Essential Properties Raises Outlook as Revenue Growth Accelerates
Second-quarter revenue rose 18% to $161.9 million as rental income and loan interest increased.
Essential Properties Realty Trust (EPRT), a net-lease real estate investment trust, raised the lower end of its annual AFFO outlook after second-quarter earnings rebounded and property investments remained above their late-2024 pace.
The quarter extended the company’s portfolio expansion while signaling a shift in transaction mix. Essential Properties completed fewer investments than in the first quarter, increased dispositions and directed a larger share of its activity toward existing relationships.
Revenue rose 18% from a year earlier, accelerating to $161.9 million from $137.1 million as rental revenue increased 17% and interest from loans and direct-financing leases climbed 29%. Net income attributable to stockholders also rose 18% to $74.3 million, while diluted earnings increased 6% to $0.34 a share as the weighted-average share count grew 9%.
Diluted earnings recovered from $0.28 a share in the first quarter to match the fourth-quarter level of $0.34. AFFO held at $0.50 a share sequentially, though its year-over-year growth slowed to 9% from 11% in the first quarter. FFO eased to $0.53 a share from $0.54 in each of the previous two quarters.
Essential Properties invested $332.4 million during the quarter, down from $388.6 million in the first quarter but above the $295.8 million deployed in the fourth quarter. The cash capitalization rate edged up to 7.8%, while sale-leasebacks accounted for 84% of activity after representing all investments in each of the prior two quarters. The weighted-average lease term on new investments shortened for a second consecutive quarter to 16 years.
The portfolio grew to 2,493 properties and 28.5 million square feet at June 30, while the top 10 tenants’ share of annual base rent declined to 15.2% from 15.8% three months earlier. Occupancy slipped to 99.6% from 99.7%, and rent coverage held at 3.5 times.
The company now expects 2024 AFFO of $2.01 to $2.05 a share, raising the bottom of its range for a second consecutive quarter while leaving the ceiling unchanged. It also increased the lower end of its investment-volume forecast to $1.2 billion from $1.1 billion and retained the $1.5 billion upper end.
Essential Properties ended the quarter with $1.7 billion of available liquidity after issuing $400 million of 10-year debt carrying a 5.38% coupon. That funding left the company with capacity to pursue its higher investment target as reported leverage edged up to 4.5 times annualized adjusted EBITDAre.