EPRT - Earnings call transcript Q4 2024 | Essential Properties Realty Trust, Inc.

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Operator

Good morning, ladies and gentlemen, and welcome to Essential Properties Realty Trust Fourth Quarter 2024 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded, and a replay of the call will be available 3 hours after the completion of the call for the next 2 weeks. The dial-in details for the replay can be found in yesterday's press release.

Additionally, there will be an audio webcast available on Essential Properties' website at www.essentialproperties.com, an archive of which will be available for 90 days.

Head morning Patten, Mavoides, Salisbury, Chief Capital Max this Executive and Head call A.J. Markets; Mark and Officer; Financial Jenkins, the are President Pete Chief of On Investments; of Officer; Rob Peil, Head Asset of Management.

the is Rob over Salisbury. It to call to my pleasure now turn

Robert Salisbury

today Conference Thank you, Call. us everyone, Properties' Fourth you for and operator. Essential thank Quarter Good joining morning, for XXXX Earnings

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

the I'll that, to Pete. call With over turn

Peter Mavoides

of business dynamic recurring continue our of XX% providing tenant the investments well investment business market for relationships, to from the has and we and Rob, quarter today our joining discussed us earnings Properties. environment. interest our value operators fourth generated third in to Maintaining plan value Essential how in base. relationship-driven everyone drive a you, thank On us with call, to our relationships you with in investment positioned activity with our underscoring Thank to your execute existing quarter strategy

and attractive quarter X.Xx billion, by earnings support shareholders. core liquidity pro growth for at continuing balance to our us tenant and our investing our credit and With forma leverage same-store perform our to $X.X continue our to industries continued generating to in in Our sustainably end spreads, portfolio also relationships well portfolio tenant with of grow sheet expectations. positions trends rent with healthy line our of and performance well attractive

remains supportive The and continued strong XXXX trends portfolio our of attractive investment business environment plan. the current

we a share the a have per AFFO $X.XX range result, $X.XX XXXX $X.XX, As to updated representing increase at low to our end. guidance

noted we cap begun materialize competition compression. markets have to in capital as earnings quarter resulting has our call, normalized, As rate third on modest

to continue rates We in to this investment than expect slightly XXXX, XXXX our lower cap trend. be reflecting

ended and large our investment our properties in articulated million is $XXX X,XXX investments operating in with to growing of industries. tenants were of that However, We investment XXX supportive the pipeline to XX $X.X guidance quarter billion. leased

end, expiring X unit From XX lease Our stood at the year our annual generation and in of the average weighted unit our average at a at over flow health a coverage the base quarter, years rent ago, years. term next rent is tenants quarter tenant line cash weighted which with level this profitability perspective, indicating X.Xx level. was X.X% ratio our by

rate Tenant by X.X%, which credit is XXX%. quarter high leases activity rates, de team serves of for our in resolving At XX signed materially rent which properties portfolio same-store the management further a recapture XXX%, at events in trends buy with XX during rental up rate favorable benign were of property ultimately with The our risk by supported asset the is pricing and remain at from a execution when our expediently properties. and of XX.X%, credit a collections and vacant leases in events fourth up of quarter X recapture of we credit XX% to level, picked XXXX occupancy growth minimis disciplined XXXX. of leasing mitigate

constructive continue performance for backdrop the to we tenant first the into company. credit portfolio Looking expect quarter, a and

XX over bankruptcy year-end, at X% is Zips a tenants, recent XX which locations of for of this Chapter portfolio, represented one basis our our XXXX points large reports, tenant Car from ABR XX X recently As protections. in of ABR. press carwash sites across At our decline noted filed peak in of in approximately Wash, exposure

reduction our proactive highlights exposure in our approach our driven of to key differentiated model. reporting, management, an underperforming a to financial material business This underpinning operator by asset proprietary

Given these our nature properties. the is event to with is our the of note ongoing X would I expectations leases this our it credit that us assumptions guidance supporting discuss bankruptcy, range. the premature for consistent around on

our of investment with million XX the quarter, fourth at the average X-quarter in during separate side, through X%, yield we average. $XXX On invested weighted cash trailing line transactions a

industries the weighted most These a average of and broad-based in activity from initial years departures notable investment XX.X quarter with across yield X%, our GAAP X.X%. was escalation of weighted term investments average lease generating of rent had top Our no strategy. of an annual our a average investment

per quarter Our $X.X this the property investments investment unit rent had coverage average and million. a average level of was X.Xx weighted

sale-leaseback quarter to of providing where were we operator. transactions this capital All expanding investments are an the

Looking ahead, our of expansion solid, a industries. new and variety across M&A unit remains pipeline investment targeted reflecting

the investment modestly compressed. rates characterized earlier, is current have noted climate that As cap by attractive

long-term this contractual in pipeline growth and trajectory. reflects with range trend mid- pricing to strong escalations, which Our supportive of is X% high our

X.X% and largest tool just is operators, middle offer our an which us diversity account of ABR direct From of top tenant for quarter opportunity risk a our a our XX.X% is and on and for set. of Tenant focus a at ABR. expansive market tenant benefit differentiator now XX an concentration important tenants perspective, end represents mitigation

in an we to ABR, per investments industry the down of accretive to above properties this of carwash sold to proactively We The in at XX this approximately last properties, portfolio volume fourth ceiling picked number the represented pricing. dispositions XX.X% average which at of allowing million this million with dispositions our were quarter of the highlighting owning for $XX.X disposition executed net us weighted average from fungible proceeds. a opportunistically This us in of Dispositions -- risks. quarter as the in approximately $X.X importance yield exposure liquid quarter fourth allows a monetized of up manage soft X.X XX% property, sector, cash XX% quarter. pare

Over the management average, disposition portfolio expect near sales X-quarter asset activity. with our and trailing ongoing by driven our we term, opportunistic

that, sheet With like call Mark quarter. to turn through the who I'd the over CFO, financials you to balance take fourth will our and Patten, the for

Mark Patten

Pete, morning, and good Thanks, everyone.

level totaled in of versus which quarter, On period $XX.X in This a up XXXX. our reflected we share over increase an with a expectations as AFFO AFFO million of the increase of range $XX.X detailed, last good performance highlighted was million in nominal an headlines a per the initial for As at was from Pete our guidance cap AFFO investments our by rate. our line XX%. basis, strong cash XXXX, quarter $X.XX, quarter quarter. X% an of is the same fourth had QX of X% the provided Among

Total G&A to million $X.X expense the period in the majority increase team. with $X.X in QX we as the relating XXXX versus for of continue was million our in to invest XXXX same increased compensation

G&A period total favorably to the for percentage as compares quarter, recurring a X.X% cash same of X.X% our the in was which revenue ago. Importantly, a year the

modestly our the Our for cash favorable were G&A expectations total quarter. G&A and to recurring

year, higher as larger annual at percentage G&A that continue operating basis, will a on G&A a invest of cash our and as us a leverage to platform we generates percentage of as portfolio manage an was levels. the revenue total base, and asset recurring Our cash our full enabling a expect for decline revenue over total X.X% scaling to

payout We of cash the ratio of AFFO fourth XX%. in an declared a which dividend represents $X.XXX quarter,

Our on basis. reaching quarter, to a in [ run rate after free $XX.X flow over cash ] continues to million equating dividends $XXX retained anima per build the million fourth

our continue of as our annual program, an our flow retained to free view We source XX% capital of approximately capital needs. attractive upwards to investment representing cash support of

sheet. balance our to Turning

With in gross billion XXXX, credit build, our our scale portfolio QX continues end. profile. at assets quarter the to net income-producing improving increasing activity reached of $X our The investment income-producing

sale $XX.XX we of approximately quarter, program capital basis share. On stock at of our remained of per an forward on million on $XX all the price markets in the completing a active ATM average the front,

with of revolving credit equity balance. settled a to $XXX proceeds repay the facility of our million utilized portion We forward

plan keeping capacity by balance Our $XXX at end, we our million which flexibility continue quarter on totaled to utilizing funding maintaining forward on equity unsettled available of while program revolver. investment our

average Similar quarter, weighted to at last our end. unsettled remained share $XX.XX above price quarter of well equity of forward the price our

shares the dilution under potential stock forward share these diluted included from As count. a in is our method, the result, treasury

AFFO per our This for this headwind share our shares million in For diluted the quarter,and treasury a the of forward million for year. count the calculation. adjustment $X.XX unsettled included X.X of approximately to an fourth full represented from related to equity XXX.X stock $X.XX share quarter,

debt at billion quarter strategic leverage previously financial net amendment annualized the financing, of our number to at of the commitment to with thank X.Xx forma announced adjusted facility. for covenants participation a end. committed for our a remain revolver structure an and support company, adjusted fuel as amended and closing to continue for bolstered and to maintaining was with low date We group billion, our like of and another maturity credit successful to pro sheet facility of liquidity an extended continued full significant supporting $X our unsecured well-capitalized the external We forward balance EBITDAre, accomplishments growth end upsized yielded We'd growth. to senior quarter liquidity to in February further rate equity, our business. our Our our $X.X the improvements The XXXX. entire their including bank unsettled

we've growth we midpoint. AFFO press guidance the to release, range implying XXXX share noted $X.XX, the over $X.XX in to as X% our earnings Lastly, per at updated

Importantly, equity raising. approach a issuance, we our is this believe to minimal which guidance requires to front-footed testament range capital

over With that, the call back to Pete. turn I'll

Peter Mavoides

business. results pleased summary, fourth quarter prospects we full the and the optimistic In Mark. remain Thanks, about and for are year with very our

Operator, please for open the call questions.

Operator

[Operator is question Haendel Instructions] Our St. from first

Juste Mizuho. with

Haendel St. Juste

credit. here segment Pete, the last broadly. talk have Rents bit of question, more more My cap a a run up about quite compressed and carwash years. rates and the bankruptcy first tenant the bit hoping couple I you segment was could the carwash on in is Zips

add hoping time? still or that you I'm of maintaining, curious XX lower how exposure playing the we have. if you drift some risk specifically of I'm basis that be could envision your out. you're could with seems level comfortable like you is a point year It could ABR exposure color over this on than XX% So Zips, down more far And see the

Peter Mavoides

basis embedded in in bankruptcy. them that, a Certainly, XX at and good Zips. having as $X.XX -- would of position our place points exposure down don't ongoing Yes. Obviously, really to we're I early a too properties on historical feel a it's negotiation our Haendel, an $X.XX I at we it's But dollar. There's with recoveries look in start. on Sure. ABR good pared to to and X discussion. in you lot know we're like the

we the coverage across first carwash really the that turned broadly, the portfolio. space. see quite exposure. some strong didn't bankruptcy that we've obviously, not space investing our for More And one and as we we conviction in have It's coming, We've we strong time, in been seen. have

benefits of take across our that where of margins XX sales, almost the and adding reporting expertise see -- and manage operators deep operators financial the we platform as industry then XXX EBITDA are operators value, growing portfolio. and is action we washes with can having the not are corrective that improving One ongoing car XXX

industries. great position pretty as we continue great industry. bankruptcy. been risk-adjusted carwash its be comfortable We returns So think through leading of It's to about get we're with our one and will going our Zips a

Haendel St. Juste

could a if to able if if And Zips. share they add I paid and that. about February question Appreciate to January Curious that follow-up you're rent.

Peter Mavoides

make to that. collection where comments But able don't. share call the not we're collected. -- We XXX% did we We're on

So you hint. that should give a

Haendel St. Juste

regarding bit. expound Fair are what And the and sale-leasebacks rates, the for you to mentioned competition a I portfolio Where sustainable? in And expect think enough. of your the I it could compression. on see is, Do the means was competition on transact you to you Okay. seeing specific the do you second I think increased seeing. guess, industries? then question it's you that think hoping ability commentary you which you're cap

Peter Mavoides

tackle you question? don't why Max, that

Max Jenkins

across and us. the in the cap set otherwise, from and of middle-market to new servicing and competition compression realize remains the ample marketplace. both We've Pete. couple focus capital opportunity last attractive for quarters, into environment seen to -- would those slightly the operators over some to relationships effect invest to on there's we've it But couple risk-adjusted a -- that Thanks, continue our only favorable peers, returns. And us country. rates. of been providing increased an transaction just a to growth be We there's But entrants modest Sure.

pipeline that's we're strong implied sits, will guidance. So in the earnings happy with where it our the and support

Peter Mavoides

caps about I all And yields Max. Thanks, would this felt the the high as high Yes, [ were as last of in the saw said in more we throughout kind we like as water the say, to in GAAP to of year. the said, X.X of kind mark. kind Xs ] we think year, year be mid- we expect we've

Operator

is question Sachs. Burrows Caitlin next from Goldman Our with

Caitlin Burrows

I the the give side. side alone, if significant. if interest maybe at that. like it rate like rate on guess just mean, of any business has maybe positive discussion your on I was how moves you volatility interest Wondering more impacted look could or more just kind pretty negative on of you expanding recently, XQ

to anything the wondering and, that I happened So subsequent extent that's end. quarter you felt what guess, to

Peter Mavoides

Yes. a is have we transaction Listen, XX- Caitlin, cycle. what XX-day to

and So making -- priced probably XX-year anywhere deal investments. closing days to ago if we're any we're from it today, we XX XXX the

And doesn't And capital in so the sheet, priced our of even that, month-over-month we've how that positioned then is it balance and deploying you think well come about such pricing. capital the advance week-over-week into in. raising we're volatility

much moves try slowly. insulate we so more from And moved and to those much ourselves volatile are --

aggressive think a out deals. bidding. were commentary counterparties, how returns we turn year, and get our [ consistent then And they're quarter, try we be you our And have were And for blowing more calendar of more deliberately we the premium that deploy we to is in looking fourth and predictable they to you with Max's getting more why which when to capital. a X.X, ] X.X the at people

a cap think in rates I here quarter. consistently it's on the But quarter, goes. we've first the where expect saw We as little we fourth more and overall, that So abating the downward of pressure said. in see we'll bit market

Caitlin Burrows

deals. or of from just you deal that And particular, think dispositions about about in it move little then was maybe think portfolio with could And Wondering a what like it, source of capital you we a going it in maybe if bit decide it. on fourth to versus as you do like couple forward? how about more Got the forward quarter. management the talk made

Peter Mavoides

risk source Yes. it's lightening really we where of to XX%, ceiling From or that was pricing The at it's from we're of soft capital. fourth bringing accretive capital, our Certainly not you X necessarily did. up new which a a carwash cap, management. more see exposure, portfolio on quarter down management,

the our in XX% or think the quarter of carwash in XX% space. were dispositions I fourth

So industry mostly it was management exposure. portfolio

this X call, to we more disposition activity think As we we said the as be expect on about with moderate consistent our the and year. average quarter

Operator

Our Hightower next question is from with Rich Barclays.

Richard Hightower

Mark. side stick capital equation, just of to to the Maybe the

equity be issuance also investment And minimal just dispositions you maybe the will maybe overall also needed. you talk just to might targets. But relative know hit about you -- your needed to that I what said mentioned as maybe decrease saw XXXX what guys think quarter. I piece point, just we this year and full just together needs And sort about of your in at the fourth that started But hear we us the well. obviously, remaining to on any thinking then hit some equity thoughts year help guidance. capital to obviously

Mark Patten

it. provide Well, out on we guidance probably got XXXX I'll You until XXXX. leave actually

let me... So

Richard Hightower

I Mark. had to try,

Mark Patten

Yes. all. I appreciate at Rich. problem No it,

other flow. of listen, mentioned some growing about and blocks it, one about the think my cash the our thing in think So free remarks I building I you -- as

got delivers about if quarter ambition We've -- a think of you our that's on $X amount million got And for mentioned, even investment unsettled addition, pretty of we've component use X if of significant that. probably [indiscernible]. in So for billion. decent dispositions, Pete average that, even we our a capital $XXX that

our and -- the normal you that standpoint, really of is sort could you activity. our from deploy that So assumption ATM equity is of underlying kind that could achieve guidance issuance with

mentioned different capital be way, say a is like raising and on what growth I'll our my it remarks to or So front-footed we equitizing I ambitions. in

I about us very opportunistic. of being it, think a puts makes very position us it So -- as in

look do what in say, we you I we positive as actually would otherwise, or it if execution of offering our at So would the could bigger our wanted that, we're something terms all to leverage. be But at sitting and it be expectations. -- liquidity, to a more would X.Xx do just

sort pretty to probably billion, the around If you -- you're least out, investment... to of our which X.Xx, is say, at approaching get our right of we have $X quarters run X.X somewhere liquidity much historical,

[Technical Difficulty]

Richard Hightower

Okay. Got it.

Sorry.

there I Mark, my breaking I was that. end, most that -- I were so you think, And but think of just to caught guess on up I sources.

in on uses point? be timing volume acquisition the best the at the kind this What's of way Just to of year check we for throughout modeling second. should a

Peter Mavoides

Rob?

Robert Salisbury

cadence today, bit Rich, XX a quarter standpoint, years would for to where right Obviously, But the think little days But don't for assumption of from to over sits year past. our XX historically the now. we ratable beyond have been visibility here. course in the fourth speaking probably just a a reasonable pipeline be historical... a I our has us larger

Operator

from is Smedes Rose with question next Our Citi.

Unknown Analyst

getting This the from have share you behavior for inflationary Mattie any tenants consumer Fardis is environment? to ] that [ you're feedback given on able Do around Smedes. you're current

Peter Mavoides

delayed, is on a our at lag. X-quarter right? financials feedback sites be our Listen, going to unit-level Yes. We're receiving

in seeing we're and we're on pressures news the seeing on And more But would say, the to it's, much is come XX- abating and cost current. if so current numbers. to is lag. And data those through you hear what inflation the input I typically factors anything, XXX-day

Unknown Analyst

your Great. exposure slightly to up And Is about? there under there be sequentially. ticked tenants Xx then ABR anything concerned coverage to

Peter Mavoides

flows is developing sites No. capital are to that positive with we're and There's -- by our influenced ABR. and work that bucket ebbs and actually before those putting producing particularly partners sites

sense to and bumping and would they credit end and guidance de guidance So the thinking uptick of were in should view give point. think into a and certainly, of and at And quarter would nothing be built is built into be I issues, I we're the this bottom our they there -- if this the about. you are minimis say, range, concerned

Operator

question Capital Borden Eric next Markets. is with Our BMO from

Eric Borden

Circle popped the C-stores tenant -- just XX appetite to I that you noticed more top into about to more portfolio. the then could add talk K if to potential and Just list. acquire speaking, to there, the more broadly wondering wanted opportunity the

Peter Mavoides

you why A.J., that? tackle don't

A. Peil

Sure.

we've So Circle that very a quarters. top K great C-stores with it an or XX that the across It the sequencing has grow happy over is [indiscernible] community really And in. I been area to back we're rental years previous the in continued really with put happy credit. ratably, the was board We're and that escalation in tenant. space. the think store just

Eric Borden

that built you I if bad your quarter-over-quarter. we What bps watch have have could was of if then talk about then into you current guidance wondering outside just guys for And there. occupancy Okay. debt? could XX list you slightly moderated noticed Zips. a And comment

Peter Mavoides

our around X. ebbs the portfolio. on releasing one are That's Well, to from I flows properties went which stats the I We room. occupancy, On vacant and wouldn't read call, certainly too naturally the is did X through much jumping -- in into positive. think right. All going that

assumptions will those any stats, So around into online through built our be guidance. be run back properties would those and and sites specific releasing certainly X brought

debt, don't bad that? why tackle of terms In Rob, you

Robert Salisbury

Yes.

range guidance including assumptions, credit. range includes of a our So wide for

portfolio a have specific But as our of the experienced [indiscernible] past. that in the quantified basis reference, frame maybe we said just points. haven't mentioned XX has We about historically,

we when reserve. through as tenant construct we identify general a and top-down process, So well a bake we go our as where a of combination guidance range, in bottom-up individual

if assumption excess in typically, that's well And number, XX helpful. that results an that's basis in points of so that

Eric Borden

last though. sorry, bit know I little bit. I'll up I a take I of I'm heard your you're it question. offline, the breaking if think don't

Peter Mavoides

appreciate We that. Thanks. Great.

Sorry for breaking up.

Operator

Michael next UBS. from Our Goldsmith is with question

Michael Goldsmith

First question, industry on the again. carwash

have operators seen Given visibility the focused for group range this X the Zips of you they've years. car been on is past what narrow every pressure wash the into, roughly XXX on within noted a that it year it's sites Or more new filing, broad-based? where open is

is understand specific is trying of So to just kind industry-wide just this if to operator, just or operators. specific kind it of this [indiscernible]

Peter Mavoides

trend. Yes. sales in it and coverage competition do of do Obviously, right space, and We certainly we're our guys is roughly and new that it are capital trying flat in deploy the who there think the it's to with guys a in and EBITDA carwash portfolio, margins our who XX% flat monitoring operator is mid-Xs. and excess well. Across overall specific with

feel we sites So good corrective there's But working. And us the quarterly entire carwash a space action our that and something on we aren't basis that concern. take see exposure. it with to where think monitor certainly systemic we don't I gives

Michael Goldsmith

the year? you a start good that. And follow of lack or call. keep visibility factors at did sound other up billion like then year, the appreciate from the that $X.X lead that acquisition to Is guidance. of a did potentially down midpoint a into Because challenging you optimistic year at to But were last this the $X transaction it I the year. this million with up, work guide of more some would the market reflection relatively as

Peter Mavoides

Yes.

a normalization the us conservatism drive assets a the think markets, great will acquisitive. was a a to historically high And recognition it's and And the less competition that cap expect for and resumption aggressively in year deploy little of capital of making the to and was cap capital a advantage rates of dislocation I were markets take super at that wide we in capital historically down allowing XXXX and rates. wide rates. we spreads XXXX thus at looking us really buying

we and ended it's the we'll we see the remains call, not year, between in where XX-year year things early difference But there's as a guidance. in where huge the out. volatile, up shake of the earlier obviously, midpoint and last And But our discussed right?

year continue continue see relationships brings. transact, to the and we'll So what to our service

Operator

Our is question John next Alichowski Wells with Fargo. from

Unknown Analyst

is This low What wondering you compression have what end AFFO have John. on on was behalf any you $X.XX of for acquisitions rate the seen the I raise were guide? year-to-date? does pipeline look the how recently? trend of like? cap plus drivers Cheryl the just And And seen

Peter Mavoides

Yes.

we said compression. prepared our As with is rate in pipeline albeit cap the remarks, full, modest

of So expect both from as to in transact credit experience the given driven X. of around cap it's around said, an do going to I mid- we're I the really investments, by driver we a a and assumptions high experience The is and bunch Xs, currently of performance the think capital. guidance capital. rates down which the be to of But cost price portfolio. huge positioned is capital is around credit of Obviously, that and range not cost where and the of

Unknown Analyst

up kind We picked What drove see the credit the one. the that in assets coverage one last bucket? just X.XXx X.X that of then And in to category. pickup

Peter Mavoides

going be across specific the think increase don't in tenants I to to kind that's anything or drive there's that broad-based bucket. industries portfolio. It's to of the going

Operator

of is Granath Farrell with from America. question next Bank Our

Farrell Granath

XXXX? on the a Is I of the be a there going that be a about, the ask would other portfolio? industry focus it rebalancing you there dispositions that into Or in key slowing, that there your to focus just but carwashes. was may wanted reduction about any spoke be would

Peter Mavoides

Yes.

given soft industry of XX%. any So ceiling the for have we

pair so crest create in And our service industries to relationships. when we invest continue to to able to we the that to exposure those ability -- that, really within and look be

risk to is property risks most be out to risks asset we on and activity an the a of or really those portfolio think and where at really the disposition and out individual either I tenant hang that, level Beyond there. nothing systemic see of going level moving tenant level based,

Farrell Granath

on XX is XX sorry additional that the credit bad there go Zips, new included Or initial that also, Okay. assumption credit assumption? was may your the bring just to initially back and -- wanted baked into basis assumptions. additional for to to an points? points to of now guide into of understand, compared I that And debt is in the be guide bad exposure basis

Peter Mavoides

Yes.

in event. got think about happens So you a to what credit

tenant file and and a for and You paying those assets. you have your on a bankruptcy have you you those then a recovery reposition assets stops then take assets lease and

you're downtime building in of really those assets you're specific assets the depending and upon assumption, it's going XX, days, a then experience of asset, have assuming the credit whether So when XX, a to market. the the XXX recovery of the downtime,

know, and to that sites, those experience the our all see. can't assumption our happen specific top of assets don't then things to Our in has performance we to going unit-level and that, we credit guidance on goes top that through that we of tenants is account assumption for all visibility of an unknown our based -- on our think around and what make assumptions into upon and

days And so would changed since say has not the provided without guidance. speaking credit materially specifically to year our in XX I loss assumptions Zips, for initially we the

Operator

Daniel Our One is next from Capital with Securities. question Guglielmo

Daniel Guglielmo

Page on by U.S. of of there And deals. all have the the many major changes quarter-to-quarter. weren't state I X appreciate large in a diversification you know supplement. map I forward pipeline But

So thinking expect material where about year that from there are or regions X map states certain changes? now, you'd

Peter Mavoides

relationships now. that XX to I anticipate materially from diversification our not X Page expect output tenant geography's would a us, geographical ratably. And I such bring different We where months often grow say of our would an

Daniel Guglielmo

Have where of the partners parts you kind it's have you been to through of more follow-up then And kind like U.S. inbound Southern wage that, to of as of look the And expand take of Atlanta, mentioned from some reacceleration Houston. tenants Dallas, Miami, your And in had we data. in those partners it the Great. Okay. wage you. a kind some cities looks growth, trying like and country? getting

Peter Mavoides

Yes. I for And us our diversity. similar capital demand those our relationships been in our I bringing are has markets. heavy currently, proportionately say, mean, markets to into would inbound we're those given that geographic

Operator

is Jay question Securities. next Kornreich Our [Operator from with Instructions] Wedbush

Jay Kornreich

Just exposure exposure lately. that's that's It going increased lowering XX allocations, to faced headwinds below looks to industry basis industry exposure to back XX%. some an the carwash like casual you've X.X%. And dining car -- beyond points

So to exposures can smaller just there, other provide see if around exposure and conviction you curious there's you'd you if that to like any increase going your thoughts forward. industry any have increasing

Peter Mavoides

where opportunities. say to our us and the by would Certainly, childhood I and and the where I driven they bring like opportunities discussion than the expect in our are we restaurants And generally, and ones And pie industry ratably. -- have diversification early some the I there's consolidation like more said carwashes, -- automotive service. our just industries relationships, much that more geographic are relationships had, industries Yes. given are have they grow is other like others are consolidated. deep

general, which our have our a And around ABR. real dining, is around our experience real really why the fungibility X.X% that the of casual strong loss us more In experience estate credit we is estate that confidence. that dining around that casual conviction events driven conviction and it's by credit and of gives recoveries

investment and XX-plus years We've been so it for we I've And for investing -- remains casual in core in industry continue us. the specific been a there. dining space, to restaurants invest

Jay Kornreich

I And just then one appreciate more. that.

from, coming typically them In terms tenants. -- of from come the they is where transaction of typically existing bulk comes

can. do your market, platform continuing I versus guess forward cost guess, to And your going coming like curious you are existing valuing capital best new tenants providers loyal to your just and of really I and transact as the relationship capital just chasing how sticky so the feel they I'm to or,

Peter Mavoides

Max?

Max Jenkins

that. Thanks, Jay. take I'll This is Max.

post business we it you think look percentages ebbs always quarter-over-quarter, the or repeat XX%, and existing give around can take. at that relationship probably that kind I of to and

always that's that repeat relationship would and our other, exchanging so expand, the be new over our to and out to day, the transact for all you and to and operators I end and referrals. just relationship majority these force of kind you actively of ideas. that each going relationships But that to the tells tenants And continues our continually be pipeline. with strongest when the driving sourcing tenants that new the pipeline. talk the of of we're relationships, over you At and continues business build they're And think drive driver always there then

Peter Mavoides

a priority coming -- underwritten high advance a us price And system. do negotiated, new the they capital high are they going over certainly certainty. a execution not source. do And a and I these an the would credit reliability operators, in to on reliability docs And having pricing check they say incumbent, gives being question, certainly having capital into and that But on value they any predictability. advantage unsophisticated that to the they're place

Operator

Our McGinniss next Greg question is Scotiabank. with from

Greg McGinniss

similar to cross re-leasing unique a expect in were Was spreads threshold? XXXX? standpoint the outcome you do while. the you in handled a positive time for management or portfolio anything first help Cash from a about achievable is outcome, the expirations or And there differently anything that similar

Peter Mavoides

A.J., do that? you want to tackle

A. Peil

was I on think anything rates. quarter the unique there to the don't Yes. recovery

positive breakdown period, relet. led XX-month the some just Some XX the to we trailing at had of number of staff of being particular this bumps bumps, leases renew the the with you positive. usual, leases that led which some renewed, look larger-than-usual larger And to leasing if lease than of kind of total which had renewals

whether the the two quarter kind as consistent just just a should vacancy. I renew, and of was One is in period. repositioning we other stats think of without that forward. move the contractual it's renewals But I more or this be trailing buckets. had the vacancy But different is pretty fact particular it's leases through think we XX XX XX-month episodic assets, So really

Greg McGinniss

the -- Okay. And go understand ahead. sorry, can I

Peter Mavoides

listen, renewals, in not those the bunch repurpose vacancy rates, percentages had how the just of with a asset Greg, to ultimate an an average vacant take consistent, just weighted with just depend be we to relatively rate, or back we downtime? would of asset really those would anticipate going on asset. recovery we to of we're I is asset I renewing as it it a having really an and the lease, factor at it's and and the bunch relets. look So I add, are are a right Is renewing a

Greg McGinniss

what That down recognize coverage quarter-to-quarter. we then move see tenant healthy Okay. I did to But remains credit. is and on X% appears follow-up appreciated. that that color to around last bucket? Was a makes the will that be And dropping And rent sense. into from of kind due tenants tenant the credit acquisitions? CCC+ Or of that a doubling is Any quarter. is to

Peter Mavoides

A.J.?

A. Peil

that and the But than marriage coverage to, we're coverage, bucket, it's half down as or an if look rating, rating implied the categories, attention we coverage really even we tenants was greater it's those paying And level X within bucket economics. is the the it's as attention remember is oftentimes us up lot more what's gives of in still is pay to of thing than level confidence. what It really something down to. for Yes. are the Xx of implied to portfolio. And And is bucket unit which what CCC+ the the that's migrating particular credit which a well like? is look that B- particular cohort unit

Peter Mavoides

fresh credits. can CCC Yes, of a we're deploying not Greg. capital And you assume into lot

Operator

Our Spenser Advisors. next question Street Glimcher from is with Green [ ]

Spenser Allaway

one Just pipeline. the on me acquisition for

in guys So reflecting of able most activity new as robust, pipeline expansion. activity Are industries the continued from seeing you that far share as you're the to that growth you terms remains commented M&A new unit year? unit the into thus which well

Peter Mavoides

seeing you are what Max, there?

Max Jenkins

has looks follow-on it of Spenser, trends to conclusion historical the tenants. add-on in nothing unit I consistent lot draws with M&A, the existing it's think that new in But ratable been a historical pretty pipeline there's a pretty and both really transactions as periods.

Spenser Allaway

in might because they driven are for bucket of you commented been sale hoc assets year? estate? there kind up either ad some compression obviously good just a for industry, be come be guys inbounds And Or these you divestment that or from then know the compelling of XXXX. that think as cap opportunistic on Have this one of asset sales. been I the earmarked particular would already Okay. have this that any maybe by dispositions just actually throughout in the rate real

Peter Mavoides

to Yes. going don't buy risk finding to not asset if because sell trying how we and asset most the Generally, phone It's our like capital rings we're the auction most an be is to that competitive, generally and competitive that are it. see an an the mostly someone we we running going do profile.

not to And the volume. our tend on deliberate that unsolicited what's properties. it's management to we more activities we respond just risk inbounds So take, that's driving and

Operator

question Massocca B. next is Securities. Riley Our John from with

John Massocca

compression all investments XXXX even seeing that those just investments? than is LOI, kind view out, potential the or cap factors? in macro more are Or of that's a the or just you done given stuff kind in theoretical investment On year-to-date, on PSA I volume that's pipeline of the more days mean, rate it on maybe XX

Peter Mavoides

we're in John, we was constructive [ you back more negotiated particularly, a if where XX-year December think, and it. deals much November living there And those ].

I so think, mid- discussed. that And Xs to in our that current cap is we pipeline, rate high

John Massocca

Okay. That's were in Zips activity? XQ the helpful. then 'XX there disposition And any

Peter Mavoides

there Was John? any . what,

John Massocca

Car bucket mean, I curious Washes. just if... was I XQ, Zips of there's big in a carwashes and

Peter Mavoides

individual we're imminently to pretty the and investor, them. -- becomes And going a break. break, them fix something -- price it illiquid apparent that institutional We'll going unloaded steep. it we is when going and as to transact when first No, to becomes that's are key here, not becomes sell assets and is to sell then sophisticated the

Wash So fourth Car was the Zips no there quarter. in

John Massocca

the then that remainder this breathing of in those was to investment that those much again assets tenants? how kind how number some maybe the individual room getting the was of driven just carwash below much of at by be more and XX% fourth mean, for And aggressive sales quarter Okay. side on or And the year? generally, with risk I

Peter Mavoides

don't We want the XX . for next our the own breathing assets choose want years. look so room, right? portfolio both, we're to and a to It's going at that we

Operator

from with is question Caitlin Sachs. Goldman next Our Burrows

Caitlin Burrows

so don't it's think figured I'd come I up ask.

as guys your from term, like debt? you I obviously of made you leverage the Just think you near where equity But given earlier going a are between you on capacity. today, forward, versus lot using point deciding is think about funding and guys have here, leverage how a

Mark Patten

free about Caitlin. cash With generally, debt, really our flow. growing just guess I what say flow, had into equity, it as historically debt Thanks, and that's XX%. free we split been XX% about the I'd think more between cash XX% turned equity XX% is,

So utilize as continue we at we look that. to it, would

We ourselves our also leverage to orient stands. where

to issuance. So deploy, us that about a we equity, when to as is debt access for when think when obviously to point utilize

on for either. to starts But revolver the the equity opportunistic will that don't for on debt hopefully from us thinking be for I the fashion. could do can be deal. think as our near-term debt case, the but and the us, an accommodate tenure we any standpoint, we term hopefully, I mentioned, In really liquidity opportunistic have on front, also we're front. with some have it demands in we XXXX then And with our unsecured out things bond we

Operator

There back to any I for Thank no this hand the closing would are you. remarks. further Pete floor over time. Mavoides like questions at to

Peter Mavoides

conferences and thank Well, Obviously, nondeal today's on participating we'll in Great. at for be next of all various road the months. roadshows you call. in couple the

to all day. Have in a look we you great so Thanks. forward with meeting And person.

Operator

conference. today's concludes This

may lines you participation. your for at your You Thank disconnect time. this

Essential Properties Realty Trust (EPRT) 13 Feb 252024 Q4 Earnings call transcript