Essential Properties(US:EPRT)2024-10-23 21:04Portfolio Overview - As of September 30, 2024, the company had a portfolio of 2,053 properties with an annualized base rent of $438.0 million, achieving a 99.9% occupancy rate[197]. - The occupancy level of the portfolio is high at 99.9% as of September 30, 2024, with only three properties vacant, significantly less than 1% of the portfolio[227]. - The company’s real estate investment portfolio consisted of 2,053 properties with an annualized base rent of $438.0 million as of September 30, 2024[260]. - The company operates 2,053 properties across 49 states, with Texas contributing the highest annualized base rent of $56,750,000, accounting for 13.0% of the total[269]. - The total square footage of all properties is 21,037,576 sq. ft., with an average rent per square foot of $20.92[269]. Lease and Rent Details - 93.2% of the annualized base rent was attributable to properties operated by tenants in service-oriented and experience-based businesses[197]. - The weighted average remaining lease term was 14.1 years, with only 3.9% of annualized base rent expiring before January 1, 2029[199]. - 98.6% of leases provided for future base rent increases at a weighted average rate of 1.7% per year[200]. - The portfolio's weighted average rent coverage ratio was 3.6x, with 99.0% of leases requiring periodic tenant financial reporting[202]. - 96.4% of leases were triple-net, reducing potential capital expenditures related to operating expenses[262]. - The five largest tenants had a rent coverage ratio of 6.5x, indicating strong financial health[262]. Investment Strategy - The company aims to maximize stockholder value through disciplined underwriting and risk management strategies[211]. - The management team has significant experience in the net-lease industry, supporting the company's growth and investment strategies[208]. - The company emphasizes investments in service-oriented or experience-based businesses, which are generally more insulated from e-commerce pressure[219]. - 89% of investments during the three months ended September 30, 2024, were sale-leaseback transactions[199]. - The company plans to continue disciplined growth by originating sale-leaseback transactions, with 91.8% of the portfolio's annualized base rent attributable to internally originated transactions as of September 30, 2024[217]. Financial Performance - Total revenues for the three months ended September 30, 2024, reached $117.13 million, an increase of $25.48 million compared to $91.66 million in the same period of 2023[276]. - Rental revenue increased by $23.5 million, or 27.1%, to $110.5 million for the three months ended September 30, 2024, compared to $86.97 million in the same period of 2023[276]. - Net income attributable to stockholders for the three months ended September 30, 2024, was $49.14 million, an increase of $3.23 million compared to $45.91 million in the same period of 2023[276]. - Funds from Operations (FFO) attributable to stockholders and non-controlling interests for the three months ended September 30, 2024, was $86,070,000, up from $70,580,000 in 2023, indicating a 22% growth[304]. - Cash NOI attributable to stockholders and non-controlling interests for the three months ended September 30, 2024, was $105,171,000, compared to $83,815,000 in 2023, reflecting a 25.5% increase[314]. Debt and Financing - As of September 30, 2024, total principal outstanding debt was $2.21 billion, an increase from $1.68 billion as of December 31, 2023, with a weighted average interest rate of 4.2%[239]. - The company has a Revolving Credit Facility of up to $600 million, maturing on February 10, 2026, with two six-month extension options[240]. - All long-term debt as of September 30, 2024, was fixed-rate or effectively converted to fixed-rate, with a weighted average debt maturity of 4.3 years[234]. - The company issued $400 million of senior unsecured notes due July 2031, with a fixed interest rate of 2.95%[250]. - The company is subject to customary restrictive covenants under its credit agreements, including maintaining certain leverage and cash flow ratios[244]. Impairment and Expenses - Provision for impairment of real estate surged to $5.7 million for the three months ended September 30, 2024, compared to only $165,000 in the same period of 2023, reflecting a significant increase in impairment charges[281]. - General and administrative expenses increased by $1.45 million, or 20.2%, to $8.62 million for the three months ended September 30, 2024, primarily due to higher salary expenses and professional fees[280]. - Interest expense increased by $9 million, or 71.2%, to $21.63 million for the three months ended September 30, 2024, attributed to a higher outstanding debt balance and increased interest rates[284]. Future Outlook - The company plans to manage long-term debt maturities to avoid significant amounts maturing in any single year[234]. - The company has access to various future sources of debt capital, including public issuances and mortgage financing, to diversify funding sources[236]. - The company must distribute at least 90% of its REIT taxable income to maintain its REIT status, limiting reliance on retained earnings for business needs[232].