Essential Properties Realty Trust, Inc.

Good morning, ladies and gentlemen, and welcome to Essential Properties Realty Trust's fourth quarter 2024 earnings conference call. At this time, all participants are in a listen-only mode. A 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. As a reminder, this conference is being recorded, and a replay of the call will be available three 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. On the call this morning are Pete Mavoides, President and Chief Executive Officer, Mark Patton, Chief Financial Officer, Rob Salisbury, Head of Capital Markets, Max Jenkins, Head of Investments, and A.J. Peel. head of asset management. It is now my pleasure to turn the call over to Rob Salisbury.

Thank you, operator. Good morning, everyone, and thank you for joining us today for Essential Properties' fourth quarter 2024 earnings conference call. 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 filings with the SEC and in yesterday's earnings press release. With that, I'll turn the call over to Pete.

Thank you, Rob. And thank you to everyone joining us today for your interest in essential properties. On our third quarter earnings call, we discussed how our relationship-driven investment strategy has positioned us well to execute our business plan in that dynamic market environment. Maintaining relationships with and providing value to operators continues to drive investment activity in the fourth quarter, with 79% of our investments generated from existing relationships. underscoring the value of recurring business with our tenant base. Our portfolio also continued to perform well with tenant credit trends and same-store rent performance healthy and in line with our expectations. With quarter-end performer leverage of 3.8 times and liquidity of $1.4 billion, our balance sheet positions us well to continue to grow our portfolio by continuing to support our tenant relationships and investing in our core industries at attractive spreads, generating sustainably attractive earnings growth for our shareholders. The continued strong portfolio trends and the current attractive investment environment remain supportive of our 2025 business plan. As a result, we have updated our 2025 AFFO per share guidance range to $1.85 to $1.89, representing a penny increase at the low end. As we noted on our third quarter earnings call, competition has begun to materialize as capital markets have normalized, resulting in modest cap rate compression. We continue to expect our investment cap rates in 2025 to be slightly lower than 2024, reflecting this trend. However, our large and growing investment pipeline is supportive of our articulated investment guidance of 900 million to 1.1 billion. We ended the quarter with investments in 2,104 properties that were leased to 413 tenants operating in 16 industries. Our weighted average lease term stood at 14 years at quarter end, in line with a year ago, which is 5.8% of our annual base rent expiring over the next five years. From a tenant health perspective, our weighted average unit level rent coverage ratio was 3.5 times this quarter, indicating the profitability and cash flow generation by our tenants at the unit level. At a high level, our portfolio credit trends remain benign, with same store rent growth in the fourth quarter of 1.4%, occupancy of 99.7%, which is seven vacant properties. and collections of 100%. Tenant credit events were de minimis during the quarter, and our leasing activity picked up materially in 2024, with 72 leases signed for a recapture rate of 101%, up from 22 leases at a recapture rate of 79% in 2023. The execution of our property management team serves to further mitigate risk by resolving credit events expediently and at favorable rental rates, which ultimately is supported by disciplined asset pricing when we buy properties. Looking into the first quarter, we continue to expect a constructive tenant credit and portfolio performance backdrop for the company. As noted in recent press reports, one of our Car Wash tenants, Zips Car Wash, recently filed for Chapter 11 bankruptcy protections. At year end, this tenant represented approximately 20 basis points of ABR across three locations in our portfolio, which is a large decline from our peak exposure in 2017 of 16 sites at over 5% of ABR. This material reduction in exposure to an underperforming operator highlights our proactive approach to asset management, driven by our proprietary financial reporting a key underpinning of our differentiated business model. Given the ongoing nature of the bankruptcy, it is premature for us to discuss our expectations around our leases on these three properties. I would note that this credit event is consistent with the assumptions supporting our guidance range. On the investment side, during the fourth quarter, we invested $333 million through 37 separate transactions at a weighted average cash yield of 8%. in line with our trailing four-quarter average. Our investment activity in the quarter was broad-based across most of our top industries with no notable departures from our investment strategy. These investments had a weighted average initial lease term of 17.7 years and a weighted average annual rent escalation of 2%, generating an average gap yield of 9.2%. Our investments this quarter had a weighted average unit level rent coverage of 3.4 times, and the average investment per property was 3.3 million. All of the investments this quarter were sale-leaseback transactions, where we are providing capital to an expanding operator. Looking ahead, our investment pipeline remains solid, reflecting M&A and new unit expansion across a variety of targeted industries. As noted earlier, the current investment climate is characterized by attractive cap rates that have modestly compressed. Our pipeline reflects this trend with pricing in mid to high 7% range and strong contractual escalations, which is supportive of our long-term growth trajectory. From a tenant concentration perspective, our largest tenant represents 4.2% of AVR at quarter end and and our top 10 tenants now account for just 17.6% of ABR. Tenant diversity is an important risk mitigation tool and a differentiator for us, and it is a direct benefit of our focus on middle market operators, which offer an expansive opportunity set. Dispositions picked up in the fourth quarter as we opportunistically monetized the number of investments at accretive pricing. We sold 24 properties of this quarter for $60.4 million in net proceeds. This represented an average of approximately $2.5 million per property, highlighting the importance of owning fungible liquid properties, which allows us to proactively manage portfolio risks. The dispositions this quarter were executed at a 7.0 weighted average cash yield with approximately 70% of disposition volume in the car watch sector, allowing us to pair this industry exposure to 14.2% of ABR, down from above our soft ceiling of 15% last quarter. Over the near term, we expect our disposition activity to be slower than the fourth quarter at a level relatively in line with our trailing eight-quarter average. driven by opportunistic asset sales and ongoing portfolio management activity. With that, I'd like to turn the call over to Mark Patton, our CFO, who will take you through the financials and balance sheet for the fourth quarter.