EPRT - Earnings call transcript Q4 2020 | Essential Properties Realty Trust, Inc.

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Operator

Greetings, and welcome to the Essential Properties Realty Trust, Inc. Fourth Quarter 2020 Earnings Conference Call. [Operator Instructions].

As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Dan Donlan, Senior Vice President of Capital Markets. you. Thank

begin. may You

Daniel Donlan

and and COO; for everyone. XXXX Essential today CEO; fourth With operator, Mavoides, are joining President Mark our Conference appreciate Patten, us me and quarter our discuss today Properties Seibert, to year good you, results We Pete our morning, Gregg you Call. full and Thank Fourth CFO. Quarter our

the results forward-looking make may statements matters the these call, those yesterday's earnings conference release actual that ahead. statements reflect to this the from company's after that the time certain in were actual differ company's risks significantly SEC revisions to we in and are and could The results detail differ will future federal greater please from discussed filings disclosed under forward-looking be we During changes time cause securities Pete, go with in made. materially statements, to laws. statements considered may release. Factors statements to from that, may With in forward-looking and not expectations

Peter Mavoides

Dan. And thank your is for today Properties. you, in everyone to Essential us interest joining who you Thank

We calendar results a turn to importantly, and, year. full the are and year more report our fourth excited new to quarter

all timely. is and pandemic I While the pay year. environment. want our current this tenants incredible unprecedented profitably take at us, of with efforts operate the employees and reliably their adapted our to very moment COVID-XX still their much have in to Essential importantly, acknowledge over to businesses And rent Properties a most

on lease and back aggressively warranted documenting portfolio high firmly growth in actions and working tenant seamlessly to then stabilized growth in challenges beyond. effectively the of and have asset relationships, and back deliver repositionings; the presented and structuring These shifting members XXXX by we restructurings team earnings and necessary occupancy sustained with are collections, the track attractive managing the the accommodations; Our appropriate through tenant to by to negotiating, when half rose and pandemic rent XXXX. conditions the

improvement and our saw restructured We relet tenants. Turning to handful collections properties continued fourth increase quarter. to a a for our larger in rent of leases the occupancy as and we an

our and growth. In capital has addition capital markets opportunities trends, remain operating the these to investing in growth improve, of conducive continued cost to and sheet conservative a positive that support towards to external balance maintaining

of with existing relationships fourth such, to that and M&A our from As a sourcing million predictability of our quality we tenants, sale-leasebacks and perspective. and $XXX level investment record which relationship, initial strategy, the activity XX% our a yield X.X% XX% Consistent demand our from various investments for us. with from was activity invested renewed in the which of cash existing an pent-up both speaks growth-oriented relationships market at and transactions our underwriting were platform of direct a the investment involved were quarter,

combined All $X.XX January these visibility factors XXXX $X.XX gave to in of per us guidance of to late share. AFFO provide the

the par lease disproportionately been whose rent mid-December. that their January operations. was best in recognized from close the mostly reintroduction of local continues deferrals drive the with half concentration in deferrals. contractual granted disciplined mandated tenants are business the of collections. rent In The the of collections now were geographic another of ABR, ABR, to contractual impacted cash risk-adjusted remain another to entertainment January, rent the with to With state Turning since provide some attributable fourth shutdowns recognized to We deferrals the to investment of rent collected whom investment-grade the net has to majority we tenant the rents collected for quarter mind, entire our of X% one our majority strategy our recognized due of in attributable that many tenants, XX% to mandated convinced sector. to of returns on we peers, provided deferrals. lease and/or due XX% that our in industry, approximately our net that Over X% these of cash with certain

That re-leasing but to investments less our to Turning This properties just in and We to deliberate us the not up a said, to On was highly portfolio. that note, a in manner, operating industries of reported to our which sales I a XX% our dining, reduction exposure quarter represent XXX industry. rental our of driven XXXX, quarter family XX and of in vacant our base, efficiently industries had when the highlight industries is portfolio first opportunities. dispose our order new changing efforts, as leased also X the our would asset will size fitness public as and smaller like from to we since casual our XX% adapt fungible our ended has at core industries we continue X diversity concentration market the we decline exploring estate Combined, dynamics. in end. exposures and we Essential, for fitness, these industry to quarter, the health health to the to company. This selective quarter and as active remain more of XX.X% challenged real timely properties XX which Due and furnishings, of ABR, only manage in movie theaters. of dining assets allowed view broke our and to with by progress but both reducing ability X,XXX casual nature family in tenants industries. a second than and equipment were home is now different last towards out X.X% and nearly quarter

ability value high in As occupancy leased. of stated Therefore, keep indicator company we before, our in them it a leases, our the key stable see value. we to does our not our have reside properties that and and as resides of consistently

quarter over next X.X% years. X with at XX.X stood Our X.X% years of in and expiring at ABR end, weighted the average expiring our lease XXXX term

weighted surprise we as average last X.Xx, unit was had coverage coverage ratio to level expected X.Xx was our a us lower; quarter's a This slight for which coverage. to improvement the migrate fourth X.Xx, was Our over an our pleasant their due positive various over managed year-over-year, of tick and coverage up. investments, however, profitability of tenants accelerate to quarter average seeing coverage which ratio coverage Xx had impact

implied as and loan As rent the they impacted our up mentioned shutdowns, are skewed do negatively traditional deferrals. on metrics previously, pandemic-related focus coverage been pick statistics, we have credit by which yet programs of unit somewhat ratings have level forgivable not and these benefits the credit

net sheet. which has EBITDAre, plans. leverage well-positioned annualized X.Xx the Turning adjusted to to balance debt with to We the finished our us growth finance quarter of

While could capture we grow on alongside are a we our opportunities, that and confident pandemic operators in tenants certain and industries. investment impact lingering recognize have our ability to attractive

As that such, that, locations we pandemic. adapt have to to portfolio diligent ability like will tenants Seibert, who remain the you I'd our in With over and detail. resiliency underwriting activity and through take COO, and Gregg in throughout it to an our highly focused shown and on greater the turn investment

Gregg Seibert

Pete. Thanks,

XX% our which at from investments we washes. services, strategy, and years fitness, weighted XX through and auto perspective, our car ABR theater million to going rent Due with fitness, and X.X%. level provisions. quick Consistent to care and quarterly coming XX% The industries of XX.X%. efforts was reductions average movie pet average our average X.X%. industry During at these dental industries. Tier view XX.X%, to are per quarter of cash was investments into were master million. building and has service the health made materials X.Xx, washes of lease our originated further escalation service, Conversely, XX.X% quick subject years. casual medical The increases service, and expect for sales, deemphasize X dining, coming combined XX.X% of car direct with today. furnishings deliberate are different into home $X.X as we weighted our of and at XX.X within with and we financial industry Essential business our forward, was declined XX% lease and lease unit industries at and education to industry sale-leasebacks, cap a investment average of health our We ABR medical X equipment the our From cash auto X early ongoing And XX% XX XXX see contain at Properties. transactions our sales, reporting restaurants, X.X family by separate restaurants service industries: form term fourth dining activity requirements These over rental investments dental, childhood last concentration segments followed fourth rate casual concentration grocery. and invested the largest an The to annual was equipment weighted family were and XX% over properties investment coverage through weighted quarter, $XXX rental and average property our

a This one lowest Increasing to tenant diversity differentiator In redline in perspective, at which net is XX XX% our a XX% middle XX% a and quarter movie our the that addition, benefit of top on our of X.X ABR, today. years offers ABR mitigation tenant strategy companies significantly credits. From in industries concentration lease the X.X% for ABR the our XXXX and Essential a the decision publicly-traded home top to direct end, important risk market compares of also tool X.X sector. furnishing tenant no ago. concentrated an an expansive our declining just which to concentration is as rated investment our has tenant is than more over more years resulted X.X% combined Properties, represented our concentration set of and opportunity now theater of for accounts focus, last and investment-grade

XX properties cash of properties, achieved rate the net in was this the on excluding a quarter this one proceeds. X.X% quarter, tenants buyback which transaction X elevated dispositions cap quarter, When slightly in and properties average of we terms million In dispositions vacant their our vacant as $XX sold costs, exercised option. for including we

properties it portfolio. risk the in investment for industries, an tenants Patten, have aspect of financials manage through that important that, sheet the would call the allows to balance as like us our With over liquid and I fourth to unit owning who we Mark? Mark the mentioned turn within the CFO, quarter. take will to you As our proactively highly is level are and past, discipline

Mark Patten

Thanks, Gregg.

we activity reported release the night, the in the particularly of that quarter As of initial third last our strong results, kicked our we impact in with our latter were part pleased fourth quarter. earnings off investment

bankruptcy included the Our the of or XXXX XXXX compared for the same filings operating nearly period million million $X.X to in $X.X revenue revenues, recognized approximately the nearly having including previously X nearly total $XX.X quarter, from in XX during results fourth of write-off to that revenues by an impacted which stemmed million was increase of million straight-line $X fourth tenants Chapter quarter for mostly quarter. of the X%, of

just up We well tenants as recognized in an as for the picked in a as XXXX, was as which specifically I'll additional status expenses, quarter. versus we over X a basis our also vacancies quarter QX previously saw were to million quarter, level G&A mention QX adjustment tenants, COVID was percentage $X.X nearly totaled nearly million, nonaccrual revenue revenue the the property $X.X approximately million our X%, bankruptcy XX% as X $X and for their XXXX move which property at the mentioned of G&A properties a We than filings. in GAAP taxes related cash was fourth the quarter compared aforementioned of filed represent XXXX. million the resolved QX here, result associated X% was favorable which of with in in recurring into have XXXX, of decrease Total that bankruptcy XX.X%. $X.X other we less that during ABR did year-end and which to of level total

benefited from compensation. and lower incentive lower G&A fees XXXX professional QX Our

the For the quarter total was of million G&A recurring million million XX% the year, just and approximately or for year. full revenue. $X.X our our $XX.X in cash Net over $XX.X was income

X.X% of XXXX, FFO million $XX.X totaled year in increase and of the the and same XXXX. for the an periods million XX.X%, for respectively, over $XXX.X quarter Our full

decrease Our the fully quarter fourth and a FFO periods a the per represents $X.XX share diluted basis same $X.XX in on for XXXX. was the in which over year,

$XX.X million, share per on And per million, XXXX. Our to FFO core core totaling XXXX. equated fully flat from On fully XXXX the basis. million a $XX.X FFO full year totaled from XXXX, the $X.XX, diluted to was for $X.XX relatively was core share a which diluted in $XXX.X up is for FFO QX basis, decrease year which a

$X.XX the for per the up million, and approximately $XX.X for year $X.X respectively, increase, obviously in up per year, connection adjustments quarter, pandemic. million, to was impacted an per off and third diluted AFFO were to receivables totaling AFFO compared million. and totaling share that's respectively, the share, made our was a FFO, with Consistent revenues full fourth And for $X.XX fully $XXX metrics for basis, share and adversely quarter. and quarter AFFO On with million we full Our periods $X.XX the our the AFFO by same core in XXXX. XX% $X.XX, FFO the was $XX.X

yet addition, had these as in into deploying per reflected full QX not an of late fully results. of impact our our weight share in record In the the level follow-on XXXX offering metrics adverse XXXX on our this impact was of September investments capital

ABR paying tenants is QX XXXX in owed The earlier. to referenced and As in was QX us than it with the what these in rent and are to another today relates I tenant aggregate. that current associated the tenants XXXX. higher tenants, X These

XXXX. the So impact news from adjustments nonrecurring therefore, $X.X X QX on is we tenants substantially in quarter negative properties, fourth accrual we million tenants, vacant were the and in owed Separately, our deferred million XXXX $X.X rent all basis. in good cash for to these is formerly the the of to those QX that approximate accounted limited and made an NOI we from the we that collected

balance points. I'll a Turning sheet. just to our highlight few

year-end. total Gregg the gross $X.X investments than was of at of $XXX mentioned, more million billion With our the in quarter assets addition that undepreciated

totaled new with an the cash $X million, nearly additional for restricted available $XX deployment investments. cash in unrestricted in million Our

an facility long-term a the December average proceeds in ticked up ATM we we to Our investment from weighted approximately price From share. $XX that by with late debt million generated basis our of on $XX.XX which credit shares made really million connection in on a was gross related million, the perspective, of selling draw $XX approximately X.X activity. equity at our program, gross a

Pete just noted, to our and to ample provides our well targets strong X.Xx potential pipeline to within as leverage of be As leverage at continue us for year-end, of our an continues pursue investments. runway

also growth million facility by loans. position, $XXX of one course, available significant totaling the the as liquidity $XXX of approximately of on feature supported the external and credit excludes remains term million our Our million on which, accordion yearend, $XX

a as weather With in during sheet hold We to not of pandemic low for continue us view stability significant seen of a we've us strategic over and a our challenging macroeconomic the position and for environment, intervening the months. Pete. advantage to platform that, just turn such the back provides to that growth, these the balance levered I'll a liquidity height is but call

Peter Mavoides

Thanks, Mark.

of with our through and We properties pipeline to have earnings away markets are excited growth. robust with to opportunities move accretive investment that capital allowed the drive managing from environment us order pivot the pandemic tenants operating and in on forward our and capitalizing

investment returns differentiated resilient we lease the please should continue net that, as has to risk-adjusted portfolio future. that in disciplined generate our created believe With we let's the open for operator, and call attractive questions. importantly, strategy incredibly grow More an

Operator

Instructions]. [Operator

question the Nate first Crossett with comes of Berenberg. from Our line

Nate Crossett

acquisition been Obviously, volumes ramping. have

about? upward was is So to of bound an also, know curious guidance on rate team, is we the there then kind thinking of I that size run of current baked here? be what your the And kind into should just just based your limit

Peter Mavoides

guidance. $XXX really And The as trailing us, range, provide Sure. but very specific a guide likely happy you transact. any quarters and We in, wide to highs our at see average. we're opportunities and there. the been upon really in indicator that's quarter, it fourth to detail that people don't been big as on Thanks, quarter tradition, Nate. our see can can we million, depends that of you with around really But an X averaging come the And for our where provide in results given million disclosure. a lows, $XXX we're with and quarter was acquisition

at came been and team, we when staffed and remains has Our that to staffed public level. transact

has of look as but trailing built certainly, range XXXX, a is the so into And looking assumptions average. guidance out baseline good our at a in you it,

Nate Crossett

your seems like, that above What was kind just fair. year, well? That's it comments as the expectation your X%. Is pretty Okay. about just pricing? year for It stable, for on of this

Peter Mavoides

competitive the rates has the mix; cap been overall into being the The X.X% the said and the being on say really last gravitating really, call, environment. over Yes. as X range quarters And from we've that two I would there's one industry our in to two industry that's mix, going that: down. really X.X%, have factors away in of out And secure towards lot space. rate then it's of to some add, cap risky to invest capital A from And now. lot right the there and more of a I awful we would industries. work people our put more impacted competitive industries the

greater I tenants. the there's think pandemic, the assets specifically middle of space, coming of durability the through in the this market appreciation a

say, of basis And my seeing point fight I been had it's XX has so years it's X, transactions. space we I we low And there mid-Xs, lot competition. common. that and investing low a in becoming and more more guidance Gregg been our really been get to investing Xs. and and generally, would we this And on we're can below to every rare have for

Xs low would the And risk-adjusted cost accretive capital our down, get to do if on certainly, wouldn't the where so make those possibility. the of but is of scenario there is it a of still an a for hard out returns. sub-X, to and that. even supportive but entire And guidance. me It's I lot to of fortunately, is realm competitive we're trying see pressures quarter dip put But best we be

Nate Crossett

Okay.

getting potential some think a Do that to side. of Just rating growing quickly you're you're on the investment-grade given that quickly? cost closer point, just guys you capital at pretty

Peter Mavoides

you, I an I balance quality have really because pursued certainly sure. since Well, to maintained support that hadn't calendar needed remind debt our investment-grade think sheet coming We investment-grade would a on Fitch. from activity, here really be investment-grade for have rating XXXX. We we hadn't second we rating may public. the

about do something we but it, looking think could at, get. certainly if so we I we're And thinking needed and

Operator

comes St. next the Haendel from line of Our question

Juste with Mizuho.

Haendel St. Juste

everyone's Hope well.

like Ruby So was there. the you've could Loves you and hoping in two progress fourth some about I sounds guys made my the first your quarter, question, real It comments talk Tuesday. bankruptcies that in

you What Have re-leased recoveries like? you look What the also the some guidance color? they'll And can in maybe of share your like? maybe all So what's embedded look former you for resolutions? boxes? do do think those clarify

Peter Mavoides

over the vacant, start an by be guidance cap you situations the trade rate a is our an and would saying of could to I not an asset -- assets asset at certainly I about back re-lease just at lease think and the investments say has Yes. ground a repositioned the are that those X% to assets really or X% of static and local the material Ruby rent. to we guidance. gains we trade re-lease would where on taken assets face And recovery tenant and we really, Particularly would cap. those sold a resolution complicated. the that repositioned Tuesday, at Chick-fil-A as in recoveries

range. would shakes our generally, with very that. we some recovery certainly, in to our numbers What investments. both the recoveries disclose -- not be those is And everything out, relatively is, So either scenarios those the consistent of say we we're static supplemental, those would would detailed on number ultimately, I both provide my of in something when expectation going on XX% on be, of generally

Haendel St. Juste

the the type further guess, color that along Okay. for curious sounds I the the with the on for there? rent market levels what market It the of boxes, types Maybe Ruby, is And then Loves' of maybe differently. demand space? And in offer what furniture broadly you're Loves. on some like

Peter Mavoides

I and only would had say start Art X Loves, Yes. we It that Van sites. -- X really former

as the broad have don't or specific foot sample as Recoveries square a $X square And set. be as as foot, so really sites. $XX high on a a depending low can we

recoveries X to to not use. decent As furniture another repositioned the one, two have we remaining the But sit furniture we worked third we have Loves' we of generally, one today, of are is them and the And the reposition furniture and and assets fungible. operator. in

Haendel St. Juste

Collections collection hoping Appreciate sequential could was some versus January. on XX% some the of quarter. light fourth to were overall, X% XX% the set quarter, up up to cash drivers that. set were And January your you XQ last in Page quarter from one the XX supplement, figures the but collections XX% to January deferral of I of on -- X% in you while on versus and the in XX%, the from the noted fourth changes in declined in

in a about talk of some deferral that to to bit you leases cash the do Maybe And mentioned, what's when bucket? changes? rents? can X% sequential you color restructuring? you also, expect of on that So convert bit a left those And

Peter Mavoides

change That's would expirations the deferrals. in was rent cash the certainly a had biggest lot of -- say there, of we of collections questions Generally, Haendel. I

on As year, had of would be the approached new the looking really generally, the that in situation call, crept in in we of the recognizing said really beyond fourth year, quarter. out change. different. late we some quarter would deferrals the It materially we weren't last the the end second when that deferrals But we

biggest the cash collection is the change just of So expiration in would rents, say, I of deferrals.

theaters good struggle. from on of lease AMC I'm who continues not that gotten to And industry industry that X% that to our chunk came of continue movie exposures, fourth larger assets we're also more remains much back and insightful net first, going have that had recognized really which the throughout sure to you've a online collections Sitting repositionings, they other end collecting. and and deferrals. bunch at struggle, peers XX% and We contribute remains We here commentary the the that much went to X X% to up offline leased a about good chunk is into that. some X%, the but talking of a the

Haendel St. Juste

on, was I'm that in those said late up if I follow been like deferral could And sounds in -- you COVID mentioned that restriction-related. it have some crept curious, you there might the quarter.

maybe color the And on you makes deferrals. that, that's some what So [indiscernible] think industry? tenant

Peter Mavoides

and as imagine. shutdowns, remained and fitness largely, entertainment It creditworthy What would recognizing centers, and those me COVID-related that is challenged are you was tenants gives comfort of the those supported remain and the good remain structures. current, capital by the sectors reinstitution those deferrals that have are tenants in

Operator

from line Our of next question comes the Katy McConnell with Citi.

Mary McConnell

Can on you the volumes the year-end of XQ before acceleration closings be maybe reason timing touch of might whether just year-to-date? the an lighter acquisitions and for

Peter Mavoides

the fight. in And are slow good driven. quarter Yes. result year-end tends slip. and lull that. would big year. I We excited no them pipeline or quarter-end our particularly a tend And wouldn't is mean, listen, that the here for a XX, more whatever argue, industry they Katy, We all tax acquisitions, start at quarter March. to better more that in a you some to generally, worse, to And fourth business, feel say front-end in every good I fight heck have the like different. about about be that, to reason this loaded. that's where crush this January that's I activity for we quarter the in to that for We and trend feel for tend sitting fourth was acute

Mary McConnell

what could tenants to? risk background quarter? on a the exposure have more fourth adjustment in And the All you on that that be tax provide any burden right. some for And fall other to you drove bankruptcy then you can

Peter Mavoides

and I it, happened. extent that Yes. those what bankrupt when mean the paying tenant taxes become kick and a a taxes out that's paying lease, a liable terminate tenant isn't we for we and to those

-- but that's the bear the pass our becomes we landlord so liable. properties, that through a certainly to over we X,XXX of extent those tenant to become risks as taxes. And uncreditworthy, and tenants, And a owning we risk

certainly but claim, those it Now -- make timing of oftentimes, it that's quarter here. in was be us for a all investing. And And will in I a shouldn't quarter lease becomes more in we'll hold first but the issue, taxes. a repeated receive net risk bankruptcy the and general, that fourth outsized for think

Operator

Our the next comes from question McGrath Evercore. with of line Sheila

Sheila McGrath

might Pete, clarity of either deferral are I a landlord, with surrounding shutdown, a Properties, on tenants if Essential benefit language hindsight look or any what wondering like? was as a requiring more new like the lease providing short-term

Peter Mavoides

our That if really required crept bear quite state-mandated those of tenants into the share surprised that are Currently, wouldn't Sheila, be negotiations; of why able tenants are as agreements ultimately, pay structure shutdowns, rents deferral rent looking of is we to mandated were say of forced to and frankly, lease rights. risks. regardless which being to leases I opposed And majeure tenants hasn't to as force start shutdowns. risk pay -- risks allocation to and that not the

it's be I topical. frankly, a it quite that of the us, don't for once-in-a-lifetime to given hopefully, and, event crept And pandemic nature in. hasn't So the expect

Sheila McGrath

X question. Okay. Great. last And

dispositions fourth have You did more in than typical. quarter

what and XXXX the you there volume as in larger And exposure do drivers are? disposition you to wondered gyms? dining Just expect casual reduce

Peter Mavoides

No.

wasn't that industries one tenant are. frankly, that in happened and buyback rightsized I think where as quite tenant those would fourth quarter, they performing expected. have large We had the are we

the be happy acquisition. operators. were our transact on we say performing to capital back on and those move So dispositions, would guide good is redeploy able assets like historical average I and much into a to that better the

the a quarter, XXXX. So fourth it's heightened but that right quarter certainly $XX about feels for in million-ish

Operator

of Ki with Kim Truist. the Our line from next question Bin comes

Ki Bin Kim

Loves or or run of given come Tuesday to moving Sports rate. of of like have much not is a how But guys you run trouble quarter were this the them. rate on a of some these how couple curious the and tenants Ruby did kind been fourth the Town good in there quarter, So released I'm Furniture, just revenue some pieces and just job ABR outlining

Peter Mavoides

mean why you tackle the by on but don't that? Dan, what know come, don't Ki Bin, I you

Daniel Donlan

Yes. paid I us in mean, aspect paid -- Town so would the us Kim, Sports Sports. be main rent Town December. I think They

the have a of that's think on tenants you and us I basis. cash piece just nonaccrual paying it. us a big So then that paying are And

folks going potentially those well. run the that's as potential us upside XXXX, pay more as throughout to So rate

Peter Mavoides

rate -- would we is certainly a I run quarter, fourth from momentum Yes. guidance. certainly and in depressed reflected perspective, our say, quarter which in the the is have first good

Ki Bin Kim

tenants guess one the million, and Town have $X.X reverse. something in in right, going if fourth that like sure not you ABR So collect rent. X of so it was But other to the What expenses -- will of be month forward? piece starting aspects drag with first dollars quarter, there's is that that question we should quarter, the a million-plus? I was other I'm Sports, My $X.X other -- that modeling are rent. you partial of that is only a

Peter Mavoides

of $X.X catch-up several million the over quarters. the Well, part recognized [indiscernible] is is on it

not is going up. X for shot as one, straight-line that of quarter to be part the So a catch

Ki Bin Kim

rent how dialogue your it. currently And Got And you've been had there's Okay. that you are from collecting any much if AMC? with tenant?

Peter Mavoides

Yes. exactly we're from Yes, short AMC. collecting disclosing I'd stop what of

we've end we their all they dialogue and percentage and through dependent achieved level with them situation. the year, of our on the it fluid that really as deferral active at have put rent a sites. recall And remains You'll was the on in certainly, of been landlords, that a kind revenue, them of

Ki Bin Kim

for we question should last kind just in rate G&A And it. What of Got me. XXXX? run expect

Peter Mavoides

fees, I obviously, that tick on that's level bit from -- news. in recurring we rate mean, kind good that, this of a we're some one than a of But think I think better year simply because settled things in terms we the going than being the where I just QX incentives, of other professional of pretty think most. it's a little -- tougher hopeful compensation up out was Well, run a I to

it finished So grab just I -- real off we where probably, think maybe quick.

the you unless a I think tick G&A, G&A, probably, probably just $XX.X it's bit where for if going, up think I had that getting look total little it total -- G&A kind we that million but year. at from you're for probably full cash will that's of

So than call it, million. probably that, more a little bit $X

Operator

the line Scotiabank. McGinniss Greg comes Our from question of next with

Greg McGinniss

But acquisitions. target you're has you disclosure services So concentrated which noticed industry Pete, industries, fairly this added we exposure that in quarter. to other EPRT a for to had the looking approach

to whether And curious what encompasses? other industries look category Just you're transactions? for or into not that starting

Peter Mavoides

an I thesis like investment had The separated bucket. property, right, real another of in equipment did always we the services do we've And and underpinnings and experience-based being Greg. Thanks, will $X.X is generally, our out, reaches are a and million has to investment self-explanatory. then and per which sufficient much asset that, rental our pretty granular, to coupled manifested owning sales. when pieces Yes. with service services with would fungible industry warrant estate we say concentration

universe. and they're open. So our investment certainly criteria, and industries constantly team or extent for expand service-based to granularity estate we're investment other our fungibility that to meet real to the if so industries -- we're a the remains and And have open that here. looking that they fundamentals We're challenge

got? head. As Dan we blank know of in either. that services, a we don't services, sit sit of sits X.X% is today? today, Dan, we the I I as bucket know because off that what in X.X% my what's know other he me other giving stare what doesn't top that. don't

Daniel Donlan

funeral homes. mostly It's

Gregg Seibert

Okay.

assets, that's other component. retail some service in which and have have small maybe a particular have a one We we -- a

just easy some not our of identify of real those existing into one are buckets. to And

Greg McGinniss

Okay. That's fair.

one. another Just

is in rent that recognition minority and where of recognizing run to tenants the rent? XX% not has little bullish just rate some of tenants get in lowering paying, curious some other exposure fair bit right at specific not future a that concerns? with there's you're mentioned but near-term any also where the Kind of now some dealt if of whether AMC in may You've or rent a portfolio maybe you're trying prospects. categories until as on you be not have I'm January

Peter Mavoides

story. and Yes. X% listen, non-recognized, in terribly our as hopeful on material. X/X the have list that certainly, back not of comes our XXX We're our I tenants, I that of certainly X% in the of that driver it's you some and we activity. investments guys of is would see mean, Certainly, but that's and is is them are we're not other working disposition AMC those rightsize to little online, a say, the a watch bunch

Operator

line of question next Sachs. Goldman the Caitlin with from Our comes Burrows

Caitlin Burrows

impacts, events, actual bankruptcy XXXX any, just results? talk on are you additional in the about assumed XXXX credit I what was Whether levels wondering range? guidance, that and if the if compares guidance or that to could debt how

Peter Mavoides

and the our Caitlin, back, accelerated Listen, weak welcome pandemic, of reinitiating And tenants for this COVID in restructuring you thank really us. on Sure. whole portfolio. view, the within

much so out we credit normalized think XXXX, expect XXXX, look in to high mirror. of level a rearview we the perspective, I is as And events. largely, the from level we of restructurings more in And experienced our

past, situations a proxy bake XX we specific As roughly assumption of those we good well scenarios. the incorporates disclosed as ABR. we've guidance in loss basis a as think in know credit certainly of. all I points And generic And that is

Caitlin Burrows

from in Okay. increasing was the as the think, goes And or I it rent of increase in Does levels, fourth quarter, an recognized XX%. the maybe guidance similarly, then year about not? on terms assume

Peter Mavoides

expect the burn to off. we mean, I Yes. deferrals

build ability expect and we to as paying or tenant-by-tenant, who have look people think kick in I we not start at aren't guidance. make will envision portfolio assets very we in to the that collect put have our we and And future. assumption a we're don't asset-by-asset the we pay. that don't We out guys And collecting either rent where the who we a up scenario we paying rent them

Caitlin Burrows

of coverage the on looks 'XX details has under same distribution overall show with has that you distribution maybe was then 'XX wondering XQ the but Xx. could go pie amount has And chart and so shifted XQ declined in through remains Okay. you level with in that on shifted, coverage. unit rent how Xx of coverage above X.Xx, at some It I the the was that just unchanged? but the the like the and portion if tenants

Peter Mavoides

Yes.

the the the the monthly tenants call of one is we was and provide of and real-time majority to feel the think, disclosure entire were certainly, for an the for much our and reasons that didn't the was partially given indicative collections because the the quarter portfolio. is on online we've of more why been offline data commentary in my I balance as that it risk relevant particularly from we pandemic that's have of the transitioned away year. nature people And steering really fact of that

that spend account distribution just don't the because account does a granted. I So take take of looking it pandemic, doesn't the into into lot it nor at time deferrals we're that

through And tenants. to pandemic expect the of so full that behind number until be effects noisy we our this we pretty start getting quarter the second of generally, kind

Caitlin Burrows

it. Got Okay.

would pre-pandemic? to metrics answered think the it, say you in a shifted kind more then fair it's you to term, temporary that of similar would medium that's longer I kind be those to to of you those that, may shift but that that So expect that have think look there over and

Peter Mavoides

Yes, of those if deferrals certainly. to through any would And the were sites we for guys? questions, that pretty granted, looks were imagine we all operator, say, the I we go if Are levels, better. not to would I exercise pre-pandemic of similar affecting it more got done

Daniel Donlan

Where the go? operator

Peter Mavoides

Operator, there? you

Operator

resume to gentlemen, I and our Ladies and apologize going ahead We're delay. conference. go the for

Sam going Choe is question the Suisse. come next with to line Our from of Crédit

Sam Choe

to top this entered pre-existing I an have been think Tire tenants. your Am a assume you seeing I'm expanding answered. on I But of that example that correct of most guys Mavis XX was them relationship? Discount

Peter Mavoides

for Yes, them. but a them and apologize some company. We the we with add-on able happy we're did do a tenant, there. lost great plow-through questions year, Yes. the here. the Yes, to earlier operator And great They're our investments Sam. somehow, the with we're of some gap in to we rest investments

We Northeast good our happy to have sites add in really that to the portfolio. were we

Sam Choe

Got it.

the pre-existing prepared that most your XX%, So I you growth, think XX% around has said in of remarks, been relationships.

growth entire should XX on throughout flattish? will top that be tenant relationships exposure? increase building portfolio, relatively your could be pre-existing So that Or given

Peter Mavoides

Yes.

relationships our to them. And populating are managing start and at managing important look have portfolio tenants, our concentration, grow exposures continue vast kind of point. our majority top capacitized of with tenants kind some we of, that to construction and investing we top our weigh. again, XX, with XX certainly, we considerations concentrations individual our We When with stop

to the of I so expect majority would of be vast our investments And top XX. our outside

Sam Choe

from Got me. more it. One

sense, and mentioned some health casual more the the reducing that dining those fitness core of to exposure seeing and Because I'm I strategy I your challenged obviously. during segments -- make did mean, think you you health what But guys still you assets? operations? What was like you and assets So about fitness added quarter. that consider

Peter Mavoides

the was a us rent adding They and a older another They and in markets those level. we'd in a perspective. during bankruptcy membership third that perspective gyms started like that in was from and fourth competition during in Yes. re-tenanting local that perspective at comfort I work Sports the within that user positioned would are against high newer paying to be a well emerged similar of that doesn't fourth. able repositioning coverage. put gym, have our gives a think the the -- and facilities what facilities there you're out rent seeing it as basis are that a have well-positioned revenue and We quarter -- rent Town are and the if

opportunities And material health think a to evaluate going of to open gyms, and be to in continue to investments, our but And so continue I we're investing we the look space. it's there. in not and we'll fitness certainly, part

Operator

move Milligan which our next R.J. coming from We'll Raymond on with question, to James. the is line of

Richard Milligan

have your any that to start the on before of to does questions recent Most the and what then have has it my asked at what an I'm answered. the curious, need or XX-year spike in impact your on business? been level And to with just business? does XX-year, impact get point had

Peter Mavoides

impact think making cycle, on a had overlay spike -- isn't of I sources I look XX-day a think recent crept spreads cost would to expensive. not rate I would the Yes. has would a market be. We And about to alternative more in with the as those material move move of stop hasn't that that any to also XX- of certainly, add transaction would the our saying really going a Certainly, buyers. our that capital ultimately, move think We're -- would isn't historically what XX leverage would, And movement it in. anticipating. have wide really -- is short dependent more you you investments, to as yield what XX-year And level curve, disadvantage forward the that transactions. certainly business. dramatic say to XX-day make help capital is us for our tenants XX- and impact private create

Richard Milligan

the Okay. of even through attractive? terms the moved those That's your in going assets portfolio, thoughts? performance credit exposure? Does change increasing the in then interest non-rated going investment-grade in that in tenants helpful. curve that make new investments? after does -- Any less we've pandemic, of just of given investment-grade or typically any as And terms down perhaps below strategy that further attractive, Or more in

Peter Mavoides

sitting pretty in I with be think structure long-term desire Listen, XXX because context basis sale-leaseback strategy when couple And by our almost the good sale-leaseback, tenants. to points we're the at tenancy. about that provider competing market rent Yes. our that in portfolio a of and the cap investments been the has a really of this portfolio as our our us X.X% investment-grade of money the choice of peers, the And that that roughly GAAP with cash we're middle XX% on pickup to our my fact quality good quality comparing you we Particularly our is and nature the with of to counterparty, on our reliability with able assembled to constructed rate. and lease rate execution to of January, form a here the terms. and we've feel governed cap

people pandemic, of investment the said invest been thesis in returns with some this we space. risk-adjusted to leasebacks assets know be sale in prepared relationships that trust has and good disciplined and we'll and we and if think continue feel and we're have that through marketability. validated getting I And the I net lease anything, we As in our the remarks, best think,

Richard Milligan

sale-leasebacks is, or my going changes question the form any changes escalators you're shape Okay. as leases, thinking about final those forward? structuring the And or of contemplated new and in

Peter Mavoides

see occasion, to see little to always as intensely market counterparties and X%. us negotiated wanting to really of illustrative flat in The say pay tenants. closer you'll the with been flat we high market. a lease an would the sample we've are to would wanting X.X% I as tends the range be just I the not Listen, get X.X%, higher Historically, with as possible. escalations were provision average, to that's deals change of and a X%. quarter. possible the than you On X.X% as in did, we investment-grade On say,

you you tenant have can, grow And they as where remains being when and so instead to rents below can. a as you your get that push may cost of escalations, as kind And faster we your of underwriting, continue I good say, would profitability. the as it's negotiation to further because get much faster rent. like the we'll from your tenants X% better of than to dynamic, higher have seasoning favorably, escalation for scenario as continue growing lower to be than funds as and to will try their tenant's we

So your coverage -- more stable. rents and better more get

Operator

coming Our John is of with Ladenburg from next line Massocca question the Thalmann.

John Massocca

just answered. questions of been a one. quick But have Most my also

kind I to stickiness the rates. of you guess, Just You rate to some some benefits was REITs? as in there are because of maybe cap tenants, to the be net think non-investment-grade I access are out think marketplace factors that cap now rate of of of what pandemic? there the lease mentioned alternative more this those middle compression? there middle than competing have market Is of bank out were cap mean, today. the market about capital of even what one I you there compression driving is seeing it been the kind sources supposed that the prior financing Is

Peter Mavoides

noise certainly despite And interest window in past would XX Yes. Listen, and basis the movements the we've in really stickiness rates. transacted argue volatile I that the point remains. over year, all the

middle levered I would are to gone. public the XX more investors, technology is dipping fill who other discovered John, today stickiness Most no with into don't capital whether on it's their the X, a appetites to So private competition financing months guys coming of from cost say, the lease down ago. or was investment aggressive a get is easy X, it who've markets the to capital. of ABS is REITs I of net think X, financing are compete bank now more able basis than certainly that

John Massocca

going in as passing who's ABS some rate this compressor, a think, how a guess kind phase, investment you really in in kind if real leverage, high think do the utilized the the that is? And sustainable cap of could of you of be forward? you that past, Is your someone will, I opinion? Or ABS-backed private market, space

Peter Mavoides

very it's think first prevalent long here, around use and that's would way very access one forward. bonds time being as for market. its ABS Listen, call a going a to on I debt a and of efficient did efficient I a been here time. the It's is capital more And anticipate ago. today, Gregg, it competitive long a the factor

Operator

not questions Instructions]. additional [Operator I'm time. coming seeing any in at this

the to I'd management So floor comments. like over to additional for pass back closing any

Peter Mavoides

our today. And Great. but importantly, excited bit where you for fourth we're ability a your waiting operator. to and for guys come more quarter, grow. you, Thank host and time Clearly, XXXX to we apologize about about dropped we're continue leaving there. the invest portfolio excited again, and the for has thanks the But

at and And upcoming, So of again. Thanks we well. look stay thank lot the now. forward you. Citigroup investors to meeting you Bye with a Conference

Operator

your for today's on thank we participation Ladies you and gentlemen, conference.

this You your time. may at lines disconnect

Essential Properties Realty Trust (EPRT) 24 Feb 212020 Q4 Earnings call transcript