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Section 1: 8-K (8-K PRESS RELEASE Q1 2019 EARNINGS)

eprt-8k_20190508.DOCX.htm

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

 

CURRENT REPORT

 

Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934

 

May 8, 2019

Date of Report (Date of earliest event reported)

 

Essential Properties Realty Trust, Inc.

(Exact name of registrant as specified in its charter)

 

 

Maryland

(State or other jurisdiction of incorporation)

 

 

001-38530

(Commission File Number)

 

 

82-4005693

(IRS Employer Identification No.)

 

902 Carnegie Center Blvd., Suite 520
Princeton, New Jersey

(Address of principal executive offices)

 

 

08540

(Zip Code)

 

 

Registrant’s telephone number, including area code: (609) 436-0619

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligations of the registrant under any of the following provisions:

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

 

 

 


 


Item 2.02 — Results of Operations and Financial Condition.

On May 8, 2019, Essential Properties Realty Trust, Inc. (the “Company”) issued a press release announcing the Company’s financial results for the three months ended March 31, 2019. The press release is furnished hereto as Exhibit 99.1 and incorporated herein by reference.

Item 7.01— Regulation FD Disclosure.

On May 8, 2019, the Company issued its Supplemental Operating & Financial Data—First Quarter Ended March 31, 2019. The Supplemental Operating & Financial Data is furnished hereto as Exhibit 99.2 and incorporated herein by reference.

The foregoing information is furnished pursuant to Item 2.02, “Results of Operations and Financial Condition,” and Item 7.01, “Regulation FD Disclosure.”  The information in Items 2.02 and 7.01 of this Current Report on Form 8‑K and the exhibits furnished therewith shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that Section, and shall not be or be deemed to be incorporated by reference in any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, regardless of any general incorporation language in such filing.

Item 9.01 — Financial Statements and Exhibits.

(d) Exhibits.

 

Exhibit No.

Description

99.1

Earnings Press Release dated May 8, 2019 for the quarter ended March 31, 2019

99.2

Supplemental Operating & Financial Data—First Quarter Ended March 31, 2019

 


 


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

ESSENTIAL PROPERTIES REALTY TRUST, INC.

 

 

 

 

Date:  May 8, 2019

 

By:

/s/ Hillary P. Hai

 

 

 

Hillary P. Hai

 

 

 

Chief Financial Officer

 

 

 

(Back To Top)

Section 2: EX-99.1 (EX-99.1)

eprt-ex991_7.htm

Exhibit 99.1

Essential Properties Announces First Quarter 2019 Results

 

- Raised $234.6 Million in Net Proceeds from First Follow-On Offering of 14,030,000 Shares -

- Closed Investments of $118.2 Million at a 7.5% Weighted Average Cash Cap Rate -

- Same-Store Contractual Cash Rent Grew 1.8% in the First Quarter -

- Reiterates 2019 AFFO per Share Guidance Range -

 

May 8, 2019

 

PRINCETON, N.J.--(BUSINESS WIRE)--Essential Properties Realty Trust, Inc. (NYSE: EPRT; “Essential Properties” or the “Company”), today announced operating results for the three months ended March 31, 2019.

 

First Quarter 2019 Financial and Operating Highlights

 

 

Completed first follow-on offering in March of 14,030,000 shares at $17.50 raising $234.6 million in net proceeds

 

Ended the first quarter at 99.9% leased with a weighted average lease term (“WALT”) of 14.5 years and a weighted average rent coverage ratio of 2.8x

 

Grew Same-Store Contractual Cash Rents by 1.8%

 

Reduced top 10 tenant concentration to 30.7%, a 240 bps sequential decline

 

Invested $118.2 million in 51 properties at a 7.5% weighted average cash cap rate

 

Net income increased to $8.7 million, or $0.13 per share on a fully diluted basis

 

Increased Funds from Operations (“FFO”) to $18.6 million, or $0.29 per share on a fully diluted basis

 

Increased Adjusted Funds from Operations (“AFFO”) to $17.9 million, or $0.27 per share on a fully diluted basis

 

Net debt to Annualized Adjusted EBITDAre was 3.7x at quarter end

 

CEO Comments

 

Commenting on the first quarter results, Essential Properties’ President and Chief Executive Officer, Pete Mavoides, said, “The first quarter was transformative for the Company. Our first follow-on offering in March meaningfully increased our float and liquidity while further broadening of base of institutional investors. During the quarter, we continued to execute our investment strategy of sourcing relationship-driven sale-leaseback transactions with middle-market tenants, which served to further diversify our portfolio, lower our top 10 tenant concentration, and lengthen our weighted average lease term. In addition, the newer vintage nature of our portfolio helped drive both a 1.8% increase in same-store contractual cash NOI and strong occupancy with just one vacant asset at quarter-end. Lastly, with a low levered balance sheet and our recently expanded $600 million unsecured credit facility being fully available, we have ample capital capacity to execute on our growing investment pipeline into 2020.”


Financial Results

 

Total Revenue

Total revenue for the quarter ended March 31, 2019 increased to $31.1 million, as compared to $20.2 million for the same quarter in 2018.

 

Net Income

Net income for the quarter ended March 31, 2019 increased to $8.7 million, as compared to $1.1 million for the same quarter in 2018.

 

Funds from Operations

FFO for the quarter ended March 31, 2019 increased to $18.6 million, as compared to $8.2 million for the same quarter in 2018.

 

Adjusted Funds from Operations

AFFO for the quarter ended March 31, 2019 increased to $17.9 million, as compared to $7.4 million for the same quarter in 2018.

 

Dividend Information

As previously announced, on March 8, 2019 Essential Properties declared a cash dividend of $0.21 per share of common stock for the quarter ended March 31, 2019. The dividend was paid on April 16, 2019 to stockholders of record as of the close of business on March 31, 2019.

 

Net Investment Activity

Acquisitions

During the quarter ended March 31, 2019, Essential Properties invested $118.2 million in 51 properties in 35 separate transactions at a weighted average cash and GAAP cap rate of 7.5% and 8.4%, respectively. These properties are 100% leased with a WALT of 15.1 years. As a percentage of cash ABR, 77.6% of the Company’s acquisitions for the quarter ended March 31, 2019 came from sale-leaseback transactions, 47.1% were subject to a master lease and 100% are required to provide the Company with financial reporting.

 

Dispositions

During the quarter ended March 31, 2019, Essential Properties sold seven properties for $10.5 million, recording a net gain on these dispositions of $0.7 million. The disposition weighted average cash cap rate on the properties sold in the quarter ended March 31, 2019, all of which were leased at the time of sale, was 6.6%.

 

 

 


Portfolio Update

 

Portfolio Highlights

As of March 31, 2019, Essential Properties’ portfolio consisted of 711 freestanding net lease properties, which included three properties that secured mortgage notes receivable, with a WALT of 14.5 years and a weighted average rent coverage ratio of 2.8x. As of the same date, the portfolio was 99.9% leased by 172 tenants operating 197 different concepts across 44 states in 16 distinct industries. At quarter end, 91.7% of the Company’s cash ABR was generated from tenants that operate service-oriented or experience-based businesses, and 61.9% of its cash ABR was derived from properties subject to a master lease.

 

Leasing Activity

During the quarter ended March 31, 2019, the Company had one vacant property, which is currently being marketed for sale or lease. In addition, the Company signed one new lease without vacancy at a 108% recovery rate.

 

Capital Markets, Leverage and Balance Sheet and Liquidity

 

Capital Markets Activity

On March 18, 2019, the Company closed an underwritten public offering of 14,030,000 shares of its common stock, including 1,830,000 shares of common stock purchased by the underwriters pursuant to an option to purchase additional shares, at an offering price of $17.50 per share. In total, the Company received approximately $234.6 million in net proceeds from the transaction.

 

Leverage

As of March 31, 2019, the Company’s ratio of net debt to Annualized Adjusted EBITDAre was 3.7x.

 

Balance Sheet and Liquidity

Essential Properties had no outstanding borrowings under its $300 million unsecured revolving credit facility as of March 31, 2019. In addition, the Company had $114.0 million of cash and cash equivalents and restricted cash as of March 31, 2019.

 

On April 12, 2019, the Company amended its pre-existing credit facility to, among other things, i) increase the maximum aggregate initial original principal amount of revolving loans available to $400 million, ii) extend the term of the facility to four years from the date of amendment, iii) reduce the interest rate on the facility to LIBOR plus 1.25% to 1.85% and iv) permit the incurrence of an additional $200 million in term loans thereunder on a non-revolving basis. The amended credit facility includes an accordion feature to increase, subject to certain conditions, the maximum availability of the facility by up to $200 million.

 

 


2019 Guidance

 

The Company reiterates its previously issued expectation that 2019 AFFO per share on a fully diluted basis will be within a range of $1.11 to $1.15. This AFFO per share guidance equates to anticipated net income, excluding gains or losses on sales of property, of $0.50 to $0.54 per share, plus $0.63 to $0.64 per share of expected real estate depreciation and amortization, minus $0.02 to $0.03 per share related to non-cash items.

 

Conference Call Information

 

In conjunction with the release of Essential Properties’ operating results, the Company will host a conference call on May 9, 2019 at 10:00 a.m. EDT to discuss the results. To access the conference, dial (866) 682-6100. A live webcast will also be available in listen-only mode by clicking on the webcast link in the Investor Relations section at www.essentialproperties.com.  

 

A telephone replay of the conference call can also be accessed by calling (877) 481-4010 and entering the access code: 47135. The telephone replay will be available through May 23, 2019.

 

A replay of the conference call webcast will be available approximately two hours after the conclusion of the live broadcast. The webcast replay will be available for 90 days. No access code is required for this replay.

 

Supplemental Materials

 

The Company’s Supplemental Operating & Financial Data—First Quarter Ended March 31, 2019 is available on Essential Properties’ website at investors.essentialproperties.com.

 

About Essential Properties Realty Trust, Inc.

 

Essential Properties Realty Trust, Inc. is an internally managed real estate company that acquires, owns and manages primarily single-tenant properties that are net leased on a long-term basis to companies operating service-oriented or experience-based businesses. As of March 31, 2019, the Company’s portfolio consisted of 711 freestanding net lease properties with a weighted average lease term of 14.5 years and a weighted average rent coverage ratio of 2.8x. As of the same date, the Company’s portfolio was 99.9% leased to 172 tenants operating 197 different concepts in 16 distinct industries across 44 states.

 

Forward-Looking Statements

 

This press release contains forward-looking statements within the meaning of the federal securities laws. When used in this press release, the words “estimate,” “anticipate,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “seek,” “approximately” or “plan,” or the negative of these words and phrases or similar words or phrases that are predictions of or indicate future events or trends and that do not relate solely to historical matters are intended to identify forward-looking statements. You can also identify forward-looking statements by discussions of strategy, plans or intentions of management.  Forward-looking statements involve numerous


risks and uncertainties and you should not rely on them as predictions of future events. Forward-looking statements depend on assumptions, data or methods that may be incorrect or imprecise and the Company may not be able to realize them. The Company does not guarantee that the transactions and events described will happen as described (or that they will happen at all). You are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of this press release. While forward-looking statements reflect the Company’s good faith beliefs, they are not guarantees of future performance. The Company undertakes no obligation to publicly release the results of any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date of this press release or to reflect the occurrence of unanticipated events, except as required by law. In light of these risks and uncertainties, the forward-looking events discussed in this press release might not occur as described, or at all.

 

Additional information concerning factors that could cause actual results to differ materially from these forward-looking statements is contained from time to time in the company’s Securities and Exchange Commission (the "Commission”) filings, including, but not limited to, the Company’s Quarterly Reports on Form 10-Q. Copies of each filing may be obtained from the Company or the Commission. Such forward-looking statements should be regarded solely as reflections of the company’s current operating plans and estimates. Actual operating results may differ materially from what is expressed or forecast in this press release.

 

The results reported in this press release are preliminary and not final. There can be no assurance that these results will not vary from the final results reported in the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2019 that it will file with the Commission.

 

Non-GAAP Financial Measures and Certain Definitions

 

The Company’s reported results are presented in accordance with GAAP. The Company also discloses the following non-GAAP financial measures: funds from operations (“FFO”), adjusted funds from operations (“AFFO”), earnings before interest, taxes, depreciation and amortization (“EBITDA”), EBITDA further adjusted to exclude gains (or losses) on sales of depreciable property and real estate impairment losses (“EBITDAre”), adjusted EBITDAre, annualized adjusted EBITDAre, net debt, net operating income (“NOI”) and cash NOI (“Cash NOI”). The Company believes these non-GAAP financial measures are accepted industry measures used by analysts and investors to compare the operating performance of REITs.

 

FFO and AFFO

 

The Company computes FFO in accordance with the definition adopted by the Board of Governors of the National Association of Real Estate Investment Trusts ("NAREIT"). NAREIT defines FFO as GAAP net income or loss adjusted to exclude extraordinary items (as defined by GAAP), net gain or loss from sales of depreciable real estate assets, impairment write-downs associated with depreciable real estate assets and real estate-related depreciation and amortization (excluding amortization of deferred financing costs and depreciation of non-real estate assets), including the pro rata share of such adjustments of unconsolidated subsidiaries. FFO is used by management, investors and analysts to facilitate meaningful comparisons of


operating performance between periods and among the Company’s peers primarily because it excludes the effect of real estate depreciation and amortization and net gains on sales (which are dependent on historical costs and implicitly assume that the value of real estate diminishes predictably over time, rather than fluctuating based on existing market conditions).

 

To derive AFFO, the Company modifies the NAREIT computation of FFO to include other adjustments to GAAP net income related to certain items that it believes are not indicative of the Company’s core operating performance, including straight-line rental revenue, non-cash interest expense, non-cash compensation expense, other amortization and non-cash charges, capitalized interest expense and transaction costs. Such items may cause short-term fluctuations in net income but have no impact on operating cash flows or long-term operating performance. The Company believes that AFFO is an additional useful supplemental measure for investors to consider because it will help them to better assess the Company’s operating performance without the distortions created by non-cash and certain other revenues and expenses.

 

FFO and AFFO do not include all items of revenue and expense included in net income, nor do they represent cash generated from operating activities, and they are not necessarily indicative of cash available to fund cash requirements; accordingly, they should not be considered alternatives to net income as a performance measure or cash flows from operations as a liquidity measure and should be considered in addition to, and not in lieu of, GAAP financial measures. FFO and AFFO may not be comparable to similarly titled measures reported by other companies.

 

EBITDA and EBITDAre

 

The Company calculates EBITDA as earnings before interest, income taxes and depreciation and amortization. In 2017, NAREIT issued a white paper recommending that companies that report EBITDA also report EBITDAre. The Company computes EBITDAre in accordance with the definition adopted by NAREIT. NAREIT defines EBITDAre as EBITDA (as defined above) excluding gains (or losses) from the sales of depreciable property and real estate impairment losses. The Company presents EBITDA and EBITDAre as they are measures commonly used in its industry and the Company believes that these measures are useful to investors and analysts because they provide important supplemental information concerning its operating performance, exclusive of certain non-cash items and other costs. The Company uses EBITDA and EBITDAre as measures of its operating performance and not as measures of liquidity.

 

EBITDA and EBITDAre are not measures of financial performance under GAAP, and the Company’s EBITDA and EBITDAre may not be comparable to similarly titled measures reported by other companies. You should not consider EBITDA and EBITDAre as alternatives to net income or cash flows from operating activities determined in accordance with GAAP.

 

Net Debt

 

The Company calculates its net debt as our gross debt (defined as total debt plus net deferred financing costs on its secured borrowings) less cash and cash equivalents and restricted cash deposits held for the benefit of lenders. The Company believes excluding cash and cash equivalents and restricted cash deposits held for the benefit of lenders from gross debt, all of


which could be used to repay debt, provides an estimate of the net contractual amount of borrowed capital to be repaid, which it believes is a beneficial disclosure to investors and analysts.

 

NOI and Cash NOI

 

The Company calculates NOI as total revenues less property expenses. NOI excludes all other items of expense and income included in the financial statements in calculating net income or loss. Cash NOI further excludes non-cash items included in total revenues and property expenses, such as straight-line rental revenue and other amortization and non-cash charges. The Company believes NOI and Cash NOI provide useful and relevant information because they reflect only those income and expense items that are incurred at the property level and present such items on an unlevered basis.

 

NOI and Cash NOI are not measures of financial performance under GAAP, and the Company’s NOI and Cash NOI may not be comparable to similarly titled measures reported by other companies. You should not consider the Company’s NOI and Cash NOI as alternatives to net income or cash flows from operating activities determined in accordance with GAAP.

 

Adjusted EBITDAre / Adjusted NOI / Adjusted Cash NOI

 

The Company adjusts EBITDAre, NOI and Cash NOI based on an estimate calculated as if all acquisition and disposition activity that took place during the current quarter had occurred on the first day of the quarter. The Company then annualizes these estimates for the current quarter by multiplying them by four, which it believes provides a meaningful estimate of the Company’s current run rate for all properties owned as of the end of the current quarter. You should not unduly rely on these measures as they are based on assumptions and estimates that may prove to be inaccurate. The Company’s actual reported EBITDAre, NOI and Cash NOI for future periods may be significantly less than these estimates of current run rates for a variety of reasons.

 

Cash ABR

 

Cash ABR means annualized contractually specified cash base rent in effect as of the end of the current quarter for all of the Company’s leases (including those accounted for as direct financing leases) commenced as of that date and annualized cash interest on its mortgage loans receivable as of that date.

 

Cash Cap Rate

 

Cash Cap Rate means annualized contractually specified cash base rent for the first full month after acquisition or disposition divided by the purchase or sale price, as applicable, for the property.

 


GAAP Cap Rate

 

GAAP Cap Rate means annualized rental income computed in accordance with GAAP for the first full month after acquisition divided by the purchase price, as applicable, for the property.

 

Rent Coverage Ratio

 

Rent coverage ratio means the ratio of tenant-reported or, when unavailable, management’s estimate based on tenant-reported financial information, annual EBITDA and cash rent attributable to the leased property (or properties, in the case of a master lease) to the annualized base rental obligation as of a specified date.

 



Essential Properties Realty Trust, Inc.

Consolidated Statements of Operations

 

 

 

Three Months Ended March 31,

 

(in thousands, except share and per share data)

 

2019

 

 

2018

 

 

 

(Unaudited)

 

 

(Unaudited)

 

Revenues:

 

 

 

 

 

 

 

 

Rental revenue1,2

 

$

30,774

 

 

$

20,093

 

Interest income on loans and direct financing leases

 

 

326

 

 

 

70

 

Other revenue

 

 

7

 

 

 

4

 

Total revenues

 

 

31,107

 

 

 

20,167

 

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

Interest

 

 

7,089

 

 

 

8,276

 

General and administrative

 

 

4,188

 

 

 

3,356

 

Property expenses3

 

 

1,247

 

 

 

347

 

Depreciation and amortization

 

 

9,120

 

 

 

6,468

 

Provision for impairment of real estate

 

 

1,440

 

 

 

1,849

 

Total expenses

 

 

23,084

 

 

 

20,296

 

Other operating income:

 

 

 

 

 

 

 

 

Gain on dispositions of real estate, net

 

 

676

 

 

 

1,232

 

Income from operations

 

 

8,699

 

 

 

1,103

 

Other income:

 

 

 

 

 

 

 

 

Interest

 

 

91

 

 

 

36

 

Income before income tax expense

 

 

8,790

 

 

 

1,139

 

Income tax expense

 

 

67

 

 

 

30

 

Net income

 

 

8,723

 

 

 

1,109

 

Net income attributable to non-controlling interests

 

 

(2,594

)

 

 

 

Net income attributable to stockholders and members

 

$

6,129

 

 

$

1,109

 

 

 

 

 

 

 

 

 

 

Basic weighted average shares outstanding

 

 

45,240,246

 

 

 

 

 

Basic net income per share

 

$

0.13

 

 

 

 

 

Diluted weighted average shares outstanding

 

 

64,640,054

 

 

 

 

 

Diluted net income per share

 

$

0.13

 

 

 

 

 

 

1.

Includes contingent rent (based on a percentage of the tenant's gross sales at the leased property) of $349 and $515 for the three months ended March 31, 2019 and 2018, respectively.

2.

Includes reimbursable income from our tenants of $743 and $18 for the three months ended March 31, 2019 and 2018, respectively.

3.

Includes reimbursable expenses from our tenants of $743 and $18 for the three months ended March 31, 2019 and 2018, respectively.


Essential Properties Realty Trust, Inc.

Consolidated Balance Sheets

 

(in thousands, except share and per share amounts)

 

March 31, 2019

 

 

 

 

December 31, 2018

 

 

 

(Unaudited)

 

 

 

 

(Audited)

 

ASSETS

 

 

 

 

 

 

 

 

 

 

Investments:

 

 

 

 

 

 

 

 

 

 

Real estate investments, at cost:

 

 

 

 

 

 

 

 

 

 

Land and improvements

 

$

451,459

 

 

 

 

$

420,848

 

Building and improvements

 

 

956,497

 

 

 

 

 

885,656

 

Lease incentives

 

 

4,794

 

 

 

 

 

2,794

 

Construction in progress

 

 

2,460

 

 

 

 

 

1,325

 

Intangible lease assets

 

 

69,132

 

 

 

 

 

66,421

 

Total real estate investments, at cost

 

 

1,484,342

 

 

 

 

 

1,377,044

 

Less: accumulated depreciation and amortization

 

 

(60,230

)

 

 

 

 

(51,855

)

Total real estate investments, net

 

 

1,424,112

 

 

 

 

 

1,325,189

 

Loans and direct financing lease receivables, net

 

 

11,943

 

 

 

 

 

17,505

 

Real estate investments held for sale, net

 

 

3,765

 

 

 

 

 

 

Net investments

 

 

1,439,820

 

 

 

 

 

1,342,694

 

Cash and cash equivalents

 

 

109,113

 

 

 

 

 

4,236

 

Restricted cash

 

 

4,910

 

 

 

 

 

12,003

 

Straight-line rent receivable, net

 

 

16,615

 

 

 

 

 

14,255

 

Prepaid expenses and other assets, net

 

 

10,072

 

 

 

 

 

7,712

 

Total assets

 

$

1,580,530

 

 

 

 

$

1,380,900

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

 

 

 

Secured borrowings, net of deferred financing costs

 

$

504,727

 

 

 

 

$

506,116

 

Revolving credit facility

 

 

 

 

 

 

 

34,000

 

Intangible lease liabilities, net

 

 

10,074

 

 

 

 

 

11,616

 

Dividend payable

 

 

16,145

 

 

 

 

 

13,189

 

Accrued liabilities and other payables

 

 

10,093

 

 

 

 

 

4,938

 

Total liabilities

 

 

541,039

 

 

 

 

 

569,859

 

Commitments and contingencies

 

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

 

 

 

 

Preferred stock, $0.01 par value; 150,000,000 authorized; none issued and outstanding as of March 31, 2019 and December 31, 2018

 

 

 

 

 

 

 

 

Common stock, $0.01 par value; 500,000,000 authorized; 57,825,460 and 43,749,092 issued and outstanding as of March 31, 2019 and December 31, 2018, respectively

 

 

571

 

 

 

 

 

431

 

Additional paid-in capital

 

 

805,139

 

 

 

 

 

569,407

 

Distributions in excess of cumulative earnings

 

 

(13,673

)

 

 

 

 

(7,659

)

Total stockholders' equity

 

 

792,037

 

 

 

 

 

562,179

 

Non-controlling interests

 

 

247,454

 

 

 

 

 

248,862

 

Total equity

 

 

1,039,491

 

 

 

 

 

811,041

 

Total liabilities and equity

 

$

1,580,530

 

 

 

 

$

1,380,900

 

 


Essential Properties Realty Trust, Inc.

Reconciliation of Non-GAAP Financial Measures

 

 

 

Three Months Ended March 31,

 

(unaudited, in thousands except per share amounts)

 

2019

 

 

2018

 

Net income

 

$

8,723

 

 

$

1,109

 

Depreciation and amortization of real estate

 

 

9,097

 

 

 

6,467

 

Provision for impairment of real estate

 

 

1,440

 

 

 

1,849

 

Gain on dispositions of real estate, net

 

 

(676

)

 

 

(1,232

)

Funds from Operations

 

 

18,584

 

 

 

8,193

 

Adjustments:

 

 

 

 

 

 

 

 

Straight-line rental revenue, net

 

 

(2,903

)

 

 

(1,650

)

Non-cash interest expense

 

 

816

 

 

 

576

 

Non-cash compensation expense

 

 

1,226

 

 

 

178

 

Other amortization and non-cash charges

 

 

231

 

 

 

176

 

Capitalized interest expense

 

 

(25

)

 

 

(53

)

Transaction costs

 

 

 

 

 

8

 

Adjusted Funds from Operations

 

$

17,929

 

 

$

7,428

 

 

 

 

 

 

 

 

 

 

Net income per share1:

 

 

 

 

 

 

 

 

Basic

 

$

0.13

 

 

 

 

 

Diluted

 

$

0.13

 

 

 

 

 

FFO per share1:

 

 

 

 

 

 

 

 

Basic

 

$

0.29

 

 

 

 

 

Diluted

 

$

0.29

 

 

 

 

 

AFFO per share1:

 

 

 

 

 

 

 

 

Basic

 

$

0.28

 

 

 

 

 

Diluted

 

$

0.27

 

 

 

 

 

 

1.

Calculations exclude $155 from the numerator related to dividends paid on unvested restricted share awards.


Essential Properties Realty Trust, Inc.

Reconciliation of Non-GAAP Financial Measures

 

 

 

Three Months Ended

 

(in thousands)

 

March 31, 2019

 

Net income

 

$

8,723

 

Depreciation and amortization

 

 

9,120

 

Interest expense

 

 

7,089

 

Interest income

 

 

(91

)

Income tax expense

 

 

67

 

EBITDA

 

 

24,908

 

Provision for impairment of real estate

 

 

1,440

 

Gain on dispositions of real estate, net

 

 

(676

)

EBITDAre

 

 

25,672

 

Adjustment for current quarter acquisition and disposition activity 1

 

 

1,629

 

Adjustment to exclude certain percentage rent 2

 

 

(263

)

Adjusted EBITDAre - Current Estimated Run Rate

 

 

27,038

 

General and administrative

 

 

4,188

 

Adjusted net operating income ("NOI")

 

 

31,226

 

Straight-line rental revenue, net 1

 

 

(3,089

)

Other amortization and non-cash charges

 

 

229

 

Adjusted Cash NOI

 

$

28,366

 

 

 

 

 

 

Annualized EBITDAre

 

$

102,688

 

Annualized Adjusted EBITDAre

 

$

108,152

 

Annualized Adjusted NOI

 

$

124,904

 

Annualized Adjusted Cash NOI

 

$

113,464

 

 

1.

Adjustment assumes all acquisitions and dispositions of real estate investments made during the three months ended March 31, 2019 had occurred on January 1, 2019.

2.

Adjustment excludes contingent rent (based on a percentage of the tenant's gross sales at the leased property) where payment is subject to exceeding a sales threshold specified in the lease.



Essential Properties Realty Trust, Inc.

Reconciliation of Non-GAAP Financial Measures

 

(dollars in thousands, except share and per share amounts)

 

March 31, 2019

 

Secured debt:

 

 

 

 

Series 2016-1, Class A

 

$

254,020

 

Series 2016-1, Class B

 

 

17,243

 

Series 2017-1, Class A

 

 

226,223

 

Series 2017-1, Class B

 

 

15,669

 

Total secured debt

 

 

513,155

 

 

 

 

 

 

Unsecured debt:

 

 

 

 

Revolving credit facility 1

 

 

 

Total unsecured debt

 

 

 

Gross debt

 

 

513,155

 

      Less: cash & cash equivalents

 

 

(109,113

)

Less: restricted cash deposits held for the benefit of lenders

 

 

(4,910

)

Net debt

 

 

399,132

 

 

 

 

 

 

Equity:

 

 

 

 

Preferred stock

 

 

 

Common stock & OP units (76,882,012 shares @ $19.52/share as of 3/31/19) 2

 

 

1,500,737

 

Total equity

 

 

1,500,737

 

Total enterprise value ("TEV")

 

$

1,899,869

 

 

 

 

 

 

Net Debt / TEV

 

 

21.0

%

Net Debt / Annualized EBITDAre

 

 

3.9

x

Net Debt / Annualized Adjusted EBITDAre

 

 

3.7

x

 

1.

The Company’s revolving credit facility provided a maximum aggregate initial original principal amount of up to $300 million as of March 31, 2019 and includes an accordion feature to increase, subject to certain conditions, the maximum availability of the facility by up to $200 million. In April 2019, the Company amended the facility to, among other things, i) increase the maximum aggregate initial original principal amount of revolving loans available to $400 million, ii) extend the term of the facility to four years from the date of amendment, iii) reduce the interest rate on the facility to LIBOR plus 1.25% to 1.85% and iv) permit the incurrence of an additional $200 million in term loans thereunder on a non-revolving basis.

2.

Common equity & units as of March 31, 2019, based on 57,825,460 common shares outstanding (including unvested restricted share awards) and 19,056,552 OP units held by non-controlling interests



Investor/Media:

Essential Properties Realty Trust, Inc.

Daniel Donlan

Senior Vice President, Capital Markets

609-436-0619

[email protected]

 

Source: Essential Properties Realty Trust, Inc.

(Back To Top)

Section 3: EX-99.2 (EX-99.2)

eprt-ex992_6.pptx.htm

Slide 0

Supplemental Operating & Financial Data First Quarter Ended March 31, 2019 Exhibit 99.2

Slide 1

Table of Contents 242, 242, 242 Financial Summary Consolidated Statements of Operations 2 Funds from Operations and Adjusted Funds from Operations 3 Consolidated Balance Sheets 4 GAAP Reconciliations to EBITDAre, GAAP NOI and Cash NOI 5 Market Capitalization, Debt Summary and Leverage Metrics 6 Net Investment Activity Investment Summary 7 Disposition Summary 8 Portfolio Summary Portfolio Highlights 9 Tenant and Industry Diversification 10 Portfolio Health 11 Leasing Summary Leasing Expiration Schedule, Leasing Activity and Statistics 12 Same-Store Analysis 13 Lease Escalations 14 Glossary 15-17

Slide 2

Financial Summary Consolidated Statements of Operations 242, 242, 242 Includes contingent rent (based on a percentage of the tenant's gross sales at the leased property) of $349 and $515 for the three months ended March 31, 2019 and 2018, respectively. Includes reimbursable income from our tenants of $743 and $18 for the three months ended March 31, 2019 and 2018, respectively. Includes reimbursable expenses from our tenants of $743 and $18 for the three months ended March 31, 2019 and 2018, respectively.     Three Months Ended March 31, (in thousands, except share and per share data)   2019   2018     (unaudited)   (unaudited) Revenues: Rental revenue1,2   $ 30,774   $ 20,093 Interest income on loans and direct financing leases 326 70 Other revenue   7   4 Total revenues 31,107 20,167           Expenses: Interest   7,089   8,276 General and administrative 4,188 3,356 Property expenses3   1,247   347 Depreciation and amortization 9,120 6,468 Provision for impairment of real estate   1,440   1,849 Total expenses 23,084 20,296 Other operating income:         Gain on dispositions of real estate, net 676 1,232 Income from operations   8,699   1,103 Other income: Interest   91   36 Income before income tax expense 8,790 1,139 Income tax expense   67   30 Net income 8,723 1,109 Net income attributable to non-controlling interests   (2,594)   — Net income attributable to stockholders and members $ 6,129 $ 1,109           Basic weighted average shares outstanding 45,240,247 Basic net income per share   $ 0.13     Diluted weighted average shares outstanding 64,640,054 Diluted net income per share   $ 0.13    

Slide 3

Financial Summary Funds from Operations (FFO) and Adjusted Funds from Operations (AFFO) 242, 242, 242 Calculations exclude $155 from the numerator related to dividends paid on our unvested restricted share awards.     Three Months Ended March 31, (unaudited, in thousands except per share amounts)   2019   2018 Net income   $ 8,723   $ 1,109 Depreciation and amortization of real estate   9,097   6,467 Provision for impairment of real estate   1,440   1,849 Gain on dispositions of real estate, net   (676)   (1,232) Funds from Operations   18,584   8,193 Adjustments:         Straight-line rental revenue, net   (2,903)   (1,650) Non-cash interest expense   816   576 Non-cash compensation expense   1,226   178 Other amortization and non-cash charges   231   176 Capitalized interest expense   (25)   (53) Transaction costs — 8 Adjusted Funds from Operations   $ 17,929   $ 7,428 Net income per share1:         Basic $ 0.13 Diluted   $ 0.13     FFO per share1: Basic   $ 0.29     Diluted $ 0.29 AFFO per share1:         Basic $ 0.28 Diluted   $ 0.27    

Slide 4

Financial Summary Consolidated Balance Sheets 242, 242, 242     March 31, 2019   December 31, 2018 (in thousands, except share and per share amounts)   (unaudited)   (audited) ASSETS         Investments: Real estate investments, at cost:         Land and improvements $ 451,459 $ 420,848 Building and improvements   956,497   885,656 Lease incentives 4,794 2,794 Construction in progress   2,460   1,325 Intangible lease assets 69,132 66,421 Total real estate investments, at cost   1,484,342   1,377,044 Less: accumulated depreciation and amortization (60,230) (51,855) Total real estate investments, net   1,424,112   1,325,189 Loans and direct financing lease receivables, net 11,943 17,505 Real estate investments held for sale, net   3,765   — Net investments 1,439,820 1,342,694 Cash and cash equivalents   109,113   4,236 Restricted cash 4,910 12,003 Straight-line rent receivable, net   16,615   14,255 Prepaid expenses and other assets, net 10,072 7,712 Total assets   $ 1,580,530   $ 1,380,900 LIABILITIES AND EQUITY         Secured borrowings, net of deferred financing costs $ 504,727 $ 506,116 Revolving credit facility   —   34,000 Intangible lease liabilities, net 10,074 11,616 Dividend payable   16,145   13,189 Accrued liabilities and other payables 10,093 4,938 Total liabilities   541,039   569,859 Commitments and contingencies — — Stockholders' equity:         Preferred stock, $0.01 par value; 150,000,000 authorized; none issued and outstanding as of March 31, 2019 and December 31, 2018 — — Common stock, $0.01 par value; 500,000,000 authorized; 57,825,460 and 43,749,092 issued and outstanding as of March 31, 2019 and December 31, 2018, respectively   571   431 Additional paid-in capital 805,139 569,407 Distributions in excess of cumulative earnings   (13,673)   (7,659) Total stockholders' equity 792,037 562,179 Non-controlling interests   247,454   248,862 Total equity 1,039,491 811,041 Total liabilities and equity   $ 1,580,530   $ 1,380,900

Slide 5

Financial Summary GAAP Reconciliations to EBITDAre, GAAP NOI, Cash NOI and Estimated Run Rate Metrics 242, 242, 242 These adjustments are made to reflect EBITDAre, NOI and Cash NOI as if all acquisitions and dispositions of real estate investments made during the three months ended March 31, 2019 had occurred on January 1, 2019. Adjustment excludes contingent rent (based on a percentage of the tenant's gross sales at the leased property) where payment is subject to exceeding a sales threshold specified in the lease.     Three Months Ended (unaudited, in thousands)   March 31, 2019 Net income   $ 8,723 Depreciation and amortization   9,120 Interest expense   7,089 Interest income (91) Income tax expense   67 EBITDA 24,908 Provision for impairment of real estate   1,440 Gain on dispositions of real estate, net (676) EBITDAre   25,672 Adjustment for current quarter acquisition and disposition activity1 1,629 Adjustment to exclude certain percentage rent 2   (263) Adjusted EBITDAre - Current Estimated Run Rate 27,038 General and administrative   4,188 Adjusted net operating income ("NOI") 31,226 Straight-line rental revenue, net1   (3,089) Other amortization and non-cash charges 229 Adjusted Cash NOI   $ 28,366 Annualized EBITDAre   $ 102,688 Annualized Adjusted EBITDAre $ 108,152 Annualized Adjusted NOI   $ 124,904 Annualized Adjusted Cash NOI $ 113,464

Slide 6

Financial Summary Market Capitalization, Debt Summary and Leverage Metrics 242, 242, 242 Maturity figures for our secured debt are based off of our anticipated repayment schedule. The Series 2016-1 notes mature in November 2046 but have an anticipated repayment date of November 2021. The Series 2017-1 notes mature in June 2047 but have an anticipated repayment date of June 2024. Our revolving credit facility provided a maximum aggregate initial original principal amount of up to $300 million as of March 31, 2019 and includes an accordion feature to increase, subject to certain conditions, the maximum availability of the facility by up to $200 million. In April 2019, we amended the facility to, among other things, i) increase the maximum aggregate initial original principal amount of revolving loans available to $400 million, ii) extend the term of the facility to four years from the date of amendment, iii) reduce the interest rate on the facility to LIBOR plus 1.25% to 1.85% and iv) permit the incurrence of an additional $200 million in term loans thereunder on a non-revolving basis. Common equity & units as of March 31, 2019, based on 57,825,460 common shares outstanding (including unvested restricted share awards) and 19,056,552 OP units held by non-controlling interests.               (dollars in thousands, except share and per share amounts) March 31, 2019 Rate Maturity1 Secured debt:             Series 2016-1, Class A $ 254,020 4.45% 2.7 years Series 2016-1, Class B   17,243   5.43%   2.7 years Series 2017-1, Class A 226,223 4.10% 5.2 years Series 2017-1, Class B   15,669   5.11%   5.2 years Total secured debt 513,155 4.35% 3.9 years               Unsecured debt: Revolving credit facility2   —   LIBOR plus 1.45% to 2.15%   3.2 years Total unsecured debt — Gross debt   513,155       3.9 years Less: cash & cash equivalents (109,113) Less: restricted cash deposits held for the benefit of lenders   (4,910)         Net debt 399,132               Equity: Preferred stock   —         Common stock & OP units (76,882,012 shares @ $19.52/share as of 3/31/19)3 1,500,737 Total equity   1,500,737         Total enterprise value ("TEV") $ 1,899,869               Net Debt / TEV 21.0% Net Debt / Annualized EBITDAre   3.9x         Net Debt / Annualized Adjusted EBITDAre 3.7x

Slide 7

Net Investment Activity Investment Summary 242, 242, 242 Cash ABR for the first full month after the investment divided by the purchase price for the property. GAAP rent for the first twelve months after the investment divided by the purchase price for the property. As a percentage of cash ABR for that particular quarter. In aggregate, includes the purchase of eight properties with no unit-level reporting per the lease; however, the Company was able to receive financials due to existing relationships with the tenants. Included a $5.7M mortgage loan that contractually converted to a 20 year master lease in 1Q’2019. Excludes one property securing $3.5 million of short-term financing. Investments 2Q 2017 3Q 2017 4Q 2017 1Q 2018 2Q 2018 3Q 20185 4Q 20186 1Q 2019 Number of Transactions 11 18 21 16 23 34 24 35 Property Count 37 50 90 28 86 62 39 51 Avg. Investment per Unit (in 000s) $2,474 $2,728 $1,742 $2,195 $2,438 $2,042 $2,572 $2,303 Cash Cap Rates1 7.6% 7.7% 7.7% 7.8% 7.6% 7.6% 7.6% 7.5% GAAP Cap Rates2 8.9% 8.9% 8.7% 8.3% 8.7% 8.5% 8.5% 8.4% Master Lease %3 71% 73% 65% 33% 82% 58% 57% 47% Sale-Leaseback %3 76% 94% 75% 68% 90% 77% 83% 78% % of Financial Reporting3 100% 98% 100% 100% 96%4 100% 90%4 100% Rent Coverage Ratio 4.0x 2.8x 3.1x 2.3x 2.4x 2.7x 2.8x 3.2x Lease Term Years 17.3 18.4 15.5 14.1 17.2 16.1 16.6 15.1

Slide 8

Net Investment Activity Disposition Summary 242, 242, 242 Net of transaction costs. Gains/(losses) based on our aggregate allocated purchase price. Cash ABR at time of sale divided by gross sale price (excluding transaction costs) for the property. Property count excludes dispositions in which only a portion of the owned parcel is sold. Excludes one property sold pursuant to an existing tenant purchase option. Excludes the sale of one leasehold property. Dispositions 2Q 2017 3Q 2017 4Q 2017 1Q 2018 2Q 2018 3Q 2018 4Q 2018 1Q 2019 Realized Gain/(Loss)1,2 8.9% 10.2% 15.9% (1.7%) 9.7%5 (6.6%)6 0.4% 2.9% Cash Cap Rate on Leased Assets3 6.5% 6.1% 6.4% 6.7% 7.1%5 6.8%6 6.9% 6.6% Leased Properties Sold4 6 8 9 5 8 17 7 7 Vacant Properties Sold4 8 6 3 1 2 4 1 -- Rent Coverage Ratio 2.0x 2.4x 1.8x 0.8x 2.1x5 1.8x6 1.8x 1.8x

Slide 9

Portfolio Summary Portfolio Highlights 242, 242, 242 Investment Properties (#)1 711 Square Footage (mm) 6.4 Tenants (#) 172 Concepts (#) 197 Industries (#) 16 States (#) 44 Weighted Average Remaining Lease Term (Years) 14.5 Triple-Net Leases (% of Cash ABR) 91.1% Master Leases (% of Cash ABR) 61.9% Sale-Leaseback (% of Cash ABR)2 82.0% Unit-Level Rent Coverage 2.8x Unit-Level Financial Reporting (% of Cash ABR) 97.7% Leased (%) 99.9% Top 10 Tenants (% of Cash ABR) 30.7% Average Investment Per Property ($mm) $2.1 Average Transaction Size ($mm)2 $6.4 Total Cash ABR ($mm) $115.1 Includes one undeveloped land parcel, one vacant site and three properties that secure investments in mortgage notes receivable. Exclusive of GE Seed Portfolio. As of March 31, 2019

Slide 10

Portfolio Summary Tenant and Industry Diversification 242, 242, 242 Top 10 Tenants1 Properties % of Cash ABR 77 4.5% 5 3.9% 13 3.6% 15 3.3% 5 3.2% 13 2.7% 26 2.5% 3 2.3% 19 2.3% 5 2.2% Top 10 Tenants 181 30.7% Total 711 100.0% Top 10 Tenant Exposure Diversification by Industry Represents tenant or guarantor. Excludes one undeveloped land parcel and one vacant site. Calculation excludes properties with no annualized base rent and properties under construction. Tenant Industry Type of Business Cash ABR ($'000s)   % of Cash ABR   # of Properties2   Building SqFt ('000s)   Rent Per SqFt3 Quick Service Service $ 15,922   13.8%   200   540,323   $ 29.85 Car Washes Service 12,693   11.0%   49   228,377   55.58 Early Childhood Education Service 12,401   10.8%   54   615,728   19.38 Medical / Dental Service 11,082   9.6%   76   434,020   24.83 Convenience Stores Service 9,607   8.3%   79   310,421   30.95 Casual Dining Service 7,644   6.6%   57   338,820   22.96 Automotive Service Service 6,999   6.1%   56   382,841   18.55 Family Dining Service 4,253   3.7%   27   157,410   27.02 Pet Care Services Service 2,911   2.5%   22   133,730   19.50 Other Services Service 2,502   2.2%   16   134,753   18.56 Service Subtotal   $ 86,013   74.7%   636   3,276,421   $ 26.07 Health and Fitness Experience 8,956   7.8%   20   806,000   10.68 Entertainment Experience 6,300   5.5%   17   597,408   10.55 Movie Theatres Experience 4,299   3.7%   6   293,206   14.66 Experience Subtotal   $ 19,555   17.0%   43   1,696,614   $ 11.32                       Home Furnishings Retail 6,686   5.8%   10   493,027   13.56 Grocery Retail 212   0.2%   1   32,190   6.58 Retail Subtotal   $ 6,898   6.0%   11   525,217   $ 13.13                       Building Materials Other 2,643   2.3%   19   896,956   2.95                       Total   $ 115,109   100.0%   709   6,395,208   $ 17.83

Slide 11

19.1% 40.6% Portfolio Summary Portfolio Health 242, 242, 242 Tenant Financial Reporting % of Cash ABR by Unit-Level Coverage Tranche1 Unit-Level Coverage by Lease Expiration Unit-Level Coverage by Tenant Credit2 Note: ‘NR’ means not reported. Certain tenants, whose leases do not require unit-level financial reporting, provide the Company with unit-level financial information. The data shown includes unit-level coverage for these leases. The chart illustrates the portions of annualized base rent as of March 31, 2019 attributable to leases with tenants having specified implied credit ratings based on their Moody’s RiskCalc scores. Moody’s equates the EDF scores generated using RiskCalc with a corresponding credit rating. Tenant Financial Reporting Requirements % of Cash ABR Unit-Level Financial Information 97.7% Corporate-Level Financial Reporting 98.4% Both Unit-Level and Corporate-Level Financial Information 97.4% No Financial Information 1.3% 17.9% Rent Coverage Ratio (x) Rent Coverage Ratio (x)

Slide 12

  Cash % of # of Wgt. Avg.   Renewed Per Re-Leased to New Tenant Total Year1 ABR Cash ABR Properties2 Coverage3 $(000)s Terms of Lease Without Vacancy After Vacancy Leasing 2019 $ 589 0.5% 9 2.9x Prior Cash ABR $ 572 $ 2,280 - $ 2,851 2020 812 0.7% 9 2.6x   New Cash ABR 521 2,407 - 2,928 2021 756 0.7% 9 3.4x Recovery Rate 91.1% 105.6% - 102.7% 2022 764 0.7% 5 3.9x   Number of Leases 8 4 - 12 2023 2,218 1.9% 13 2.9x Average Months Vacant - - - - 2024 2,507 2.2% 17 2.3x   % of Total Cash ABR4 - - - 2.5% 2025 894 0.8% 9 3.6x 2026 1,890 1.6% 10 2.6x 2027 8,191 7.1% 45 2.7x 2028 2,905 2.5% 18 2.9x Vacant Properties at December 31, 2018     0 2029 3,610 3.1% 57 3.6x Expiration Activity       + 1 2030 4,406 3.8% 42 3.3x Leasing Activity - 0 2031 4,770 4.1% 30 3.4x Vacant Property Sales       - 0 2032 11,186 9.7% 72 2.8x Vacant Properties at March 31, 2019 1 2033 9,639 8.4% 45 2.3x 2034 10,254 8.9% 60 3.1x 2035 541 0.5% 4 2.0x 2036 2,463 2.1% 21 2.3x 2037 22,853 19.9% 98 2.9x 2038 18,266 15.9% 96 2.3x 2039 4,587 4.0% 33 2.9x 2040 1,005 0.9% 7 2.9x Total $115,109 100.0% 709 2.8x Leasing Summary Leasing Expiration Schedule, Leasing Activity and Statistics 242, 242, 242 Expiration year of contracts in place as of March 31, 2019 and excludes any tenant option renewal periods that have not been exercised. Excludes one undeveloped land parcel and one vacant site. Weighted by cash ABR as of March 31, 2019. New cash ABR divided by total cash ABR as of March 31, 2019. Annual Lease Expiration by Cash ABR Leasing Activity – Trailing 12 Months Leasing Statistics

Slide 13

Leasing Summary Same-Store Analysis 242, 242, 242 Same-Store Portfolio: All properties owned, excluding new sites under construction, for the entire same-store measurement period, which is January 1, 2018 through March 31, 2019. The same-store portfolio for 1Q 2019 is comprised of 456 properties and represented 59% of our current portfolio as measured by contractual cash rent divided by our cash ABR at March 31, 2019. Contractual Cash Rent: The amount of cash rent our tenants are contractually obligated to pay per the in-place lease as of March 31, 2019; excludes percentage rent that is subject to sales breakpoints per the lease. Defined Terms Same-Store Portfolio Performance   Contractual Cash Rent ($000s) % Type of Business Q1 2019 Q1 2018 Change Service $ 12,886 $ 12,665 1.8% Experience 1,791 1,746 2.6% Retail 1,516 1,495 1.4% Industrial 661 648 2.0% Total Same-Store Rent $ 16,855 $ 16,554 1.8% - Property Operating Expense1 247 241 2.4% Total Same-Store NOI $ 16,608 $ 16,313 1.8% Excludes reimbursable property operating expenses.

Slide 14

Leasing Summary Lease Escalations 242, 242, 242 Leases contributing 98% of cash ABR provided for base rent escalation, generally ranging from 1.0% to 4.0% annually, with a weighted average annual escalation rate of 1.5%, which assumes 0.0% change in annual CPI 11% of contractual rent escalations by cash ABR are CPI-based, while 87% are based on fixed percentage or scheduled increases 63% of cash ABR derived from flat leases is attributable to leases that provide for contingent rent based on a percentage of the tenant’s gross sales at the leased property Based on cash ABR as of March 31, 2019. Represents the weighted average annual escalation rate of the entire portfolio as if all escalations occur annually. For leases in which rent escalates by the greater of a stated fixed percentage or CPI, we have assumed an escalation equal to the stated fixed percentage in the lease. As any future increase in CPI is unknowable at this time, we have not included an increase in the rent pursuant to these leases in the weighted average annual escalation rate presented. Lease Escalation Frequency Lease Escalation Type     Weighted Average Lease Escalation Frequency % of Cash ABR Annual Escalation Rate1,2 Annually 78.6% 1.7% Every 2 years 0.6 1.2 Every 3 years 0.1 0.0 Every 4 years 0.7 0.8 Every 5 years 14.2 1.1 Other escalation frequencies 3.4 1.0 Flat 2.4 NA Total / Weighted Average 100.0% 1.5%

Slide 15

Glossary Supplemental Reporting Measures 242, 242, 242 FFO and AFFO Our reported results are presented in accordance with U.S. generally accepted accounting principles ("GAAP"). We also disclose funds from operations (“FFO”) and adjusted funds from operations (“AFFO”), both of which are non-GAAP financial measures. We believe these non-GAAP financial measures are accepted industry measures used by analysts and investors to compare the operating performance of REITs. We compute FFO in accordance with the definition adopted by the Board of Governors of the National Association of Real Estate Investment Trusts ("NAREIT"). NAREIT defines FFO as GAAP net income or loss adjusted to exclude extraordinary items (as defined by GAAP), net gain or loss from sales of depreciable real estate assets, impairment write-downs associated with depreciable real estate assets and real estate-related depreciation and amortization (excluding amortization of deferred financing costs and depreciation of non-real estate assets), including the pro rata share of such adjustments of unconsolidated subsidiaries. FFO is used by management, investors and analysts to facilitate meaningful comparisons of operating performance between periods and among our peers primarily because it excludes the effect of real estate depreciation and amortization and net gains on sales (which are dependent on historical costs and implicitly assume that the value of real estate diminishes predictably over time, rather than fluctuating based on existing market conditions). To derive AFFO, we modify the NAREIT computation of FFO to include other adjustments to GAAP net income related to certain items that we believe are not indicative of our core operating performance, including straight-line rental revenue, non-cash interest expense, non-cash compensation expense, other amortization and non-cash charges, capitalized interest expense and transaction costs. Such items may cause short-term fluctuations in net income but have no impact on operating cash flows or long-term operating performance. We believe that AFFO is an additional useful supplemental measure for investors to consider because it will help them to better assess our operating performance without the distortions created by non-cash and certain other revenues and expenses. FFO and AFFO do not include all items of revenue and expense included in net income, nor do they represent cash generated from operating activities, and they are not necessarily indicative of cash available to fund cash requirements; accordingly, they should not be considered alternatives to net income as a performance measure or cash flows from operations as a liquidity measure and should be considered in addition to, and not in lieu of, GAAP financial measures. FFO and AFFO may not be comparable to similarly titled measures reported by other companies.

Slide 16

Glossary Supplemental Reporting Measures 242, 242, 242 We also present our earnings before interest, taxes and depreciation and amortization for real estate (“EBITDA”), EBITDA further adjusted to exclude gains (or losses) on sales of depreciable property and real estate impairment losses (“EBITDAre”), net debt, net operating income (“NOI”) and cash NOI (“Cash NOI”), all of which are non-GAAP financial measures. We believe these non-GAAP financial measures are accepted industry measures used by analysts and investors to compare the operating performance of REITs. EBITDA and EBITDAre We calculate EBITDA as earnings before interest, income taxes, and depreciation and amortization. In 2017, NAREIT issued a white paper recommending that companies that report EBITDA also report EBITDAre. We compute EBITDAre in accordance with the definition adopted by NAREIT. NAREIT defines EBITDAre as EBITDA (as defined above) excluding gains (or losses) from the sales of depreciable property and real estate impairment losses. We present EBITDA and EBITDAre as they are measures commonly used in our industry and we believe that these measures are useful to investors and analysts because they provide important supplemental information concerning our operating performance, exclusive of certain non-cash and other costs. We use EBITDA and EBITDAre as measures of our operating performance and not as measures of liquidity. EBITDA and EBITDAre are not measures of financial performance under GAAP, and our EBITDA and EBITDAre may not be comparable to similarly titled measures reported by other companies. You should not consider EBITDA and EBITDAre as alternatives to net income or cash flows from operating activities determined in accordance with GAAP. Net Debt We calculate our net debt as our gross debt (defined as total debt plus net deferred financing costs on our secured borrowings) less cash and cash equivalents and restricted cash deposits held for the benefit of lenders. We believe excluding cash and cash equivalents and restricted cash deposits held for the benefit of lenders from gross debt, all of which could be used to repay debt, provides an estimate of the net contractual amount of borrowed capital to be repaid, which we believe is a beneficial disclosure to investors and analysts. NOI and Cash NOI We calculate NOI as total revenues less property expenses. NOI excludes all other items of expense and income included in the financial statements in calculating net income or loss. Cash NOI further excludes non-cash items included in total revenues and property expenses, such as straight-line rental revenue and other amortization and non-cash charges. We believe NOI and Cash NOI provide useful and relevant information because they reflect only those income and expense items that are incurred at the property level and present such items on an unlevered basis. NOI and Cash NOI are not measurements of financial performance under GAAP, and our NOI and Cash NOI may not be comparable to similarly titled measures reported by other companies. You should not consider our NOI and Cash NOI as alternatives to net income or cash flows from operating activities determined in accordance with GAAP. Adjusted EBITDAre / Adjusted NOI / Adjusted Cash NOI We adjust EBITDAre, NOI and Cash NOI based on an estimate calculated as if all acquisition and disposition activity that took place during the current quarter had been made on the first day of the quarter. We then annualize these estimates for the current quarter by multiplying them by four, which we believe provides a meaningful estimate of our current run rate for all properties owned as of the end of the current quarter. You should not unduly rely on these metrics as they are based on assumptions and estimates that may prove to be inaccurate. Our actual reported EBITDAre, NOI and Cash NOI for future periods may be significantly less than these estimates of current run rates for a variety of reasons.

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Glossary of Supplemental Reporting Measures Other Terms 242, 242, 242 Cash ABR Cash ABR means annualized contractually specified cash base rent in effect as of the end of the current quarter for all of our leases (including those accounted for as direct financing leases) commenced as of that date and annualized cash interest on our mortgage loans receivable as of that date. Rent Coverage Ratio Rent coverage ratio means the ratio of tenant-reported or, when unavailable, management’s estimate based on tenant-reported financial information, annual EBITDA and cash rent attributable to the leased property (or properties, in the case of a master lease) to the annualized base rental obligation as of a specified date. GE Seed Portfolio GE seed portfolio means our acquisition of a portfolio of 262 net leased properties on June 16, 2016, consisting primarily of restaurants, that were being sold as part of the liquidation of General Electric Capital Corporation for an aggregate purchase price of $279.8 million (including transaction costs). GAAP Cap Rate GAAP Cap Rate means annualized rental income computed in accordance with GAAP for the first full month after acquisition divided by the purchase price, as applicable, for the property. Cash Cap Rate Cash Cap Rate means annualized contractually specified cash base rent for the first full month after acquisition or disposition divided by the purchase or sale price, as applicable, for the property.

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