Essential Properties(US:EPRT)2026-02-11 22:29Portfolio Overview - As of December 31, 2025, the total annualized base rent was $555.0 million, with 91.5% attributable to properties leased to service-oriented and experience-based businesses[20] - The portfolio consisted of 2,300 properties, with a 99.7% occupancy rate and 659 different concepts across 48 states, ensuring no single tenant contributed more than 3.4% of annualized base rent[21] - The weighted average remaining lease term was 14.4 years, with only 5.2% of annualized base rent from leases expiring before January 1, 2031[22] - As of December 31, 2025, 66.8% of annualized base rent was from master leases, which spread investment risk across multiple properties[26] - The company's portfolio was 99.7% occupied as of December 31, 2025, with a weighted average remaining lease term of 14.4 years[38] Financial Performance - The company's net income for the year ended December 31, 2025, was $253.7 million, with an EBITDAre of $512.7 million and an Annualized Adjusted EBITDAre of $562.4 million, resulting in a net debt to Annualized Adjusted EBITDAre ratio of 4.4x[38] - In 2025, the company completed $1.3 billion of investments in 270 properties, with total gross investment in real estate reaching $7.2 billion[29] - Liquidity as of December 31, 2025, totaled $1.4 billion, including $70.4 million in cash and cash equivalents[36] - The company had $2.5 billion of gross debt outstanding with a weighted average maturity of 4.2 years, and total liquidity of $1.4 billion as of December 31, 2025[38] - The company sold 60 properties for net sales proceeds of $130.1 million during the year ended December 31, 2025[44] Investment Strategy - 95% of investments were made through a sale-leaseback structure, which allows for favorable lease terms and financial reporting from tenants[23] - The average investment per property was $3.1 million, focusing on smaller, low basis single-tenant properties to mitigate risk[25] - During the year ended December 31, 2025, the company completed $1.3 billion in investments, with 95% of new investments attributable to internally originated sale-leaseback transactions[39] - The company focuses on middle-market companies in service-oriented or experience-based businesses, which are believed to be more insulated from e-commerce pressures[45] - The company maintains a disciplined underwriting process, targeting properties with strong operating performance and healthy rent coverage ratios[41] Lease Structure and Terms - 97.9% of leases provided for base rent increases at a weighted average rate of 1.8% per year, offering protection against inflation[27] - Leases contributing 97.9% of annualized base rent provide for annual rent increases ranging from 1.0% to 4.0%, with a weighted average annual escalation of 1.8%[39] - The portfolio's weighted average rent coverage ratio was 3.6x, with 99.2% of leases requiring periodic financial reporting from tenants[28] - 97.3% of the company's leases were triple-net, enhancing the stability of rental revenue[39] Environmental, Social, and Governance (ESG) Initiatives - The company maintains a strong focus on Environmental, Social, and Governance (ESG) initiatives, integrating ESG performance metrics into executive compensation to align leadership incentives with sustainability goals[56] - The company aims to reduce its carbon footprint by implementing sustainability upgrades at corporate offices and income properties[57] - The company has established a goal to publish its 2025 Corporate Responsibility Report, aligned with the Sustainability Accounting Standards Board and the Financial Stability Board Task Force on Climate-related Financial Disclosure indices[57] - The company conducts environmental assessments before property acquisitions to identify potential environmental concerns, following the Standard Practice for Environmental Site Assessments[65] - The company requires lessees to comply with environmental laws and indemnify the company for any losses incurred due to violations[66] - The company is subject to various environmental laws and regulations, which may impose significant liabilities and require compliance expenditures[67] Workforce and Diversity - As of December 31, 2025, the company had 56 full-time employees, with women comprising 38% of the workforce and holding approximately 55% of non-executive management positions[50] - The company is committed to diversity, with minorities making up approximately 30% of the employee base and 35% of non-executive management positions[50] - The company has a commitment to maintaining a workplace free from discrimination and harassment, supported by annual training for employees[53] Debt and Interest Rate Management - Total principal outstanding for the company is $2,530,000,000 as of December 31, 2025, with a weighted average interest rate of 4.23%[333] - The 2027 Term Loan has a principal of $430,000,000 with a fixed interest rate of 2.36%[333] - The company has effectively fixed the interest rate on variable-rate borrowings through interest rate swap agreements, with an aggregate liability of $18.5 million in case of early termination[335] - The estimated fair value of the senior unsecured notes is $766,504,000, compared to a carrying value of $800,000,000[340] - The company is exposed to interest rate risk, which may affect earnings and cash flows due to potential refinancing at higher rates upon maturity of long-term debt[337] - Future variable-rate debt may be incurred without hedging, increasing exposure to interest rate fluctuations[338] - The company aims to limit the impact of future interest rate changes on its earnings and cash flows through effective risk management strategies[337] - An increase in interest rates could adversely impact earnings if the company cannot acquire real estate with rental rates high enough to offset increased borrowing costs[338] - The 2028 Term Loan has a principal of $400,000,000 with a fixed interest rate of 4.51%[333] - The total principal outstanding for 2024 was $2,130,000,000, indicating an increase of approximately 18.8% year-over-year[333]