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    EPRT
    Earnings call· Jun 2026(Q2 FY26)

    ESSENTIAL PROPERTIES REALTY TRUST, INC. EPRT

    Jul 23, 2026 Source

    Executive summary

    Essential Properties Realty Trust Q2 FY26 — Strong Investment Volume and Raised Guidance

    Essential Properties reported a strong second quarter, driven by robust investment activity at attractive cap rates and disciplined capital management. The company raised its full-year AFFO per share and investment volume guidance, underscoring confidence in its growth strategy and balance sheet strength. Management continues to focus on portfolio diversification and efficient capital deployment, while acknowledging potential future dilution from debt refinancing and equity accounting.

    Highlights

    5

    • Accretively invested $332 million in Q2 FY26 at an average initial cash yield of 7.8%.

    • Increased 2026 AFFO per share guidance to $2.01-$2.05, implying over 7% growth at midpoint.

    • Increased 2026 investment volume guidance to $1.2 billion-$1.5 billion.

    • Maintained strong occupancy at 99.6% with only 9 vacant properties.

    • Pro forma net debt to annualized adjusted EBITDA remained low at 3.5x with $1.7 billion total available liquidity.

    Concerns

    3

    • Treasury stock method dilution is expected to be a $0.01-$0.02 headwind to AFFO per share for 2026.

    • Refinancing the February 2027 term loan (2.26% rate) is expected to be dilutive by $0.04-$0.06 per share for 2027.

    • The under 1x rent coverage bucket ticked up slightly, though considered normal ebb and flow.

    Guidance & targets

    5
    CategoryTargetConfidence
    2026 AFFO per share
    $2.01 to $2.05
    high materiality
    High
    2026 Investment volume
    $1.2 billion to $1.5 billion
    high materiality
    High
    2026 Cash G&A
    trending towards the bottom half of $30 million to $34 million
    medium materiality
    Medium
    2026 AFFO per share impact from Treasury Stock Method dilution
    $0.01 to $0.02 headwind
    medium materiality
    Medium
    2027 AFFO per share impact from 2027 term loan refinancing
    $0.04 to $0.06 dilution
    high materiality
    Medium

    Operational metrics

    28
    GAAP Net Income
    $74.5 million
    Q2 FY26

    Reported in the earnings release.

    AFFO
    $110.1 millionup 18% YoY
    Q2 FY26

    Nominal AFFO increased 18% year-over-year.

    AFFO per share growth
    9%vs Q2 FY25
    Q2 FY26

    AFFO per share was $0.50, representing an increase of 9% versus the second quarter of 2025.

    Total G&A
    $10.9 million
    Q2 FY26
    Cash G&A
    $7.2 million
    Q2 FY26

    Trending towards the bottom half of the $30M-$34M annual guidance range.

    G&A as percentage of total revenue
    4.4%down from 5.2% YoY
    Q2 FY26

    Down from 5.2% in the same period a year ago.

    Cash dividend per share
    $0.32
    Q2 FY26
    AFFO payout ratio
    64%
    Q2 FY26
    Unsettled forward equity
    $575 million
    Q2 FY26

    Remaining at quarter end.

    Income-producing gross assets
    $7.8 billion
    Q2 FY26

    Totaled at quarter end.

    Weighted average lease term
    over 14 years
    Q2 FY26
    Weighted average lease escalations
    1.9%
    Q2 FY26
    Annual Base Rent (ABR) expiring through 2028
    2.3%
    through 2028
    Portfolio rent coverage
    3.5xstable since last quarter
    Q2 FY26
    ABR with rent coverage below 1.5x
    declined 50 bpssequentially
    Q2 FY26

    Reflecting continued improvement in credit quality.

    Top 10 tenants ABR
    15.2%
    Q2 FY26

    At quarter end.

    Top 20 tenants ABR
    25.4%
    Q2 FY26

    At quarter end.

    Top industry exposure ABR
    12.6%reduced 40 bps
    Q2 FY26

    Reduced by 40 basis points during the quarter. Top 3 industries are car wash, medical dental, early child education, each approximately 12% of ABR.

    Average investment size per property
    $3.1 million
    Q2 FY26

    Reflects focus on granular, highly fungible assets.

    Loan portfolio balance
    $400 million
    Q2 FY26

    Approximately $400 million.

    Loan repayment yield
    9.3%
    Q2 FY26

    Yield on loan repayments.

    Master leases as percentage of portfolio
    around 60%
    Q2 FY26

    Consistent with overall portfolio.

    Headcount growth
    5 to 10 professionals a year
    annual

    Anticipated to taper off as efficiency increases.

    Health and Fitness gym investment range
    $7 million to $12 million
    current

    Compared to some higher-end models ranging up to $60 million.

    Investment volume since Q1 end
    $350 million
    since Q1 end

    Refers to transactions closed or under PSA since Q1 end.

    Loan portfolio percentage
    5%
    Q2 FY26

    Consistent with the overall portfolio.

    Under 1x rent coverage bucket
    —ticked up slightly
    Q2 FY26

    Considered normal ebb and flow, not material or a credit concern.

    Large deal size range
    $50 million to $100 million
    Q2 FY26

    A chunky deal of this size can affect weighted average close date.

    Industry KPIs

    7
    MetricValueDetails
    Occupancy rate99.6%%
    Disposition volume$54.3 millionUSD
    Same store noi growth1.5%%
    Investment volume closed$332 millionUSD
    Net debt adjusted EBITDA3.5xx
    Ffo core ffo normalized ffo per share$0.50USD
    Third party strategic capital fund jv platformpartially funded

    Orderbook & backlog

    3
    Closed plus identified opportunities$1 billionYTD Q2 FY26

    Well positioned to execute on increased full year investment guidance.

    Pipeline (forward 90-day look)90-plus percent chance of closingQ2 FY26

    If in pipeline, high probability of closing. Some hangover into next quarter is expected.

    Investment volume under contract or PSA$430 millionQ2 FY26

    Refers to transactions ahead of the conference call, including closed and under PSA.

    Deals & partnerships

    2
    Various institutional investorsUnsecured bond issuance$400 million10-year

    Successfully completed a $400 million 10-year unsecured bond offering with a coupon of 5-3/8%.

    Early childhood education operatorSale-leaseback transaction partially funded via Operating Partnership (OP) units

    One sale leaseback transaction in the early childhood education sector was partially funded in a tax efficient execution through the issuance of operating partnership units. This was the first OP unit transaction for EPRT.

    Risks & headwinds

    4
    Treasury Stock Method (TSM) dilutionFY26

    $0.01 to $0.02 headwind to AFFO per share for FY26

    Mitigation: Management incorporates conservative assumptions; stock price movement impacts dilution.

    2027 Term Loan Refinancing DilutionFY27

    $0.04 to $0.06 dilution to AFFO per share for FY27

    Mitigation: Multiple alternatives to address (bond market, term loan market, credit facility, forward equity, internal cash flow); will address well ahead of maturity.

    Increased loan loss reserveQ2 FY26

    Larger reserve this quarter (non-cash item)

    Mitigation: Reflects management conservatism; loan book is current with nothing on non-accrual; tenant credit trends remain favorable.

    Under 1x rent coverage bucket increaseQ2 FY26

    Ticked up slightly

    Mitigation: Considered normal ebb and flow, idiosyncratic, not material, and not a credit concern. Any concerns would be baked into guidance.

    What to watch in Q3 FY26

    5

    H2 FY26 Investment Volume

    Next quarter (Q3 FY26)
    Current$332 million in Q2 FY26
    TargetExecution towards $1.2 billion to $1.5 billion full-year guidance

    Why it matters

    Verifies the company's ability to maintain deal flow and achieve its raised investment targets, crucial for future earnings growth.

    we are well positioned to execute on our increased full year investment guidance range of $1.2 billion to $1.5 billion.

    Q&A highlights

    6

    Inquired about the use of OP units in Q2, future plans, and if it targets a specific tenant type.

    Management explained the OP unit transaction was a tax-efficient way to monetize real estate for an operator not needing cash, differentiating EPRT from competitors. They noted such deals are episodic due to unique seller situations but represent a valuable tool.

    “it was tax efficient for them to take OP units and participate in OP and have ownership in EPRT going forward, and it was a valuable currency in the transaction. It differentiated us from competitors.”

    asked by Greg McGinniss · answered by Peter Mavoides

    2 min read6 chapters

    Detailed Narrative

    01

    Deal Sourcing and Execution

    Essential Properties invested $332 million in Q2 FY26, primarily through sale leaseback transactions (84% of investments). The average initial cash yield was 7.8% (GAAP yield 9.1%), reflecting the company's ability to source attractive opportunities and maintain a meaningful spread to its cost of capital. The quarter saw 36 transactions across 103 properties, with 72% of volume from existing relationships, demonstrating a relationship-driven origination platform.

    02

    Portfolio Fundamentals and Diversification

    The portfolio ended the quarter with 2,493 properties and over 500 tenants, maintaining strong occupancy at 99.6%. Weighted average lease term is over 14 years with 1.9% annual escalations. Portfolio rent coverage remained stable at 3.5x, and the percentage of ABR with rent coverage below 1.5x declined by 50 basis points sequentially. Top 10 tenants represent 15.2% of ABR, and top industry exposure (car wash, medical dental, early child education) was reduced to 12.6% of ABR, highlighting broad diversification.

    03

    Capital Structure and Liquidity

    The company's capital position is robust, with pro forma net debt to annualized adjusted EBITDA at 3.5x and total available liquidity of $1.7 billion. This was bolstered by a $400 million 10-year unsecured bond offering with a 5-3/8% coupon. Approximately $85 million of equity was raised through ATM and OP unit transactions, leaving $575 million of unsettled forward equity at quarter-end, providing ample capacity for future growth.

    04

    Asset Management and Dispositions

    Essential Properties disposed of $54.3 million of assets at a weighted average cap rate of 7.3% during the quarter, driven by proactive asset management decisions. Management expects disposition activity to moderate to a normalized level of $20 million to $30 million per quarter, continuing to prune the portfolio for risk management and credit exposure.

    05

    Loan Book Management

    The loan portfolio balance is approximately $400 million, with repayments occurring at a 9.3% yield. While loans are structured similarly to sale-leaseback investments, the company's preference is for real estate ownership. The loan loss reserve was increased this quarter due to management conservatism, but the loan book remains current with no non-accrual loans, indicating stable tenant credit trends.

    06

    Technology and Efficiency

    The company is investing in its technology platform and utilizing AI across sourcing, property management, and asset management to enhance efficiency and improve investment processes. This strategic investment aims to support continued growth while rationalizing G&A over time⏳.

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