Essential Properties Realty Trust, Inc.

Good day and welcome to the Essential Properties Realty Trust second quarter 2020 earnings call. Currently, all phone lines are in a listen-only mode. Later, there will be an opportunity to ask questions during a question-and-answer session. You may register to ask a question at any time by pressing the star, then 1, on your touch-tone phone. It is now my pleasure to turn the program over to Mr. Dan Donlan. You may begin.

Thank you, Operator, and good morning, everyone. We appreciate you joining us today for Essential Properties' second quarter 2020 conference call. Here with me today to discuss our second quarter results are Pete Mavoides, our president and CEO, Greg Seibert, our COO, and Anthony Dopkin, our interim CFO. During this 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 funds with the SEC and in yesterday's earnings press release. With that, Pete, please go ahead.

Thanks, Dan. And thank you to everyone who has joined us today for your interest in essential properties. The second quarter presented an extremely challenging operating environment in the wake of the COVID-19 pandemic. However, the obstacles we faced paled in comparison to those of our tenants. While we worried about whether or not to grant deferral requests and where our collections may land at quarter end, our tenants were managing through mandatory shutdowns and stay-at-home orders. They confronted the threat of losing multi-generational businesses and the pain of laying off employees in large numbers, only to face the new challenge of quickly and profitably restarting operations without endangering themselves, their employees, and their customers. And those complications do not even compare to those faced by the frontline workers and emergency responders who have selflessly combated this pandemic and all of the individuals and families whose health have been directly affected by it. So overall, we feel fortunate to be where we are, how the portfolio has performed, and our prospects going forward. Starting with the operating status of our properties and rent collections. As of today, approximately 93% of our portfolio as a percentage of ABR is open or operating, albeit some on a limited basis. This compares to just 66% back on April 15th when we first reported this statistic. We have found operating status to be the factor most correlated to a tenant's ability to meet its rent obligations. so we feel optimistic about this trend and continue to monitor it closely. In terms of rent collections, we collected approximately 69% of contractual rent in the second quarter, including 68% in April, 67% in May, and 72% in June. More importantly, We saw collections materially improved 87% in July, with the majority of our tenants operating without deferrals. As you can see in our disclosure, the vast majorities of our deferrals in July are concentrated in industries that continue to face closures and utilization or capacity constraints, including theaters, fitness centers, and casual and family dining. The operators in these industries have proven incredibly resilient in adapting to this new operating environment, and we expect collections to continue to improve in the coming months, assuming we do not revert back to widespread shutdowns. Moving on to rent deferrals, we deferred 29% of the contractual rent due to us in the second quarter, or approximately $11.5 million. We view these modest tenant accommodations as entirely reasonable and appropriate given the impact of the pandemic. That said, approximately 1.7 million of that deferred rent was not recognized in revenue, giving our view on the probability of collection. Turning to the portfolio, we ended the quarter with investments in 1,060 properties that were 99.6% leased to 215 tenants operating in 16 different units. Our weighted average lease term stood at 14.6 years, which is 1.1% of our ABR expiring over the next three and a half years. Our weighted average unit level coverage was three times at quarter end, but we would note that this coverage ratio lags our reporting by a quarter. So the impact from the pandemic is not flowing through our tenants' financials. Ultimately, the value of our company does not reside in our leases. It resides in our properties and our ability to keep them consistently leased. And we see high and stable occupancy as a key indicator of that value. Turning to investment activity in the quarter. As discussed on our first quarter's earnings call and throughout the quarter, we intended to take a conservative investment posture given the volatility the pandemic caused both in our portfolio and our cost of capital. During the quarter, we invested 42 million at a weighted average cash cap rate of 7.4%, and the majority of these investments were committed to prior to the onset of the pandemic in mid-March. All of our second quarter investments were directly originalized sale leasebacks. 68% contained master lease provisions, and 100% are required to provide us with corporate and union-level financial reporting on a regular basis. Turning to the balance sheet, we finished the quarter with low leverage of 4.9 times net debt to annualized adjusted EBITDA RE and excellent liquidity over $500 million. Looking forward, our investment team and relationships continue to drive an attractive opportunity set. But as we have indicated in the past, we would need to see stability in both our portfolio and our weighted average cost of capital prior to becoming more aggressive on the external front growth, excuse me, on the internal growth front. We are very pleased with the operating collection trends demonstrated by the portfolio. But one month is a small subset, and unfortunately, the pandemic does not appear to be entirely controlled in many states. In terms of our weighted average cost of capital, it has continued to improve since March as our share price has rebounded. The debt markets appear to be open and efficient, and nominal interest rates have moved lower still. So we are cautiously optimistic about our ability to become more offensive on the investment front, and we will closely monitor our key metrics going forward. With that, I'd like to turn it over to Anthony, our interim CFO, who will take you through the balance sheet and the financials for the second quarter. Anthony?