Yahoo Finance Essential Properties Realty Trust Inc (EPRT) Q1 2024 Earnings Call Transcript Highlights: ...
AFFO per Share: Increased to $0.42, up 5% year-over-year.
Total AFFO: Reached $71.1 million, a 22% increase from Q1 2023.
Investments: Totalled $249 million in Q1 2024, with a cash cap rate of 8.1%.
Dividend: Declared at $0.285 per share, with an AFFO payout ratio of 68%.
Free Cash Flow: Retained free cash flow after dividends was $23.9 million.
Gross Assets: Income producing gross assets reached $5.1 billion.
Liquidity: Total liquidity exceeded $850 million at quarter end.
Leverage: Pro forma net debt to annualized adjusted EBITDAre was 3.6 times.
Equity Capital Raised: Over $300 million through equity offerings and ATM program.
2024 AFFO Guidance: Refined to $1.72 to $1.75 per share, indicating over 5% growth at the midpoint.
Release Date: April 25, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Q & A Highlights
Q: With the rates now seemingly higher for longer, how should we think about the appropriate funding mix to fund external growth for the remainder of the year? A: Mark Patten, CFO, noted that the company could execute a term loan, likely in the range of SOFR plus 545-555 basis points, considering the current market conditions. He emphasized the availability of the bank debt market as a viable avenue, although unsecured bond issuance is less attractive due to recent increases in the 10-year yield.
Q: How competitive is the sale leaseback market today? Are you seeing investors stepping off the sidelines given the attractiveness of sale-leaseback capital for potential tenants? A: CEO Peter Mavoides observed that competition has been muted in recent quarters due to challenging financing costs for assets, although there remains some competition from other investors and alternative capital sources.
Q: Acknowledging that your four-wall coverage increased sequentially, is there concern that consumers, particularly at the lower economic spectrum, are topped out, affecting tenant transactions? A: Mavoides explained that Essential Properties focuses on industries not reliant on the low-end consumer, such as essential services and experience-based industries, and has not seen these concerns impact tenant discussions or operations.
Q: Can you discuss the movement around tenant risks, particularly the less than one-time rent coverage population and your comfort with Red Robin given its share price decline? A: Mavoides addressed that fluctuations in tenant credit are part of the business, with specific focus on managing idiosyncratic events. Regarding Red Robin, he expressed confidence in their management and the quality of the real estate despite the equity market performance.
Q: How much more exposure would you be comfortable with in casual dining, and what is driving the increase in the low end of your guidance? A: Mavoides indicated comfort with increasing exposure in casual dining, citing positive credit experiences. The increase in guidance is driven by portfolio stability, conservative initial credit loss assumptions, and strong visibility into the pipeline.
Q: What is your expectation for cap rates in the near term, given the current market conditions? A: Mavoides expects cap rates to remain stable in the near term, with potential downward pressure later in the year if capital markets normalize and competition increases.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
