Essential Properties Realty Trust Inc.
04/22/2026 | Press release | Distributed by Public on 04/22/2026 15:21
Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)
Management's Discussion and Analysis of Financial Condition and Results of Operations.
In this Quarterly Report on Form 10-Q, we refer to Essential Properties Realty Trust, Inc., a Maryland corporation, together with its consolidated subsidiaries, including its operating partnership, Essential Properties, L.P., as "we," "us," "our" or the "Company," unless we specifically state otherwise or the context otherwise requires.
Special Note Regarding Forward-Looking Statements
This quarterly report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act") and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). In particular, many statements pertaining to our business and growth strategies, investment, financing and leasing activities, and trends in our business, including trends in the market for long-term, net leases of freestanding, single-tenant properties, contain forward-looking statements. When used in this quarterly report, the words "estimate," "anticipate," "expect," "believe," "intend," "may," "will," "should," "seek," "approximately," and "plan," and variations of such words, and similar words or phrases, that are predictions of 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, beliefs or intentions of management.
Forward-looking statements involve known and unknown risks and uncertainties that may cause our actual results, performance or achievements to be materially different from the results of operations or plans expressed or implied by such forward-looking statements; accordingly, you should not rely on forward-looking statements as predictions of future events. Forward-looking statements depend on assumptions, data or methods that may be incorrect or imprecise, and may not be realized. We do not guarantee that the transactions and events described will happen as described (or that they will happen at all). The following factors, among others, could cause actual results and future events to differ materially from those set forth or contemplated in the forward-looking statements:
•general business and economic conditions, including those impacting the domestic labor market, and factors such as tariffs impacting international trade;
•risks inherent in the real estate business, including tenant defaults or bankruptcies, illiquidity of real estate investments, fluctuations in real estate values and the general economic climate in local markets, competition for tenants in such markets, potential liability relating to environmental matters and potential damages from natural disasters;
•the performance and financial condition of our tenants;
•the availability of suitable properties to acquire and our ability to acquire and lease those properties on favorable terms;
•our ability to renew leases, lease vacant space or re-lease space as existing leases expire or are terminated;
•volatility and uncertainty in financial markets, in particular the equity and credit markets, fluctuations in the Consumer Price Index, and the impact of inflation on us and our tenants;
•the degree and nature of our competition;
•our failure to generate sufficient cash flows to service our outstanding indebtedness;
•our ability to access debt and equity capital on attractive terms;
•fluctuating interest rates;
•availability of qualified personnel and our ability to retain our key management personnel;
•changes in, or the failure or inability to comply with, applicable law or regulation;
•our failure to continue to qualify for taxation as a real estate investment trust ("REIT");
•changes in the U.S. tax law and other U.S. laws, whether or not specific to REITs; and
•additional factors discussed in the sections entitled "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in this quarterly report and in our Annual Report on Form 10-K for the year ended December 31, 2025.
You are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of this quarterly report. While forward-looking statements reflect our good faith beliefs, they are not guarantees of future events or of our performance. We disclaim any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, new information, data or methods, future events or other changes, except as required by law.
Because we operate in a highly competitive and rapidly changing environment, new risks emerge from time to time, and it is not possible for management to predict all such risks, nor can management assess the impact of all such risks on our business or the extent to which any risk, or combination of risks, may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual events or results.
Overview
We are 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 middle-market companies operating service-oriented or experience-based businesses. We generally invest in and lease freestanding, single-tenant commercial real estate facilities where a tenant services its customers and conducts activities that are essential to the generation of the tenant's sales and profits. As of March 31, 2026, 91.6% of our $584.2 million of annualized base rent was attributable to properties operated by tenants in service-oriented and experience-based businesses. "Annualized base rent" means annualized contractually specified cash base rent in effect on March 31, 2026 for all of our leases (including those accounted for as loans or direct financing leases) commenced as of that date and annualized cash interest on our mortgage loans receivable as of that date.
We were organized on January 12, 2018 as a Maryland corporation. We elected to be taxed as a REIT for U.S. federal income tax purposes beginning with the year ended December 31, 2018, and we believe that our current organization, operations and intended distributions will allow us to continue to so qualify. Our common stock is listed on the NYSE under the symbol "EPRT".
Our primary business objective is to maximize stockholder value by generating attractive risk-adjusted returns through owning, managing and growing a diversified portfolio of commercially desirable properties. As of March 31, 2026, we had a portfolio of 2,417 properties (inclusive of one undeveloped land parcel and 150 properties which secure our investments in mortgage loans receivable) that was diversified by tenant, industry, concept and geography, had annualized base rent of $584.2 million and was 99.7% occupied. Our portfolio is built based on the following core investment attributes:
Diversification. As of March 31, 2026, our portfolio was 99.7% occupied by tenants operating 662 different brands, or concepts, across 48 states, with none of our tenants contributing more than 3.2% of our annualized base rent. Our goal is that, over time, no more than 5% of our annualized base rent will be derived from any single tenant or more than 1% from any single property.
Long Lease Term. As of March 31, 2026, our leases had a weighted average remaining lease term of 14.6 years (based on annualized base rent), with 2.8% of our annualized base rent attributable to leases expiring prior to January 1, 2029. Our properties generally are subject to long-term net leases that we believe provide us a stable base of revenue from which to grow our portfolio.
Significant Use of Sale-Leaseback Investments. We seek to acquire properties owned and operated by middle-market businesses and lease the properties back to the operators pursuant to our standard lease form. During the three months ended March 31, 2026, 100% of our investments were sale-leaseback transactions.
Significant Use of Master Leases. As of March 31, 2026, 65.3% of our annualized base rent was attributable to master leases.
Contractual Base Rent Escalation. As of March 31, 2026, 97.6% of our leases (based on annualized base rent) provided for increases in future base rent at a weighted average rate of 1.7% per year.
Smaller, Low Basis Single-Tenant Properties. We generally invest in freestanding "small-box" single- tenant properties. As of March 31, 2026, our average investment per property was $3.0 million (which equals our aggregate investment in our properties (including transaction costs, lease incentives and amounts funded for construction in progress) divided by the number of properties owned at such date), and we believe investments of similar size allow us to grow our portfolio without concentrating a large amount of capital in individual properties and limit our exposure to events that may adversely affect a particular property. Additionally, we believe that many of our properties are generally fungible and appropriate for multiple commercial uses, which reduces the risk that a particular property may become obsolete and enhances our ability to sell a property if we choose to do so.
Healthy Rent Coverage Ratio and Tenant Financial Reporting. As of March 31, 2026, our portfolio's weighted average rent coverage ratio was 3.5x, and 99.0% of our leases (based on annualized base rent) obligate the tenant to periodically provide us with specified unit-level financial reporting. "Rent coverage ratio" means, as of a specified date, the ratio of (x) tenant-reported or, when unavailable, management's estimate (based on tenant-reported financial information) of annual earnings before interest, taxes, depreciation, amortization and cash rent attributable to the leased property (or properties, in the case of a master lease) to (y) the annualized base rental obligation.
Our Competitive Strengths
We believe the following competitive strengths distinguish us from our competitors and allow us to compete effectively in the single-tenant, net-lease market:
Carefully Constructed Portfolio of Properties Leased to Service-Oriented or Experience-Based Tenants. We have strategically constructed a portfolio that is diversified by tenant, industry, concept and geography and generally avoids exposure to businesses that we believe are subject to pressure from e-commerce. Our properties are generally subject to long-term net leases that we believe provide us with a stable and predictable base of revenue from which to grow our portfolio. As of March 31, 2026, we had a portfolio of 2,417 properties, with annualized base rent of $584.2 million, which was purposefully selected by our management team in accordance with our focused and disciplined investment strategy. Our portfolio is diversified with our tenants operating 662 different concepts across 48 states. No single tenant contributed more than 3.2% of our annualized base rent as of March 31, 2026, consistent with our strategy of having a scaled portfolio that, over time, allows us to derive no more than 5% of our annualized base rent from any single tenant or more than 1% from any single property.
We believe that our portfolio's diversity and the rigorous underwriting process we utilize decrease the impact on us of an adverse event affecting an individual tenant, industry or region. Our focus on leasing to tenants in industries where the leased properties are essential to generating the tenants' revenues and profits (and that we believe are well-positioned to withstand competition from e-commerce) increases the stability and predictability of our rental revenue.
Differentiated Investment Strategy. We seek to acquire and lease freestanding, single-tenant commercial real estate facilities where a tenant services its customers and conducts activities at the property that are essential to the generation of its sales and profits. We primarily seek to invest in properties leased to unrated middle-market companies that we determine have attractive credit characteristics and stable operating histories. We believe middle-market companies are underserved from a capital perspective and that we can offer them attractive real estate financing solutions while allowing us to enter into lease agreements that provide us with attractive risk-adjusted returns. Furthermore, many net-lease transactions with middle-market companies involve properties that are individually relatively small, which allows us to avoid concentrating a large amount of capital in individual properties. We maintain close relationships with our tenants, which we believe allows us to source additional investments and become the capital provider of choice as our tenants' businesses grow and their real estate needs increase.
Disciplined Underwriting Leading to Strong Portfolio Characteristics. We generally seek to invest in single assets or portfolios of assets through transactions which range in aggregate purchase price from $2 million to $100 million. Our size allows us to focus on investing in a segment of the market that we believe is underserved from a capital perspective and where we can originate or acquire relatively smaller assets on attractive terms that provide meaningful growth to our portfolio. In addition, we seek to invest in commercially desirable properties that are suitable for use by different tenants, offer attractive risk-adjusted returns and possess characteristics that reduce our real estate investment risks.
Experienced and Proven Management Team. Our senior management has significant experience in the net lease industry and a track record of growing net lease businesses to significant scale.
Our senior management team has been responsible for our focused and disciplined investment strategy and for developing and implementing our investment sourcing, underwriting, closing and asset management infrastructure, which we believe can support significant investment growth without a proportionate increase in our operating expenses. During the three months ended March 31, 2026, 100% of our new investments in real estate were attributable to internally originated sale-leaseback transactions and 57% of our new investments were consummated with parties who had previously engaged in one or more transactions that involved a member of our senior management team (including operators and tenants and other participants in the net lease industry, such as brokers, intermediaries and financing sources). The substantial experience, knowledge and relationships of our senior leadership team provide us with an extensive network of contacts that we believe allows us to originate attractive investment opportunities and effectively grow our business.
Scalable Platform Allows for Significant Growth. Building on our senior leadership team's experience in net-lease real estate investing, we have developed leading origination, underwriting, financing and property management capabilities. Our platform is scalable, and we seek to leverage our capabilities to improve our efficiency and processes to continue to seek attractive risk- adjusted growth. While we expect that our general and administrative expenses could increase as our portfolio grows, we expect that such expenses as a percentage of our portfolio and our revenues will decrease over time due to efficiencies and economies of scale.
Extensive Tenant Financial Reporting Supports Active Asset Management. We seek to enter into lease agreements that obligate our tenants to periodically provide us with corporate and/or unit-level financial reporting, which we believe enhances our ability to actively monitor our investments, manage credit risk, negotiate lease renewals and proactively manage our portfolio to protect stockholder value. As of March 31, 2026, leases contributing 99.0% of our annualized base rent required tenants to provide us with specified unit-level financial information, and leases contributing 98.6% of our annualized base rent required tenants to provide us with corporate-level financial reporting.
Our Business and Growth Strategies
Our primary business objective is to maximize stockholder value by generating attractive risk-adjusted returns through owning, managing and growing a diversified portfolio of commercially desirable properties. We intend to pursue our objective through the following business and growth strategies.
Structure and Manage Our Diverse Portfolio with Focused and Disciplined Underwriting and Risk Management. We seek to maintain the stability of our rental revenue and maximize the long-term return on our investments while continuing our growth by using our focused and disciplined underwriting and risk management expertise. When underwriting assets, we focus on commercially desirable properties, with strong operating performance, healthy rent coverage ratios and tenants with attractive credit characteristics.
•Leasing. In general, we seek to enter into leases with (i) relatively long terms (typically with initial terms of 15 years or more and tenant renewal options); (ii) attractive rent escalation provisions; (iii) healthy rent coverage ratios; and (iv) tenant obligations to periodically provide us with financial information, which provides us with information about the operating performance of the leased property and/or tenant and allows us to actively monitor the security of payments under the lease on an ongoing basis. We strongly prefer to use master lease structures, pursuant to which we lease multiple properties to a single tenant on a unitary (i.e., "all or none") basis. In addition, in the context of our sale-leaseback investments, we generally seek to establish contract rents that are at or below prevailing market rents, which we believe enhances tenant retention and reduces our releasing risk if a lease is rejected in a bankruptcy proceeding or expires.
•Diversification. We monitor and manage the diversification of our portfolio in order to reduce the risks associated with adverse developments affecting a particular tenant, property, industry or region. Our strategy targets a portfolio that, over time, will (1) derive no more than 5% of its annualized base rent from any single tenant or more than 1% of its annualized base rent from any single property, (2) be primarily leased to tenants operating in service-oriented or experience- based businesses and (3) avoid significant industry, concept or geographic concentration. While we consider these criteria when making investments, we may be opportunistic in managing our business and make investments that do not meet one or more of these criteria if we believe the opportunity presents an attractive risk-adjusted return.
•Asset Management. We are an active asset manager and regularly review each of our properties to evaluate various factors, including, but not limited to, changes in the business performance at the property, credit of the tenant and local real estate market conditions. Among other things, we use Moody's Analytics RiskCalc, which is a model for predicting private company defaults based on Moody's Analytics Credit Research Database, to proactively detect credit deterioration. Additionally, we monitor market rents relative to in-place rents and the amount of tenant capital expenditures in order to refine our tenant retention and alternative use assumptions. Our management team utilizes our internal credit diligence to monitor the credit profile of each of our tenants on an ongoing basis. We believe that this proactive approach enables us to identify and address issues in a timely manner and to determine whether there are properties in our portfolio that are appropriate for disposition.
•In addition, as part of our active portfolio management, we may selectively dispose of assets that we conclude do not offer a return commensurate with the investment risk, contribute to unwanted geographic, industry or tenant concentrations, or may be sold at a price we determine is attractive. We believe that our underwriting processes and active asset management enhance the stability of our rental revenue by reducing default losses and increasing the likelihood of lease renewals.
Focus on Relationship-Based Sourcing to Grow Our Portfolio by Originating Sale-Leaseback Transactions. We plan to continue our disciplined growth by originating sale-leaseback transactions and opportunistically making acquisitions of properties subject to net leases that contribute to our portfolio's tenant, industry and geographic diversification. During the three months ended March 31, 2026, 100% of our new investments in real estate were attributable to internally originated sale-leaseback transactions and 57% of our new investments were consummated with parties who had previously engaged in one or more transactions that involved a member of our senior management team (including operators and tenants and other participants in the net lease industry, such as brokers, intermediaries and financing sources). In addition, we seek to enhance our relationships with our tenants to facilitate investment opportunities, including selectively agreeing to reimburse certain of our tenants for development costs at our properties in exchange for contractually specified rent that generally increases proportionally with our funding. We believe our senior management team's reputation, in-depth market knowledge and extensive network of longstanding relationships in the net lease industry provide us access to an ongoing pipeline of attractive investment opportunities.
Focus on Middle-Market Companies in Service-Oriented or Experience-Based Businesses. We primarily focus on investing in properties that we lease on a long-term, triple-net basis to middle- market companies that we determine have attractive credit characteristics and stable operating histories. Properties leased to middle-market companies may offer us the opportunity to achieve superior risk-adjusted returns as a result of our extensive and disciplined credit and real estate analysis, lease structuring and portfolio composition. We believe our capital solutions are attractive to middle- market companies, as such companies often have limited financing options as compared to larger, credit rated organizations. We also believe that, in many cases, smaller transactions with middle- market companies will allow us to maintain and grow our portfolio's diversification. Middle-market companies are often willing to enter into leases with structures and terms that we consider attractive (such as master leases and leases that require ongoing tenant financial reporting) and believe contribute to the stability of our rental revenue.
In addition, we emphasize investments in properties leased to tenants engaged in service-oriented or experience-based businesses, such as car washes, restaurants (primarily quick service restaurants), early childhood education, medical and dental services, convenience stores, automotive services, equipment rental, entertainment and health and fitness, as we believe these businesses are generally more insulated from e-commerce pressure than many others.
Internal Growth Through Long-Term Triple-Net Leases That Provide for Periodic Rent Escalations. We seek to enter into long-term (typically with initial terms of 15 years or more and tenant renewal options), triple-net leases that provide for periodic contractual rent escalations. As of March 31, 2026, our leases had a weighted average remaining lease term of 14.6 years (based on annualized base rent), with only 2.8% of our annualized base rent attributable to leases expiring prior to January 1, 2029, and 97.6% of our leases (based on annualized base rent) provided for increases in future base rent at a weighted average of 1.7% per year.
Actively Manage Our Balance Sheet to Maximize Capital Efficiency. We seek to maintain a prudent balance between debt and equity financing and to maintain funding sources that lock in long-term investment spreads and limit interest rate sensitivity. We target a level of pro forma net debt that, over time, is generally less
than 5.5 times our annualized adjusted EBITDAre (as defined in "Non-GAAP Financial Measures" below). We seek to maintain access to multiple sources of debt capital, including the investment grade-rated unsecured bond market and bank debt, through our revolving credit facility and our unsecured term loan facilities.
Historical Investment and Disposition Activity
The following table sets forth select information about our investment activity for the previous eight quarters beginning with the quarter ended June 30, 2024 through the quarter ended March 31, 2026 (dollars in thousands):
| Three Months Ended | ||||||||||||||||||||||||||
| June 30, 2024 | September 30, 2024 | December 31, 2024 | March 31, 2025 | |||||||||||||||||||||||
| Investment activity | $ | 333,910 | $ | 307,615 | $ | 333,435 | $ | 307,706 | ||||||||||||||||||
| Number of transactions | 35 | 37 | 37 | 21 | ||||||||||||||||||||||
| Property count | 83 | 57 | 78 | 48 | ||||||||||||||||||||||
| Avg. investment per unit | $ | 3,393 | $ | 4,102 | $ | 3,281 | $ | 5,453 | ||||||||||||||||||
|
Cash cap rate 1
|
8.0%
|
8.1%
|
8.0%
|
7.8%
|
||||||||||||||||||||||
|
GAAP cap rate 2
|
9.1%
|
9.1%
|
9.2%
|
9.4%
|
||||||||||||||||||||||
|
Master lease percentage 3,4
|
76%
|
57%
|
69%
|
71%
|
||||||||||||||||||||||
|
Sale-leaseback percentage 3,5
|
100%
|
89%
|
100%
|
90%
|
||||||||||||||||||||||
| Existing relationship percentage |
82%
|
79%
|
79%
|
86%
|
||||||||||||||||||||||
|
Percentage of financial reporting3
|
100%
|
100%
|
100%
|
100%
|
||||||||||||||||||||||
| Rent coverage ratio | 3.0x | 4.7x | 3.4x | 3.0x | ||||||||||||||||||||||
| Lease term (years) | 17.8 | 17.2 | 17.7 | 17.5 | ||||||||||||||||||||||
| Three Months Ended | ||||||||||||||||||||||||||
| June 30, 2025 | September 30, 2025 | December 31, 2025 | March 31, 2026 | |||||||||||||||||||||||
| Investment activity | $ | 334,041 | $ | 369,848 | $ | 295,814 | $ | 388,632 | ||||||||||||||||||
| Number of transactions | 25 | 35 | 34 | 22 | ||||||||||||||||||||||
| Property count | 77 | 87 | 58 | 126 | ||||||||||||||||||||||
| Avg. investment per unit | $ | 3,971 | $ | 3,849 | $ | 4,588 | $ | 2,887 | ||||||||||||||||||
|
Cash cap rate 1
|
7.9%
|
8.0%
|
7.7%
|
7.7%
|
||||||||||||||||||||||
|
GAAP cap rate 2
|
9.7%
|
10.0%
|
9.1%
|
8.8%
|
||||||||||||||||||||||
|
Master lease percentage 3,4
|
69%
|
76%
|
76%
|
49%
|
||||||||||||||||||||||
|
Sale-leaseback percentage 3,5
|
93%
|
97%
|
100%
|
100%
|
||||||||||||||||||||||
| Existing relationship percentage |
88%
|
70%
|
85%
|
57%
|
||||||||||||||||||||||
|
Percentage of financial reporting3
|
100%
|
100%
|
100%
|
100%
|
||||||||||||||||||||||
| Rent coverage ratio | 3.4x | 5.9x | 4.7x | 3.1x | ||||||||||||||||||||||
| Lease term (years) | 19.5 | 18.6 | 19.4 | 17.7 | ||||||||||||||||||||||
_____________________________________
(1) Cash annualized base rent for the first full month after the investment divided by the gross investment in the property plus transaction costs.
(2) GAAP rent and interest income for the first twelve months after the investment divided by the gross investment in the property plus transaction costs.
(3) As a percentage of annualized base rent.
(4) Includes investments in mortgage loans receivable collateralized by more than one property.
(5) Includes investments in mortgage loans receivable made in support of sale-leaseback transactions.
The following table sets forth select information about our disposition activity for the previous eight quarters beginning with the quarter ended June 30, 2024 through the quarter ended March 31, 2026 (dollars in thousands):
| Three Months Ended | ||||||||||||||||||||||||||
| June 30, 2024 | September 30, 2024 | December 31, 2024 | March 31, 2025 | |||||||||||||||||||||||
|
Disposition volume1
|
$ | 4,783 | $ | 16,973 | $ | 60,449 | $ | 24,338 | ||||||||||||||||||
|
Cash cap rate on leased assets 2
|
7.3%
|
6.8%
|
7.0%
|
6.9%
|
||||||||||||||||||||||
|
Leased properties sold 3
|
4 | 7 | 24 | 10 | ||||||||||||||||||||||
|
Vacant properties sold 3
|
2 | 2 | - | 1 | ||||||||||||||||||||||
| Three Months Ended | ||||||||||||||||||||||||||
| June 30, 2025 | September 30, 2025 | December 31, 2025 | March 31, 2026 | |||||||||||||||||||||||
|
Disposition volume1
|
$ | 46,193 | $ | 11,455 | $ | 48,083 | $ | 10,175 | ||||||||||||||||||
|
Cash cap rate on leased assets 2
|
7.3%
|
6.6%
|
6.9%
|
6.9%
|
||||||||||||||||||||||
|
Leased properties sold 3
|
18 | 6 | 13 | 5 | ||||||||||||||||||||||
|
Vacant properties sold 3
|
5 | 1 | 6 | 1 | ||||||||||||||||||||||
_____________________________________
(1) Net of transaction costs.
(2) Annualized base rent at time of sale divided by the gross sale price (excluding transaction costs) for the property.
(3) Property count excludes dispositions of undeveloped land parcels or dispositions where only a portion of the owned parcel was sold.
Liquidity and Capital Resources
As of March 31, 2026, the net investment value of our income property portfolio totaled $6.9 billion, consisting of investments in 2,417 properties (inclusive of one undeveloped land parcel and 150 properties which secure our investments in mortgage loans receivable), with annualized base rent of $584.2 million. Substantially all of our cash from operations is generated by our investment portfolio.
The liquidity requirements for operating our Company consist primarily of funding our investment activities, servicing our outstanding indebtedness and paying our general and administrative expenses and dividends as declared by our board of directors. The occupancy level of our portfolio is high (99.7% as of March 31, 2026) and, because substantially all of our leases are triple-net (whereby our tenants are generally responsible for all maintenance costs for operating the property, and insurance and property taxes associated with the leased properties), our liquidity requirements are not significantly impacted by property costs. When a property becomes vacant, we are required to pay the property costs not paid by a tenant, as well as those property costs accruing during the time it takes to locate a new tenant or to sell the property. As of March 31, 2026, seven of our investment properties were vacant, less than 1% of our portfolio, and all remaining properties were subject to a lease (excluding one undeveloped land parcel) or mortgage loan receivable. We expect to incur property costs from time to time in periods during which properties that become vacant are being marketed for lease or sale. In addition, we may recognize an expense for certain property costs, such as real estate taxes billed in arrears, if we believe the tenant is likely to vacate the property before making payment on those obligations. The amount of such property costs can vary quarter-to-quarter based on the timing of property vacancies and the level of underperforming properties; however, we do not expect that such costs will be significant to our operations.
We intend to continue to grow through additional investments in stand-alone single tenant properties. To accomplish this objective, we seek to invest in real estate utilizing a combination of debt and equity capital and with cash from operations that we do not distribute to our stockholders. When we sell properties, we generally reinvest the cash proceeds in new single tenant properties. Our short-term liquidity requirements also include the funding needs associated with 69 properties where we have agreed to reimburse the tenant for certain development, construction, or renovation costs or to provide construction financing in exchange for contractual payments of interest or increased rent that generally increases in proportion with our level of funding. As of March 31, 2026, we agreed to provide construction financing or reimburse the tenant for certain development, construction and renovation costs in an aggregate amount of $340.6 million, and, as of such date, we have funded $234.3 million of this commitment. We expect to fund the remaining commitment totaling $106.3 million by March 31, 2027.
Additionally, as of April 17, 2026, we were under contract to acquire three properties with an aggregate purchase price of $12.4 million, subject to completion of our due diligence procedures and satisfaction of customary closing conditions. We expect to meet our short-term liquidity requirements, including our construction financing and tenant reimbursement obligations and potential investment in future single tenant properties, primarily with our cash and cash equivalents, net cash from operating activities, issuance of common stock subject to outstanding forward sale agreements, borrowings under the Revolving Credit Facility and potentially through proceeds generated from asset sales and our October 2024 ATM Program, under which we may offer and sell common stock with an aggregate gross sales price of up to $330.7 million as of April 17, 2026.
Our long-term liquidity requirements consist primarily of the funds necessary to make additional investments and repay indebtedness. We expect to meet our long-term liquidity requirements through various sources of capital, including net cash from operating activities, borrowings under our Revolving Credit Facility, future debt financings, proceeds from the sale of our common stock and proceeds from the sale of selected properties in our portfolio. However, at any point in time, there may be a number of factors that could have a material and adverse effect on our ability to access these capital sources, including unfavorable conditions in the overall equity and credit markets, our level of leverage, the portion of our portfolio that is unencumbered, our credit ratings, borrowing restrictions imposed by our debt agreements, general market conditions for real estate and potentially REITs specifically, our operating performance, our liquidity and general market perceptions about us. The success of our business strategy will depend, to a significant degree, on our ability to access these various capital sources to fund our future investments and thereby grow our cash flows.
An additional liquidity need is funding the required level of distributions, generally 90% of our REIT taxable income (determined without regard to the dividends paid deduction and excluding any net capital gain), that are among the requirements for us to continue to qualify for taxation as a REIT. Holders of OP Units and LTIP Units are entitled to distributions per unit equivalent to those paid by us per share of common stock. During the three months ended March 31, 2026, our board of directors declared total cash distributions of $0.31 per share of common stock/OP Unit/LTIP Unit totaling $67.6 million and $67.6 million was payable as of March 31, 2026. To continue to qualify for taxation as a REIT, we must make distributions to our stockholders aggregating annually at least 90% of our REIT taxable income, determined without regard to the dividends paid deduction and excluding any net capital gain. As a result of this requirement, we cannot rely on retained earnings to fund our business needs to the same extent as other entities that are not REITs. If we do not have sufficient funds available to us from our operations to fund our business needs, we will need to find alternative ways to fund those needs. Such alternatives may include, among other things, selling properties (whether or not the sales price is optimal or otherwise meets our strategic long-term objectives), incurring additional indebtedness or issuing equity securities in public or private transactions. The availability and attractiveness of the terms of these potential sources of financing cannot be assured.
Generally, our short-term debt capital needs are provided through the use of our Revolving Credit Facility. We manage our long-term leverage position through the issuance of long-term fixed-rate debt on an unsecured or secured basis. Generally, we will seek to issue long-term debt on an unsecured basis as we believe this facilitates greater flexibility in the management of our portfolio and our ability to retain optionality in our overall financing and growth strategy. By seeking to match the expected cash inflows from our long-term income producing investments with the expected cash outflows for our long-term debt, we seek to "lock in," for as long as is economically feasible, the expected positive spread between our scheduled cash inflows from our investments and the cash outflows on our debt obligations. In this way, we seek to reduce the risk that increases in interest rates would adversely impact our cash flows and results of operations. Our ability to execute leases that contain annual rent escalations also contributes to our ability to manage the risk of a rising interest rate environment. We use various financial instruments designed to mitigate the impact of interest rate fluctuations on our cash flows and earnings, including hedging strategies such as interest rate swaps and caps, depending on our analysis of the interest rate environment and the costs and risks of such strategies. Although we are not required to maintain a particular leverage ratio and may not be able to do so, we generally consider that a level of pro forma net debt (which includes recourse and non-recourse debt and any outstanding preferred stock, less cash and cash equivalents, restricted cash available for future investment and estimated proceeds from any unsettled forward sale agreements assuming full physical settlement) that, over time, is generally less than 5.5 times our annualized adjusted EBITDAre is prudent for a real estate company like ours.
As of March 31, 2026, all of our long-term debt was fixed-rate debt or was effectively converted to a fixed-rate for the term of the debt though hedging strategies, and our weighted average debt maturity was 4.0 years. As we continue to invest in real estate properties and grow our real estate portfolio, we intend to manage our long-term debt maturities to reduce the risk that a significant amount of our debt will mature in any single year in the future.
Future sources of debt capital may include public issuances of senior unsecured notes, term loan borrowings and mortgage financing of a single-asset or a portfolio of assets. These sources of debt capital may offer us the opportunity to lower our cost of funding and further diversify our sources of debt capital. Over time, we may choose to issue preferred equity as a part of our overall strategy for funding our business. As our outstanding debt matures, we may refinance it as it comes due or choose to repay it using cash and cash equivalents or borrowings under our Revolving Credit Facility. We believe that the cash generated by our operations, together with our cash and cash equivalents at March 31, 2026, our borrowing availability under the Revolving Credit Facility, issuance of common stock subject to outstanding forward sale agreements, and our potential access to additional sources of capital, will be sufficient to fund our operations for the next 12 months, including investing in the real estate for which we currently have commitments, and the longer-term period thereafter.
Supplemental Guarantor Information
The Company and the Operating Partnership have filed a registration statement on Form S-3 with the SEC registering, among other securities, debt securities of the Operating Partnership, which, unless otherwise specified, will be fully and unconditionally guaranteed by the Company. At March 31, 2026, the Operating Partnership had issued and outstanding $800.0 million of senior notes. The obligations of the Operating Partnership under the Senior Notes are guaranteed on a senior basis by the Company. The guarantee is full and unconditional, and the Operating Partnership is a consolidated subsidiary of the Company.
Pursuant to Rule 3-10 of Regulation S-X, subsidiary issuers of obligations guaranteed by the parent are not required to provide separate financial statements, provided that the subsidiary obligor is consolidated into the parent company's consolidated financial statements, the parent guarantee is "full and unconditional" and, subject to certain exceptions as set forth below, the alternative disclosure required by Rule 13-01 is provided, which includes narrative disclosure and summarized financial information. Accordingly, separate consolidated financial statements of the Operating Partnership have not been presented. Furthermore, as permitted under Rule 13-01(a)(4)(vi), the Company has excluded the summarized financial information for the Operating Partnership as the assets, liabilities and results of operations of the Company and the Operating Partnership are not materially different than the corresponding amounts presented in the consolidated financial statements of the Company, and management believes such summarized financial information would be repetitive and not provide incremental value to investors.
Description of Certain Debt
The following table summarizes our outstanding indebtedness as of March 31, 2026 and December 31, 2025:
| Principal Outstanding |
Weighted Average Interest Rate (1)
|
|||||||||||||||||||||||||||||||
| (in thousands) | Maturity Date | March 31, 2026 | December 31, 2025 | March 31, 2026 | December 31, 2025 | |||||||||||||||||||||||||||
| Unsecured term loans: | ||||||||||||||||||||||||||||||||
| 2027 Term Loan | February 2027 | $ | 430,000 | $ | 430,000 | 2.26% | 2.36% | |||||||||||||||||||||||||
| 2028 Term Loan | January 2028 | 400,000 | 400,000 | 4.51% | 4.51% | |||||||||||||||||||||||||||
| 2029 Term Loan |
February 2029 (2)
|
450,000 | 450,000 | 5.25% | 5.25% | |||||||||||||||||||||||||||
| 2030 Term Loan |
January 2030 (2)
|
450,000 | 450,000 | 4.67% | 4.67% | |||||||||||||||||||||||||||
| Senior unsecured notes: | ||||||||||||||||||||||||||||||||
| 2031 Notes | July 2031 | 400,000 | 400,000 | 3.12% | 3.12% | |||||||||||||||||||||||||||
| 2035 Notes | December 2035 | 400,000 | 400,000 | 5.40% | 5.40% | |||||||||||||||||||||||||||
| Revolving Credit Facility |
February 2030 (2)
|
100,000 | - | 4.46% | -% | |||||||||||||||||||||||||||
| Total principal outstanding | $ | 2,630,000 | $ | 2,530,000 | 4.22% | 4.23% | ||||||||||||||||||||||||||
_____________________________________
(1)Interest rates are presented after giving effect to our interest rate swap and lock agreements, where applicable.
(2)After giving effect to extension options exercisable at the Operating Partnership's election.
Revolving Credit Facility and Credit Facility Term Loans
Through our Operating Partnership, we are party to an Amended and Restated Credit Agreement with a group of lenders, which was most recently amended on February 6, 2025 (the "Amended Credit Agreement"), and provides for revolving loans of up to $1.0 billion (the "Revolving Credit Facility") and an additional $1.3 billion of term loans, consisting of a $400.0 million term loan (the "2028 Term Loan"), a $450.0 million term loan (the "2029 Term Loan") and a $450.0 million term loan (the "2030 Term Loan" and, together with the 2028 Term Loan and 2029 Term Loan, the "CF Term Loans"). All principal amounts available under the CF Term Loans were drawn as of March 31, 2026.
The Revolving Credit Facility has a fully-extended maturity date of February 6, 2030, after giving effect to two extension options of six months each, exercisable by the Operating Partnership, subject to the satisfaction of certain conditions. The 2028 Term Loan matures on January 25, 2028, the 2029 Term Loan has an original maturity of three years, plus extension options at the Operating Partnership's election, which can extend the maturity to February 24, 2029 and the 2030 Term Loan has an original maturity of three years, plus extension options at the Operating Partnership's election, which can extend the maturity to January 11, 2030. The loans under each of the Revolving Credit Facility and the CF Term Loans initially bear interest at an annual rate of applicable Adjusted Term SOFR (as defined in the Amended Credit Agreement) plus an applicable margin (which applicable margin varies between the Revolving Credit Facility and the CF Term Loans). The Adjusted Term SOFR is a rate with a term equivalent to the interest period applicable to the relevant borrowing. In addition, the Operating Partnership is required to pay a revolving facility fee throughout the term of the Revolving Credit Facility. The applicable margin and the revolving facility fee rate are a spread and rate, as applicable, set according to the credit ratings provided by S&P, Moody's and/or Fitch.
Each of the Revolving Credit Facility and the CF Term Loans is freely pre-payable at any time. Outstanding credit extensions under the Revolving Credit Facility are mandatorily payable if the amount of such credit extensions exceeds the revolving facility limit. The Operating Partnership may re-borrow amounts paid down on the Revolving Credit Facility prior to its maturity. Loans repaid under the CF Term Loans cannot be reborrowed. The Amended Credit Agreement has an accordion feature to increase, subject to certain conditions, the maximum availability of credit (either through increased revolving commitments or additional term loans) by up to $1.0 billion.
The Operating Partnership is the borrower under the Amended Credit Agreement, and we and certain of the subsidiaries of the Operating Partnership that own a direct or indirect interest in an eligible real property asset are guarantors under the Amended Credit Agreement. Under the terms of the Amended Credit Agreement, we are subject to customary restrictive financial and nonfinancial covenants which, among other things, require us to maintain certain leverage ratios, cash flow and debt service coverage ratios, secured borrowing ratios. As of March 31, 2026, we were in compliance with these covenants.
The Amended Credit Agreement also restricts our ability to pay distributions to our stockholders under certain circumstances. However, we may make distributions to the extent necessary to maintain our qualification as a REIT under the Code. In addition to the financial covenants described above, the Amended Credit Agreement contains customary affirmative and negative covenants that, among other things and subject to exceptions, limit or restrict our ability to incur indebtedness and liens, consummate mergers or other fundamental changes, dispose of assets, make certain restricted payments, make certain investments, modify our organizational documents, transact with affiliates, change our fiscal periods, provide negative pledge clauses, make subsidiary distributions, enter into certain new lines of business or engage in certain activities, and fail to meet the requirements for taxation as a REIT.
2027 Term Loan
Through our Operating Partnership, we are party to a $430.0 million term loan (the "2027 Term Loan") that matures in February 2027. The 2027 Term Loan bears interest at an annual rate of applicable Adjusted Term SOFR plus an applicable margin. The applicable Adjusted Term SOFR is the rate for a term equivalent to the interest period applicable to the relevant borrowing. The applicable margin is a spread set according to the Company's corporate credit ratings provided by S&P, Moody's and/or Fitch.
The 2027 Term Loan is pre-payable at any time by the Operating Partnership without penalty. The 2027 Term Loan has an accordion feature to increase, subject to certain conditions, the maximum availability of the facility up to an aggregate of $500.0 million.
The Operating Partnership is the borrower under the 2027 Term Loan, and we and certain of the subsidiaries of the Operating Partnership that own a direct or indirect interest in an eligible real property asset are guarantors under the facility. Under the terms of the 2027 Term Loan, we are subject to customary restrictive financial and nonfinancial covenants which, among other things, require us to maintain certain leverage ratios, cash flow and debt service coverage ratios, and secured borrowing ratios. As of March 31, 2026, we were in compliance with these covenants.
The 2027 Term Loan restricts our ability to pay distributions to our stockholders under certain circumstances. However, we may make distributions to the extent necessary to maintain our qualification as a REIT under the Code. The 2027 Term Loan contains certain additional covenants that, subject to exceptions, limit or restrict our incurrence of indebtedness and liens, disposition of assets, transactions with affiliates, mergers and fundamental changes, modification of organizational documents, changes to fiscal periods, making of investments, negative pledge clauses and lines of business and REIT qualification.
Senior Unsecured Notes
On June 22, 2021, the Operating Partnership issued $400 million aggregate principal amount of 2.950% Senior Notes due 2031 (the "2031 Notes"), resulting in net proceeds of $396.6 million. On August 21, 2025, the Operating Partnership issued $400.0 million aggregate principal amount of 5.400% Senior Notes due 2035 (the "2035 Notes" and, together with the 2031 Notes, the "Senior Notes"), resulting in net proceeds of $390.7 million. The Senior Notes were issued by the Operating Partnership and the obligations of the Operating Partnership under the Senior Notes are fully and unconditionally guaranteed by the Company.
The indenture and supplemental indenture creating the Senior Notes contain customary restrictive covenants, including limitations on our ability to incur additional secured and unsecured indebtedness. As of March 31, 2026, we were in compliance with these covenants.
Cash Flows
Comparison of the three months ended March 31, 2026 and 2025
As of March 31, 2026, we had $15.2 million of cash and cash equivalents and $1.0 million of restricted cash, as compared to $47.0 million of cash and cash equivalents and no restricted cash as of March 31, 2025.
Cash Flows for the three months ended March 31, 2026
During the three months ended March 31, 2026, net cash provided by operating activities was $99.8 million and our net income was $60.0 million. Our cash flows from operating activities are primarily dependent upon the occupancy level of our portfolio, the rental rates specified in our leases, the interest on our loans and direct financing lease receivables, the collectability of rent and interest and the level of our operating expenses and general and administrative costs. Our cash inflows from operating activities reflect adjustments to net income for non-cash items of $46.9 million, including increases for i) depreciation and amortization of tangible, intangible and right of use real estate assets and amortization of deferred financing costs and other non-cash interest expense of $45.5 million, ii) our provision for impairment of real estate of $16.8 million, iii) non-cash equity-based compensation expense of $4.2 million, iv) adjustments to rental revenue for tenant credit of $1.4 million and v) the change in our provision for credit losses of $0.6 million, reduced by i) our $5.3 million gain on dispositions of real estate, net and ii) $16.3 million related to the recognition of straight-line rent receivables. An additional inflow was from our increase in accrued liabilities and other payables of $2.9 million, offset by the outflow caused by the increase in our rent receivables, prepaid expenses and other assets, net of $10.0 million.
Net cash used in investing activities during the three months ended March 31, 2026 was $373.0 million. Our net cash used in investing activities generally reflects our investment in real estate, including capital expenditures, construction in progress and lease incentives, and in mortgage loans receivable, which totaled $388.8 million in the aggregate. These cash outflows were partially offset by $9.8 million of proceeds from sales of investments, net of disposition costs, and $6.1 million of principal collections on our loans and direct financing lease receivables.
Net cash provided by financing activities of $219.0 million during the three months ended March 31, 2026 reflected net cash inflows of $192.7 million from the issuance of common stock and $290.0 million of borrowings under the Revolving Credit Facility. These cash inflows were partially offset by the payment of $65.4 million in dividends, the repayment of $190.0 million of borrowings under the Revolving Credit Facility, the payment of
$0.2 million of offering costs, and the payment of $8.2 million in taxes related to the net settlement of equity awards upon vesting.
Off-Balance Sheet Arrangements
We had no off-balance sheet arrangements as of March 31, 2026.
Contractual Obligations
The following table provides information with respect to our contractual obligations as of March 31, 2026:
| Payment due by period | ||||||||||||||||||||||||||||||||
| (in thousands) | Total | April 1 - December 31, 2026 | 2027-2028 | 2029-2030 | Thereafter | |||||||||||||||||||||||||||
| Unsecured term loans | $ | 1,730,000 | $ | - | $ | 830,000 | $ | 900,000 | $ | - | ||||||||||||||||||||||
| Senior unsecured notes | 800,000 | - | - | - | 800,000 | |||||||||||||||||||||||||||
| Revolving Credit Facility | 100,000 | - | - | 100,000 | - | |||||||||||||||||||||||||||
|
Tenant construction financing and
reimbursement obligations (1)
|
106,338 | 106,338 | - | - | - | |||||||||||||||||||||||||||
|
Operating lease obligations (2)
|
28,896 | 916 | 2,997 | 2,704 | 22,279 | |||||||||||||||||||||||||||
| Total | $ | 2,765,234 | $ | 107,254 | $ | 832,997 | $ | 1,002,704 | $ | 822,279 | ||||||||||||||||||||||
_____________________________________
(1)Includes obligations to reimburse certain of our tenants for development, construction and renovation costs that they incur related to properties leased from the Company in exchange for contractual payments of interest or increased rent that generally increases proportionally with our funding.
(2)Includes $20.7 million of rental payments due under ground lease arrangements where our tenants are directly responsible for payment.
Additionally, we may enter into commitments to purchase goods and services in connection with the operation of our business. These commitments generally have terms of one-year or less and reflect expenditure levels comparable to our historical expenditures as adjusted for growth.
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States ("GAAP") requires our management to use judgment in the application of accounting policies, including making estimates and assumptions. Estimates and assumptions include, among other things, subjective judgments regarding the fair values and useful lives of our properties for depreciation and lease classification purposes, the collectability of receivables and asset impairment analysis. We base estimates on the best information available to us at the time, our experience and on various other assumptions believed to be reasonable under the circumstances. These estimates affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. If our judgment or interpretation of the facts and circumstances relating to various transactions or other matters had been different, it is possible that different accounting would have been applied, resulting in a different presentation of our consolidated financial statements. From time to time, we reevaluate our estimates and assumptions. In the event estimates or assumptions prove to be different from actual results, adjustments are made in subsequent periods to reflect more current estimates and assumptions about matters that are inherently uncertain. A summary of our critical accounting policies is included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025 in the section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations." We have not made any material changes to these policies during the periods covered by this quarterly report.
Our Real Estate Investment Portfolio
As of March 31, 2026, we had a portfolio of 2,417 properties, inclusive of one undeveloped land parcel and 150 properties that secure our investments in mortgage loans receivable, that was diversified by tenant, concept, industry and geography and had annualized base rent of $584.2 million. Our tenants operate 662 different concepts across 48 states. None of our tenants represented more than 3.2% of our portfolio at March 31, 2026, and our top ten largest tenants represented 15.8% of our annualized base rent as of that date.
As of March 31, 2026, 97.5% of our leases (based on annualized base rent) were triple-net, where the tenant is typically responsible for all improvements and is contractually obligated to pay all operating expenses, such as maintenance, insurance, utility and tax expense, related to the leased property. Due to the triple-net structure of our leases, we do not expect to incur significant capital expenditures relating to our triple-net leased properties, and the potential impact of inflation on our operating expenses is reduced.
Diversification by Tenant
As of March 31, 2026, our top ten tenants included ten different concepts. The following table details information about our tenants and the related concepts as of March 31, 2026 (dollars in thousands):
|
Tenant (1)
|
Concept |
Number of
Properties (2)
|
Annualized Base Rent |
% of Annualized Base Rent |
||||||||||||||||||||||
| EquipmentShare.com Inc. | EquipmentShare | 57 | $ | 18,934 | 3.2 | % | ||||||||||||||||||||
| Express Wash Operations, LLC | Whistle Express Car Wash | 33 | 10,900 | 1.9 | % | |||||||||||||||||||||
| CNP Holdings, LLC | Chicken N Pickle | 8 | 8,641 | 1.5 | % | |||||||||||||||||||||
| BW Ultimate Parent, LLC | Allsup's/YesWay | 13 | 8,337 | 1.4 | % | |||||||||||||||||||||
| Dave & Buster's Inc. | Dave & Buster's | 5 | 8,240 | 1.4 | % | |||||||||||||||||||||
| Undefeated Tribe Operating Company, LLC | Crunch Fitness | 13 | 8,026 | 1.4 | % | |||||||||||||||||||||
| Busy Bees US Holdings Limited | Various | 32 | 7,359 | 1.3 | % | |||||||||||||||||||||
| Early Foundations LLC | Primrose School | 21 | 7,329 | 1.3 | % | |||||||||||||||||||||
| Denali Midco 2 LLC | Super Star Car Wash | 19 | 6,961 | 1.2 | % | |||||||||||||||||||||
| GSP Flagstop LLC | Flagstop Car Wash | 20 | 6,880 | 1.2 | % | |||||||||||||||||||||
| Top 10 Subtotal | 221 | 91,606 | 15.8 | % | ||||||||||||||||||||||
| Other | 2,188 | 492,561 | 84.2 | % | ||||||||||||||||||||||
| Total | 2,409 | $ | 584,166 | 100.0 | % | |||||||||||||||||||||
_____________________________________
(1)Represents tenant, guarantor or parent company.
(2)Excludes one undeveloped land parcel and seven vacant properties.
Diversification by Concept
Our tenants operate their businesses across 662 concepts. (i.e., brands). The following table provides information about the top ten concepts in our portfolio as of March 31, 2026 (dollars in thousands):
| Concept | Type of Business |
Annualized Base Rent |
% of Annualized Base Rent |
Number of
Properties (1)
|
Building
(Sq. Ft.) (1)
|
|||||||||||||||||||||||||||
| EquipmentShare | Service | $ | 18,934 | 3.2 | % | 57 | 1,104,897 | |||||||||||||||||||||||||
| Crunch Fitness | Experience | 15,618 | 2.7 | % | 27 | 1,011,932 | ||||||||||||||||||||||||||
| Whistle Express Car Wash | Service | 10,900 | 1.9 | % | 33 | 135,867 | ||||||||||||||||||||||||||
| Denny's Restaurant | Service | 10,394 | 1.8 | % | 73 | 351,685 | ||||||||||||||||||||||||||
| John Deere | Service | 9,717 | 1.7 | % | 43 | 877,794 | ||||||||||||||||||||||||||
| Chicken N Pickle | Experience | 8,641 | 1.5 | % | 8 | 279,483 | ||||||||||||||||||||||||||
| Allsup's/YesWay | Service | 8,337 | 1.4 | % | 13 | 75,429 | ||||||||||||||||||||||||||
| Primrose School | Service | 8,289 | 1.4 | % | 23 | 272,636 | ||||||||||||||||||||||||||
| Super Star Car Wash | Service | 6,961 | 1.2 | % | 19 | 91,470 | ||||||||||||||||||||||||||
| Flagstop Car Wash | Service | 6,880 | 1.2 | % | 20 | 93,538 | ||||||||||||||||||||||||||
| Top 10 Subtotal | 104,672 | 17.9 | % | 316 | 4,294,731 | |||||||||||||||||||||||||||
| Other | 479,495 | 82.1 | % | 2,093 | 22,810,612 | |||||||||||||||||||||||||||
| Total | $ | 584,166 | 100.0 | % | 2,409 | 27,105,343 | ||||||||||||||||||||||||||
_____________________________________
(1)Excludes one undeveloped land parcel and seven vacant properties.
Diversification by Industry
Our tenants' business concepts are diversified across various industries. The following table summarizes those industries as of March 31, 2026 (dollars in thousands except per sq. ft amounts):
| Tenant Industry |
Type of Business |
Annualized Base Rent |
% of Annualized Base Rent |
Number of
Properties (1)
|
Building
(Sq. Ft.) (1)
|
Rent Per
Sq. Ft. (2)
|
||||||||||||||||||||||||||||||||
| Car Washes | Service | $ | 76,163 | 13.0 | % | 220 | 1,083,076 | $ | 69.91 | |||||||||||||||||||||||||||||
| Medical / Dental | Service | 71,183 | 12.2 | % | 281 | 2,293,824 | 29.99 | |||||||||||||||||||||||||||||||
| Early Childhood Education | Service | 63,408 | 10.9 | % | 256 | 2,781,513 | 22.56 | |||||||||||||||||||||||||||||||
| Quick Service | Service | 49,545 | 8.5 | % | 466 | 1,249,440 | 39.94 | |||||||||||||||||||||||||||||||
| Automotive Service | Service | 48,759 | 8.3 | % | 317 | 2,480,130 | 19.50 | |||||||||||||||||||||||||||||||
| Convenience Stores | Service | 37,117 | 6.4 | % | 177 | 773,083 | 48.65 | |||||||||||||||||||||||||||||||
| Casual Dining | Service | 33,972 | 5.8 | % | 130 | 923,447 | 36.79 | |||||||||||||||||||||||||||||||
| Equipment Rental and Sales | Service | 28,650 | 4.9 | % | 100 | 1,982,691 | 14.45 | |||||||||||||||||||||||||||||||
| Other Services | Service | 18,046 | 3.1 | % | 72 | 912,573 | 19.78 | |||||||||||||||||||||||||||||||
| Family Dining | Service | 16,361 | 2.8 | % | 99 | 555,326 | 29.65 | |||||||||||||||||||||||||||||||
| Pet Care Services | Service | 7,835 | 1.3 | % | 35 | 294,841 | 25.59 | |||||||||||||||||||||||||||||||
| Service Subtotal | 451,039 | 77.2 | % | 2,153 | 15,329,944 | 29.19 | ||||||||||||||||||||||||||||||||
| Entertainment | Experience | 54,883 | 9.4 | % | 74 | 2,632,159 | 19.55 | |||||||||||||||||||||||||||||||
| Health and Fitness | Experience | 24,548 | 4.2 | % | 47 | 1,787,385 | 13.14 | |||||||||||||||||||||||||||||||
| Movie Theaters | Experience | 4,436 | 0.8 | % | 6 | 293,206 | 15.13 | |||||||||||||||||||||||||||||||
| Experience Subtotal | 83,867 | 14.4 | % | 127 | 4,712,750 | 16.85 | ||||||||||||||||||||||||||||||||
| Other Industrial | Industrial | 29,297 | 5.0 | % | 63 | 4,103,188 | 7.00 | |||||||||||||||||||||||||||||||
| Building Materials | Industrial | 4,808 | 0.8 | % | 24 | 1,297,669 | 3.71 | |||||||||||||||||||||||||||||||
| Industrial Subtotal | 34,105 | 5.8 | % | 87 | 5,400,857 | 6.22 | ||||||||||||||||||||||||||||||||
| Grocery | Retail | 14,737 | 2.5 | % | 41 | 1,635,542 | 9.01 | |||||||||||||||||||||||||||||||
| Home Furnishings | Retail | 418 | 0.1 | % | 1 | 26,250 | 15.92 | |||||||||||||||||||||||||||||||
| Retail Subtotal | 15,155 | 2.6 | % | 42 | 1,661,792 | 9.12 | ||||||||||||||||||||||||||||||||
| Total/Weighted Average | $ | 584,166 | 100.0 | % | 2,409 | 27,105,343 | $ | 21.23 | ||||||||||||||||||||||||||||||
_____________________________________
(1)Excludes one undeveloped land parcel and seven vacant properties.
(2)Excludes properties with no annualized base rent and properties under construction.
Diversification by Geography
Our 2,417 properties are located in 48 states. The following table details the geographical locations of our properties as of March 31, 2026 (dollars in thousands):
| State |
Annualized Base Rent |
% of Annualized Base Rent |
Number of Properties |
Building (Sq. Ft.) |
||||||||||||||||||||||
| Texas | $ | 76,397 | 13.1 | % | 277 | 3,538,923 | ||||||||||||||||||||
| Florida | 42,570 | 7.3 | % | 139 | 1,231,537 | |||||||||||||||||||||
| Georgia | 36,196 | 6.2 | % | 169 | 1,286,017 | |||||||||||||||||||||
| Ohio | 30,611 | 5.2 | % | 146 | 1,696,344 | |||||||||||||||||||||
| Wisconsin | 26,081 | 4.5 | % | 99 | 1,472,770 | |||||||||||||||||||||
| Missouri | 21,474 | 3.7 | % | 93 | 1,450,515 | |||||||||||||||||||||
| Oklahoma | 19,011 | 3.3 | % | 73 | 986,076 | |||||||||||||||||||||
| North Carolina | 18,479 | 3.2 | % | 86 | 790,650 | |||||||||||||||||||||
| Indiana | 18,150 | 3.1 | % | 80 | 828,661 | |||||||||||||||||||||
| Arizona | 17,497 | 3.0 | % | 70 | 733,113 | |||||||||||||||||||||
| Illinois | 17,443 | 3.0 | % | 70 | 821,103 | |||||||||||||||||||||
| Alabama | 15,108 | 2.6 | % | 65 | 931,286 | |||||||||||||||||||||
| South Carolina | 14,123 | 2.4 | % | 67 | 558,561 | |||||||||||||||||||||
| Michigan | 14,108 | 2.4 | % | 69 | 1,213,064 | |||||||||||||||||||||
| Pennsylvania | 13,311 | 2.3 | % | 70 | 710,609 | |||||||||||||||||||||
| Tennessee | 13,304 | 2.3 | % | 64 | 464,983 | |||||||||||||||||||||
| New Jersey | 13,156 | 2.3 | % | 34 | 497,462 | |||||||||||||||||||||
| Virginia | 12,969 | 2.2 | % | 41 | 422,951 | |||||||||||||||||||||
| New York | 12,232 | 2.1 | % | 68 | 728,522 | |||||||||||||||||||||
| Minnesota | 11,535 | 2.0 | % | 45 | 641,853 | |||||||||||||||||||||
| California | 11,399 | 2.0 | % | 36 | 265,409 | |||||||||||||||||||||
| Mississippi | 11,294 | 1.9 | % | 76 | 415,174 | |||||||||||||||||||||
| Louisiana | 10,778 | 1.8 | % | 37 | 352,037 | |||||||||||||||||||||
| Arkansas | 10,213 | 1.7 | % | 66 | 507,946 | |||||||||||||||||||||
| Colorado | 9,258 | 1.6 | % | 34 | 392,441 | |||||||||||||||||||||
| New Mexico | 8,167 | 1.4 | % | 28 | 187,680 | |||||||||||||||||||||
| Massachusetts | 7,736 | 1.3 | % | 35 | 488,841 | |||||||||||||||||||||
| Kentucky | 7,599 | 1.3 | % | 51 | 327,218 | |||||||||||||||||||||
| Iowa | 7,571 | 1.3 | % | 35 | 414,813 | |||||||||||||||||||||
| Connecticut | 7,236 | 1.2 | % | 22 | 555,538 | |||||||||||||||||||||
| Utah | 7,186 | 1.2 | % | 7 | 528,351 | |||||||||||||||||||||
| Nevada | 6,718 | 1.2 | % | 16 | 168,720 | |||||||||||||||||||||
| Maryland | 5,371 | 0.9 | % | 17 | 276,445 | |||||||||||||||||||||
| Kansas | 4,919 | 0.8 | % | 18 | 201,900 | |||||||||||||||||||||
| New Hampshire | 3,792 | 0.6 | % | 13 | 268,937 | |||||||||||||||||||||
| Oregon | 3,676 | 0.6 | % | 10 | 187,977 | |||||||||||||||||||||
| Washington | 2,926 | 0.5 | % | 17 | 105,513 | |||||||||||||||||||||
| South Dakota | 2,775 | 0.5 | % | 9 | 130,152 | |||||||||||||||||||||
| North Dakota | 2,573 | 0.4 | % | 7 | 97,442 | |||||||||||||||||||||
| West Virginia | 2,350 | 0.4 | % | 24 | 85,800 | |||||||||||||||||||||
| Nebraska | 2,222 | 0.4 | % | 11 | 138,797 | |||||||||||||||||||||
| Vermont | 1,286 | 0.2 | % | 10 | 80,819 | |||||||||||||||||||||
| Maine | 1,167 | 0.2 | % | 4 | 71,000 | |||||||||||||||||||||
| Idaho | 788 | 0.1 | % | 3 | 43,588 | |||||||||||||||||||||
| Rhode Island | 481 | 0.1 | % | 2 | 22,865 | |||||||||||||||||||||
| Delaware | 415 | 0.1 | % | 1 | 4,186 | |||||||||||||||||||||
| Wyoming | 300 | 0.1 | % | 1 | 10,001 | |||||||||||||||||||||
| Alaska | 215 | 0.0 | % | 2 | 6,630 | |||||||||||||||||||||
| Total | $ | 584,166 | 100.0 | % | 2,417 | 27,341,220 | ||||||||||||||||||||
Lease Expirations
As of March 31, 2026, the weighted average remaining term of our leases was 14.6 years (based on annualized base rent), with only 2.8% of our annualized base rent attributable to leases expiring prior to January 1, 2029. The following table sets forth our lease expirations for leases in place as of March 31, 2026 (dollars in thousands):
|
Lease Expiration Year (1)
|
Annualized Base Rent |
% of Annualized Base Rent |
Number of
Properties (2)
|
Weighted
Average Rent
Coverage Ratio (3)
|
||||||||||||||||||||||
| 2026 | $ | 5,397 | 0.9 | % | 29 | 3.0x | ||||||||||||||||||||
| 2027 | 6,118 | 1.0 | % | 41 | 3.7x | |||||||||||||||||||||
| 2028 | 4,562 | 0.8 | % | 17 | 2.9x | |||||||||||||||||||||
| 2029 | 11,279 | 1.9 | % | 122 | 4.7x | |||||||||||||||||||||
| 2030 | 6,006 | 1.0 | % | 56 | 3.7x | |||||||||||||||||||||
| 2031 | 11,109 | 1.9 | % | 58 | 3.0x | |||||||||||||||||||||
| 2032 | 13,588 | 2.3 | % | 45 | 4.0x | |||||||||||||||||||||
| 2033 | 6,516 | 1.1 | % | 26 | 3.1x | |||||||||||||||||||||
| 2034 | 29,056 | 5.0 | % | 188 | 5.0x | |||||||||||||||||||||
| 2035 | 20,321 | 3.5 | % | 122 | 3.8x | |||||||||||||||||||||
| 2036 | 38,613 | 6.6 | % | 160 | 3.6x | |||||||||||||||||||||
| 2037 | 23,458 | 4.0 | % | 121 | 3.7x | |||||||||||||||||||||
| 2038 | 51,560 | 8.8 | % | 190 | 4.3x | |||||||||||||||||||||
| 2039 | 43,169 | 7.5 | % | 176 | 3.6x | |||||||||||||||||||||
| 2040 | 46,885 | 8.0 | % | 166 | 4.4x | |||||||||||||||||||||
| 2041 | 22,500 | 3.9 | % | 99 | 2.4x | |||||||||||||||||||||
| 2042 | 24,825 | 4.2 | % | 115 | 3.0x | |||||||||||||||||||||
| 2043 | 49,530 | 8.5 | % | 183 | 2.3x | |||||||||||||||||||||
| 2044 | 47,627 | 8.2 | % | 166 | 2.7x | |||||||||||||||||||||
| 2045 | 71,259 | 12.2 | % | 200 | 3.0x | |||||||||||||||||||||
| Thereafter | 50,788 | 8.7 | % | 129 | 4.1x | |||||||||||||||||||||
| Total/Weighted Average | $ | 584,166 | 100.0 | % | 2,409 | 3.5x | ||||||||||||||||||||
_____________________________________
(1)Expiration year of contracts in place as of March 31, 2026, excluding any tenant option renewal periods that have not been exercised.
(2)Excludes one undeveloped land parcel and seven vacant properties.
(3)Weighted by annualized base rent.
Unit-Level Rent Coverage
Generally, we seek to acquire investments with healthy rent coverage ratios, and as of March 31, 2026, the weighted average rent coverage ratio of our portfolio was 3.5x. Our portfolio's unit-level rent coverage ratios (by annualized base rent and excluding leases that do not report unit-level financial information) as of March 31, 2026 are displayed below:
| Unit-Level Coverage Ratio | % of Total | |||||||
| ≥ 2.00x | 68.3 | % | ||||||
| 1.50x to 1.99x | 16.5 | % | ||||||
| 1.00x to 1.49x | 11.2 | % | ||||||
| < 1.00x | 3.4 | % | ||||||
| Not reported | 0.6 | % | ||||||
| 100.0 | % | |||||||
Implied Tenant Credit Ratings
Tenant financial distress is typically caused by consistently poor or deteriorating operating performance, near-term liquidity issues or unexpected liabilities. To assess the probability of tenant insolvency, we utilize Moody's Analytics RiskCalc, which is a model for predicting private company defaults based on Moody's Analytics Credit Research Database, which incorporates both market and company-specific risk factors. The following table illustrates the portions of our annualized base rent as of March 31, 2026 attributable to leases with tenants having specified implied credit ratings based on their Moody's RiskCalc scores:
| Credit Rating | NR | < 1.00x | 1.00 to 1.49x | 1.50 to 1.99x | ≥ 2.00x | |||||||||||||||||||||||||||
| CCC+ | 0.1 | % | 0.2 | % | 0.9 | % | 0.2 | % | 0.2 | % | ||||||||||||||||||||||
| B- | - | % | 0.2 | % | - | % | 0.1 | % | 2.9 | % | ||||||||||||||||||||||
| B | - | % | 0.9 | % | 0.5 | % | 2.0 | % | 6.9 | % | ||||||||||||||||||||||
| B+ | - | % | 0.6 | % | 2.5 | % | 5.1 | % | 7.1 | % | ||||||||||||||||||||||
| BB- | 0.1 | % | 0.2 | % | 0.5 | % | 2.5 | % | 11.5 | % | ||||||||||||||||||||||
| BB | - | % | 0.6 | % | 0.9 | % | 3.2 | % | 9.0 | % | ||||||||||||||||||||||
| BB+ | - | % | 0.1 | % | 1.8 | % | 0.4 | % | 10.4 | % | ||||||||||||||||||||||
| BBB- | 0.1 | % | 0.1 | % | 2.4 | % | 0.9 | % | 7.1 | % | ||||||||||||||||||||||
| BBB | - | % | - | % | 0.4 | % | 1.4 | % | 5.3 | % | ||||||||||||||||||||||
| BBB+ | 0.1 | % | 0.3 | % | 0.2 | % | 0.1 | % | 2.5 | % | ||||||||||||||||||||||
| A- | - | % | - | % | - | % | 0.1 | % | 1.3 | % | ||||||||||||||||||||||
| A | - | % | - | % | - | % | 0.1 | % | 1.1 | % | ||||||||||||||||||||||
| A+ | - | % | - | % | - | % | - | % | - | % | ||||||||||||||||||||||
| AA- | - | % | - | % | - | % | - | % | - | % | ||||||||||||||||||||||
_____________________________________
NR Not reported
Results of Operations
The following discussion includes the results of our operations for the periods presented.
Comparison of the three months ended March 31, 2026 and 2025
| Three months ended March 31, | ||||||||||||||||||||||||||
| (dollar amounts in thousands) | 2026 | 2025 | Change | % | ||||||||||||||||||||||
| Revenues: | ||||||||||||||||||||||||||
| Rental revenue | $ | 149,392 | $ | 121,792 | $ | 27,600 | 22.7 | % | ||||||||||||||||||
| Interest on loans and direct financing lease receivables | 8,627 | 7,525 | 1,102 | 14.6 | % | |||||||||||||||||||||
| Other revenue, net | 779 | 37 | 742 | 2,005.4 | % | |||||||||||||||||||||
| Total revenues | 158,798 | 129,354 | 29,444 | |||||||||||||||||||||||
| Expenses: | ||||||||||||||||||||||||||
| General and administrative | 12,327 | 11,543 | 784 | 6.8 | % | |||||||||||||||||||||
| Property expenses | 1,495 | 2,257 | (762) | (33.8) | % | |||||||||||||||||||||
| Depreciation and amortization | 43,189 | 34,993 | 8,196 | 23.4 | % | |||||||||||||||||||||
| Provision for impairment of real estate | 16,830 | 5,883 | 10,947 | 186.1 | % | |||||||||||||||||||||
| Change in provision for credit losses | 622 | 44 | 578 | 1313.6 | % | |||||||||||||||||||||
| Total expenses | 74,463 | 54,720 | 19,743 | |||||||||||||||||||||||
| Other operating income: | ||||||||||||||||||||||||||
| Gain on dispositions of real estate, net | 5,312 | 4,984 | 328 | (6.6) | % | |||||||||||||||||||||
| Income from operations | 89,647 | 79,618 | 10,029 | |||||||||||||||||||||||
| Other (expense)/income: | ||||||||||||||||||||||||||
| Interest expense | (29,947) | (23,793) | (6,154) | 25.9 | % | |||||||||||||||||||||
| Interest income | 410 | 614 | (204) | (33.2) | % | |||||||||||||||||||||
| Income before income tax expense | 60,110 | 56,439 | 3,671 | |||||||||||||||||||||||
| Income tax expense | 160 | 158 | 2 | 1.3 | % | |||||||||||||||||||||
| Net income | 59,950 | 56,281 | 3,669 | |||||||||||||||||||||||
| Net income attributable to non-controlling interests | (158) | (173) | 15 | (8.7) | % | |||||||||||||||||||||
| Net income attributable to stockholders | $ | 59,792 | $ | 56,108 | $ | 3,684 | ||||||||||||||||||||
Revenues:
Rental revenue. Rental revenue increased by $27.6 million for the three months ended March 31, 2026 as compared to the three months ended March 31, 2025. The increase in rental revenue was driven primarily by the growth in our real estate investment portfolio, which grew by 277 rental properties, or 14%, since March 31, 2025. A portion of our real estate investments were acquired throughout the periods presented and were not all owned by us for the entirety of the applicable periods; accordingly, a significant portion of the increase in rental revenue between periods is related to recognizing revenue in 2026 from acquisitions that were made during 2025 and early 2026.
Interest on loans and direct financing lease receivables. Interest on loans and direct financing lease receivables increased by $1.1 million for the three months ended March 31, 2026 as compared to the three months ended March 31, 2025, primarily due to the increase in our mortgage loans receivable portfolio during 2026, which led to a higher average daily balance of loans receivable outstanding during the three months ended March 31, 2026.
Other revenue, net. Other revenue increased by $0.7 million during the three months ended March 31, 2026 as compared to the three months ended March 31, 2025, primarily due to non-recurring lease termination and other fees received during the three months ended March 31, 2026.
Expenses:
General and administrative. General and administrative expenses increased by $0.8 million for the three months ended March 31, 2026 as compared to the three months ended March 31, 2025, primarily due to an increase in equity-based compensation expense and professional fees during the three months ended March 31, 2026.
Property expenses. Property expenses decreased by $0.8 million for the three months ended March 31, 2026 as compared to the three months ended March 31, 2025. The decrease in property expenses was primarily due to decreased reimbursable property taxes and property-related operating costs during the three months ended March 31, 2026.
Depreciation and amortization. Depreciation and amortization expense increased by $8.2 million during the three months ended March 31, 2026 as compared to the three months ended March 31, 2025. Depreciation and amortization expense increased in proportion to the increase in the size of our real estate investment portfolio during the three months ended March 31, 2026.
Provision for impairment of real estate. Impairment charges on real estate investments were $16.8 million and $5.9 million for the three months ended March 31, 2026 and 2025, respectively. During the three months ended March 31, 2026 and 2025, we recorded a provision for impairment of real estate on eight and seven of our real estate investments, respectively.
Change in provision for credit losses. The change in our provision for credit losses in our loan portfolio increased by $0.6 million for the three months ended March 31, 2026 as compared to the three months ended March 31, 2025. Under ASC 326, we are required to re-evaluate the expected loss on our portfolio of loans and direct financing lease receivables at each balance sheet date. Changes in our provision for credit losses are driven by revisions to global and asset-specific assumptions in our credit loss model and by changes in the size of our loan and direct financing lease portfolio.
Other operating income:
Gain on dispositions of real estate, net. Gain on dispositions of real estate, net, increased by $0.3 million for the three months ended March 31, 2026 as compared to the three months ended March 31, 2025. We disposed of six and 11 real estate investments during the three months ended March 31, 2026 and 2025, respectively.
Other (expense)/income:
Interest expense. Interest expense increased by $6.2 million during the three months ended March 31, 2026 as compared to the three months ended March 31, 2025. The increase in interest expense was primarily due to an increase in our outstanding debt balance during the three months ended March 31, 2026 as compared to the three months ended March 31, 2025.
Interest income. Interest income decreased by $0.2 million for the three months ended March 31, 2026 as compared to the three months ended March 31, 2025. The decrease in interest income was primarily due to a decrease in our short term investments and a decrease in interest rates during the three months ended March 31, 2026 compared to the three months ended March 31, 2025.
Income tax expense. Income tax expense increased by approximately $2,000 for the three months ended March 31, 2026 as compared to the three months ended March 31, 2025. We are organized and operate as a REIT and are generally not subject to U.S. federal corporate income taxes on our REIT taxable income that is currently distributed to our stockholders. However, the Operating Partnership is subject to taxation in certain state and local jurisdictions that impose income taxes on a partnership.
Non-GAAP Financial Measures
Our reported results are presented in accordance with GAAP. We also disclose the following non-GAAP financial measures: funds from operations ("FFO"), core funds from operations ("Core 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"), cash
NOI ("Cash NOI") and cash general and administrative expense ("Cash G&A"). We believe these non-GAAP financial measures are 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, and may be useful to 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 and losses 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).
We compute Core FFO by adjusting FFO, as defined by NAREIT, to exclude certain GAAP income and expense amounts that we believe are infrequent and unusual in nature and/or not related to our core real estate operations. Exclusion of these items from similar FFO-type metrics is common within the equity REIT industry, and management believes that presentation of Core FFO provides investors with a metric to assist in their evaluation of our operating performance across multiple periods and in comparison to the operating performance of our peers, because it removes the effect of unusual items that are not expected to impact our operating performance on an ongoing basis. Core FFO is used by management in evaluating the performance of our core business operations. Items included in calculating FFO that may be excluded in calculating Core FFO include certain transaction related gains, losses, income or expense or other non-core amounts as they occur.
To derive AFFO, we modify our computation of Core FFO to include other adjustments to GAAP net income related to certain items that we believe are not indicative of our operating performance, including straight-line rental revenue, non-cash interest, non-cash compensation expense, other amortization expense, other non-cash adjustments and capitalized interest expense. 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 when assessing our operating performance without the distortions created by non-cash items and certain other revenues and expenses.
FFO, Core FFO and AFFO do not include all items of revenue and expense included in net income, they do not 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. Additionally, our computation of FFO, Core FFO and AFFO may differ from the methodology for calculating these metrics used by other equity REITs and, therefore, may not be comparable to similarly titled measures reported by other equity REITs.
The following table reconciles net income (which is the most comparable GAAP measure) to FFO, Core FFO and AFFO attributable to stockholders and non-controlling interests:
| Three months ended March 31, | ||||||||||||||
|
(in thousands)
|
2026 | 2025 | ||||||||||||
| Net income | $ | 59,950 | $ | 56,281 | ||||||||||
| Depreciation and amortization of real estate | 43,130 | 34,950 | ||||||||||||
| Provision for impairment of real estate | 16,830 | 5,883 | ||||||||||||
| Gain on dispositions of real estate, net | (5,312) | (4,984) | ||||||||||||
| FFO attributable to stockholders and non-controlling interests | 114,598 | 92,130 | ||||||||||||
|
Non-core (income) expense (1)
|
48 | - | ||||||||||||
| Core FFO attributable to stockholders and non-controlling interests | 114,646 | 92,130 | ||||||||||||
| Adjustments: | ||||||||||||||
| Straight-line rental revenue, net | (15,365) | (10,973) | ||||||||||||
| Non-cash interest | 1,441 | 1,278 | ||||||||||||
| Non-cash compensation expense | 4,165 | 3,968 | ||||||||||||
| Other amortization expense | 286 | 252 | ||||||||||||
| Other non-cash adjustments | 1,192 | 272 | ||||||||||||
| Capitalized interest expense | (561) | (1,226) | ||||||||||||
| AFFO attributable to stockholders and non-controlling interests | $ | 105,804 | $ | 85,701 | ||||||||||
_____________________________________
(1)Includes non-core technology expenses during the three months ended March 31, 2026.
We compute 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. We believe that these measures are useful to investors and analysts because they provide supplemental information concerning our operating performance, exclusive of certain non-cash items and other costs. We use EBITDA and EBITDAre as measures of our operating performance and not as measures of liquidity.
EBITDA and EBITDAre do not include all items of revenue and expense included in net income, they do not 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. Additionally, our computation of EBITDA and EBITDAre may differ from the methodology for calculating these metrics used by other equity REITs and, therefore, may not be comparable to similarly titled measures reported by other equity REITs.
The following table reconciles net income (which is the most comparable GAAP measure) to EBITDA and EBITDAre attributable to stockholders and non-controlling interests:
| Three months ended March 31, | ||||||||||||||
| (in thousands) | 2026 | 2025 | ||||||||||||
| Net income | $ | 59,950 | $ | 56,281 | ||||||||||
| Depreciation and amortization | 43,189 | 34,993 | ||||||||||||
| Interest expense | 29,947 | 23,793 | ||||||||||||
| Interest income | (410) | (614) | ||||||||||||
| Income tax expense | 160 | 158 | ||||||||||||
| EBITDA attributable to stockholders and non-controlling interests | 132,836 | 114,611 | ||||||||||||
| Provision for impairment of real estate | 16,830 | 5,883 | ||||||||||||
| Gain on dispositions of real estate, net | (5,312) | (4,984) | ||||||||||||
|
EBITDAre attributable to stockholders and non-controlling interests
|
$ | 144,354 | $ | 115,510 | ||||||||||
We further adjust EBITDAre for the most recently completed quarter (i) based on an estimate calculated as if all re-leasing, investment and disposition activity that took place during the quarter had been made on the first day of the quarter; (ii) to exclude certain GAAP income and expense amounts that we believe are infrequent and unusual in nature; and (iii) to eliminate the impact of lease termination fees and contingent rental revenue from certain of our tenants, which is subject to sales thresholds specified in the applicable leases ("Adjusted EBITDAre"). We then annualize quarterly Adjusted EBITDAre by multiplying it by four ("Annualized Adjusted EBITDAre"), which we believe provides a meaningful estimate of our current run rate for all of our investments as of the end of the most recently completed quarter. You should not unduly rely on this measure, as it is based on assumptions and estimates that may prove to be inaccurate. Our actual reported EBITDAre for future periods may be significantly less than our current Annualized Adjusted EBITDAre.
The following table reconciles net income (which is the most comparable GAAP measure) to Annualized Adjusted EBITDAre attributable to stockholders and non-controlling interests for the three months ended March 31, 2026:
| (in thousands) |
Three months ended March 31, 2026
|
|||||||
| Net income | $ | 59,950 | ||||||
| Depreciation and amortization | 43,189 | |||||||
| Interest expense | 29,947 | |||||||
| Interest income | (410) | |||||||
| Income tax expense | 160 | |||||||
| EBITDA attributable to stockholders and non-controlling interests | 132,836 | |||||||
| Provision for impairment of real estate | 16,830 | |||||||
| Gain on dispositions of real estate, net | (5,312) | |||||||
|
EBITDAre attributable to stockholders and non-controlling interests
|
144,354 | |||||||
|
Adjustment for current quarter re-leasing, acquisition and disposition activity (1)
|
3,930 | |||||||
|
Adjustment to exclude other non-core or non-recurring activity (2)
|
1,518 | |||||||
|
Adjustment to exclude termination/prepayment fees and certain percentage rent (3)
|
(761) | |||||||
|
Adjusted EBITDAre attributable to stockholders and non-controlling interests
|
$ | 149,041 | ||||||
|
Annualized Adjusted EBITDAre attributable to stockholders and non-controlling interests
|
$ | 596,164 | ||||||
_____________________________________
(1)Adjustment assumes all re-leasing activity, investments in and dispositions of real estate and loan repayments completed during the three months ended March 31, 2026 had occurred on January 1, 2026.
(2)Adjustment is made to i) exclude non-core adjustments made in computing Core FFO, if any, ii) exclude changes in our provision for credit losses and iii) eliminate the impact of seasonal fluctuation in certain non-cash compensation expense recorded in the period.
(3)Adjustment excludes lease termination or loan prepayment fees and 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, if any.
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 available for future investment. We believe excluding cash and cash equivalents and restricted cash available for future investment 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.
The following table reconciles total debt (which is the most comparable GAAP measure) to net debt:
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| (in thousands) | March 31, 2026 | December 31, 2025 | ||||||||||||
| Unsecured term loan, net of deferred financing costs | $ | 1,725,991 | $ | 1,725,010 | ||||||||||
| Revolving credit facility | 100,000 | - | ||||||||||||
| Senior unsecured notes | 787,105 | 786,708 | ||||||||||||
| Total debt | 2,613,096 | 2,511,718 | ||||||||||||
| Deferred financing costs and original issue discount, net | 16,904 | 18,282 | ||||||||||||
| Gross debt | 2,630,000 | 2,530,000 | ||||||||||||
| Cash and cash equivalents | (15,176) | (60,181) | ||||||||||||
| Restricted cash available for future investment | (993) | (10,184) | ||||||||||||
| Net debt | 2,613,831 | 2,459,635 | ||||||||||||
|
Less: Unsettled forward equity (1)
|
(540,582) | (332,151) | ||||||||||||
| Pro forma net debt | $ | 2,073,249 | $ | 2,127,484 | ||||||||||
(1)Adjusted to reflect, on a pro forma basis, 17,695,008 shares at $$30.55 per share and 10,900,920 shares at $30.47 per share, all sold on a forward basis, as if they had been physically settled for cash on March 31, 2026 and December 31, 2025, respectively.
We compute 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, in accordance with GAAP. 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 adjustments. We believe NOI and Cash NOI provide useful and relevant information because they reflect only those revenue 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. 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. Additionally, our computation of NOI and Cash NOI may differ from the methodology for calculating these metrics used by other equity REITs, and, therefore, may not be comparable to similarly titled measures reported by other equity REITs.
The following table reconciles net income (which is the most comparable GAAP measure) to NOI and Cash NOI attributable to stockholders and non-controlling interests:
| Three months ended March 31, | ||||||||||||||
| (in thousands) | 2026 | 2025 | ||||||||||||
| Net income | $ | 59,950 | $ | 56,281 | ||||||||||
| General and administrative expense | 12,327 | 11,543 | ||||||||||||
| Depreciation and amortization | 43,189 | 34,993 | ||||||||||||
| Provision for impairment of real estate | 16,830 | 5,883 | ||||||||||||
| Change in provision for credit losses | 622 | 44 | ||||||||||||
| Gain on dispositions of real estate, net | (5,312) | (4,984) | ||||||||||||
| Interest expense | 29,947 | 23,793 | ||||||||||||
| Interest income | (410) | (614) | ||||||||||||
| Other income | - | - | ||||||||||||
| Income tax expense | 160 | 158 | ||||||||||||
| NOI attributable to stockholders and non-controlling interests | 157,303 | 127,097 | ||||||||||||
| Straight-line rental revenue, net | (15,365) | (10,973) | ||||||||||||
| Other amortization and non-cash adjustments | 1,478 | 524 | ||||||||||||
| Cash NOI attributable to stockholders and non-controlling interests | $ | 143,416 | $ | 116,648 | ||||||||||
We compute Cash G&A as general and administrative expense, as determined in accordance with GAAP, less non-core general and administrative expense, non-cash compensation expense and straight-line rent expense on leases where we are the lessee. We exclude non-core general and administrative expense, non-cash compensation expense and straight-line rent expense because they may cause short-term fluctuations in general
and administrative expense but have no impact on operating cash flows or long-term operating performance. We believe that Cash G&A is a useful supplemental measure for investors to consider when assessing our operating performance without the distortion created by non-cash and non-core items.
Cash G&A is not a measure of financial performance under GAAP. You should not consider our Cash G&A as an alternative to general and administrative expense determined in accordance with GAAP. Additionally, our computation of Cash G&A may differ from the methodology for calculating this metric used by other equity REITs, and, therefore, may not be comparable to similarly titled measures reported by other equity REITs.
The following table reconciles general and administrative expense (which is the most comparable GAAP measure) to Cash G&A:
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| Three months ended March 31, | ||||||||||||||
| (in thousands) | 2026 | 2025 | ||||||||||||
| General and administrative expense | $ | 12,327 | $ | 11,543 | ||||||||||
| Non-core general and administrative expense | (48) | - | ||||||||||||
| Non-cash compensation expense | (4,165) | (3,968) | ||||||||||||
| Straight-line rent expense | (99) | 11 | ||||||||||||
| Cash G&A | $ | 8,015 | $ | 7,586 | ||||||||||
(1)Includes non-core technology expenses during the three months ended March 31, 2026.
Essential Properties Realty Trust Inc. published this content on April 22, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on April 22, 2026 at 21:22 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]