Essential Properties(EPRT)2025-02-12 22:09Financial Performance - The company's net income for the year ended December 31, 2024, was 410.8 million and an Annualized Adjusted EBITDAre of 1.16 per share of common stock for the year ended December 31, 2024[30]. - The company may be unable to maintain current distribution levels if sufficient cash is not available, potentially leading to a decrease in stock price[166]. - Future distributions depend on various factors including actual and projected operating results, FFO, Core FFO, AFFO, and liquidity[167]. - The market price of the company's common stock has experienced significant volatility, which may lead to a decrease in share value unrelated to operating performance[164]. Portfolio Overview - As of December 31, 2024, the total annualized base rent was 2.9 million, focusing on smaller, low basis single-tenant properties[23]. - The portfolio was 99.7% occupied, with leases contributing 98.4% of annualized base rent providing for annual increases ranging from 1.0% to 4.0%[42]. - The company sold 46 properties for net sales proceeds of 1.2 billion of investments in 297 properties, including 1.0 billion, including 2.1 billion of gross debt outstanding, with a net debt to Annualized Adjusted EBITDAre ratio of 4.6x[42]. - The company had 1.7 billion in term loans and 1.7 billion, aimed at hedging interest rate risks[125]. Tenant and Lease Information - 66.1% of annualized base rent was attributable to master leases, which spread investment risk across multiple properties[26]. - 98.4% of leases provided for future base rent increases at a weighted average rate of 1.7% per year, offering protection against inflation[27]. - The company's five largest tenants contributed 10.7% of annualized base rent, while the ten largest contributed 17.6%, indicating potential risk if any of these tenants face financial difficulties[84]. - Approximately 84.3% of annualized base rent comes from tenants in service-oriented or experience-based industries, which are sensitive to consumer discretionary spending[88]. Risk Factors - Adverse changes in U.S. and global markets may impact tenants' ability to make rental payments, affecting the company's growth and profitability[77]. - The company is exposed to significant risks from single-tenant leases, where the default of a single tenant can lead to substantial revenue loss[81]. - Economic conditions and inflation may adversely affect tenants' operating expenses, impacting their ability to pay rent[91]. - The company acknowledges that future environmental legislation may impose additional liabilities, which could materially and adversely affect its operations[71]. Environmental, Social, and Governance (ESG) Initiatives - The Board actively oversees Environmental, Social, and Governance (ESG) initiatives, integrating ESG performance metrics into executive compensation to align with long-term sustainability goals[59]. - The company aims to reduce its carbon footprint by implementing sustainability upgrades at corporate offices and income properties[60]. - The company plans to publish its 2024 Corporate Responsibility Report, aligned with the Sustainability Accounting Standards Board and the Financial Stability Board Task Force on Climate-related Financial Disclosure indices[62]. - The company conducts environmental assessments before property acquisitions to identify potential environmental concerns, adhering to established standards[69]. Cybersecurity Measures - The company is committed to enhancing its cybersecurity risk management program, including third-party expert involvement for system penetration testing[62]. - The company conducts annual cybersecurity risk assessments with external consultants to enhance security controls[188]. - The cybersecurity program includes comprehensive incident response and recovery plans that are periodically tested[190]. - The Board oversees cybersecurity risk management, receiving periodic reports on material security risks[195]. Legal and Regulatory Compliance - The company is subject to various legal proceedings, but management does not expect any material adverse effects on business operations or financial condition[214]. - Compliance with regulations such as the Americans with Disabilities Act may require unanticipated expenditures, impacting financial performance[112]. - Changes in tax laws applicable to REITs could adversely affect the company's tax treatment and impact investors[162].