Essential Properties(US:EPRT)2021-05-04 23:40Financial Data and Key Metrics Changes - Total revenue for Q1 2021 reached $48.6 million, an increase of $7.1 million or 17% compared to the previous year, reflecting the impact of record investments made in Q4 2020 [27] - Net income was $15.3 million, up 9% from Q1 2020 [31] - FFO totaled $32.9 million, a 29% increase over the same period in 2020, with FFO per share at $0.30, a 7% increase [31] - AFFO was $32.5 million for the quarter, representing a 22% increase year-over-year, with AFFO per share also at $0.30, up 3% from Q1 2020 [32] Business Line Data and Key Metrics Changes - The company invested $198 million in 74 properties during the quarter, with a weighted average cash yield of 7% and a weighted average lease term of 16.1 years [15][9] - 85% of the first quarter investments were through direct sale leasebacks, with 79% containing master lease provisions [16] - The weighted average unit level coverage ratio improved to three times, up from 2.9 times in the previous quarter [13] Market Data and Key Metrics Changes - The portfolio consisted of 1,240 properties, 99.1% leased to 259 tenants across 17 industries, with a weighted average lease term of 14.3 years [12] - The largest industry segments included quick service restaurants (36% of cash ABR), auto service (14%), early childhood education (13%), and medical/dental (12.4%) [17] - Tenant concentration decreased, with no tenant representing more than 2.6% of ABR, and the top 10 tenants accounting for just 20.2% of ABR, down from 41.8% three years ago [20] Company Strategy and Development Direction - The company aims to continue adding properties and tenants predominantly through direct sale leasebacks with growing middle market operators [14] - The focus remains on pandemic-resistant industries while selectively pursuing opportunities in entertainment and casual dining sectors as they rebound [18] - The company maintains a low-leveraged balance sheet and significant liquidity, which is viewed as a strategic advantage for growth and stability [37] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the stability and durability of the portfolio as tenants recover from the pandemic [6] - The company anticipates a strong pipeline of accretive investment opportunities and reiterated its 2021 AFFO per share guidance of $1.22 to $1.26 [11] - Management noted that the capital markets remain attractive, allowing for continued external growth [10] Other Important Information - The company ended the quarter with total gross assets of $2.8 billion and unrestricted cash of nearly $43 million [33] - The company executed an upsized overnight equity offering post-quarter, generating $193 million in gross proceeds, which improved liquidity to $492 million [35] Q&A Session Summary Question: Investment activity and transaction timing - Management indicated a typical transaction cycle of 60 to 90 days, with variations based on underlying M&A transactions [39] Question: Lease restructuring details - Management clarified that the impact seen in retail was largely due to restructuring leases related to specific tenants [43] Question: Pipeline and competition - Management noted increased competition in the first half of the year but expects to continue transacting in the low seven range for cap rates [49] Question: Auto service tenant issue - Management reassured that the automotive service sector is performing well and the occupancy dip was not a significant concern [55] Question: Early childhood education performance - Management reported that early childhood education operators are now open and operating profitably, with occupancy rebounding significantly [71]