Essential Properties Realty Trust, Inc.

Good morning, ladies and gentlemen, and welcome to the Essential Properties Realty Trust fourth quarter 2022 earnings conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. This conference call is being recorded, and a replay of the call will be available two hours after the completion of the call for the next two weeks. The dial-in details for the replay can be found in yesterday'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 and Portfolio Management at Essential Properties.

Thank you, Operator, and good morning, everyone. We appreciate you joining us today for Essential Properties' fourth quarter 2022 conference call. Here with me today to discuss our operating results are Pete Mavotti, our president and CEO, and Mark Patton, our CFO. During this conference call, we will make certain statements that may be considered forward-looking statements on our 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 provisions to those forward-looking statements to reflect the changes after those 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 at the SEC and in yesterday's earnings press release. With that, Pete, please go ahead.

Thank you, Dan, and thank you to everyone who is joining us today for your interest in essential properties. We finished 2022 on a strong note with a record $328 million of investments in the fourth quarter and $937 million invested for the full year. This translated to year-over-year AFFO per share growth of 14% in 2022, which we are extremely proud of given the unprecedented volatility in the capital markets and the rapid rise in interest rates. As our fourth quarter results indicate, our portfolio continues to perform at a high level with unit-level coverage of four times, occupancy of 99.9%, and same-store rent growth of 1.6%. which speaks to the de minimis credit losses that we experienced in 2022 as our weighted average contractual rent escalations are approximately 1.6% per annum. This strong performance is a testament to our granular and fungible properties, the resiliency of our service-oriented and experience-based tenancy, which represents 93% of our ABR, and our proven ability to accretively recycle out of our weaker performing properties. On the investment front, we remained active in support of our long-standing tenant relationships as they are increasingly turning to us as a reliable capital provider to grow their footprints given the limited funding available in the bank market and private leveraged buyers largely being sidelined due to the dislocation in the debt markets. With quarter end pro forma leverage of 4.5 times and liquidity of nearly 700 million, our balance sheet continues to be well capitalized for our investment activity. We are reaffirming our 2023 AFFO per share guidance of $1.58 to $1.64, which implies year-over-year growth of 5% at midpoint. Turning to the portfolio. We ended the quarter with investments in 1,653 properties that were 99.9% leased to 350 tenants operating in 16 industries. Our weighted average lease term stood at 13.9 years with only 6.1% of our ABR expiring through 2027. From a tenant health perspective, our weighted average unit level coverage ratio was four times this quarter, which was expected given the lagging impact of inflationary pressures flowing through our tenant financials. Our percentage of ABR under one times coverage continued to moderate from pandemic pressures experienced during the reporting period and now stands at a more normalized level of three percent of ABR. During the fourth quarter, we invested $328 million through 39 separate transactions at a weighted average cash yield of 7.5%, which was up 40 basis points versus the prior quarter. These investments were made in 13 different industries, with 75% of our activity coming from the car wash, casual dining, auto service, and entertainment industries. The weighted average lease term of our investments this quarter was 18.7 years, the weighted average annual rent escalation was 1.8%, the weighted average unit level coverage was 3.2 times, and the average investment per property was 2.8 million. Consistent with our investment strategy, 99% of our quarterly investments were originated through direct sale leasebacks, which are subject to our lease form with ongoing financial reporting requirements. 90%, contained master lease provisions and 95% were generated from existing relationships. Looking ahead to the first quarter of 2023, we have closed 65.7 million of investments to date at a 7.6 cash yield. Our investment pipeline remains robust as an increasing number of middle market companies are seeking sale-lease-backed capital as a financing alternative as other sources of capital have become unavailable or uneconomic. We see this trend continuing to benefit essential properties, as 97% of our 2022 investments were sale-leaseback transactions, and we remain well-positioned to reliably deliver capital to our relationships. From an industry perspective, car washes are our largest industry at 13.2% of AVR. followed by early childhood education at 12.8%, quick service restaurants at 11.6%, and medical dental at 11.1%. Of note, unit level coverage for our early childhood education portfolio continues to increase above pre-pandemic levels as our operators are seeing strong pricing power and a better labor environment, which has allowed our facilities to further increase their enrollment. From a tenant concentration perspective, our largest tenant represents 3.4% of ABR at quarter end, and our top 10 tenants now account for only 18% of ABR. Tenant diversity is an important risk mitigation tool and differentiator for us, and it is a direct benefit of our focus on unrated tenants and middle market operators, which offers an expansive opportunity set. In terms of dispositions, we sold 26 properties this quarter for $75.5 million in net proceeds at a 6.9% weighted average cash yield and a weighted average unit level coverage ratio of 2.1 times. As we have mentioned in the past, owning fungible and liquid properties is an important aspect of our investment discipline as it allows us to proactively manage industries, tenants, and unit level risks within the portfolio. This record level of disposition activity was in response to the capital markets volatility experienced in the back half of 2022 and our desire to lower our reliance on raising new capital. While we do not anticipate our elevated level of quarterly dispositions to persist, we do expect our disposition activity to remain well above our trailing eight quarter average of 27 million through at least the first half of 2023. With that, I'd like to turn it over to Mark Patton, our CFO, who will take you through the financials and balance sheet for the second quarter.