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Essential Properties Realty Trust (EPRT) Q3 Earnings call transcript Oct 24, 2024

Daily EarningsMonday, Oct 28, 2024 8:25 pm ET

1min read

ABR -- EPRT -- PFO --

In the third quarter of 2024, Essential Properties Realty Trust reported a strong financial performance, reflecting a resilient portfolio with high occupancy, healthy same-store growth, and improving credit trends. The company's continued success is a testament to its strategic focus on owning real estate on a conservative basis leased to growing operators in service and experience-based industries.

Strong Portfolio Performance and Strategic Growth

Essential Properties Realty Trust's portfolio has been performing at a high level, with 99.9% of its 2,053 properties leased to 407 tenants operating in 16 industries. The company's weighted average lease term stands at 14.1 years, and only 3.9% of annual base rent is set to expire through 2028. This solid foundation, coupled with a strong tenant base, positions the company well for future growth.

Investment Activity and Future Outlook

The company's investment activity remains robust, with $308 million invested through 37 separate transactions in Q3 2024, reflecting a weighted average cash yield of 8.1%. Looking ahead, Essential Properties expects to invest between $900 million and $1.1 billion in 2025, with cap rates expected to compress modestly over the coming quarters due to the normalization of capital market conditions. The company's confidence in its future growth prospects is evident in its guidance for AFFO per share in 2025, which ranges from $1.84 to $1.89, implying a growth rate of over 7% at the midpoint.

Strategic Diversification and Risk Management

Essential Properties Realty Trust's strategy of diversification across industries and geographies has proven to be a key strength. The company's largest tenant represents only 4.3% of ABR at quarter end, and its top 10 tenants account for just 17.7% of ABR. This strategic approach to tenant concentration not only mitigates risk but also differentiates Essential Properties in the market.

Navigating Market Challenges and Competition

Despite the challenges presented by market volatility and competition, Essential Properties Realty Trust remains focused on its strategic objectives. The company's ability to maintain high occupancy levels and healthy same-store growth, even in the face of hurricane disruptions, underscores its resilience. The company's investment pipeline remains solid, with a steady pace of investments expected in its core industries.

Conclusion

In conclusion, Essential Properties Realty Trust's third-quarter earnings call highlighted a company in a strong financial position, with a clear growth strategy and a focus on strategic investments. The company's resilient portfolio performance, strategic diversification, and ability to navigate market challenges make it well-positioned for continued success in the future. As the company looks ahead to 2025 and beyond, its robust business plan and differentiated investment strategy bode well for sustainable growth and shareholder value creation.

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