EPRT

Business Context and Reporting Period

Company: Essential Properties Realty Trust, Inc. (EPRT)
Filing Type: Form 10-K (Annual Report)
Reporting Period: Fiscal year ended December 31, 2025
Business Overview: EPRT is an internally managed REIT that acquires, owns, and manages single-tenant properties net-leased to middle-market companies in service-oriented and experience-based sectors (e.g., car washes, medical services, quick-service restaurants). As of December 31, 2025, the portfolio consisted of 2,300 properties across 48 states, with 99.7% occupancy and a weighted average remaining lease term of 14.4 years.

Key Financial Metrics

Note: Liquidity includes $70.4 million in cash/restricted cash, $332.2 million from unsettled forward equity sales, and $1.0 billion in revolving credit facility availability.

Material Changes vs. Prior Period

• Revenue Growth: Total revenues increased 24.8% year-over-year, driven by a 23.9% increase in rental revenue and a 35.1% increase in interest on loans. This growth reflects a larger portfolio (2,300 properties vs. 2,104 in 2024) and higher annualized base rent ($555.0 million).
• Investment Activity: The Company completed $1.3 billion in investments during 2025, acquiring 270 properties (including 15 mortgage loans). This compares to $1.2 billion in investments in 2024.
• Debt Expansion: Total debt increased to $2.5 billion from $2.1 billion. In August 2025, the Company issued $400 million of 5.400% Senior Notes due 2035. The weighted average interest rate on debt was 4.23% (after hedging).
• Impairment: Provision for impairment of real estate decreased to $12.0 million in 2025 from $14.8 million in 2024.
• Equity Raises: Net proceeds from common stock issuances totaled $657.6 million in 2025, including a March 2025 follow-on offering and sales under the ATM program.

Guidance, Outlook, and Risks

Management Commentary & Outlook: Management maintains a disciplined investment strategy focusing on middle-market, unrated tenants in essential service sectors. The Company targets a pro forma net debt ratio of less than 5.5x Annualized Adjusted EBITDAre. With $1.4 billion in liquidity and a strong balance sheet, EPRT intends to continue growing its portfolio through acquisitions and sale-leaseback transactions. The Company expects to fund remaining construction commitments of approximately $114.5 million by December 31, 2026.

Key Risks & Contingencies:

• Tenant Credit Risk: The portfolio relies on unrated middle-market tenants. While the weighted average rent coverage ratio is 3.6x, defaults or bankruptcies could materially impact cash flows.
• Interest Rate Sensitivity: While most debt is fixed or hedged, rising rates could increase borrowing costs for refinancing or new acquisitions, potentially compressing spreads.
• Lease Expirations: Only 5.2% of annualized base rent expires prior to January 1, 2031, providing stability, though re-leasing risks remain.
• REIT Qualification: Failure to maintain REIT status would subject the Company to corporate income tax, significantly reducing cash available for distribution.

Investor Verification Checklist

• Forward Equity Settlement: Verify the physical settlement status of the $332.2 million in forward equity sales agreements and the impact on share count dilution.
• Debt Maturity Profile: Review the scheduled principal payments, noting $430 million due in 2027 and $400 million in 2028, to assess refinancing needs.
• Tenant Concentration: Confirm that no single tenant exceeds 3.4% of annualized base rent and monitor the top 10 tenants (16.5% of rent) for credit deterioration.
• Construction Commitments: Track the funding of the remaining $114.5 million in tenant reimbursement obligations for development costs.
• Impairment Trends: Monitor the $12.0 million impairment charge and the specific properties involved to assess portfolio quality.