Essential Properties Realty Trust's Q4 2024: Discrepancies in Car Wash Exposure, Acquisition Plans, and Cap Rate Outlook

These are the key contradictions discussed in Essential Properties Realty Trust's latest 2024 Q4 earnings call, specifically including: Car Wash Segment Exposure and Tenant Rent Payment, Acquisition Guidance and Pipeline, and Credit Experience and Cap Rate Expectations:



Investment Activity and Cap Rates:
- Essential Properties Realty Trust invested $333 million through 37 transactions in Q4, with weighted average cash yield of 8%, in line with the trailing four-quarter average.
- Investment activity was broad-based across top industries, with no notable departures from the investment strategy.
- The company expects 2025 investment cap rates to be slightly lower than 2024, reflecting modest cap-rate compression due to the normalization of capital markets.

Tenant Credit and Portfolio Performance:
- The weighted average unit-level rent coverage was 3.5 times for the quarter, indicating profitability and cash flow generation by tenants.
- Same-store rent growth in Q4 was at 1.4%, with an occupancy rate of 99.7%, and collections of 100%.
- The tenant credit environment remained benign, with tenant credit events being minimal, supported by the company's proactive asset management approach.

Car Wash Segment Dynamics:
- The car wash segment exposure was reduced to 20 basis points of ABR, down from a peak of 16 sites and 5% of ABR in 2017.
- The reduction in exposure was due to the proactive management approach and a focus on asset-level performance and financial health, which led to four car washes being sold in 2024.

Financial Performance and Guidance:
- AFFO per share in Q4 increased by 7% to $0.45, with total AFFO of $81.8 million, up 22% from the same period in 2023.
- The company updated its 2025 AFFO guidance range to $1.85 to $1.89, reflecting confidence in its operational performance and investment activity.