) - Interest expense increased by **$15.8 million (48.0%)** for the first six months of 2025 compared to the same period in 2024, due to a higher outstanding debt balance and increased interest rates[315](index=315&type=chunk)[325](index=325&type=chunk) [Non-GAAP Financial Measures](index=62&type=section&id=Non-GAAP%20Financial%20Measures) Non-GAAP Financial Measures (in thousands) | Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | FFO | $100,455 | $84,241 | $192,585 | $162,089 | | Core FFO | $100,455 | $84,241 | $192,585 | $162,089 | | AFFO | $93,021 | $77,117 | $178,722 | $148,234 | Debt Summary (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Debt | $2,319,755 | $2,117,517 | | Net Debt | $2,308,931 | $2,085,022 | [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=67&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Interest rate risk is managed through hedging, with the Revolving Credit Facility being the primary variable-rate exposure - The company's variable-rate term loans (2027, 2028, 2029, 2030 Term Loans) are hedged with interest rate swaps, effectively fixing the interest rates[349](index=349&type=chunk) - The main exposure to interest rate fluctuations is from the Revolving Credit Facility A sensitivity analysis indicates that a **100 basis point** increase in rates would result in a **$2.0 million** increase in annual interest expense based on the balance at June 30, 2025[350](index=350&type=chunk) [Item 4. Controls and Procedures](index=68&type=section&id=Item%204.%20Controls%20and%20Procedures) Management confirmed the effectiveness of disclosure controls and procedures, with no material changes to internal controls - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report[356](index=356&type=chunk) - No material changes were made to the company's internal control over financial reporting during the most recent fiscal quarter[357](index=357&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=69&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in ordinary course legal proceedings, not expecting a material adverse financial impact - Management believes that no current legal proceedings, individually or in aggregate, will have a material adverse effect on the company's business or financial condition[360](index=360&type=chunk) [Item 1A. Risk Factors](index=69&type=section&id=Item%201A.%20Risk%20Factors) No material changes to previously disclosed risk factors were reported for the current period - No material changes to the risk factors disclosed in the Annual Report on Form 10-K for the year ended December 31, 2024, have occurred[361](index=361&type=chunk) [Other Items (Items 2, 3, 4, 5, 6)](index=69&type=section&id=Other%20Items) This section reports no unregistered equity sales, no senior security defaults, and no other material information - The report indicates no unregistered sales of equity securities (Item 2), no defaults upon senior securities (Item 3), and no other material information to disclose (Item 5) for the quarter ended June 30, 2025[362](index=362&type=chunk)[363](index=363&type=chunk)[365](index=365&type=chunk)

```markdown [Financial & Operating Highlights](index=1&type=section&id=Financial%20%26%20Operating%20Highlights) [Second Quarter 2025 Financial and Operating Highlights](index=1&type=section&id=Second%20Quarter%202025%20Financial%20and%20Operating%20Highlights) In the second quarter of 2025, Essential Properties demonstrated strong growth, with Net Income per Share rising 10% to $0.32 and AFFO per Share increasing 7% to $0.46 compared to Q2 2024 Second Quarter 2025 Key Financial and Operating Metrics | Metric | Value | Change vs Q2 2024 | | :--- | :--- | :--- | | **Investments** | $334.0 million | - | | Weighted Avg Cash Cap Rate | 7.9% | - | | **Dispositions (Net Proceeds)** | $46.2 million | - | | Weighted Avg Cash Cap Rate | 7.3% | - | | **Net Income per Share** | $0.32 | +10% | | **AFFO per Share** | $0.46 | +7% | | **Equity Raised (ATM Program)** | $118.9 million | - | | **Pro Forma Net Debt / Ann. Adj. EBITDAre** | 3.5x | - | [Year to Date 2025 Financial and Operating Highlights](index=1&type=section&id=Year%20to%20Date%202025%20Financial%20and%20Operating%20Highlights) For the first six months of 2025, the company invested $641.7 million at a 7.9% weighted average cash cap rate, contributing to a 7% year-over-year increase in AFFO per share to $0.91 Year to Date 2025 Key Financial and Operating Metrics | Metric | Value | Change vs YTD 2024 | | :--- | :--- | :--- | | **Investments** | $641.7 million | - | | Weighted Avg Cash Cap Rate | 7.9% | - | | **Dispositions (Net Proceeds)** | $70.5 million | - | | Weighted Avg Cash Cap Rate | 7.2% | - | | **Net Income per Share** | $0.61 | +7% | | **AFFO per Share** | $0.91 | +7% | - Key capital activities in the first half of 2025 included upsizing the revolving credit facility to **$1.0 billion** and raising a total of **$431.8 million** in gross equity through a follow-on offering and the ATM program[3](index=3&type=chunk) - A significant portion of these shares (**16.5 million**) remain unsettled on a forward basis, representing estimated net proceeds of **$507.4 million**[3](index=3&type=chunk) [Activity Subsequent to Second Quarter 2025](index=1&type=section&id=Activity%20Subsequent%20to%20Second%20Quarter%202025) Subsequent to the end of the second quarter, the company continued its portfolio management activities, investing an additional $8.0 million and realizing $1.8 million in gross proceeds from dispositions Subsequent Activity Metrics | Activity | Amount | | :--- | :--- | | Investments | $8.0 million | | Dispositions (Gross Proceeds) | $1.8 million | [Management Commentary and Portfolio Overview](index=2&type=section&id=Management%20Commentary%20and%20Portfolio%20Overview) [CEO Comments](index=2&type=section&id=CEO%20Comments) The CEO expressed a positive outlook, highlighting the company's strong performance in the first half of the year, characterized by resilient portfolio trends, robust investment execution, and proactive capital management - CEO Pete Mavoides noted that the year has been positive relative to expectations due to:[5](index=5&type=chunk) - Resilient portfolio trends[5](index=5&type=chunk) - Strong execution on investments[5](index=5&type=chunk) - Proactive capital markets activity[5](index=5&type=chunk) - A substantial investment pipeline despite a fluid macroeconomic backdrop[5](index=5&type=chunk) [Portfolio Highlights](index=2&type=section&id=Portfolio%20Highlights) As of June 30, 2025, the company's portfolio comprised 2,190 properties with a high occupancy rate of 99.6%, a long weighted average lease term of 14.3 years, and a healthy rent coverage ratio of 3.4x Portfolio Key Metrics | Metric | Value (as of June 30, 2025) | | :--- | :--- | | Number of properties | 2,190 | | Weighted average lease term (WALT) | 14.3 years | | Weighted average rent coverage ratio | 3.4x | | Top 10 tenant concentration (% of cash ABR) | 17.6% | | Weighted average occupancy | 99.6% | | Service-oriented or experience-based (% of cash ABR) | 93.0% | [Portfolio Activity](index=2&type=section&id=Portfolio%20Activity) [Investments](index=2&type=section&id=Investments) The company invested $334.0 million in Q2 and $641.7 million year-to-date, maintaining a consistent weighted average cash cap rate of 7.9%, with a high percentage of sale-leaseback transactions and reliance on existing relationships Investment Metrics | Investment Metric | Q2 2025 | YTD 2025 | | :--- | :--- | :--- | | Investment volume | $334.0 million | $641.7 million | | Number of properties | 77 | 125 | | Wtd. avg. cash / GAAP cap rate | 7.9% / 9.7% | 7.9% / 9.6% | | Wtd. avg. lease escalation | 2.2% | 2.2% | | % Sale-leaseback transactions | 93% | 92% | | % Existing relationship | 88% | 87% | | WALT | 19.5 years | 18.5 years | [Dispositions](index=3&type=section&id=Dispositions) In Q2 2025, the company generated $46.2 million in net proceeds from the sale of 23 properties, achieving a net gain of $2.1 million, with year-to-date dispositions totaling $70.5 million from 34 properties Disposition Metrics | Disposition Metric | Q2 2025 | YTD 2025 | | :--- | :--- | :--- | | Net proceeds | $46.2 million | $70.5 million | | Number of properties sold | 23 | 34 | | Net gain / (loss) | $2.1 million | $7.1 million | | Wtd. avg. cash cap rate | 7.3% | 7.2% | [Loan Repayments](index=3&type=section&id=Loan%20Repayments) The company received $3.4 million in loan principal repayments during Q2 2025 and $5.8 million year-to-date, with the repaid loans having a weighted average interest rate of 9.1% for the quarter Loan Repayment Metrics | Loan Repayment Metric | Q2 2025 | YTD 2025 | | :--- | :--- | :--- | | Proceeds—Principal | $3.4 million | $5.8 million | | Number of properties | 2 | 5 | | Weighted average interest rate | 9.1% | 8.4% | [Capital Structure and Liquidity](index=3&type=section&id=Capital%20Structure%20and%20Liquidity) [Leverage and Liquidity](index=3&type=section&id=Leverage%20and%20Liquidity) As of June 30, 2025, the company maintained a strong liquidity position of $1.3 billion, with leverage at 4.5x Net Debt to Annualized Adjusted EBITDAre, improving to 3.5x on a pro forma basis Leverage and Liquidity Metrics | Metric (as of June 30, 2025) | As Reported | Pro Forma | | :--- | :--- | :--- | | Net debt to Annualized Adjusted EBITDAre | 4.5x | 3.5x | | Cash and cash equivalents | $21.1 million | $328.5 million | | Unused revolving credit facility | $800.0 million | $1.0 billion | | Forward equity sales - unsettled | $507.4 million | — | | **Total available liquidity** | **$1.3 billion** | **$1.3 billion** | [Equity Activity](index=4&type=section&id=Equity%20Activity) During Q2 2025, the company sold **3,664,521 shares** through its ATM program at a net price of $32.00 per share, raising **$117.3 million** - In Q2 2025, the company sold **3,664,521 shares** via its ATM program, raising net proceeds of **$117.3 million**[13](index=13&type=chunk) - As of quarter-end, **16,512,921 forward shares** remained unsettled, representing **$507.4 million** in estimated net proceeds[13](index=13&type=chunk) [Outlook and Shareholder Information](index=4&type=section&id=Outlook%20and%20Shareholder%20Information) [2025 Guidance](index=4&type=section&id=2025%20Guidance) Reflecting its strong performance and positive outlook, the company has increased its full-year 2025 guidance, with the new AFFO per share range at $1.86 to $1.89 and investment volume target raised to $1.0 billion to $1.2 billion 2025 Guidance Metrics | 2025 Guidance Metric | Updated Range | | :--- | :--- | | AFFO per share | $1.86 to $1.89 | | Investment volume | $1.0 billion to $1.2 billion | | Cash G&A expense | $28 million to $31 million | [Dividend Information](index=4&type=section&id=Dividend%20Information) The company's board of directors declared a second quarter 2025 cash dividend of $0.30 per share, corresponding to an annualized dividend of $1.20 per share - A cash dividend of **$0.30 per share** was declared for Q2 2025[16](index=16&type=chunk) - This represents an annualized dividend of **$1.20 per share**[16](index=16&type=chunk) [Consolidated Financial Statements](index=6&type=section&id=Consolidated%20Financial%20Statements) [Consolidated Statements of Operations](index=6&type=section&id=Consolidated%20Statements%20of%20Operations) For the three months ended June 30, 2025, total revenues grew 25.4% year-over-year to $137.1 million, driving a 22.6% increase in net income attributable to stockholders to $63.2 million Consolidated Statements of Operations (in thousands) | Metric | Q2 2025 | Q2 2024 | YoY Change | | :--- | :--- | :--- | :--- | | Total revenues | $137,062 | $109,268 | +25.4% | | Income from operations | $87,813 | $66,797 | +31.5% | | Net income attributable to stockholders | $63,212 | $51,517 | +22.7% | Consolidated Statements of Operations (in thousands) | Metric | YTD 2025 | YTD 2024 | YoY Change | | :--- | :--- | :--- | :--- | | Total revenues | $266,416 | $212,770 | +25.2% | | Income from operations | $167,431 | $129,179 | +29.6% | | Net income attributable to stockholders | $119,320 | $98,491 | +21.1% | [Consolidated Balance Sheets](index=7&type=section&id=Consolidated%20Balance%20Sheets) As of June 30, 2025, the company's total assets grew to $6.29 billion from $5.80 billion at year-end 2024, primarily due to an increase in net real estate investments Consolidated Balance Sheets (in thousands) | Metric | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | **Assets** | | | | Net investments | $6,051,213 | $5,552,606 | | Total assets | $6,289,589 | $5,798,682 | | **Liabilities & Equity** | | | | Total liabilities | $2,451,603 | $2,226,555 | | Total stockholders' equity | $3,829,888 | $3,563,678 | | Total liabilities and equity | $6,289,589 | $5,798,682 | [Reconciliation of Non-GAAP Financial Measures](index=8&type=section&id=Reconciliation%20of%20Non-GAAP%20Financial%20Measures) [Reconciliation of Net Income to FFO, Core FFO, and AFFO](index=8&type=section&id=Reconciliation%20of%20Net%20Income%20to%20FFO%2C%20Core%20FFO%2C%20and%20AFFO) The company reported strong growth in its key non-GAAP metrics for Q2 2025, with FFO and Core FFO per diluted share increasing to $0.50 and AFFO per diluted share growing to $0.46 year-over-year FFO, Core FFO, and AFFO Per Diluted Share | Per Diluted Share | Q2 2025 | Q2 2024 | YoY Change | | :--- | :--- | :--- | :--- | | Net Income | $0.32 | $0.29 | +10.3% | | FFO | $0.50 | $0.47 | +6.4% | | Core FFO | $0.50 | $0.47 | +6.4% | | AFFO | $0.46 | $0.43 | +7.0% | FFO, Core FFO, and AFFO Per Diluted Share | Per Diluted Share | YTD 2025 | YTD 2024 | YoY Change | | :--- | :--- | :--- | :--- | | Net Income | $0.61 | $0.57 | +7.0% | | FFO | $0.98 | $0.93 | +5.4% | | Core FFO | $0.98 | $0.93 | +5.4% | | AFFO | $0.91 | $0.85 | +7.1% | [Reconciliation of Net Income to EBITDAre and NOI](index=9&type=section&id=Reconciliation%20of%20Net%20Income%20to%20EBITDAre%20and%20NOI) The reconciliation of net income to non-GAAP measures shows an Annualized Adjusted EBITDAre of $512.3 million and an Annualized Adjusted Cash NOI of $506.2 million for Q2 2025, providing a run-rate estimate of earnings power Annualized Run-Rate Metrics (in thousands) | Annualized Run-Rate Metrics (Q2 2025) | Value | | :--- | :--- | | Annualized Adjusted EBITDAre | $512,324 | | Annualized Adjusted NOI | $556,328 | | Annualized Adjusted Cash NOI | $506,184 | [Debt and Enterprise Value Calculation](index=10&type=section&id=Debt%20and%20Enterprise%20Value%20Calculation) As of June 30, 2025, the company had total gross debt of $2.33 billion, with pro forma net debt decreasing to $1.80 billion after accounting for unsettled forward equity sales, resulting in a pro forma Net Debt to Annualized Adjusted EBITDAre ratio of 3.5x Debt and Enterprise Value Metrics | Metric (as of June 30, 2025) | As Reported | Pro Forma | | :--- | :--- | :--- | | Net Debt | $2.31 billion | $1.80 billion | | Total Enterprise Value (TEV) | $8.65 billion | $8.67 billion | | Net Debt / TEV | 26.7% | 20.8% | | Net Debt / Annualized Adj. EBITDAre | 4.5x | 3.5x | [Definitions of Non-GAAP Financial Measures](index=12&type=section&id=Definitions%20of%20Non-GAAP%20Financial%20Measures) [Non-GAAP Definitions](index=12&type=section&id=Non-GAAP%20Definitions) This section provides definitions for key non-GAAP financial measures used throughout the report, including FFO, Core FFO, AFFO, EBITDAre, Net Debt, NOI, and Cash NOI, explaining their utility for comparing REIT operating performance - The company computes FFO in accordance with NAREIT's definition, which excludes real estate depreciation and gains/losses on property sales from net income[42](index=42&type=chunk) - AFFO is derived from Core FFO by further adjusting for non-cash items like straight-line rent and non-cash compensation to better reflect operating performance[44](index=44&type=chunk) - EBITDAre is calculated per NAREIT standards, excluding gains/losses on property sales and impairment losses from EBITDA[46](index=46&type=chunk) ```

Group 1 - The company has sold its position in Essential Properties Realty Trust, Inc. (EPRT) and reinvested the proceeds into Blue Owl Capital Inc. (OWL) [1] - Following the reinvestment, EPRT has experienced a decline [1] Group 2 - The company invests significant resources, including thousands of hours and over $100,000 annually, into researching profitable investment opportunities [2] - The investment strategy has garnered over 500 five-star reviews from satisfied members [2]

Group 1 - The investment approach has received over 500 five-star reviews from members who are experiencing benefits [1] - The company invests over $100,000 annually and dedicates thousands of hours to research profitable investment opportunities, particularly in real estate strategies [1] - REITs have been in a bear market for the past three years, indicating a challenging environment for real estate investment trusts [1] 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 [1] - The investing group High Yield Landlord offers features such as three portfolios (core, retirement, international), buy/sell alerts, and direct access to analysts for real-time transactions [1]

Portfolio Performance - The portfolio is 99.7% leased, demonstrating stability[15] - Same-store rent growth has averaged 1.4% over the last four quarters[15] - Only 5.4% of ABR is expiring through 2029, with a coverage ratio of 4.0x[15] - The portfolio has experienced an annualized rent loss of approximately 30 bps since inception in 2016[19] Balance Sheet and Liquidity - Pro forma Net Debt / Annualized Adjusted EBITDAre is 3.4x at 1Q'25-end, indicating low leverage[15] - The company has approximately $1.5 billion of pro forma liquidity[15] - The weighted average debt maturity is 3.9 years, with a weighted average interest rate of 4.1%[15] Investment Activity - Closed investments of approximately $227 million in 2Q'25 to date, with an expected cash yield of approximately 7.8%[15] - Approximately $29 million of dispositions closed in 2Q'25 to date at a 7.2% cash yield[15] - Approximately $237 million under PSA or LOI, with 2Q'25 expected cash yield of ~7.8%[15] Portfolio Composition - Top 10 tenants represent 17.3% of ABR, indicating diversification[15] - 93% of cash ABR comes from service-oriented and experience-based tenants[39]

I often talk with family & friends about the idea of owning REITs ( XLRE ) but they always scoff at the idea. Instead, most talk about owning physical rental properties, thinking this is the only way to generate cash flow.Contributing analyst to the iREIT+Hoya Capital investment group. The Dividend Collectuh is not a registered investment professional nor financial advisor and these articles should not be taken as financial advice. This is for educational purposes only and I encourage everyone to do their o ...

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]

Investment Ratings - Cold Storage REITs: Lineage Inc. (LINE, Buy) [5] - Industrial REITs: Prologis Inc. (PLD, Neutral) [16] - Industrial REITs: Terreno Realty Corp (TRNO, Buy) [31] - Self Storage REITs: Extra Space Storage Inc. (EXR, Buy) [44] - Self Storage REITs: Public Storage Inc. (PSA, Buy) [54] - Retail REITs: Brixmor Property Group (BRX, Buy) [63] - Retail REITs: Phillips Edison & Co (PECO, Buy) [74] Core Insights - The report highlights a mixed outlook across various REIT sectors, with some companies like LINE, TRNO, EXR, PSA, BRX, and PECO receiving "Buy" ratings, while PLD is rated "Neutral" [5][16][31][44][54][63][74] - Economic occupancy for LINE decreased by 290 basis points sequentially and 260 basis points year-over-year in Q1 2025, indicating potential challenges in maintaining occupancy levels [5] - Prologis Inc. is focusing on the implications of tariff policies on global supply chains, which may disrupt tenant activities and leasing demand [16] - Terreno Realty Corp is observing a shift in leasing dynamics post-tariff announcements, with domestic customers becoming more active compared to those operating across borders [31] - Extra Space Storage Inc. is prioritizing occupancy over rent in the current environment, reflecting a strategic shift in response to market conditions [44] - Public Storage Inc. is experiencing a significant impact from regional events, such as fires in Los Angeles, which account for 15% of its NOI [54] - Brixmor Property Group is seeing a steady increase in billed occupancy, which has risen by an average of 100 basis points over the last four years [63] Summary by Sections Cold Storage REITs - Lineage Inc. (LINE) reported a decline in economic occupancy and revenue per occupied pallet, with management expressing confidence in maintaining AFFO/share and EBITDA guidance for 2025 [5][6][7] Industrial REITs - Prologis Inc. (PLD) is navigating the complexities of global supply chains and tariff impacts, with expectations for occupancy and rent growth improvements in the second half of 2025 [16][20] - Terreno Realty Corp (TRNO) is adapting to changes in leasing activity and tenant retention amid tariff uncertainties, focusing on domestic customer engagement [31][36] Self Storage REITs - Extra Space Storage Inc. (EXR) is adjusting its strategy to prioritize occupancy over rent, with a focus on counter-cyclical demand drivers [44][46] - Public Storage Inc. (PSA) is managing its rent versus occupancy strategy while facing challenges from regional disruptions [54][56] Retail REITs - Brixmor Property Group (BRX) is experiencing a positive trend in occupancy and leasing spreads, with a focus on tenant credit and market dynamics [63][66] - Phillips Edison & Co (PECO) is observing volatility in the market due to tariff updates, impacting leasing velocity and transaction activity [74]

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]