PRINCETON, N.J.--(BUSINESS WIRE)--Essential Properties Realty Trust, Inc. (NYSE:EPRT) today announced operating results for the three and nine months ended September 30, 2018.

Third Quarter 2018 Financial and Operating Highlights

• Invested $133.1 million in 62 properties at a 7.7% weighted average cash cap rate
• Increased total revenues to $25.7 million
• Net income increased to $7.7 million, or $0.12 per share on a fully diluted basis
• Increased Funds from Operations (“FFO”) to $15.8 million, or $0.25 per share on a fully diluted basis
• Increased Adjusted Funds from Operations (“AFFO”) to $15.6 million, or $0.25 per share on a fully diluted basis

Year-to-Date 2018 Financial and Operating Highlights

• Invested $411.7 million in 176 properties at a 7.7% weighted average cash cap rate
• Increased total revenue to $67.6 million
• Net income increased to $12.3 million
• Increased FFO to $33.6 million
• Increased AFFO to $31.5 million

CEO Comments

Commenting on the third quarter results, Essential Properties’ President and Chief Executive Officer, Pete Mavoides, said, “We are thrilled to report our third quarter results, which is our first full quarter as a public company. Our newer vintage portfolio of granular net lease properties is performing at a high level with same-store contractual cash NOI growing 2.0% in the quarter, occupancy increasing 50 bps to 99.8%, and our sector leading weighted average lease term remaining flat at 14.3 years. By leveraging our long-standing tenant and industry relationships, we invested $133 million into 62 single-tenant properties at 7.7% initial cap rate during the quarter. Looking ahead to next year, we are well positioned from a capital perspective with ~$74 million of cash on hand at quarter-end and low leverage at 4.7x Net Debt to Annualized Adjusted EBITDAre. While we maintain a growing and active investment pipeline, we remain highly selective towards future growth opportunities in today’s environment.”

Financial Results

Total Revenue

Total revenue for the quarter ended September 30, 2018 increased to $25.7 million, as compared to $13.6 million for the same quarter in 2017.

Total revenue for the nine months ended September 30, 2018 increased to $67.6 million, as compared to $37.0 million for the same period in 2017.

Net Income

Net income for the quarter ended September 30, 2018 increased to $7.7 million, as compared to $0.5 million for the same quarter in 2017.

Net income for the nine months ended September 30, 2018 increased to $12.3 million, as compared to $3.2 million for the same period in 2017.

Funds from Operations

FFO for the quarter ended September 30, 2018 increased to $15.8 million, as compared to $4.6 million for the same quarter in 2017.

FFO for the nine months ended September 30, 2018 increased to $33.6 million, as compared to $14.1 million for the same period in 2017.

Adjusted Funds from Operations

AFFO for the quarter ended September 30, 2018 increased to $15.6 million, as compared to $4.7 million for the same quarter in 2017.

AFFO for the nine months ended September 30, 2018 increased to $31.5 million, as compared to $13.6 million for the same period in 2017.

Dividend Information

As previously announced, Essential Properties declared a cash dividend of $0.224 per share of common stock on September 5, 2018. The dividend was comprised of $0.21 per share for the third quarter ended September 30, 2018 and $0.014 for the six days of the second quarter ended June 30, 2018 following the closing of the Company’s initial public offering (“IPO”). The dividend was paid on October 12, 2018 to stockholders of record as of the close of business on September 28, 2018.

Net Investment Activity

Acquisitions

During the quarter ended September 30, 2018, Essential Properties invested $133.1 million in 62 properties in 34 separate transactions at a weighted average cash and GAAP cap rate of 7.7% and 8.6%, respectively. These properties are 100% leased with a weighted average lease term of approximately 16.1 years. As a percentage of cash ABR, 76.7% of the Company’s acquisitions for the three months ended September 30, 2018 came from sale-leaseback transactions, 58.1% were subject to a master lease and 100% are required to provide the Company with financial reporting.

During the nine months ended September 30, 2018, Essential Properties invested $411.7 million in 176 properties in 73 separate transactions at a weighted average cash and GAAP cap rate of 7.7% and 8.6%, respectively. These properties are 100% leased with a weighted average lease term of approximately 16.4 years. As a percentage of cash ABR, 83.8% of the Company’s acquisitions for the nine months ended September 30, 2018 came from sale-leaseback transactions, 67.3% were subject to a master lease and 98.1% are required to provide the Company with financial reporting.

Dispositions

During the three months ended September 30, 2018, Essential Properties sold 21 properties for $19.4 million, with a net gain on sales of $1.5 million. The disposition weighted average cash cap rate on the 16 leased properties sold in the three months ended September 30, 2018 was 6.8%, which excludes the sale of one leasehold property.

During the nine months ended September 30, 2018, Essential Properties sold 37 properties for $40.9 million, with a net gain on sales of $5.1 million. Excluding one property sold pursuant to a tenant purchase option and the sale of one leasehold property, the disposition weighted average cash cap rate on the 28 leased properties sold in the nine months ended September 30, 2018 was 6.9%.

Portfolio Update

Portfolio Highlights

As of September 30, 2018, Essential Properties’ portfolio consisted of 645 freestanding net lease properties, which included 11 properties that secure mortgage notes receivable, with a weighted average lease term of 14.3 years and a weighted average rent coverage ratio of 2.8x. As of the same date, the portfolio was 99.8% occupied by 153 tenants operating 162 different concepts across 42 states in 15 distinct industries. At third quarter end, 90.6% of the Company’s cash ABR was generated from tenants that operate service-oriented or experience-based businesses, and 67.2% of its cash ABR was derived from properties subject to a master lease.

Leasing Activity

During the nine months ended September 30, 2018, Essential Properties renewed nine leases at a 96.2% recovery rate vs. prior cash rents and signed three new leases without vacancy at a 102.2% recovery rate. In total, the Company recovered 99.3% of prior cash rents from leasing efforts during the first three quarters of 2018, which amounted to 1.9% of its cash ABR as of September 30, 2018.

Capital Markets, Leverage and Balance Sheet and Liquidity

Capital Markets Activity

On July 24, 2018, the Company issued 2,772,191 shares of common stock to the underwriters of its IPO, pursuant to the underwriter’s option to purchase additional shares in the IPO. The Company received approximately $35.8 million in net proceeds from the issuance of these shares, after deducting underwriting discounts and other related expenses.

Leverage

As of September 30, 2018, the Company’s Net Debt to Annualized Adjusted EBITDAre was 4.7x.

Balance Sheet and Liquidity

Essential Properties has a $300 million unsecured credit facility with no amounts outstanding as of November 2, 2018. The credit facility includes an accordion feature to increase, subject to certain conditions, the maximum availability of the facility by up to $200 million. In addition, the Company had $74.1 million of cash and cash equivalents and restricted cash as of September 30, 2018.

2019 Guidance

The Company currently expects 2019 AFFO per share to 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.

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 September 30, 2018, the Company’s portfolio consisted of 645 freestanding net lease properties with a weighted average lease term of 14.3 years and a weighted average rent coverage ratio of 2.8x. As of the same date, the Company’s portfolio was 99.8% leased to 153 tenants operating 162 different concepts in 15 distinct industries across 42 states.