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    EPRT
    Earnings call· Mar 2026(Q1 FY26)

    ESSENTIAL PROPERTIES REALTY TRUST Q1 FY26 earnings call EPRT

    Apr 23, 2026 Source

    Executive summary

    Essential Properties Realty Trust Q1 FY26 — Strong Investment Activity and Raised Guidance

    Essential Properties Realty Trust delivered a strong first quarter, marked by significant capital deployment into high-quality properties and an 11% year-over-year increase in AFFO per share. The company raised its full-year AFFO per share and investment volume guidance, citing better-than-expected investment activity and portfolio credit trends. Management emphasized its robust balance sheet and differentiated sourcing strategy, positioning it for continued growth despite macro volatility.

    Highlights

    5

    • Deployed $389 million into 126 properties at a 7.7% initial cap rate and 8.8% GAAP yield.

    • AFFO per share increased by 11% year-over-year to $0.50.

    • Increased 2026 AFFO per share guidance to $2.00-$2.05, representing 7% growth at midpoint.

    • Increased investment volume guidance by $100 million to $1.1 billion-$1.5 billion.

    • Maintained low leverage of 3.5x pro forma net debt to annualized adjusted EBITDAre with $1.5 billion available liquidity.

    Concerns

    3

    • One restaurant tenant filed for bankruptcy, representing approximately 30 basis points of ABR, though recovery is expected at 80%.

    • Impairment charge primarily driven by one former American Signature location.

    • Casual dining and entertainment segments are experiencing some weakness, with flat to down 2-3% sales and 100-200 bps margin pressure.

    Guidance & targets

    4
    CategoryTargetConfidence
    2026 AFFO per share
    $2.00 to $2.05
    high materiality
    High
    2026 Investment volume
    $1.1 billion to $1.5 billion
    high materiality
    High
    2026 Cash G&A
    $30 million to $34 million
    medium materiality
    High
    Unsecured debt issuance
    Anticipated
    medium materiality
    High

    Operational metrics

    31
    AFFO
    $105.8 million
    Q1 FY26

    Nominal AFFO for the quarter.

    Cash G&A
    $8 milliondown from 5.9% in the same period a year ago
    Q1 FY26

    Represents 5% of total revenue.

    Dividend per share
    $0.31
    Q1 FY26

    Cash dividend declared in the first quarter.

    AFFO payout ratio
    62%
    Q1 FY26

    Based on the cash dividend declared.

    Income-producing gross assets
    Over $7.5 billion
    quarter end

    Increased scale and diversity of the portfolio.

    Equity raised (overnight offering)
    $402 million
    Q1 FY26

    Completed in February.

    Equity raised (ATM program)
    $17 million
    Q1 FY26

    Raised via ATM program.

    Unsettled forward equity balance
    $541 million
    quarter end

    Balance at quarter end.

    Weighted average price of unsettled forward equity
    $30.55
    quarter end

    Used in diluted share count calculation.

    Diluted share count
    212 million shares
    Q1 FY26

    Includes adjustment for treasury stock method.

    Treasury stock method dilution assumption
    $0.01 to $0.02
    full year

    Conservative assumption for full year.

    Weighted average cost of capital (WAC)
    Mid-5s
    current

    Blended cost of capital, including unsecured debt, equity, and retained FCF.

    Investment spread
    200+ basis points
    current

    Spread between deployment cap rates (mid-to-high 70s) and WAC (mid-5s).

    Average investment per property
    $2.9 million
    Q1 FY26

    Consistent with historical range, reflecting focus on fungible assets.

    Weighted average initial lease term (new investments)
    17.7 years
    Q1 FY26

    For investments made during the first quarter.

    Weighted average annual rent escalation (new investments)
    2.1%
    Q1 FY26

    For investments made during the first quarter.

    Weighted average unit level rent coverage (new investments)
    3.1x
    Q1 FY26

    Reflecting conservative rent level and healthy unit profitability.

    Transactions closed
    22
    Q1 FY26

    Number of transactions closed in the quarter.

    Properties acquired
    126
    Q1 FY26

    Number of properties acquired in the quarter.

    Sale-leasebacks as percentage of transactions
    100%
    Q1 FY26

    All transactions closed in Q1 were sale-leasebacks.

    Total portfolio properties
    2,417
    quarter end

    Number of properties in the portfolio at quarter end.

    Total portfolio tenants
    Over 400
    quarter end

    Number of tenants in the portfolio at quarter end.

    Weighted average lease term (portfolio)
    Approximately 15 years
    quarter end

    Weighted average lease term for the entire portfolio.

    ABR expiring over next 3 years
    2.8%
    quarter end

    Percentage of annual base rent expiring over the next three years.

    Top 10 tenants ABR concentration
    15.8%
    quarter end

    Percentage of ABR from the top 10 tenants.

    Top 20 tenants ABR concentration
    26%
    quarter end

    Percentage of ABR from the top 20 tenants.

    Restaurant tenant bankruptcy ABR impact
    30 basis points
    Q1 FY26

    Impact on ABR from one restaurant tenant filing for bankruptcy.

    Restaurant tenant bankruptcy recovery rate
    Approximately 80%
    Q1 FY26

    Expected recovery rate for the properties affected by the bankruptcy.

    Car Wash industry exposure soft ceiling
    15%
    ongoing

    Soft ceiling for any one industry.

    Straight-line rent adjustment
    $15.5 million
    Q1 FY26

    Amount of straight-line rent adjustment in the quarter, noted as a good run rate.

    Watchlist credit risk (unit level coverage)
    1.3%
    current

    Percentage of ABR on the watchlist, up approximately 20 basis points from prior.

    Industry KPIs

    6
    MetricValueDetails
    Occupancy rate99.7%%
    Disposition volume$10.2 millionUSD
    Same store noi growth1.4%%
    Investment volume closed$389 millionUSD
    Net debt adjusted EBITDA3.5xx
    Ffo core ffo normalized ffo per share$0.50USD

    Orderbook & backlog

    1
    Unsettled forward equity$541 millionquarter end

    Represents committed-but-undeployed capital from equity offerings.

    Deals & partnerships

    1
    Denny'sAcquired 74 properties in a sale-leaseback as part of Denny's privatization transaction.$147 million

    Average price under $2 million per asset, strong unit-level coverage, average operating history over 40 years. Involved a combination of corporate-owned and franchisee stores.

    Risks & headwinds

    6
    Macro volatility and higher 10-year yieldsCurrent/ongoing

    Cap rates in the mid-to-high 7% range (down from 8% last quarter).

    Mitigation: EPRT's position as a consistent, reliable capital provider is valued in this environment.

    Strain on the consumerOngoing

    Not quantified, but noted as a potential impact.

    Mitigation: Portfolio is performing well; guidance raised due to better-than-anticipated credit performance.

    Weakness in casual dining and entertainment spaceOngoing

    Flat to down 2-3% sales, 100-200 bps margin pressure, leading to 10-20 bps impact on rent coverage.

    Mitigation: Watching consumer trends and idiosyncratic risks of specific operators; portfolio performance is strong overall.

    Restaurant tenant bankruptcyQ1 FY26

    7 properties leased to this tenant, representing approximately 30 basis points of ABR.

    Mitigation: Expected recovery rate of approximately 80%; identified backfill tenants on 5 sites, 2 locations under contract for sale. Situation was operator specific.

    Impairment chargeQ1 FY26

    Primarily driven by one former American Signature location.

    Mitigation: Robust quarterly impairment testing process; not a material impact going forward. Home furnishing industry is not a focus for investment.

    Refinancing of term loan expiring in early FY27Early FY27

    Incremental dilution from refinancing at potentially higher rates.

    Mitigation: Plan to move to unsecured bond market in mid-year FY26 to term out debt and extend weighted average maturity of liabilities.

    What to watch in Q2 FY26

    4

    Unsecured debt issuance

    Middle of the year
    CurrentAnticipated
    TargetIssuance completed

    Why it matters

    To fund growth pipeline and extend the weighted average maturity of liabilities, impacting future financing costs and capacity.

    As we have previously discussed, we continue to anticipate an unsecured debt issuance in the middle of the year to fund our growth pipeline and extend the weighted average maturity of our liabilities.

    Q&A highlights

    6

    Cap rates were lower than recent quarters (7.7% vs 8%). What drove this, and is it sustainable? How does macro volatility impact EPRT and competition?

    Cap rates in the mid-to-high 7% range are expected, influenced by capital markets and industry mix, and 7.7% is considered healthy. Macro volatility helps EPRT as a reliable capital provider, and while it may strain consumers, it's not causing outsized issues for the portfolio, leading to raised guidance.

    “As we communicated on our last call, we expect cap rates in the mid- to high 7 range, obviously, coming down from the 8 that we saw last quarter. Some of that is capital markets and competition. Some of that is industry mix. But certainly, the 7.7% is a healthy rate, and we feel pretty good about that.”

    asked by Caitlin Burrows · answered by Peter Mavoides

    2 min read6 chapters

    Detailed Narrative

    01

    Investment Strategy & Performance

    Essential Properties Realty Trust deployed $389 million into 126 properties during the first quarter, achieving a weighted average initial cap rate of 7.7% and a GAAP yield of 8.8%. These investments featured a weighted average initial lease term of 17.7 years and a 2.1% annual rent escalation. The average investment per property was $2.9 million, aligning with the company's focus on fungible assets and broad-based capital deployment across its targeted industries.

    02

    Denny's Sale-Leaseback Transaction

    A notable transaction in Q1 was the acquisition of 74 properties in a $147 million sale-leaseback with Denny's, executed as part of their privatization. This deal involved properties with an average price under $2 million per asset, strong unit-level coverage, and an average operating history exceeding 40 years. The transaction, structured with a combination of corporate-owned and franchisee stores, exemplifies the company's ability to leverage deep industry expertise and relationships for efficient underwriting and reliable closings.

    03

    Portfolio Health & Credit Trends

    The company's portfolio ended the quarter with 2,417 properties leased to over 400 tenants, boasting a weighted average lease term of approximately 15 years and 99.7% occupancy. Same-store rent growth was 1.4%, and portfolio rent coverage remained robust at 3.5x. The percentage of ABR under 1.5x rent coverage decreased by 140 basis points to 1.3%, indicating strong overall credit performance ahead of budgeted expectations.

    04

    Balance Sheet & Liquidity

    Essential Properties maintains a strong financial position with $1.5 billion of available liquidity and a low leverage ratio of 3.5x pro forma net debt to annualized adjusted EBITDAre. The company raised $419 million in equity during the quarter, including a $402 million overnight offering and $17 million via its ATM program. At quarter-end, $541 million of unsettled forward equity remained, with a weighted average price of $30.55.

    05

    G&A and Dividend Performance

    Cash G&A for the quarter was $8 million, representing 5% of total revenue, a reduction from 5.9% in the prior year, reflecting continued cost discipline. The company declared a cash dividend of $0.31 per share, resulting in an AFFO payout ratio of 62%. Retained free cash flow after dividends reached $40 million for the quarter, equating to approximately $160 million annually, providing substantial internal capital for future growth.

    06

    Market Dynamics & Competition

    Management noted that current macro volatility🌐 and higher 10-year yields, on balance, benefit EPRT by highlighting its role as a consistent and reliable capital provider. While cap rates for new investments are now in the mid-to-high 7% range (down from 8% last quarter due to capital markets and industry mix), this still represents a healthy spread to their mid-5% weighted average cost of capital, supporting long-term growth.

    AI-generated summary of the company’s earnings call. Not investment advice.