Investor Presentation – November 20211 Disclaimer This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. These forward-looking statements can be identified by the use of words such as “expect,” “plan,” "will," “estimate,” “project,” “intend,” “believe,” “guidance,” and other similar expressions that do not relate to historical matters. These forward-looking statements are subject to known and unknown risks and uncertainties that can cause actual results to differ materially from those currently anticipated due to a number of factors, which include, but are not limited to, our continued ability to source new investments, risks associated with using debt and equity financing to fund our business activities (including refinancing and interest rate risks, changes in interest rates and/or credit spreads, changes in the price of our common shares, and conditions of the equity and debt capital markets, generally), unknown liabilities acquired in connection with acquired properties or interests in real-estate related entities, general risks affecting the real estate industry and local real estate markets (including, without limitation, the market value of our properties, the inability to enter into or renew leases at favorable rates, portfolio occupancy varying from our expectations, dependence on tenants’ financial condition and operating performance, and competition from other developers, owners and operators of real estate), the financial performance of our retail tenants and the demand for retail space, particularly with respect to challenges being experienced by general merchandise retailers, potential fluctuations in the consumer price index, risks associated with our failure to maintain our status as a REIT under the Internal Revenue Code of 1986, as amended, and other additional risks discussed in our filings with the Securities and Exchange Commission. We expressly disclaim any responsibility to update or revise forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. Essential Properties Realty Trust, Inc. and the Essential Properties Realty Trust REIT are not affiliated with or sponsored by Griffin Capital Essential Asset Operating Partnership, L.P. or the Griffin Capital Essential Asset REIT, information about which can be obtained at (https://www.gcear.com).
Investor Presentation – November 20212 Investment Highlights • Newly Assembled Portfolio of Net Lease Properties • Long Duration Leases with Solid Unit-Level Rent Coverage • Concentrated on Service-Oriented and Experience-Based Tenants • Fungible and Smaller-Scale Single-Tenant Properties • Disciplined and Proven Investment Strategy • Focus on Sale-Leasebacks with Middle-Market Companies • Balance Sheet Positioned to Fund External Growth Opportunities • Long-Term History of Maintaining Conservative Leverage Profile • Senior Management Team with Considerable Net Lease Experience • Demonstrated Record of Growing Public REITs to Significant Scale Service and Experiential Cash ABR2 95% Average Investment Per Property1 $2.2mm Internally-Originated Sale-Leasebacks2,4 83% Average Quarterly Investment Activity3 ~$180mm 1. As of September 30, 2021. 2. Based on Cash ABR as of September 30, 2021. 3. Average quarterly investment activity represents the trailing eight quarter average as of September 30, 2021 4. Exclusive of Initial Portfolio.. Unit-Level Rent Coverage1 3.5x of Weighted Average Lease Term (WALT)1 13.9 Years of Collective Net Lease Experience 60+ Years New Vintage Net Lease Portfolio with Strong External Growth Potential Creates a Compelling Investment Opportunity Net Debt-to- Annualized Adjusted EBITDAre1 4.5x Gross Debt-to- Undepreciated Gross Assets1 32% of Undepreciated Total Gross Assets1 $3.2B
Investor Presentation – November 20213 4Q’21 Update • Investment Activity1: Completed $47.1mm of QTD investments • Dispositions1: Sold two properties QTD for $4.6mm in gross proceeds • Occupancy: Portfolio remains 99.9% leased with one vacant property Well Positioned Balance Sheet • Low Leverage: Net Debt / Annualized Adjusted EBITDAre was 4.5x as of 3Q’21 • 100% Unsecured: Balance sheet has no secured debt and asset base is 100% unencumbered • Strong Liquidity: Liquidity was $428mm as of 3Q’21, which includes $400mm of capacity on our unsecured credit facility and $28mm of available cash • Well-Laddered Low-Cost Debt: Our weighted average debt maturity is 6.4 years, and our weighted average interest rate is 3.11% as of 3Q’21 Other • Reiterated 2021 Guidance: 2021 AFFO/sh guidance of $1.30-$1.32 (implies 18% yr/yr growth at midpoint) • Established 2022 Guidance: 2022 AFFO/sh guidance of $1.46-$1.50 Executive Summary We Continue to Execute Our External Growth Strategy with a Well Positioned Balance Sheet 1. As of November 1, 2021.
Investor Presentation – November 20214 Service-Oriented & Experience-Based Industries Sale-Leaseback Transactions with Middle-Market Tenants Small-Scale Net Leased Properties E-commerce resistant Profit centers essential to tenant’s operations Customers must visit to receive service/experience Longer lease term Unit-level financial reporting Include contractual rent increases Increases diversification Deeper pool of potential buyers Greater alternative uses Small-scale net leased properties are easier to divest and re-let in comparison to larger properties Service-oriented and experience-based businesses are performing well in the current economic environment and increasing store counts Targeted Investment Strategy Based on Decades of Experience Management’s Investment Discipline Has Been Refined Over Multiple Decades of Managing Assets Through Various Credit Cycles Access to growth capital for middle- market businesses is limited and results in attractive risk- adjusted returns
Investor Presentation – November 20215 Seek to be the Capital Provider of Choice Maintain Direct Relationships with Our Tenants and Actively Seek to Leverage Our Relationships to Identify New Investment Opportunities Relationship-Based Sourcing 1. Percentage of portfolio cash ABR as of September 30, 2021 that was acquired from parties who previously engaged in one or more transaction with a senior management team member. Exclusive of Initial Portfolio. 2. Percentage of portfolio cash ABR as of September 30, 2021 that was attributable to internally originated sale-leaseback transactions. Exclusive of Initial Portfolio. Repeat Business Through Existing Senior Management Relationships1 86% Internally Originated Sale- Leaseback Transactions2 83% Tenant Relationships 41% Underwriting Methodology Industry View • Determine the relevant competitive factors and long-term viability of the industry, avoiding industries subject to long-term functional obsolescence Credit of the Tenant • Perform detailed credit reviews of the financial condition of all proposed tenants to determine their financial strength and flexibility Unit-Level Profitability • Evaluate the profitability of the business operated at our real estate locations through rent coverage ratios and historical financials Real Estate Valuation • Identify whether the underlying real estate is commercially desirable and suitable for use by different tenants
Investor Presentation – November 20216 Early Childhood Education 14.5% Quick Service 13.2% Car Washes 12.9% Medical / Dental 11.7% Auto Service 8.2% C-Stores 6.8% Casual Dining 6.4% Equipment Rental & Sales 3.5% Family Dining 2.5% Other Services 2.4% Pet Care Services 1.8% Health and Fitness 4.6% Entertainment 4.3% Movie Theatres 1.8% Grocery 2.9% Home Furnishings 0.9% Building Materials 1.7% Service 83.8% New Vintage Portfolio Focused on Targeted Industries Our Portfolio Reflects a Disciplined Adherence to Investing in Properties Leased to Service-Oriented and Experience- Based Businesses with Unit-Level Reporting Investment Properties (#)1 1,397 Square Footage (mm) 12.4 Tenants (#) 297 Industries (#) 17 States (#) 45 Weighted Average Remaining Lease Term (Years) 13.9 Master Leases (% of Cash ABR) 60.8% Sale-Leaseback (% of Cash ABR)2,3 83.3% Unit-Level Rent Coverage 3.5x Unit-Level Financial Reporting (% of Cash ABR) 98.4% Leased (%) 99.9% Top 10 Tenants (% of Cash ABR) 19.0% Average Investment Per Property ($mm) $2.2 1. Includes 158 properties that secure mortgage loans receivable. 2. Exclusive of Initial Portfolio. 3. Includes investments in mortgage loans receivable made in support of sale-leaseback transactions. Portfolio Highlights September 30, 2021 Tenant Industry Diversification • E-Commerce Resistant: 95% of cash ABR comes from service-oriented and experience-based tenants • Focus on 17 Industries: Results in greater sector expertise and more efficient underwriting and asset management • Long WALT Limits Exposure to Near-Term Cash Flow Erosion: <4% of ABR expires through 2025 • Strong Operator Visibility with No Legacy Issues: 98.4% unit-level reporting; investment program started in June 2016
Investor Presentation – November 20217 Top 10 Tenants Diversification by Industry Portfolio Summary Our Top 10 Tenants Operate 230 Properties and Represent 19.0% of Cash ABR Top 10 Tenants1 Properties % of Cash ABR 21 2.7% 74 2.3% 23 2.1% 13 1.9% 6 1.9% 16 1.7% 34 1.7% 19 1.6% 5 1.6% 19 1.5% Top 10 Tenants 230 19.0% Total 1,397 100.0% 1. Represents tenant, guarantor or parent company. 2. Property count includes 159 properties that secure mortgage loans receivable, but it excludes one vacant property. 3. Calculation excludes properties with no annualized base rent and properties under construction. Tenant Industry Type of Business Cash ABR ($'000s) % of Cash ABR # of Properties2 Building SqFt Rent Per SqFt3 Early Childhood Education Service $ 32,631 14.5% 142 1,512,418 $ 21.26 Quick Service Service 29,704 13.2% 359 988,827 30.02 Car Washes Service 29,121 12.9% 120 563,278 50.81 Medical / Dental Service 26,481 11.7% 161 1,098,234 24.15 Automotive Service Service 18,403 8.2% 137 920,670 20.66 Convenience Stores Service 15,390 6.8% 135 529,990 29.04 Casual Dining Service 14,439 6.4% 97 549,047 26.82 Equipment Rental and Sales Service 7,835 3.5% 35 634,578 12.10 Family Dining Service 5,581 2.5% 37 220,106 26.28 Other Services Service 5,306 2.4% 24 292,129 18.79 Pet Care Services Service 4,031 1.8% 40 300,133 16.36 Service Subtotal 188,922 83.8% 1,287 7,609,410 25.04 Health and Fitness Experience 10,355 4.6% 27 1,087,279 9.58 Entertainment Experience 9,683 4.3% 24 775,855 12.47 Movie Theatres Experience 4,170 1.8% 6 293,206 14.22 Experience Subtotal 24,208 10.7% 57 2,156,340 11.26 Grocery Retail 6,483 2.9% 25 1,108,740 5.85 Home Furnishings Retail 2,048 0.9% 4 217,339 9.42 Retail Subtotal 8,531 3.8% 29 1,326,079 6.43 Building Materials Industrial 3,801 1.7% 23 1,257,017 3.02 Total $ 225,462 100.0% 1,396 12,348,846 $ 18.33
Investor Presentation – November 20218 Disciplined Underwriting Leading to Healthy Portfolio Metrics 98.4% of Unit-Level Reporting Provides (Near) Real-Time Tenant Visibility 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20 21 20 22 20 23 20 24 20 25 20 26 20 27 20 28 20 29 20 30 20 31 20 32 20 33 20 34 20 35 20 36 20 37 20 38 T he re a fte r % o f C a sh A B R < 1.00x 1.00 to 1.49x 1.50 to 1.99x ≥ 2.00x NR 29.0% 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% C C C + B - B B + B B - B B B B + B B B - B B B B B B + A - A A + A A - % o f C a sh A B R < 1.00x 1.00 to 1.49x 1.50 to 1.99x ≥ 2.00x NR Tenant Financial Reporting Requirements % of Cash ABR by Unit-Level Coverage Tranche1 Unit-Level Coverage by Lease ExpirationUnit-Level Coverage by Tenant Credit2 Reporting Requirements % of Cash ABR Unit-Level Financial Information 98.4% Corporate-Level Financial Reporting 98.4% Both Unit-Level and Corporate-Level Financial Information 98.2% No Financial Information 1.4% Rent Coverage Ratio (x) ≥ 2.00x 64.3% Not Reported 1.5% 1.50x to 1.99x 17.1% 1.00x to 1.49x 6.5% < 1.00x 10.5% 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, 2021 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.
Investor Presentation – November 20219 1. Includes investments in mortgage loans receivable. 2. Cash ABR for the first full month after the investment divided by the gross investment in the property plus transaction costs. 3. GAAP rent and interest income for the first twelve months after the investment divided by the gross investment in the property plus transaction costs. 4. As a percentage of cash ABR for the quarter. 5. Includes investments in mortgage loan receivables collateralized by more than one property. 6. Includes investments in mortgage loans receivable made in support of sale-leaseback transactions. Investments1 4Q’19 1Q’20 2Q’20 3Q’20 4Q’20 1Q’21 2Q'21 3Q'21 Number of Transactions 41 32 11 19 33 22 34 31 Property Count 94 63 13 50 108 74 94 85 Avg. Investment per Unit (in 000s) $2,049 $2,551 $2,870 $2,866 $2,218 $2,650 $2,354 $2,676 Cash Cap Rates2 7.3% 7.1% 7.4% 7.1% 7.1% 7.0% 7.1% 7.0% GAAP Cap Rates3 8.0% 8.0% 8.1% 7.9% 7.7% 7.9% 7.8% 7.9% Master Lease %4,5 41% 54% 68% 79% 89% 79% 83% 80% Sale-Leaseback %4,6 81% 88% 100% 92% 88% 85% 88% 84% % of Financial Reporting4 99% 100% 100% 100% 100% 100% 100% 100% Rent Coverage Ratio 3.1x 2.7x 4.3x 2.8x 3.6x 3.0x 2.7x 2.8x Lease Term Years 16.3 16.1 16.7 17.6 16.3 16.1 13.5 16.4 $204,709 $167,490 $42,369 $148,877 $244,078 $197,816 $223,186 $230,755 $0 $40,000 $80,000 $120,000 $160,000 $200,000 $240,000 $280,000 In v es tm e n t A ct iv it y ($ 0 00 s ) Established and Proven Investment Infrastructure Scalable Platform Allows for Consistent Sourcing of Investment Activity at Attractive Yields without Sacrificing Underwriting Standards and Investment Focus Trailing 8-Quarter Average: $182,410
Investor Presentation – November 202110 $15,229 $19,571 $3,420 $19,595 $39,042 $25,197 $19,578 $10,089 $0 $10,000 $20,000 $30,000 $40,000 D is p o s it io n A ct iv it y ($ 0 00 s )1 Active Asset Management Proactive Asset Management Mitigates Risk and Maximizes Risk-Adjusted Returns Dispositions Have Traded at Attractive Cap Rates: Since our inception in 2016 through 3Q’21, we have sold 229 properties for net proceeds of $339 million. Excluding vacant properties, we have sold 184 leased properties at a weighted average cash cap rate of 6.9%, which had a weighted average coverage ratio of 1.8x. Trailing 8-Quarter Average: $18,965 1. Includes the impact of transaction costs. 2. Gains/(losses) based on our initial 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 properties sold pursuant to an existing tenant purchase option. Dispositions 4Q’19 1Q’20 2Q’20 3Q’20 4Q’20 1Q’21 2Q'21 3Q'21 Realized Gain/(Loss)1,2 8.5% 3.2%5 29.5% (4.5%) (10.2%) 4.5% (7.3%) 29.8%5 Cash Cap Rate on Leased Assets3 6.9% 7.1%5 6.8% 7.0% 7.4% 7.1% 7.1% 6.5%5 Leased Properties Sold4 7 10 3 11 21 15 6 11 Vacant Properties Sold4 1 -- -- 3 2 1 1 -- Rent Coverage Ratio 1.7x 0.7x 1.3x 2.2x 2.3x 1.8x 1.8x 1.2x
Investor Presentation – November 202111 Low Leverage and Ample Liquidity to Drive Robust AFFO/sh Growth Ample Liquidity and Balance Sheet Capacity to Support External Growth • 100% Unsecured Balance Sheet: Asset base is 100% unencumbered with no secured debt • Flexible Debt Structure: We have no debt maturities until 20241 • Low Leverage: 3Q’21 Net Debt / Annualized Adjusted EBITDAre was 4.5x • Strong Liquidity: We have $428mm in immediate liquidity as of 3Q’21, which consists of $28mm in cash and full availability of our $400mm unsecured revolving credit facility 4.5x 4.9x 5.0x 5.1x 5.1x 5.3x 5.4x 5.6x 5.8x Net Debt + Preferred / EBITDAre (Net Debt plus Preferred-to-Annualized Adjusted EBITDAre2) 2022E AFFO per Share Growth3 13.1% 8.3% 8.0% 7.8% 6.3% 5.9% 5.5% 4.4% 2.1% Source: Public filings, Factset, and SNL. Note: Market data as of November 5, 2021. Financial data as of September 30, 2021. 1. Our unsecured credit facility expires in 2023, but has a one-year extension option at the Company’s election. 2. Companies may define annualized adjusted EBITDAre differently; accordingly, such data for these companies and EPRT may not be comparable. 3. 2022E AFFO per share growth is calculated using FactSet mean 2022E AFFO per share estimates and FactSet mean 2021E AFFO per share estimates.
Investor Presentation – November 202112 Flexible Debt Structure No Significant Debt Maturities Until 2024 Debt Maturity Schedule1 Our $400mm Unsecured Revolving Line of Credit had $0mm Outstanding1 3 1. As of September 30, 2021. • Well-Laddered Debt Maturities: Weighted average debt maturity is 6.4 years • Low-Cost Debt: Weighted average interest rate is 3.11% $400 $200 $430 $400 0 100 200 300 400 500 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 M a tu rin g P rin ci p al B al an ce ( $m m ) Revolving Credit Facility Availability Five-Year Unsecured Term Loan Seven-Year Unsecured Term Loan Public Unsecured Bonds
Investor Presentation – November 202113 4.6x 3.5x 3.5x 3.0x 2.7x 2.7x 2.6x NR NR 81% 75% 36% 35% 34% 23% 19% 19% 18% 4% 4% 7% 9% 12% 13% 14% 17% 23% 100% 100% 95% 71% 66% 48% 47% 39% 28% 13.5 Weighted Average Lease Term (# of Years) 13.9 9.6 10.6 9.5 8.8 10.3 10.6 8.8 Strong Unit-Level Coverage3 & Transparency Service-Oriented & Experience-Based Industries Limited Intermediate-Term Lease Maturities Source: Public filings and press releases. Note: Company data based on most recent reported filings for period ending September 30, 2021. ‘NR’ means not reported. Companies may define service-oriented and experienced-based tenants differently, may calculate weighted average remaining lease term differently, may calculate unit-level coverage differently (including peers on a mean or median basis with EPRT representing a weighted average) and may calculate the percentage of their tenants reporting differently than EPRT. Accordingly, such data for these companies and EPRT may not be comparable. 1. Designations entitled “other” are counted as one industry, even though the “other” segment could represent multiple industries. 2. Investment value includes land and improvements, building and improvements, lease incentives, construction in progress, intangible lease assets, loans and direct financing lease receivables and real estate investments held for sale, all at cost. 3. EPRT, GTY, O, SRC and STOR coverage based on four-wall. 80% % Unit-Level Financial Reporting 13% 98% 49% NR 88%98% NR NR 2 Total Number of Tenant Industries1 6 17 37 119 60 27 56 32 (% of ABR) (% of Rent Expiring through 2025) Less Reliance on Top 10 Tenancy with Smaller Scale Properties (% of ABR) $6.6 Average Investment Per Property ($mm)2 $3.7 $2.2 $4.0 $2.8 $3.8 $3.8 $1.4 $2.8 Differentiated Net Lease Portfolio Portfolio Mix and Underlying Fundamentals are Favorable Relative to Peers
Investor Presentation – November 202114 13.1% 8.3% 8.0% 7.8% 6.3% 5.9% 5.5% 4.4% 2.1% 23.2x 20.4x 20.4x 20.2x 19.1x 17.9x 17.1x 15.4x 15.0x 17.1% 13.1% 11.5% 8.5% 8.4% 7.2% 7.0% 5.2% 4.9% 20.5x 19.2x 19.0x 18.7x 18.1x 16.6x 16.3x 15.1x 14.2x 2021E AFFO per Share Multiple1 2021E AFFO per Share Growth2 Source: Public filings, FactSet and SNL. Note: Market data as of November 5, 2021. 1. 2021E AFFO per share multiple calculated using current price per share and FactSet mean 2021E AFFO per share estimates. 2. 2021E AFFO per share growth is calculated using FactSet mean 2021E AFFO per share estimates and 2020A AFFO per share. BNL 2020A AFFO calculated using 4Q20 AFFO, annualized, to adjust for timing of IPO. NNN 2020A AFFO of $2.68 excludes the net straight-line accrued rent impact of the rent deferrals (repayments) from the COVID-19 rent deferral lease amendment of $30mm for the year ended December 31, 2020. 3. 2022E AFFO per share multiple calculated using current price per share and FactSet mean 2022E AFFO per share estimates. 4. 2022E AFFO per share growth is calculated using FactSet mean 2022E AFFO per share estimates and FactSet mean 2021E AFFO per share estimates. 2022E AFFO per Share Multiple3 2022E AFFO per Share Growth4 Relative Valuation and Growth EPRT’s Projected AFFO/sh Growth is Sector Leading
Investor Presentation – November 202116 1. Includes contingent rent (based on a percentage of the tenant's gross sales at the leased property) of $233, $99, $464 and $356 for the three and nine months ended September 30, 2021 and 2020, respectively. 2. Includes reimbursable income from the Company’s tenants of $383, $71, $1,235 and $583 for the three and nine months ended September 30, 2021 and 2020, respectively 3. During the nine months ended September 30, 2021, includes the recognition of $2,061 and $1,044 of cash and straight-line rent receivables, respectively, for previously unaccrued amounts from tenants that were moved from non-accrual to accrual accounting. 4. 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. 5. Includes reimbursable expenses from the Company’s tenants of $383, $175, $1,233, and $686 for the three and nine months ended September 30, 2021 and 2020, respectively. 6. Includes a make-whole payment of $2,543 and the write-off of $1,873 of deferred financing costs during the nine months ended September 30, 2021 and the write-off of $924 of deferred financing costs during the nine months ended September 30, 2020. Financial Summary – 3Q’21 Consolidated Statements of Operations Three Months Ended September 30, Nine Months Ended September 30, (in thousands, except share and per share data) 2021 2020 2021 2020 (unaudited) (unaudited) (unaudited) (unaudited) Revenues: Rental revenue1,2,3 $ 54,929 $ 40,799 $ 153,511 $ 116,806 Interest on loans and direct financing lease receivables 4,574 2,054 11,558 6,030 Other revenue, net 98 56 150 64 Total revenues 59,601 42,909 165,219 122,900 Expenses: General and administrative4 5,596 5,917 18,497 19,706 Property expenses5 1,358 810 3,946 1,755 Depreciation and amortization 17,355 13,966 50,185 40,442 Provision for impairment of real estate — 3,221 6,120 5,080 Change in provision for loan losses 16 14 (112) 531 Total expenses 24,325 23,928 78,636 67,514 Other operating income: Gain on dispositions of real estate, net 1,343 1,003 8,841 3,971 Income from operations 36,619 19,984 95,424 59,357 Other (expense)/income: Loss on repayment of secured borrowings6 — — (4,461) (924) Interest expense (8,955) (7,651) (24,444) (21,887) Interest income 37 58 74 433 Income before income tax expense 27,701 12,391 66,593 36,979 Income tax expense 55 55 172 156 Net income 27,646 12,336 66,421 36,823 Net income attributable to non-controlling interests (139) (73) (335) (220) Net income attributable to stockholders and members $ 27,507 $ 12,263 $ 66,086 $ 36,603 Basic weighted-average shares outstanding 119,230,645 94,259,150 114,223,586 92,070,002 Basic net income per share $ 0.23 $ 0.13 $ 0.58 $ 0.39 Diluted weighted-average shares outstanding 120,298,680 95,039,832 115,339,656 92,959,708 Diluted net income per share $ 0.23 $ 0.13 $ 0.57 $ 0.39
Investor Presentation – November 202117 1. During the nine months ended September 30, 2021, includes a make-whole payment of $2,543 and the write-off of $1,873 of deferred financing costs. 2. 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. 3. Calculations exclude $61, $95, $249 and $302 from the numerator for the three and nine months ended September 30, 2021 and 2020, respectively, related to dividends paid on unvested restricted share awards and restricted share units. Financial Summary – 3Q’21 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) 2021 2020 2021 2020 Net income $ 27,646 $ 12,336 $ 66,421 $ 36,823 Depreciation and amortization of real estate 17,329 13,903 50,108 40,330 Provision for impairment of real estate — 3,221 6,120 5,080 Gain on dispositions of real estate, net (1,343) (1,003) (8,841) (3,971) Funds from Operations 43,632 28,457 113,808 78,262 Other non-recurring expenses1,2 — 116 4,461 2,252 Core Funds from Operations 43,632 28,573 118,269 80,514 Adjustments: Straight-line rental revenue, net (5,086) (3,960) (13,950) (9,321) Non-cash interest expense 488 764 1,407 1,535 Non-cash compensation expense 1,103 1,351 4,554 4,041 Other amortization expense 68 (335) 2,487 1,018 Other non-cash charges 15 14 (118) 530 Capitalized interest expense (19) (63) (55) (223) Transaction costs — 3 — 112 Adjusted Funds from Operations $ 40,201 $ 26,347 $ 112,594 $ 78,206 Net income per share3: Basic $ 0.23 $ 0.13 $ 0.58 $ 0.39 Diluted $ 0.23 $ 0.13 $ 0.57 $ 0.39 FFO per share3: Basic $ 0.36 $ 0.26 $ 0.99 $ 0.54 Diluted $ 0.36 $ 0.26 $ 0.98 $ 0.54 Core FFO per share3: Basic $ 0.36 $ 0.27 $ 1.03 $ 0.57 Diluted $ 0.36 $ 0.27 $ 1.02 $ 0.56 AFFO per share3: Basic $ 0.33 $ 0.27 $ 0.98 $ 0.57 Diluted $ 0.33 $ 0.27 $ 0.97 $ 0.56
Investor Presentation – November 202118 Financial Summary – 3Q’21 Consolidated Balance Sheets (in thousands, except share and per share amounts) September 30, 2021 December 31, 2020 ASSETS (unaudited) (audited) Investments: Real estate investments, at cost: Land and improvements $ 925,622 $ 741,254 Building and improvements 1,859,189 1,519,665 Lease incentive 13,212 14,297 Construction in progress 2,797 3,908 Intangible lease assets 87,167 80,271 Total real estate investments, at cost 2,887,987 2,359,395 Less: accumulated depreciation and amortization (182,567) (136,097) Total real estate investments, net 2,705,420 2,223,298 Loans and direct financing lease receivables, net 237,117 152,220 Real estate investments held for sale, net 3,984 17,058 Net investments 2,946,521 2,392,576 Cash and cash equivalents 27,509 26,602 Restricted cash — 6,388 Straight-line rent receivable, net 52,825 37,830 Rent receivables, prepaid expenses and other assets, net 26,832 25,406 Total assets $ 3,053,687 $ 2,488,802 LIABILITIES AND EQUITY Secured borrowings, net of deferred financing costs $ — $ 171,007 Unsecured term loans, net of deferred financing costs 626,805 626,272 Senior unsecured notes, net 394,632 — Revolving credit facility — 18,000 Intangible lease liabilities, net 12,867 10,168 Dividend payable 30,534 25,703 Derivative liabilities 20,510 38,912 Accrued liabilities and other payables 23,949 16,792 Total liabilities 1,109,297 906,854 Commitments and contingencies — — Stockholders' equity: Preferred stock, $0.01 par value; 150,000,000 authorized; none issued and outstanding as of 9/30/21 and 12/31/20 — — Common stock, $0.01 par value; 500,000,000 authorized; 121,362,362 and 106,361,524 issued and outstanding as of 9/30/21 and 12/31/20, respectively 1,214 1,064 Additional paid-in capital 2,057,674 1,688,540 Distributions in excess of cumulative earnings (98,129) (77,665) Accumulated other comprehensive loss (23,561) (37,181) Total stockholders' equity 1,937,198 1,574,758 Non-controlling interests 7,191 7,190 Total equity 1,944,389 1,581,948 Total liabilities and equity $ 3,053,686 $ 2,488,802
Investor Presentation – November 202119 Financial Summary – 3Q’21 GAAP Reconciliations to EBITDAre, GAAP NOI, Cash NOI and Estimated Run Rate Metrics 1. These adjustments are made to reflect EBITDAre, NOI and Cash NOI as if all re-leasing activity, investments in and dispositions of real estate made during the three months ended September 30, 2021 had occurred on July 1, 2021. 2. Adjustment includes the $16 adjustment to our provision for loan loss. 3. Adjustment excludes contingent rent (based on a percentage of the tenant's gross sales at the leased property) where payment is subject to exceeding a sales threshold specified in the lease and lease termination or loan prepayment fees. Three Months Ended (unaudited, in thousands) September 30, 2021 Net income $ 27,646 Depreciation and amortization 17,355 Interest expense 8,955 Interest income (37) Income tax expense 55 EBITDA 53,974 Provision for impairment of real estate — Gain on dispositions of real estate, net (1,343) EBITDAre 52,631 Adjustment for current quarter re-leasing, acquisition and disposition activity1 2,665 Adjustment to exclude other non-recurring activity2 16 Adjustment to exclude termination/prepayment fees and certain percentage rent3 (125) Adjusted EBITDAre - Current Estimated Run Rate 55,187 General and administrative 5,596 Adjusted net operating income ("NOI") 60,783 Straight-line rental revenue, net1 (5,172) Other amortization expense3 190 Adjusted Cash NOI $ 55,801 Annualized EBITDAre $ 210,524 Annualized Adjusted EBITDAre $ 220,748 Annualized Adjusted NOI $ 243,132 Annualized Adjusted Cash NOI $ 223,204
Investor Presentation – November 202120 Financial Summary – 3Q’21 Market Capitalization, Debt Summary and Leverage Metrics 1. 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. 2. Common equity & units as of September 30, 2021, based on 121,362,362 common shares outstanding (including unvested restricted share awards) and 553,847 OP units held by non-controlling interests. (dollars in thousands, except share and per share amounts) September 30, 2021 Rate Maturity Total secured debt $ — —% N/A Unsecured debt: $200mm term loan $ 200,000 3.26% 2.5 years $430mm term loan 430,000 3.02% 5.2 years Senior Unsecured Notes 400,000 3.12% 9.8 years Revolving credit facility1 — —% 1.5 years Total unsecured debt $ 1,030,000 3.11% 6.4 years Gross debt $ 1,030,000 3.11% 6.4 years Less: cash & cash equivalents (27,509) Less: restricted cash available for future investment — Net debt $ 1,002,491 Equity: Preferred stock $ — Common stock & OP units (121,916,209 shares @ $27.92/share as of 9/30/21)2 3,403,901 Total equity $ 3,403,901 Total enterprise value ("TEV") $ 4,406,392 Net Debt / TEV 22.8% Net Debt / Annualized Adjusted EBITDAre 4.5x
Investor Presentation – November 202121 Glossary Supplemental Reporting Measures FFO, Core FFO and AFFO Our reported results are presented in accordance with U.S. generally accepted accounting principles ("GAAP"). We also disclose funds from operations (“FFO”), core funds from operations (“Core FFO”) and adjusted funds from operations (“AFFO”), each of which is a non-GAAP financial measures. We believe these non-GAAP financial measures are industry measures used by analysts and investors to compare the operating performance of REITs. We compute FFO in accordance with the definition adopted by the Board of Governors of the National Association of Real Estate Investment Trusts ("NAREIT"). NAREIT defines FFO as GAAP net income or loss adjusted to exclude extraordinary items (as defined by GAAP), net gain or loss from sales of depreciable real estate assets, impairment write-downs associated with depreciable real estate assets and real estate-related depreciation and amortization (excluding amortization of deferred financing costs and depreciation of non-real estate assets), including the pro rata share of such adjustments of unconsolidated subsidiaries. FFO is used by management, and may be useful to investors and analysts, to facilitate meaningful comparisons of operating performance between periods and among our peers primarily because it excludes the effect of real estate depreciation and amortization and net gains and losses on sales (which are dependent on historical costs and implicitly assume that the value of real estate diminishes predictably over time, rather than fluctuating based on existing market conditions). We compute Core FFO by adjusting FFO, as defined by NAREIT, to exclude certain GAAP income and expense amounts that we believe are infrequent and unusual in nature and/or not related to our core real estate operations. Exclusion of these items from similar FFO-type metrics is common within the equity REIT industry, and management believes that presentation of Core FFO provides investors with a metric to assist in the evaluation of our operating performance across multiple periods and in comparison to the operating performance of our peers, because it removes the effect of unusual items that are not expected to impact our operating performance on an ongoing basis. Core FFO is used by management in evaluating the performance of our core business operations. Items included in calculating FFO that may be excluded in calculating Core FFO include items like certain transaction related gains, losses, income or expense or other non-core amounts as they occur. To derive AFFO, we modify the NAREIT computation of FFO to include other adjustments to GAAP net income related to certain items that we believe are not indicative of our operating performance, including straight- line rental revenue, non-cash interest expense, non-cash compensation expense, other amortization and non-cash charges, capitalized interest expense and transaction costs. Such items may cause short-term fluctuations in net income but have no impact on operating cash flows or long-term operating performance. We believe that AFFO is an additional useful supplemental measure for investors to consider to assess our operating performance without the distortions created by non-cash and certain other revenues and expenses. FFO, Core FFO and AFFO do not include all items of revenue and expense included in net income, they do not represent cash generated from operating activities, and they are not necessarily indicative of cash available to fund cash requirements; accordingly, they should not be considered alternatives to net income as a performance measure or cash flows from operations as a liquidity measure and should be considered in addition to, and not in lieu of, GAAP financial measures. Additionally, our computation of FFO, Core FFO and AFFO may differ from the methodology for calculating these metrics used by other equity REITs and, therefore, may not be comparable to similarly titled measures reported by other equity REITs.
Investor Presentation – November 202122 Glossary Supplemental Reporting Measures We also present our earnings before interest, taxes and depreciation and amortization for real estate (“EBITDA”), EBITDA further adjusted to exclude gains (or losses) on sales of depreciable property and real estate impairment losses (“EBITDAre”), net debt, net operating income (“NOI”) and cash NOI (“Cash NOI”), all of which are non-GAAP financial measures. We believe these non-GAAP financial measures are accepted industry measures used by analysts and investors to compare the operating performance of REITs. EBITDA and EBITDAre We compute EBITDA as earnings before interest, income taxes and depreciation and amortization. In 2017, NAREIT issued a white paper recommending that companies that report EBITDA also report EBITDAre. We compute EBITDAre in accordance with the definition adopted by NAREIT. NAREIT defines EBITDAre as EBITDA (as defined above) excluding gains (or losses) from the sales of depreciable property and real estate impairment losses. We present EBITDA and EBITDAre as they are measures commonly used in our industry and we believe that these measures are useful to investors and analysts because they provide important supplemental information concerning our operating performance, exclusive of certain non-cash and other costs. We use EBITDA and EBITDAre as measures of our operating performance and not as measures of liquidity. EBITDA and EBITDAre do not include all items of revenue and expense included in net income, they do not represent cash generated from operating activities and they are not necessarily indicative of cash available to fund cash requirements; accordingly, the should not be considered alternatives to net income as a performance measure or cash flows from operations as a liquidity measure and should be considered in addition to, and not in lieu of, GAAP financial measures. Additionally, our computation of EBITDA and EBITDAre may differ from the methodology for calculating these metrics used by other equity REITs and, therefore, may not be comparable to similarly titled measures reported by other equity REITs. Net Debt We calculate our net debt as our gross debt (defined as total debt plus net deferred financing costs on our secured borrowings) less cash and cash equivalents and restricted cash available for future investment. We believe excluding cash and cash equivalents and restricted cash available for future investment, all of which could be used to repay debt, provides an estimate of the net contractual amount of borrowed capital to be repaid, which we believe is a beneficial disclosure to investors and analysts. NOI and Cash NOI We compute NOI as total revenues less property expenses. NOI excludes all other items of expense and income included in the financial statements in calculating net income or loss. Cash NOI further excludes non-cash items included in total revenues and property expenses, such as straight- line rental revenue and other amortization and non-cash charges. We believe NOI and Cash NOI provide useful and relevant information because they reflect only those income and expense items that are incurred at the property level and present such items on an unlevered basis. NOI and Cash NOI are not measurements of financial performance under GAAP. You should not consider our NOI and Cash NOI as alternatives to net income or cash flows from operating activities determined in accordance with GAAP. Additionally, our computation of NOI and Cash NOI may differ from the methodology for calculating these metrics used by other equity REITs and, therefore, may not be comparable to similarly titled measures reported by other equity REITs.
Investor Presentation – November 202123 Glossary Supplemental Reporting Measures Adjusted EBITDAre / Adjusted NOI / Adjusted Cash NOI We further adjust EBITDAre, NOI and Cash NOI i) based on an estimate calculated as if all re-leasing, investment and disposition activity that took place during the quarter had been made on the first day of the quarter, ii) to exclude certain GAAP income and expense amounts that we believe are infrequent and unusual in nature and iii) to eliminate the impact of lease termination or loan prepayment fees and contingent rental revenue from our tenants which is subject to sales thresholds specified in the lease. We then annualize these estimates for the current quarter by multiplying them by four, which we believe provides a meaningful estimate of our current run rate for all investments as of the end of the current quarter. You should not unduly rely on these measures, as they are based on assumptions and estimates that may prove to be inaccurate. Our actual reported EBITDAre, NOI and Cash NOI for future periods may be significantly less than these estimates of current run rates. Cash ABR 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 those accounted for as direct financing leases) commenced as of that date and annualized cash interest on our mortgage loans receivable as of that date. Rent Coverage Ratio 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. Initial Portfolio Initial Portfolio means our acquisition of a portfolio of 262 net leased properties on June 16, 2016, consisting primarily of restaurants, that were being sold as part of the liquidation of General Electric Capital Corporation for an aggregate purchase price of $279.8 million (including transaction costs). GAAP Cap Rate GAAP Cap Rate means annualized rental income computed in accordance with GAAP for the first full month after investment divided by the purchase price, as applicable, for the property. Cash Cap Rate Cash Cap Rate means annualized contractually specified cash base rent for the first full month after investment or disposition divided by the purchase or sale price, as applicable, for the property. Disclaimer Essential Properties Realty Trust, Inc. and the Essential Properties Realty Trust REIT are not affiliated with or sponsored by Griffin Capital Essential Asset Operating Partnership, L.P. or the Griffin Capital Essential Asset REIT, information about which can be obtained at (https://www.gcear.com).