Essential Properties Realty Trust, Inc. (EPRT): Business Model Canvas [10-2024 Updated]

Essential Properties Realty Trust, Inc. (EPRT) operates a unique business model that focuses on providing stable rental income through strategic investments in single-tenant properties. With a portfolio of over 2,000 properties, EPRT emphasizes long-term partnerships with middle-market companies and a disciplined approach to asset management. This blog post delves into the intricacies of EPRT's business model canvas, highlighting key components such as value propositions, customer segments, and revenue streams. Discover how EPRT is positioning itself in the real estate investment trust landscape and what makes it a compelling option for investors and tenants alike.

Essential Properties Realty Trust, Inc. (EPRT) - Business Model: Key Partnerships

Collaborations with middle-market companies

Essential Properties Realty Trust, Inc. (EPRT) primarily focuses on investing in properties leased to middle-market companies. As of September 30, 2024, EPRT's portfolio comprised 2,053 properties with an annualized base rent of $438.0 million. The company targets middle-market businesses that are often underserved in the capital markets, allowing EPRT to provide attractive real estate financing solutions. Approximately 93.2% of EPRT's annualized base rent is derived from service-oriented and experience-based businesses, which are considered more resilient against e-commerce competition.

Relationships with real estate brokers and agents

EPRT maintains strong relationships with real estate brokers and agents to identify and acquire properties that fit its investment strategy. The company’s acquisition strategy includes a focus on properties that can be leased to tenants in diverse industries. As of September 30, 2024, EPRT's portfolio included 407 tenants across 16 distinct industries, with none of the tenants contributing more than 4.3% of the total annualized base rent. This diversification strategy is supported by brokers who assist in sourcing properties that align with EPRT’s criteria.

Partnerships with financial institutions for capital access

EPRT collaborates with various financial institutions to ensure access to capital for its investment activities. As of September 30, 2024, EPRT had a total gross investment of $5.76 billion, which includes $5.42 billion in real estate investments. The company utilizes a revolving credit facility and has established various debt financing strategies to support its growth. In the nine months ended September 30, 2024, EPRT declared total cash distributions of $152.5 million, which are funded through operational cash flows and financing activities.

Engagements with property management firms

To enhance operational efficiency, EPRT engages with property management firms that oversee its diverse portfolio. The company’s properties are predominantly leased on a triple-net basis, meaning tenants are responsible for all operating expenses, including maintenance and taxes. As of September 30, 2024, EPRT's portfolio was 99.9% occupied, showcasing the effectiveness of its property management strategies. The use of property management firms allows EPRT to maintain high occupancy levels while minimizing direct operational burdens.

Partnership Type	Key Statistics	Impact on EPRT
Middle-Market Companies	2,053 properties, $438.0 million annualized base rent	Provides stable income and growth opportunities
Real Estate Brokers	407 tenants across 16 industries	Diversifies portfolio and reduces tenant concentration risk
Financial Institutions	Total gross investments: $5.76 billion	Ensures liquidity for acquisitions and operational needs
Property Management Firms	99.9% occupancy rate	Enhances operational efficiency and tenant satisfaction

Essential Properties Realty Trust, Inc. (EPRT) - Business Model: Key Activities

Acquiring and managing single-tenant properties

As of September 30, 2024, Essential Properties Realty Trust, Inc. (EPRT) held a diversified portfolio of 2,053 properties with a net investment value of approximately $5.3 billion. The annualized base rent for these properties was $438.0 million, reflecting a strategic focus on single-tenant, freestanding properties leased primarily to middle-market companies in service-oriented or experience-based sectors. The average investment per property was approximately $2.7 million.

Conducting sale-leaseback transactions

During the three months ended September 30, 2024, EPRT engaged in sale-leaseback transactions that accounted for 89% of its investments. These transactions involve acquiring properties from businesses and leasing them back, allowing companies to free up capital while maintaining operational control over the property. EPRT’s disciplined underwriting process targets investments ranging from $2 million to $100 million, primarily focusing on properties leased to unrated middle-market companies.

Performing active asset management

EPRT emphasizes active asset management to enhance portfolio performance. As of September 30, 2024, the occupancy level of the portfolio was notably high at 99.9%. The company maintains a diversified tenant base with 407 tenants operating 583 different concepts across 49 states, ensuring that no single tenant contributes more than 4.3% of the annualized base rent. The rent coverage ratio for the top ten tenants was reported at 5.1x, indicating strong tenant financial health.

Implementing disciplined underwriting processes

EPRT employs rigorous underwriting processes to assess potential investments. As of September 30, 2024, 96.4% of its leases were structured as triple-net leases, transferring most property operating costs to tenants. This structure minimizes EPRT's exposure to property-related expenses and enhances cash flow stability. The company’s weighted average remaining lease term was 14.1 years, with 98.6% of leases providing for future rent increases at a weighted average rate of 1.7% per year.

Metric	Value
Number of Properties	2,053
Net Investment Value	$5.3 billion
Annualized Base Rent	$438.0 million
Occupancy Rate	99.9%
Average Investment per Property	$2.7 million
Sale-Leaseback Transaction Percentage	89%
Weighted Average Remaining Lease Term	14.1 years
Rent Coverage Ratio (Top 10 Tenants)	5.1x
Percentage of Triple-Net Leases	96.4%

Essential Properties Realty Trust, Inc. (EPRT) - Business Model: Key Resources

Diverse portfolio of 2,053 properties

As of September 30, 2024, Essential Properties Realty Trust, Inc. (EPRT) manages a diversified portfolio comprising 2,053 properties, which collectively have a net investment value of approximately $5.3 billion. This portfolio is primarily focused on single-tenant, net-leased properties, with an annualized base rent of $438.0 million. The properties span across 49 states and include a diverse range of tenants operating in 16 distinct industries.

Metric	Value
Total Properties	2,053
Net Investment Value	$5.3 billion
Annualized Base Rent	$438.0 million
States Covered	49
Industries	16

Experienced management team with industry knowledge

EPRT's management team possesses significant experience in the net-lease real estate sector. The team's track record includes successfully scaling net-lease businesses, which enhances the company's ability to navigate market challenges and identify growth opportunities. The management's expertise is critical in selecting properties and tenants that align with EPRT's investment strategy, focusing on service-oriented and experience-based businesses.

Financial reporting and analytics tools

EPRT employs advanced financial reporting and analytics tools to monitor its portfolio's performance and streamline decision-making processes. These tools aid in tracking rental revenues, occupancy rates, and financial metrics such as the weighted average rent coverage ratio of 3.6x as of September 30, 2024. The company's rigorous underwriting process ensures that investments are made based on sound financial principles, reducing overall risk exposure.

Financial Metric	Value
Weighted Average Rent Coverage Ratio	3.6x
Occupancy Rate	99.9%
Annualized Base Rent from Service-Based Tenants	93.2%

Access to capital through equity and debt financing

EPRT has established access to various capital sources, including equity and debt financing, to support its growth strategy. As of September 30, 2024, the company had declared total cash distributions of $152.5 million, with a dividend per share of $0.865. The company’s capital structure allows it to finance new acquisitions and manage existing debt effectively, with all long-term debt as of the same date being fixed-rate or effectively converted to fixed-rate through hedging strategies.

Capital Metric	Value
Total Cash Distributions Declared	$152.5 million
Dividend per Share	$0.865
Debt Maturity (Weighted Average)	4.3 years

Essential Properties Realty Trust, Inc. (EPRT) - Business Model: Value Propositions

Long-term, stable rental income through triple-net leases

As of September 30, 2024, Essential Properties Realty Trust, Inc. (EPRT) reported a portfolio of 2,053 properties with an annualized base rent of $438.0 million. The majority of these leases are triple-net, meaning tenants are responsible for maintenance, property taxes, and insurance, which provides EPRT with a stable and predictable income stream. The weighted average rent coverage ratio across the portfolio is 3.6x, enhancing the security of rental income.

Portfolio diversification across industries and geographies

EPRT’s portfolio is diversified across 16 distinct industries and 49 states, featuring 407 tenants operating 583 different concepts. As of September 30, 2024, no single tenant accounted for more than 4.3% of the annualized base rent, and the top ten tenants contributed only 17.7% of total rent. This diversification strategy minimizes risk and enhances stability.

Industry	Annualized Base Rent ($ thousands)	% of Annualized Base Rent	Number of Properties
Car Washes	67,515	15.4%	204
Early Childhood Education	51,605	11.8%	219
Medical / Dental	50,268	11.5%	230
Quick Service Restaurants	42,096	9.6%	433
Automotive Services	34,426	7.9%	254
Casual Dining	29,394	6.7%	127
Convenience Stores	27,288	6.2%	167
Equipment Rental	24,464	5.6%	87
Other Services	10,001	2.3%	50
Family Dining	7,103	1.6%	34
Pet Care Services	6,715	1.5%	39

Investment focus on service-oriented and experience-based businesses

EPRT primarily invests in properties leased to service-oriented and experience-based businesses, which comprise 93.2% of their annualized base rent. These sectors include car washes, quick-service restaurants, early childhood education, and medical services. Such businesses are generally more resilient against e-commerce pressures, contributing to the stability of EPRT's revenue.

Attractive risk-adjusted returns for investors

As of September 30, 2024, EPRT's strategic focus on middle-market companies allows for the provision of attractive risk-adjusted returns. The company has a disciplined underwriting process and a competitive edge through its diversified portfolio. The average investment per property is approximately $2.7 million, which enables EPRT to avoid concentration in larger assets and mitigate investment risks.

Essential Properties Realty Trust, Inc. (EPRT) - Business Model: Customer Relationships

Strong tenant relationships for lease renewals

As of September 30, 2024, Essential Properties Realty Trust (EPRT) maintained a portfolio of 2,053 properties, with a high occupancy rate of 99.9%. The company focuses on building strong relationships with its tenants to facilitate lease renewals and enhance tenant retention. Approximately 93.2% of EPRT's annualized base rent, totaling $438.0 million, comes from service-oriented and experience-based businesses, which are generally more resilient in maintaining occupancy rates.

Regular financial reporting from tenants

EPRT emphasizes the importance of financial transparency and requires regular financial reporting from its tenants. This practice allows EPRT to monitor tenant performance and assess their ability to meet lease obligations. As of September 30, 2024, the weighted average rent coverage ratio within EPRT's portfolio was 3.6x, indicating that tenants are generating sufficient income to cover their rent payments, thus fostering a stable financial environment for both parties.

Active communication and support for tenant needs

EPRT prioritizes active communication with its tenants to address their needs effectively. This includes providing support for tenant operations and ensuring that any issues related to property management are resolved promptly. The company utilizes a robust communication framework to ensure that tenants feel supported, which is essential for maintaining long-term relationships and minimizing vacancy rates.

Focus on building trust and long-term partnerships

Building trust is a cornerstone of EPRT's business model. The company aims to create long-term partnerships with its tenants, reducing turnover and associated costs. As of September 30, 2024, EPRT's leases had a weighted average remaining lease term of 14.1 years, reflecting the company's strategy of securing long-term commitments from tenants. Furthermore, 96.4% of EPRT's leases are structured as triple-net leases, where tenants are responsible for property expenses, thereby aligning the interests of both parties towards maintaining the property and ensuring its profitability.

Metric	Value
Number of Properties	2,053
Occupancy Rate	99.9%
Annualized Base Rent	$438.0 million
Weighted Average Rent Coverage Ratio	3.6x
Weighted Average Remaining Lease Term	14.1 years
Triple-Net Lease Percentage	96.4%

Essential Properties Realty Trust, Inc. (EPRT) - Business Model: Channels

Direct leasing agreements with tenants

As of September 30, 2024, Essential Properties Realty Trust, Inc. (EPRT) had a portfolio comprising 2,053 properties, with an impressive occupancy rate of 99.9%. The annualized base rent generated from these properties was $438.0 million. EPRT primarily engages in triple-net leases, where tenants are responsible for all property-related costs, thus providing a stable revenue stream with minimal operational risk for the company.

Online platforms for property listings and investor relations

EPRT utilizes its website and other online platforms to showcase property listings and provide updates to investors. This includes detailed financial reports and real-time data on their investment portfolio. The company’s effective online presence enhances investor engagement and provides transparency regarding its operations and financial health.

Networking through industry events and conferences

Networking plays a crucial role in EPRT's strategy. The company actively participates in various real estate investment conferences and industry events, allowing it to build relationships with potential tenants and investors. This direct engagement helps EPRT identify new investment opportunities and understand market trends.

Investor presentations and reports

EPRT regularly conducts investor presentations and publishes detailed reports to communicate its financial performance and strategic direction. For instance, during the nine months ended September 30, 2024, EPRT declared total cash distributions of $152.5 million, highlighting its commitment to returning value to shareholders. These presentations often include key financial metrics such as net income of $148.1 million for the same period.

Channel	Description	Key Metrics
Direct Leasing Agreements	Triple-net leases with 99.9% occupancy	2,053 Properties, $438.0 million Annualized Base Rent
Online Platforms	Investor relations and property listings	Real-time financial updates, enhanced transparency
Networking Events	Participation in real estate investment conferences	Opportunities for tenant and investor engagement
Investor Presentations	Regular updates on financial performance	$152.5 million in cash distributions for 2024

Essential Properties Realty Trust, Inc. (EPRT) - Business Model: Customer Segments

Middle-market companies seeking real estate solutions

Essential Properties Realty Trust, Inc. (EPRT) primarily targets unrated middle-market companies that are generally underserved in the capital markets. The company focuses on acquiring properties leased to these businesses, which typically have attractive credit characteristics and stable operating histories. As of September 30, 2024, EPRT had a portfolio comprising 2,053 properties with an annualized base rent of $438.0 million. This strategy enables EPRT to provide tailored real estate solutions to middle-market companies while achieving attractive risk-adjusted returns for its investors.

Institutional and retail investors interested in REITs

EPRT appeals to both institutional and retail investors interested in Real Estate Investment Trusts (REITs). The company is listed on the New York Stock Exchange under the symbol 'EPRT'. As of September 30, 2024, EPRT had a total stockholders' equity of $3.2 billion and a market capitalization of approximately $5.3 billion. The company declared total cash distributions of $0.865 per share during the nine months ended September 30, 2024, totaling $152.5 million.

Tenants in service-oriented or experience-based industries

EPRT's portfolio is heavily focused on service-oriented and experience-based businesses. As of September 30, 2024, 93.2% of its annualized base rent was derived from tenants in these sectors. The company maintains a diverse tenant base, with 407 tenants operating across 16 distinct industries. The weighted average rent coverage ratio for tenants operating in service-oriented businesses was 3.5x, indicating a strong ability to meet rental obligations.

Industry	Annualized Base Rent	% of Annualized Base Rent	Number of Properties
Car Washes	$67,515	15.4%	204
Early Childhood Education	$51,605	11.8%	219
Medical / Dental	$50,268	11.5%	230
Quick Service Restaurants	$42,096	9.6%	433
Automotive Services	$34,426	7.9%	254
Other Services	$350,875	80.1%	1,844

Financial partners and stakeholders

EPRT maintains strong relationships with financial partners and stakeholders to support its growth and investment strategies. The company's financial strategy includes managing long-term leverage through the issuance of fixed-rate debt, ensuring a stable capital structure. As of September 30, 2024, EPRT's total liabilities and equity were $5.5 billion, with a weighted average debt maturity of 4.3 years. This financial discipline allows EPRT to attract and retain stakeholders interested in long-term value creation.

Essential Properties Realty Trust, Inc. (EPRT) - Business Model: Cost Structure

Property acquisition and management costs

The total investment in real estate for Essential Properties Realty Trust, Inc. (EPRT) as of September 30, 2024, amounted to approximately $5.3 billion, encompassing investments in 2,053 properties. During the nine months ended September 30, 2024, EPRT reported net cash used in investing activities of $848.5 million, primarily reflecting purchases and capital expenditures related to property acquisitions. The average investment per unit for the quarter was $4,102.

General and administrative expenses

For the nine months ended September 30, 2024, EPRT's general and administrative expenses increased to $26.7 million, compared to $23.3 million for the same period in 2023, reflecting a rise in salary expenses and professional fees. Additionally, non-cash share-based compensation expenses contributed to this increase, amounting to $8.2 million for the nine months ended September 30, 2024.

Debt servicing and interest payments

EPRT's total debt as of September 30, 2024, was reported at approximately $2.2 billion. The interest expense for the nine months ended September 30, 2024, was $54.6 million. The company has several loans with varying interest rates, the most significant being the unsecured term loans with a total outstanding balance of $1.7 billion, which have interest rates averaging around 3.66%. The scheduled principal payments due over the next several years total $1.73 billion.

Marketing and tenant acquisition costs

While specific figures for marketing and tenant acquisition costs are not detailed in the financial statements, EPRT employs strategies to maintain a high occupancy level, which was reported at 99.9% as of September 30, 2024. The company utilizes a robust tenant screening process and offers incentives to attract and retain tenants, which would factor into the overall marketing costs. The increase in annualized base rent from $438.0 million reflects the successful management of tenant relations and acquisition strategies.

Cost Category	Amount ($ millions)	Notes
Property Acquisition Costs	848.5	Net cash used in investing activities for 2024
General and Administrative Expenses	26.7	For the nine months ended September 30, 2024
Total Debt	2,196.4	Total outstanding debt as of September 30, 2024
Interest Expense	54.6	For the nine months ended September 30, 2024
Annualized Base Rent	438.0	Reflects successful tenant management strategies

Essential Properties Realty Trust, Inc. (EPRT) - Business Model: Revenue Streams

Rental income from leased properties

For the nine months ended September 30, 2024, rental revenue increased by $66.4 million compared to the same period in 2023, amounting to a total rental revenue of $314.6 million. This growth was primarily driven by the expansion of EPRT's real estate investment portfolio, which increased from 1,648 rental properties valued at $4.3 billion to 1,899 properties valued at $5.3 billion. The weighted average rent coverage ratio across the portfolio stood at 3.6x.

Year	Annualized Base Rent ($ millions)	% of Annualized Base Rent	Number of Properties	Weighted Average Rent Coverage Ratio
2024	723	0.2%	10	2.5x
2025	3,008	0.7%	17	2.9x
2026	3,038	0.7%	19	3.4x
2027	5,754	1.3%	44	3.5x
2028	4,372	1.0%	16	2.5x
2029	10,160	2.3%	117	4.6x
2030	4,122	0.9%	44	4.6x
2031	12,432	2.8%	67	3.0x
2032	12,677	2.9%	45	4.3x
Total	437,951	100%	2,050	3.6x

Interest income from mortgage loans receivable

Interest income from loans receivable increased by $2.5 million for the nine months ended September 30, 2024, totaling $2.5 million compared to $1.4 million in the same period in 2023. As of September 30, 2024, the Company had 26 loans receivable outstanding with a principal balance outstanding of $335.8 million. The effective interest rate on these loans averaged around 8.00% to 10.19%.

Loan Type	Principal Balance ($ thousands)	Effective Interest Rate (%)	Stated Interest Rate (%)	Maturity Date
Mortgage	12,000	8.80%	8.00%	2039
Mortgage	7,300	8.53%	7.75%	2039
Mortgage	51,000	7.79%	7.33%	2034
Mortgage	5,300	8.42%	7.65%	2040
Mortgage	1,525	8.54%	8.50%	2024
Total	335,789	-	-	-

Fees from property management services

EPRT generates additional revenue through property management services, although specific figures for these fees are not disclosed separately in financial reports. These fees typically arise from managing properties for third parties or providing services related to tenant management and facilities maintenance. The overall contribution from property management fees is included in the broader revenue category but is not explicitly itemized in the financial statements.

Capital gains from property sales and investments

For the nine months ended September 30, 2024, EPRT reported a net gain of $1.4 million from the dispositions of real estate. The company sold several properties, with a total disposition volume of $16.973 million in the third quarter of 2024. The capital gains are influenced by the overall market conditions and the performance of the properties sold.

Quarter	Disposition Volume ($ thousands)	Cash Cap Rate (%)	Leased Properties Sold	Vacant Properties Sold
Q3 2024	16,973	6.8%	7	2
Q2 2024	4,783	7.3%	4	0
Q1 2024	11,949	6.5%	6	1
Q4 2023	30,602	6.6%	9	0

Article updated on 8 Nov 2024

Resources:

1. Essential Properties Realty Trust, Inc. (EPRT) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Essential Properties Realty Trust, Inc. (EPRT)' financial performance, including balance sheets, income statements, and cash flow statements.
2. SEC Filings – View Essential Properties Realty Trust, Inc. (EPRT)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.