Essential Properties Realty Trust, Inc.

Welcome to Essential Properties Realty Trust's first quarter 2020 earnings conference call. All lines have been placed in a listen-only mode, and the floor will be open for questions following the presentation. If you should require assistance during the conference, please press star zero on your telephone to reach a live operator. This conference call is being recorded, and a replay of the call will be available two hours after the completion of the call for two weeks. The dial-in details for the replay can be found in today's press release. Additionally, there will be an audio webcast available on Essential Properties' website at www.essentialproperties.com, an archive of which will be available for 90 days. It is now my pleasure to turn the call over to Dan Donlan, Senior Vice President and Head of Capital Markets at Essential Properties. Please go ahead.

Thank you, operator, and good morning, everyone. We appreciate you joining us today for Essential Properties' first quarter 2020 conference call. Here with me today to discuss our first quarter results are Pete Mavoides, our president and CEO, Greg Seibert, our COO, and Anthony Dobkin, our interim CFO. During this conference call, we will make certain statements that may be considered forward-looking statements under federal securities law. The company's actual future results may differ significantly from the matters discussed in these forward-looking statements, and we may not release revisions to those forward-looking statements to reflect changes after the statements were made. Factors and risks that could cause actual results to differ materially from expectations are disclosed from time to time in greater detail in the company's bonds with the SEC and yesterday's earnings press release. With that, Pete, please go ahead.

Thank you, Dan, and thank you to everyone who has joined us today for your interest in essential properties. First off, we would like to extend our thoughts and prayers to all of those impacted by COVID-19 pandemic and thank all of the frontline workers that are working hard to keep our country safe and healthy. Starting with the current situation, we wanted to highlight what has changed since we first provided a business update on April 15th. As of today, approximately 71% of our portfolio as a percentage of ABR is opened or operating on a limited basis, which compares to 66% as of April 15th. April rent collection came in at 61% in comparison to 53% at April 15th. While it is still early to tell, we forecast May rent collection to be a few hundred basis points lower and June rent collection to be a few basis points higher than April. Consistent with past practices, we are committed to providing investors with current and important transparency regarding our portfolio performance, so you should expect to see timely business updates as the situation continues to evolve. Moving on to rent deferrals. Approximately 33 percent of our April rent was deferred versus 29 percent as of April 15. With that in mind, we have noticed that many market participants are looking at a level of rent collections versus rent deferrals as an accurate indicator of tenant credit and portfolio health. We believe it is much more an indication of how management has approached the crisis. When tenants requested potential rent deferrals in response to their operations being shut down or severely limited as a result of government mandated stay-at-home orders, we took a very accommodative approach. As a result, we increased our rent receivable by approximately $16 million, which represents an average accommodation of roughly $180,000 across 88 individual tenants and 320 properties. We very easily could have firmly exerted our rights under our lease agreements to minimize deferrals and maximize cash collections in April. We felt it was a more prudent business decision, given the extreme nature of the circumstances, to work constructively with our tenants with a longer-term view rather than a focus on short-term rent collections. Specifically, we believe our more accommodative stance has resulted in, one, Tenants with a healthier liquidity position that are better able to maintain their workforce and invest in restarting their businesses when stay-at-home orders are lifted. Two, stronger long-term and differentiated relationships with our tenants, which should result in a more constructive relationship going forward. And three, a better position in the event that a tenant needs to file for bankruptcy as these rents now survive with the lease as a post-petition obligation. Again, we did not take the shorter-term view of maximizing a number to create an inflated view of creditworthiness in our portfolio. Instead, we took a longer-term view and elected to invest in our tenants and our relationships during this unprecedented time of distress. We firmly believe this stance will benefit the company in the long run. In terms of the first quarter, We ended the quarter with investments in 1,050 properties that were 99.5% leased to 212 tenants operating in 16 distinct industries. Our weighted average lease term stood at 14.6 years with just 2% of our ABR expiring prior to 2024. Our same store portfolio represented approximately 58% of our ABR at quarter end and includes five vacant restaurant properties, experienced a 1.8% year-over-year decline in cash rents. This quarter was heavily impacted by the ARTVAN bankruptcy, which was protracted by the shutdown of non-essential businesses in the state of Michigan. When excluding the impact of ARTVAN, our same-store cash rent grew nearly 1%. In terms of ARTVAN, we have reached an agreement last week with a new operator to lease all four of our sites under a new master lease at a recovery of 70 percent versus prior rents, and we expect rent to commence later in the third quarter. Due to an in-place confidentiality agreement, we cannot comment further. From a tenant help perspective, our portfolio has a weighted average rent coverage of 2.9 times with 73.4% of our ABR having rent coverage ratio of two times or better. Looking out over the next 10 years, less than 1% of leases that expire have unit level rent coverage below 1.5 times, which we believe indicates a high likelihood of lease renewal at expiration. Additionally, only 2.9% of our tenants have both an implied credit rating lower than single B per Moody's risk health and a unit level coverage below 1.5 times, which represents a very manageable number of tenants and properties with elevated risk characteristics. We anticipate these characteristics and the profitability of our tenants to protect our collateral value and allow our tenants to perform under their lease obligations as our operations begin to normalize. Turning to investment activity in the quarter. We invested $167 million at a weighted average cash cap rate of 7.1%. Approximately 88% of our first quarter investments were directly originated sale leasebacks or mortgage loans subject to sale leaseback transactions. 54% contained master lease provisions and 100% are required to provide us with corporate and unit level financial reporting on a regular basis. On a disposition front, in an effort to proactively mitigate risks and exposures, we sold 10 properties at a 7.1% cash cap rate during the quarter, generating $19.6 million in net proceeds. Looking out to the balance of 2020, while we have deliberately slowed our investment activity, we do plan to invest on a highly selective basis, which will largely be funded through our accretive capital recycling program. Additionally, given the high level of uncertainty in the capital markets, maintaining a conservative stance towards our balance sheet and liquidity remains of paramount importance to us, as Anthony will discuss momentarily. With that, I'd like to turn the call over to Anthony, who will take you through the balance sheet and the financials for the first quarter. Anthony?