Attached files
| file | filename |
|---|---|
| EX-99.1 - EX-99.1 - ESSENTIAL PROPERTIES REALTY TRUST, INC. | exhibit9911.htm |
| 8-K - 8-K - ESSENTIAL PROPERTIES REALTY TRUST, INC. | eprt-20201104.htm |
Supplemental Operating & Financial Data Third Quarter Ended September 30, 2020
Table of Contents Financial Summary Consolidated Statements of Operations 2 Funds from Operations and Adjusted Funds from Operations 3 Consolidated Balance Sheets 4 GAAP Reconciliations to EBITDAre, GAAP NOI and Cash NOI 5 Market Capitalization, Debt Summary and Leverage Metrics 6 Net Investment Activity Investment Summary 7 Disposition Summary 8 Portfolio Summary Portfolio Highlights 9 Tenant and Industry Diversification 10 Portfolio Health 11 Leasing Summary Leasing Expiration Schedule, Leasing Activity and Statistics 12 Same-Store Analysis 13 Lease Escalations 14 Covid-19 Business Update 15-16 Glossary 17-19 1 Supplemental Financial and Operating Information | As of September 30, 2020
Financial Summary Consolidated Statements of Operations Three Months Ended September 30, Nine Months Ended September 30, (in thousands, except share and per share data) 2020 2019 2020 2019 (unaudited) (unaudited) (unaudited) (unaudited) Revenues: Rental revenue1,2 $ 40,799 $ 34,958 $ 116,806 $ 97,842 Interest on loans and direct financing leases 2,054 940 6,030 1,669 Other revenue 56 393 64 641 Total revenues 42,909 36,291 122,900 100,152 Expenses: Interest 7,651 7,207 21,887 20,074 General and administrative3 5,917 7,530 19,706 16,455 Property expenses4 810 442 1,755 2,334 Depreciation and amortization 13,966 11,141 40,442 30,367 Provision for impairment of real estate 3,221 — 5,080 1,921 Provision for loan losses 14 — 531 — Total expenses 31,579 26,320 89,401 71,151 Other operating income: Gain on dispositions of real estate, net 1,003 4,087 3,971 8,237 Income from operations 12,333 14,058 37,470 37,238 Other (loss)/income: Loss on repayment and repurchase of secured borrowings5 — — (924) (4,353) Interest income 58 114 433 723 Income before income tax expense 12,391 14,172 36,979 33,608 Income tax expense 55 66 156 209 Net income 12,336 14,106 36,823 33,399 Net income attributable to non-controlling interests (73) (861) (220) (6,076) Net income attributable to stockholders and members $ 12,263 $ 13,245 $ 36,603 $ 27,323 Basic weighted-average shares outstanding 94,259,150 72,483,932 92,070,002 58,375,745 Basic net income per share $ 0.13 $ 0.18 $ 0.39 $ 0.46 Diluted weighted-average shares outstanding 95,039,832 77,612,949 92,959,708 73,021,273 Diluted net income per share $ 0.13 $ 0.18 $ 0.39 $ 0.45 1. Includes contingent rent (based on a percentage of the tenant's gross sales at the leased property) of $99, $142, $356, and $717 for the three and nine months ended September 30, 2020 and 2019, respectively. 2. Includes reimbursable income from the Company’s tenants of $71, $238, $583, and $1,179 for the three and nine months ended September 30, 2020 and 2019, respectively. 3. During the three and nine months ended September 30, 2020, includes non-recurring expenses of $115 and $234, respectively, for reimbursement of executive relocation costs and non-recurring recruiting costs and, during the nine months ended September 30, 2020, includes $1,093 for costs and charges incurred in connection with the termination of one of our executive officers. 4. Includes reimbursable expenses from the Company’s tenants of $175, $238, $686, and $1,179 for the three and nine months ended September 30, 2020 and 2019, respectively. 5. Includes the write-off of $924 of deferred financing costs during the nine months ended September 30, 2020 and, during the nine months ended September 30, 2019, includes premium paid on repurchase of notes issued under our Master Trust Funding Program of $1,400, the write-off of $2,853 of deferred financing costs related to the repurchased notes and $100 of legal costs related to the repurchase. 2 Supplemental Financial and Operating Information | As of September 30, 2020
Financial Summary Funds from Operations (FFO) and Adjusted Funds from Operations (AFFO) Three months ended September 30, Nine months ended September 30, (unaudited, in thousands except per share amounts) 2020 2019 2020 2019 Net income $ 12,336 $ 14,106 $ 36,823 $ 33,399 Depreciation and amortization of real estate 13,903 11,117 40,330 30,295 Provision for impairment of real estate 3,221 — 5,080 1,921 Gain on dispositions of real estate, net (1,003) (4,087) (3,971) (8,237) Funds from Operations 28,457 21,136 78,262 57,378 Other non-recurring expenses1 116 2,748 2,252 7,101 Core Funds from Operations 28,573 23,884 80,514 64,479 Adjustments: Straight-line rental revenue, net (3,960) (2,982) (9,321) (8,879) Non-cash interest expense 764 610 1,535 2,135 Non-cash compensation expense 1,351 1,051 4,041 3,524 Other amortization expense (335) 294 1,018 735 Other non-cash charges 14 2 530 8 Capitalized interest expense (63) (95) (223) (165) Transaction costs 3 — 112 — Adjusted Funds from Operations $ 26,347 $ 22,764 $ 78,206 $ 61,837 FFO per share2: Basic $ 0.30 $ 0.27 $ 0.84 $ 0.79 Diluted $ 0.30 $ 0.27 $ 0.84 $ 0.78 Core FFO per share2: Basic $ 0.30 $ 0.31 $ 0.87 $ 0.89 Diluted $ 0.30 $ 0.31 $ 0.86 $ 0.88 AFFO per share2: Basic $ 0.28 $ 0.29 $ 0.84 $ 0.85 Diluted $ 0.28 $ 0.29 $ 0.84 $ 0.84 Additional supplemental disclosure: Scheduled principal repayments $ 977 $ 1,159 $ 2,895 $ 4,549 Contractual deferred rents included in total revenues 1,669 — 11,425 — Reduction of revenue for non-accrual tenants: Cash $ 168 $ — $ 3,411 $ 25 Straight-line — — 2,263 — Total reduction of revenue for non-accrual tenants $ — $ — $ 5,673 $ 25 1. Includes non-recurring expenses of $39 related to reimbursement of executive relocation costs during the three and nine months ended September 30, 2020, $1,093 for severance payments and acceleration of non-cash compensation expense in connection with the termination of one of our executive officers during the nine months ended September 30, 2020, $77 and $196, respectively, of non-recurring recruiting costs during the three and nine months ended September 30, 2020, and our $924 loss on repayment of secured borrowings during the nine months ended September 30, 2020. 2. Calculations exclude $95, $110, $302 and $377 from the numerator for the three and nine months ended September 30, 2020 and 2019, respectively, related to dividends paid on unvested RSAs and RSUs. 3 Supplemental Financial and Operating Information | As of September 30, 2020
Financial Summary Consolidated Balance Sheets September 30, 2020 December 31, 2019 (in thousands, except share and per share amounts) (unaudited) (audited) ASSETS Investments: Real estate investments, at cost: Land and improvements $ 686,908 $ 588,279 Building and improvements 1,423,033 1,224,682 Lease incentive 14,246 4,908 Construction in progress 7,239 12,128 Intangible lease assets 78,482 78,922 Total real estate investments, at cost 2,209,908 1,908,919 Less: accumulated depreciation and amortization (124,489) (90,071) Total real estate investments, net 2,085,419 1,818,848 Loans and direct financing lease receivables, net 100,915 92,184 Real estate investments held for sale, net 9,582 1,211 Net investments 2,195,916 1,912,243 Cash and cash equivalents 183,765 8,304 Restricted cash 5,604 13,015 Straight-line rent receivable, net 35,247 25,926 Rent receivables, prepaid expenses and other assets, net 31,207 15,959 Total assets $ 2,451,739 $ 1,975,447 LIABILITIES AND EQUITY Secured borrowings, net of deferred financing costs $ 171,840 $ 235,336 Unsecured term loans, net of deferred financing costs 626,119 445,586 Revolving credit facility — 46,000 Intangible lease liabilities, net 8,589 9,564 Dividend payable 24,242 19,395 Derivative liabilities 43,504 4,083 Accrued liabilities and other payables 15,717 13,371 Total liabilities 890,011 773,334 Commitments and contingencies —— Stockholders' equity: Preferred stock, $0.01 par value; 150,000,000 authorized; none issued and outstanding as of September 30, 2020 and December 31, 2019 — — Common stock, $0.01 par value; 500,000,000 authorized; 104,671,571 and 83,761,151 issued and outstanding as of September 30, 2020 and December 31, 2019, respectively 1,047 838 Additional paid-in capital 1,652,956 1,223,043 Distributions in excess of cumulative earnings (57,767) (27,482) Accumulated other comprehensive loss (41,768) (1,949) Total stockholders' equity 1,554,468 1,194,450 Non-controlling interests 7,260 7,663 Total equity 1,561,728 1,202,113 Total liabilities and equity $ 2,451,739 $ 1,975,447 4 Supplemental Financial and Operating Information | As of September 30, 2020
Financial Summary GAAP Reconciliations to EBITDAre, GAAP NOI, Cash NOI and Estimated Run Rate Metrics Three Months Ended (unaudited, in thousands) September 30, 2020 Net income $ 12,336 Interest expense 7,651 Depreciation and amortization 13,966 Interest income (58) Income tax expense 55 EBITDA 33,950 Provision for impairment of real estate 3,221 Gain on dispositions of real estate, net (1,003) EBITDAre 36,168 Adjustment for current quarter acquisition and disposition activity1 2,407 Adjustment to exclude other non-recurring activity2 (47) Adjusted EBITDAre - Current Estimated Run Rate 38,528 General and administrative 5,801 Adjusted net operating income ("NOI") 44,329 Straight-line rental revenue, net1 (3,894) Other amortization expense (335) Adjusted Cash NOI $ 40,100 Annualized EBITDAre $ 144,672 Annualized Adjusted EBITDAre $ 154,112 Annualized Adjusted NOI $ 177,316 Annualized Adjusted Cash NOI $ 160,400 1. These adjustments are made to reflect EBITDAre, NOI and Cash NOI as if all investments in and dispositions of real estate made during the three months ended September 30, 2020 had occurred on July 1, 2020. 2. Adjustment excludes $116 of non-core expenses added back to compute Core FFO and the $14 adjustment to our provision for loan loss, offset by $177 of rent collected from tenants which had been written off in prior periods. 5 Supplemental Financial and Operating Information | As of September 30, 2020
Financial Summary Market Capitalization, Debt Summary and Leverage Metrics (dollars in thousands, except share and per share amounts) September 30, 2020 Rate Maturity1 Secured debt: Series 2017-1, Class A $ 158,513 4.10% 3.7 years Series 2017-1, Class B 15,669 5.11% 3.7 years Total secured debt 174,182 4.19% 3.7 years Unsecured debt: $200mm term loan 200,000 3.26% 3.5 years $430mm term loan 430,000 3.02% 6.2 years Revolving credit facility2 — LIBOR plus 1.25% to 1.85% 2.5 years Total unsecured debt 630,000 3.10% 5.3 years Gross debt 804,182 3.34% 5.0 years Less: cash & cash equivalents (183,765) Less: restricted cash deposits held for the benefit of lenders (3,906) Net debt 616,511 Equity: Preferred stock — Common stock & OP units (105,225,418 shares @ $18.32/share as of 9/30/20)3 1,927,730 Total equity 1,927,730 Total enterprise value ("TEV") $ 2,544,241 Net Debt / TEV 24.2% Net Debt / Annualized Adjusted EBITDAre 4.0x 1. Maturity figures for our secured debt are based off of our anticipated repayment schedule. The Series 2017-1 notes mature in June 2047 but have an anticipated repayment date of June 2024. 2. Our revolving credit facility provides a maximum aggregate initial original principal amount of up to $400 million and includes an accordion feature to increase, subject to certain conditions, the maximum availability of the facility by up to $200 million. 3. Common equity & units as of September 30, 2020, based on 104,671,571 common shares outstanding (including unvested restricted share awards) and 553,847 OP units held by non-controlling interests. 6 Supplemental Financial and Operating Information | As of September 30, 2020
Net Investment Activity Investment Summary $240,000 $204,709 $190,280 $200,000 $173,590 $167,490 $160,000 $148,877 $118,187 $120,000 $103,660 Investment Investment $80,000 Activity ($000s) Activity $42,369 $40,000 $0 Investments 4Q 2018 1Q 2019 2Q 20196 3Q 20197 4Q 20198 1Q 20209 2Q 2020 3Q 2020 Number of Transactions 24 35 32 28 41 32 11 19 Property Count 39 51 91 139 94 63 13 50 Avg. Investment per Unit (in 000s) $2,572 $2,303 $2,015 $1,174 $2,049 $2,551 $2,870 $2,866 Cash Cap Rates1 7.6% 7.5% 7.3% 7.5% 7.3% 7.1% 7.4% 7.1% GAAP Cap Rates2 8.5% 8.4% 8.1% 8.2% 8.0% 8.0% 8.1% 7.9% Master Lease %3,4 57% 47% 67% 73% 41% 54% 68% 79% Sale-Leaseback %3,5 83% 78% 65% 88% 81% 88% 100% 92% % of Financial Reporting3 90% 100% 100% 100% 99% 100% 100% 100% Rent Coverage Ratio 2.8x 3.2x 3.2x 3.2x 3.1x 2.7x 4.3x 2.8x Lease Term Years 16.6 15.1 15.3 16.6 16.3 16.1 16.7 17.6 1. Cash ABR for the first full month after the investment divided by the gross purchase price for the property plus transaction costs. 2. GAAP rent for the first twelve months after the investment divided by the gross purchase price for the property plus transaction costs. 3. As a percentage of cash ABR for the quarter. 4. Includes investments in mortgage loan receivables collateralized by more than one property. 5. Includes investments in mortgage loans receivable made in support of sale-leaseback transactions. 6. Includes three properties that secured $16.8 million of mortgage loans receivable. 7. Includes 71 properties that secured $35.3 million of mortgage loans receivable. 8. Includes 18 properties that secured $34.6 million of mortgage loans receivable. 9. Includes one property that secured $5.3 million of mortgage loans receivable. 7 Supplemental Financial and Operating Information | As of September 30, 2020
Net Investment Activity Disposition Summary $30,000 $26,804 1 $25,000 $19,542 $19,495 $19,571 $19,595 $20,000 $15,229 $15,000 $10,480 Disposition $10,000 Activity ($000s) Activity $5,000 $3,420 $0 Dispositions 4Q 2018 1Q 2019 2Q 20195 3Q 2019 4Q 2019 1Q 2020 2Q 2020 3Q 2020 6 Realized Gain/(Loss)1,2 0.4% 2.9% 1.3% 17.8% 8.5% 3.2% 29.5% (4.5%) 6 Cash Cap Rate on Leased Assets3 6.9% 6.6% 7.0% 6.7% 6.9% 7.1% 6.8% 7.0% Leased Properties Sold4 7 7 10 9 7 10 3 11 Vacant Properties Sold4 1 -- 1 1 1 -- -- 3 Rent Coverage Ratio 1.8x 1.8x 1.5x 1.1x 1.7x 0.7x 1.3x 2.2x 1. Includes the impact of transaction costs. 2. Gains/(losses) based on our aggregate allocated purchase price. 3. Cash ABR at time of sale divided by gross sale price (excluding transaction costs) for the property. 4. Property count excludes dispositions in which only a portion of the owned parcel is sold. 5. Excludes the prepayment of two mortgage loans receivable for $4.6 million. 6. Excludes one property sold pursuant to an existing tenant purchase option. 8 Supplemental Financial and Operating Information | As of September 30, 2020
Portfolio Summary Portfolio Highlights As of September 30, 2020 Investment Properties (#)1 1,096 Square Footage (mm) 9.1 Tenants (#) 214 Concepts (#) 300 Industries (#) 16 States (#) 43 Weighted Average Remaining Lease Term (Years) 14.6 Triple-Net Leases (% of Cash ABR) 94.1% Master Leases (% of Cash ABR) 60.4% Sale-Leaseback (% of Cash ABR)2,3 82.8% Unit-Level Rent Coverage 2.8x Unit-Level Financial Reporting (% of Cash ABR) 98.7% Leased (%) 99.4% Top 10 Tenants (% of Cash ABR) 22.6% Average Investment Per Property ($mm) $2.1 Total Cash ABR ($mm) $167.8 1. Includes two undeveloped land parcels and 92 properties that secure mortgage loans receivable. 2. Exclusive of GE Seed Portfolio. 3. Includes investments in mortgage loans receivable made in support of sale-leaseback transactions. 9 Supplemental Financial and Operating Information | As of September 30, 2020
Portfolio Summary Tenant and Industry Diversification Top 10 Tenants Diversification by Industry % of Cash Type of Cash ABR % of Cash # of Building Rent Per Top 10 Tenants1,2 Properties ABR Tenant Industry Business ($'000s) ABR Properties3 SqFt SqFt4 Quick Service Service $ 23,609 14.1% 313 827,997 $ 28.66 74 3.0% Car Washes Service 22,344 13.3% 92 429,125 50.67 Early Childhood Education Service 22,317 13.3% 97 1,027,600 21.38 23 2.8% Medical / Dental Service 18,004 10.7% 104 664,115 26.23 Convenience Stores Service 16,483 9.8% 142 576,428 28.60 13 2.6% Automotive Service Service 12,414 7.4% 93 622,326 19.95 Casual Dining Service 8,584 5.1% 57 348,219 24.65 14 2.4% Other Services Service 7,042 4.2% 33 422,068 16.69 Family Dining Service 5,922 3.5% 40 232,723 27.16 34 2.2% Pet Care Services Service 5,458 3.3% 33 262,938 20.76 Service Subtotal $ 142,178 84.8% 1004 5,413,539 $ 26.07 52.1% Health and Fitness Experience 8,133 4.8% 22 758,714 10.72 Entertainment Experience 6,250 3.7% 18 647,483 10.25 13 1.9% Movie Theatres Experience 4,166 2.5% 6 293,206 14.21 Experience Subtotal $ 18,549 11.1% 46 1,699,403 $ 11.16 20 1.9% Home Furnishings Retail 2,225 1.3% 7 383,415 5.80 14 1.9% Grocery Retail 2,048 1.2% 11 404,403 5.06 Retail Subtotal $ 4,273 2.5% 18 787,818 $ 5.42 26 1.8% Building Materials Other 2,750 1.6% 19 896,956 3.07 Top 10 Tenants 236 22.6% Total 1,087 100.0% Total $ 167,750 100.0% 1,087 8,797,716 $ 19.01 1. Represents tenant, guarantor or parent company. 2. Our Zaxby’s concentration is with multiple franchises under the same ownership. Our Driver’s Edge concentration is with GB Auto Service, Inc., which operates Driver’s Edge and other auto service brands. 3. Property count includes 92 properties that secure mortgage loans receivable, but excludes two undeveloped land parcels and seven vacant properties. 4. Calculation excludes properties with no annualized base rent and properties under construction. 10 Supplemental Financial and Operating Information | As of September 30, 2020
Portfolio Summary Portfolio Health Tenant Financial Reporting % of Cash ABR by Unit-Level Coverage Tranche1 % of Cash Tenant Financial Reporting Requirements ABR < 1.00x 9.4% Unit-Level Financial Information 98.7% 1.00x to Corporate-Level Financial Reporting 98.8% 1.49x ≥ 2.00x Both Unit-Level and Corporate-Level Financial Information 98.5% 14.9% 52.7% No Financial Information 1.0% 1.50x to 1.99x Not 22.2% Reported 0.7% Unit-Level Coverage by Tenant Credit2 Unit-Level Coverage by Lease Expiration 29.9% 18.0% 18.0% 16.0% 16.0% 14.0% 14.0% 12.0% 12.0% 10.0% 10.0% 8.0% 8.0% % % ABR of Cash 6.0% % of Cash ABR 6.0% 4.0% 4.0% 2.0% 2.0% 0.0% 0.0% B A B- A- B+ A+ BB BB- Rent AA- Rent BB+ BBB 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 BBB- BBB+ Coverage CCC+ Coverage Ratio (x) < 1.00x 1.00 to 1.49x 1.50 to 1.99x ≥ 2.00x NR Ratio (x) < 1.00x 1.00 to 1.49x 1.50 to 1.99x ≥ 2.00x NR Thereafter Note: ‘NR’ means not reported. 1. Certain tenants, whose leases do not require unit-level financial reporting, provide the Company with unit-level financial information. The data shown includes unit-level coverage for these leases. 2. The chart illustrates the portions of annualized base rent as of September 30, 2020 attributable to leases with tenants having specified implied credit ratings based on their Moody’s RiskCalc scores. Moody’s equates the EDF scores generated using RiskCalc with a corresponding credit rating. 11 Supplemental Financial and Operating Information | As of September 30, 2020
Leasing Summary Leasing Expiration Schedule, Lease Renewal Activity and Statistics Annual Lease Expiration by Cash ABR Leasing Activity – Trailing 12 Months Cash % of # of Wgt. Avg. Lease Terminated Leases Re-Leased Total Year1 ABR Cash ABR Properties2 Coverage3 $(000)s Renewals Without Vacancy After Vacancy Leasing 2020 $ 90 0.1% 1 1.9x Prior Cash ABR $ 60 $ 5,438 332 $ 5,831 2021 139 0.1% 2 3.5x New Cash ABR4 62 4,479 313 4,854 2022 298 0.2% 2 3.8x Recovery Rate 103.2% 82.4% 94.1% 83.2% 2023 746 0.4% 9 3.4x Number of Leases 2 17 3 22 2024 4,648 2.8% 46 4.5x Average Months Vacant - -3.9 - 2025 1,648 1.0% 14 3.1x % of Total Cash ABR5 0.0% 2.7% 0.1% 2.9% 2026 2,355 1.4% 14 2.2x 2027 4,649 2.8% 30 2.8x 2028 3,962 2.4% 14 2.0x 2029 5,026 3.0% 70 4.4x Leasing Statistics 2030 3,927 2.3% 46 4.0x Vacant Properties at June 30, 2020 4 2031 8,530 5.1% 47 2.8x Expiration Activity 0 2032 10,891 6.5% 55 3.7x Leasing Activity -2 2033 7,123 4.2% 27 2.2x Vacant Property Sales -3 2034 28,906 17.2% 211 3.2x Lease Termination 8 2035 12,438 7.4% 84 2.3x Vacant Properties at September 30, 2020 7 2036 2,403 1.4% 20 1.6x 2037 6,953 4.1% 42 4.1x 2038 12,908 7.7% 85 2.2x 2039 26,246 15.6% 155 2.6x Thereafter 23,863 14.2% 113 1.9x Total $167,750 100.0% 1,087 2.8x 1. Expiration year of contracts in place as of September 30, 2020 and excludes any tenant option renewal periods that have not been exercised. 2. Property count includes 92 properties that secure mortgage loans receivable, but exclude two undeveloped land parcels and seven vacant properties. 3. Weighted by cash ABR as of September 30, 2020. 4. New cash ABR reflects full lease rental rate without giving effect to free rent or discounted rent periods. 5. New cash ABR divided by total cash ABR as of September 30, 2020. 12 Supplemental Financial and Operating Information | As of September 30, 2020
Leasing Summary Same-Store Analysis Defined Terms Same-Store Portfolio Performance Same-Store Portfolio: Contractual Cash Rent ($000s) % All properties owned, excluding new sites Type of Business 3Q 2020 3Q 2019 Change under construction, for the entire same-store Service $ 22,554 $ 22,476 0.3% Experience 4,552 4,854 -6.2% measurement period, which is July 1, 2019 Retail 687 674 2.0% through September 30, 2020. The same- Industrial 609 1,395 -56.3% store portfolio for 3Q 2020 is comprised of Total Same-Store Rent $ 28,403 $ 29,399 -3.4% 723 properties and represented ~66% of our - Property Operating Expense1 228 353 -35.3% total portfolio as measured by contractual Total Same-Store NOI $ 28,175 $ 29,046 -3.0% cash rent divided by our cash ABR at September 30, 2020. Contractual Cash Rent: The amount of cash rent our tenants are contractually obligated to pay per the in- place lease as of September 30, 2020; excludes 1.) percentage rent that is subject to sales breakpoints per the lease and 2.) redevelopment properties in a free rent period 1. Excludes reimbursable property operating expenses. 13 Supplemental Financial and Operating Information | As of September 30, 2020
Leasing Summary Lease Escalations Lease Escalation Frequency Lease Escalation Type Weighted Average Flat 1,2 Lease Escalation Frequency % of Cash ABR Annual Escalation Rate CPI 1% Annually 80.0% 1.6% 4% Every 2 years 2.3 1.4 Every 3 years 0.8 1.5 Every 4 years 0.5 0.8 Every 5 years 11.1 1.4 Other escalation frequencies 4.5 0.7 Contractual Flat 0.8 0.0 Fixed Total / Weighted Average 100.0% 1.5% 96% • Leases contributing 99% of cash ABR provided for base rent escalation, generally ranging from 1.0% to 3.0% annually, with a weighted average annual escalation rate of 1.5%, which assumes 0.0% change in annual CPI • 61% of cash ABR derived from flat leases is attributable to leases that provide for contingent rent based on a percentage of the tenant’s gross sales at the leased property 1. Based on cash ABR as of September 30, 2020. 2. Represents the weighted average annual escalation rate of the entire portfolio as if all escalations occur annually. For leases in which rent escalates by the greater of a stated fixed percentage or CPI, we have assumed an escalation equal to the stated fixed percentage in the lease. As any future increase in CPI is unknowable at this time, we have not included an increase in the rent pursuant to these leases in the weighted average annual escalation rate presented. 14 Supplemental Financial and Operating Information | As of September 30, 2020
COVID-19 Impact on Portfolio Portfolio Rent Collection and Deferral Information Reported Period July August September 3Q 2020 October1 Rent Collection2 Paid 88% 91% 91% 90% 91% Deferred 9% 6% 6% 7% 6% -- Recognized3 6% 4% 4% 4% 3% -- Non-Recognized3 3% 3% 3% 3% 3% Other 3% 3% 3% 3% 4% -- Unresolved Rent4 2% 2% 2% 2% 3% -- Lost / Abated5 1% 1% 1% 1% 1% Note: Ratios are based on percentage of Cash ABR as of September 30, 2020, with one exception. The prior ABR of Towns Sports was added to the denominator despite having no lease in place at September 30, 2020. 1. Includes the impact of closed 4Q’20 investment activity, and a minimal amount of rent that we expect to collect but has not yet been paid. 2. Percentages may not add up due to rounding. 3. Recognized rent deferrals are included in revenue on our income statement while non-recognized rent deferrals are accounted for on a non-accrual basis and are not included in revenue. 4. Uncollected contractual cash rents from non-accrual tenants that were not subject to a lease deferral in the period. 5. Rent that has either been lost due to lease termination or abated temporarily. 15 Supplemental Financial and Operating Information | As of September 30, 2020
COVID-19 Impact on Portfolio Tenant Industry Breakdown Projected Level of % of Total % of 3Q’2020 % of Total Tenant Industry % of ABR1,2 % Open2 % Limited2 % Closed2 Recovery Impact Closed ABR1,2 ABR3 Collected Deferred Rent Quick Service Fast Light 14.1% 21% 76% 3% 26% 95% 6% Car Wash Fast Light 13.3% 100% 0% 0% 0% 100% 4% Child Care Moderate Severe 13.3% 100% 0% 0% 0% 83% 26% Medical / Dental Fast Moderate 10.7% 99% 0% 1% 4% 98% 9% C-Store Fast Light 9.8% 98% 1% 1% 5% 97% 2% Auto Service Fast Light 7.4% 100% 0% 0% 0% 100% 3% Casual Dining Slow Severe 5.1% 93% 1% 7% 24% 82% 4% Health & Fitness Moderate Severe 4.8% 97% 0% 3% 10% 70% 10% Other Service Fast Light 4.2% 100% 0% 0% 0% 100% 0% Entertainment Slow Severe 3.7% 95% 0% 5% 12% 93% 3% Family Dining Slow Severe 3.5% 92% 0% 8% 19% 71% 7% Pet Care Fast Light 3.3% 100% 0% 0% 0% 80% 15% Movie Theatres Slow Severe 2.5% 100% 0% 0% 0% 16% 11% Building Materials Fast Light 1.6% 100% 0% 0% 0% 100% 0% Furniture Moderate Severe 1.3% 100% 0% 0% 0% 100% 2% Grocery Fast Light 1.2% 100% 0% 0% 0% 100% 0% Total -- -- -- 87% 12% 1% -- 90% -- Light -- -- 55% 78% 21% 1% 31% 97% 29% Moderate -- -- 11% 99% 0% 1% 4% 98% 9% Severe -- -- 34% 97% 0% 3% 65% 77% 62% Fast -- -- 66% 82% 17% 1% 35% 97% 38% Moderate -- -- 19% 99% 0% 1% 10% 80% 38% Slow -- -- 15% 94% 0% 5% 55% 71% 24% 1. Cash ABR as of September 30, 2020. 2. Property operating status as of October 22, 2020, as measured by Cash ABR. 3. The prior ABR of Towns Sports was added to the denominator despite having no lease in place at September 30, 2020. 16 Supplemental Financial and Operating Information | As of September 30, 2020
Glossary Supplemental Reporting Measures FFO, Core FFO and AFFO evaluation of our operating performance across multiple periods and in comparison to the operating performance of our peers, because it Our reported results are presented in accordance with U.S. generally removes the effect of unusual items that are not expected to impact our accepted accounting principles ("GAAP"). We also disclose funds from operating performance on an ongoing basis. Core FFO is used by operations (“FFO”), core funds from operations (“Core FFO”) and adjusted management in evaluating the performance of our core business funds from operations (“AFFO”), each of which is a non-GAAP financial operations. Items included in calculating FFO that may be excluded in measures. We believe these non-GAAP financial measures are industry calculating Core FFO include items like certain transaction related gains, measures used by analysts and investors to compare the operating losses, income or expense or other non-core amounts as they occur. performance of REITs. To derive AFFO, we modify the NAREIT computation of FFO to include We compute FFO in accordance with the definition adopted by the Board other adjustments to GAAP net income related to certain items that we of Governors of the National Association of Real Estate Investment Trusts believe are not indicative of our operating performance, including straight- ("NAREIT"). NAREIT defines FFO as GAAP net income or loss adjusted to line rental revenue, non-cash interest expense, non-cash compensation exclude extraordinary items (as defined by GAAP), net gain or loss from expense, other amortization and non-cash charges, capitalized interest sales of depreciable real estate assets, impairment write-downs expense and transaction costs. Such items may cause short-term associated with depreciable real estate assets and real estate-related fluctuations in net income but have no impact on operating cash flows or depreciation and amortization (excluding amortization of deferred long-term operating performance. We believe that AFFO is an additional financing costs and depreciation of non-real estate assets), including the useful supplemental measure for investors to consider to assess our pro rata share of such adjustments of unconsolidated subsidiaries. FFO is operating performance without the distortions created by non-cash and used by management, and may be useful to investors and analysts, to certain other revenues and expenses. facilitate meaningful comparisons of operating performance between periods and among our peers primarily because it excludes the effect of FFO, Core FFO and AFFO do not include all items of revenue and real estate depreciation and amortization and net gains and losses on expense included in net income, they do not represent cash generated sales (which are dependent on historical costs and implicitly assume that from operating activities, and they are not necessarily indicative of cash the value of real estate diminishes predictably over time, rather than available to fund cash requirements; accordingly, they should not be fluctuating based on existing market conditions). considered alternatives to net income as a performance measure or cash flows from operations as a liquidity measure and should be considered in We compute Core FFO by adjusting FFO, as defined by NAREIT, to addition to, and not in lieu of, GAAP financial measures. Additionally, our exclude certain GAAP income and expense amounts that we believe are computation of FFO, Core FFO and AFFO may differ from the infrequent and unusual in nature and/or not related to our core real estate methodology for calculating these metrics used by other equity REITs and, operations. Exclusion of these items from similar FFO-type metrics is therefore, may not be comparable to similarly titled measures reported by common within the equity REIT industry, and management believes that other equity REITs. presentation of Core FFO provides investors with a metric to assist in their 17 Supplemental Financial and Operating Information | As of September 30, 2020
Glossary Supplemental Reporting Measures We also present our earnings before interest, taxes and depreciation and may not be comparable to similarly titled measures reported by other amortization for real estate (“EBITDA”), EBITDA further adjusted to equity REITs. exclude gains (or losses) on sales of depreciable property and real estate impairment losses (“EBITDAre”), net debt, net operating income (“NOI”) Net Debt and cash NOI (“Cash NOI”), all of which are non-GAAP financial measures. We believe these non-GAAP financial measures are accepted We calculate our net debt as our gross debt (defined as total debt plus net industry measures used by analysts and investors to compare the deferred financing costs on our secured borrowings) less cash and cash operating performance of REITs. equivalents and restricted cash deposits held for the benefit of lenders. EBITDA and EBITDAre We believe excluding cash and cash equivalents and restricted cash deposits held for the benefit of lenders from gross debt, all of which could We compute EBITDA as earnings before interest, income taxes and be used to repay debt, provides an estimate of the net contractual amount depreciation and amortization. In 2017, NAREIT issued a white paper of borrowed capital to be repaid, which we believe is a beneficial recommending that companies that report EBITDA also report EBITDAre. disclosure to investors and analysts. We compute EBITDAre in accordance with the definition adopted by NAREIT. NAREIT defines EBITDAre as EBITDA (as defined above) NOI and Cash NOI excluding gains (or losses) from the sales of depreciable property and real estate impairment losses. We present EBITDA and EBITDAre as they are We compute NOI as total revenues less property expenses. NOI excludes measures commonly used in our industry and we believe that these all other items of expense and income included in the financial statements measures are useful to investors and analysts because they provide in calculating net income or loss. Cash NOI further excludes non-cash important supplemental information concerning our operating items included in total revenues and property expenses, such as straight- performance, exclusive of certain non-cash and other costs. We use line rental revenue and other amortization and non-cash charges. We EBITDA and EBITDAre as measures of our operating performance and believe NOI and Cash NOI provide useful and relevant information not as measures of liquidity. because they reflect only those income and expense items that are incurred at the property level and present such items on an unlevered EBITDA and EBITDAre do not include all items of revenue and expense basis. included in net income, they do not represent cash generated from operating activities and they are not necessarily indicative of cash NOI and Cash NOI are not measurements of financial performance under available to fund cash requirements; accordingly, the should not be GAAP. You should not consider our NOI and Cash NOI as alternatives to considered alternatives to net income as a performance measure or cash net income or cash flows from operating activities determined in flows from operations as a liquidity measure and should be considered in accordance with GAAP. Additionally, our computation of NOI and Cash addition to, and not in lieu of, GAAP financial measures. Additionally, our NOI may differ from the methodology for calculating these metrics used by computation of EBITDA and EBITDAre may differ from the methodology other equity REITs and, therefore, may not be comparable to similarly for calculating these metrics used by other equity REITs and, therefore, titled measures reported by other equity REITs. 18 Supplemental Financial and Operating Information | As of September 30, 2020
Glossary Supplemental Reporting Measures Adjusted EBITDAre / Adjusted NOI / Adjusted Cash NOI GE Seed Portfolio We further adjust EBITDAre, NOI and Cash NOI i) based on an estimate GE seed portfolio means our acquisition of a portfolio of 262 net leased calculated as if all investment and disposition activity that took place properties on June 16, 2016, consisting primarily of restaurants, that were during the quarter had been made on the first day of the quarter, ii) to being sold as part of the liquidation of General Electric Capital Corporation exclude certain GAAP income and expense amounts that we believe are for an aggregate purchase price of $279.8 million (including transaction infrequent and unusual in nature and iii) to eliminate the impact of lease costs). termination fees and contingent rental revenue from our tenants which is subject to sales thresholds specified in the lease. We then annualize these GAAP Cap Rate estimates for the current quarter by multiplying them by four, which we believe provides a meaningful estimate of our current run rate for all GAAP Cap Rate means annualized rental income computed in investments as of the end of the current quarter. You should not unduly accordance with GAAP for the first full month after investment divided by rely on these measures, as they are based on assumptions and estimates the purchase price, as applicable, for the property. that may prove to be inaccurate. Our actual reported EBITDAre, NOI and Cash NOI for future periods may be significantly less than these estimates Cash Cap Rate of current run rates. Cash Cap Rate means annualized contractually specified cash base rent Cash ABR for the first full month after investment or disposition divided by the purchase or sale price, as applicable, for the property. Cash ABR means annualized contractually specified cash base rent in effect as of the end of the current quarter for all of our leases (including Disclaimer those accounted for as direct financing leases) commenced as of that date and annualized cash interest on our mortgage loans receivable as of that Essential Properties Realty Trust, Inc. and the Essential Properties Realty date. Trust REIT are not affiliated with or sponsored by Griffin Capital Essential Asset Operating Partnership, L.P. or the Griffin Capital Essential Asset Rent Coverage Ratio REIT, information about which can be obtained at (https://www.gcear.com). Rent coverage ratio means the ratio of tenant-reported or, when unavailable, management’s estimate based on tenant-reported financial information, annual EBITDA and cash rent attributable to the leased property (or properties, in the case of a master lease) to the annualized base rental obligation as of a specified date. 19 Supplemental Financial and Operating Information | As of September 30, 2020