Essential Properties Announces Fourth Quarter 2018 Results
February 27, 2019 4:15 PM
- Closed Investments of
- Same-Store Contractual Cash NOI Grew 1.9% in the Fourth Quarter -
- Reiterates 2019 AFFO per
- Added to the MSCI
Fourth Quarter 2018 Financial and Operating Highlights
- Ended the fourth quarter with 100% occupancy, 14.2 years of weighted-average lease term (“WALT”) and a weighted average rent coverage ratio of 2.8x
- Grew Same-Store Contractual Cash Rents and NOI by 1.8% and 1.9%, respectively
- Reduced top 10 tenant concentration to 33.1%, a 200 bps sequential decline
-
Invested
$103.7 million in 39 properties at a 7.6% weighted average cash cap rate -
Net income increased to
$8.3 million , or$0.13 per share on a fully diluted basis -
Increased Funds from Operations (“FFO”) to
$17.4 million , or$0.28 per share on a fully diluted basis -
Increased Adjusted Funds from Operations (“AFFO”) to
$17.0 million , or$0.27 per share on a fully diluted basis
Full Year 2018 Financial and Operating Highlights
-
Invested
$515.9 million in 215 properties at a 7.6% weighted average cash cap rate -
Net income increased to
$20.6 million -
Increased FFO to
$51.0 million -
Increased AFFO to
$48.4 million
CEO Comments
Commenting on the fourth quarter results, Essential Properties’
President and Chief Executive Officer,
Financial Results
Total Revenue
Total revenue for the quarter ended
Total revenue for the year ended
Net Income
Net income for the quarter ended
Net income for the year ended
Funds from Operations
FFO for the quarter ended
FFO for the year ended
Adjusted Funds from Operations
AFFO for the quarter ended
AFFO for the year ended
Dividend Information
As previously announced, on
Net Investment Activity
Acquisitions
During the quarter ended
During the year ended
Dispositions
During the three months ended
During the year ended
Portfolio Update
Portfolio Highlights
As of
Leasing Activity
During the year ended
Leverage and Balance Sheet and Liquidity
Leverage
As of
Balance Sheet and Liquidity
2019 Guidance
The Company reiterates its previously issued expectation that 2019 AFFO
per share will be within a range of
Conference Call Information
In conjunction with the release of Essential Properties’ operating
results, the Company will host a conference call on
A telephone replay of the conference call can also be accessed by
calling (877) 481-4010 and entering the access code: 42849. The
telephone replay will be available through
A replay of the conference call webcast will be available approximately two hours after the conclusion of the live broadcast. The webcast replay will be available for 90 days. No access code is required for this replay.
Supplemental Materials
The Company’s Supplemental Operating & Financial Data—Fourth Quarter
Ended
About
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the federal securities laws. When used in this press release, the words “estimate,” “anticipate,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “seek,” “approximately” or “plan,” or the negative of these words and phrases or similar words or phrases that are predictions of or indicate future events or trends and that do not relate solely to historical matters are intended to identify forward-looking statements. You can also identify forward-looking statements by discussions of strategy, plans or intentions of management. Forward-looking statements involve numerous risks and uncertainties and you should not rely on them as predictions of future events. Forward-looking statements depend on assumptions, data or methods that may be incorrect or imprecise and the Company may not be able to realize them. The Company does not guarantee that the transactions and events described will happen as described (or that they will happen at all). You are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of this press release. While forward-looking statements reflect the Company’s good faith beliefs, they are not guarantees of future performance. The Company undertakes no obligation to publicly release the results of any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date of this press release or to reflect the occurrence of unanticipated events, except as required by law. In light of these risks and uncertainties, the forward-looking events discussed in this press release might not occur as described, or at all.
Additional information concerning factors that could cause actual
results to differ materially from these forward-looking statements is
contained from time to time in the company’s
The results reported in this press release are preliminary and not
final. There can be no assurance that these results will not vary from
the final results reported in the Company’s Annual Report on Form 10-K
for the year ended
Non-GAAP Financial Measures and Certain Definitions
The Company’s reported results are presented in accordance with GAAP.
FFO and AFFO
The Company computes FFO in accordance with the definition adopted by
the
To derive AFFO, the Company modifies the NAREIT computation of FFO to include other adjustments to GAAP net income related to certain items that it believes are not indicative of the Company’s core operating performance, including straight-line rental revenue, non-cash interest expense, non-cash compensation expense, amortization of market lease-related intangibles, amortization of capitalized lease incentives, capitalized interest expense, transaction costs and other non-cash charges. Such items may cause short-term fluctuations in net income but have no impact on operating cash flows or long-term operating performance. The Company believes that AFFO is an additional useful supplemental measure for investors to consider because it will help them to better assess the Company’s operating performance without the distortions created by non-cash and certain other revenues and expenses.
FFO and AFFO do not include all items of revenue and expense included in net income, nor do they 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. FFO and AFFO may not be comparable to similarly titled measures reported by other companies.
EBITDA and EBITDAre
The Company calculates 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. The Company computes 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. The Company presents EBITDA and EBITDAre as they are measures commonly used in its industry and the Company believes that these measures are useful to investors and analysts because they provide important supplemental information concerning its operating performance, exclusive of certain non-cash items and other costs. The Company uses EBITDA and EBITDAre as measures of its operating performance and not as measures of liquidity.
EBITDA and EBITDAre are not measures of financial performance under GAAP, and the Company’s EBITDA and EBITDAre may not be comparable to similarly titled measures reported by other companies. You should not consider EBITDA and EBITDAre as alternatives to net income or cash flows from operating activities determined in accordance with GAAP.
Net Debt
The Company calculates its net debt as our gross debt (defined as total debt plus net deferred financing costs on its secured borrowings) less cash and cash equivalents and restricted cash deposits held for the benefit of lenders. The Company believes excluding cash and cash equivalents and restricted cash deposits held for the benefit of lenders from gross debt, all of which could be used to repay debt, provides an estimate of the net contractual amount of borrowed capital to be repaid, which it believes is a beneficial disclosure to investors and analysts.
NOI and Cash NOI
The Company calculates 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, amortization of capitalized lease incentives, amortization of market lease-related intangibles and other non-cash charges. The Company believes 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 measures of financial performance under GAAP, and the Company’s NOI and Cash NOI may not be comparable to similarly titled measures reported by other companies. You should not consider the Company’s NOI and Cash NOI as alternatives to net income or cash flows from operating activities determined in accordance with GAAP.
Adjusted EBITDAre / Adjusted NOI / Adjusted Cash NOI
The Company adjusts EBITDAre, NOI and Cash NOI based on an estimate calculated as if all acquisition and disposition activity that took place during the current quarter had occurred on the first day of the quarter. The Company then annualizes these estimates for the current quarter by multiplying them by four, which it believes provides a meaningful estimate of the Company’s current run rate for all properties owned 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. The Company’s actual reported EBITDAre, NOI and Cash NOI for future periods may be significantly less than these estimates of current run rates for a variety of reasons.
Cash ABR
Cash ABR means annualized contractually specified cash base rent in effect as of the end of the current quarter for all of the Company’s leases (including those accounted for as direct financing leases) commenced as of that date and annualized cash interest on its mortgage loans receivable as of that date.
Cash Cap Rate
Cash Cap Rate means annualized contractually specified cash base rent for the first full month after acquisition or disposition divided by the purchase or sale price, as applicable, for the property.
GAAP Cap Rate
GAAP Cap Rate means annualized rental income computed in accordance with GAAP for the first full month after acquisition divided by the purchase price, as applicable, for the property.
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.
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| Consolidated Statements of Operations | |||||||||||||||||
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Three Months Ended |
Year Ended |
||||||||||||||||
| (in thousands, except share and per share data) | 2018 | 2017 | 2018 | 2017 | |||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Audited) | ||||||||||||||
| Revenues: | |||||||||||||||||
| Rental revenue1 | $ | 27,825 | $ | 17,268 | $ | 94,944 | $ | 53,373 | |||||||||
| Interest income on loans and direct financing leases | 277 | 63 | 656 | 293 | |||||||||||||
| Other revenue2 | 548 | 135 | 623 | 783 | |||||||||||||
| Total revenues | 28,650 | 17,466 | 96,223 | 54,449 | |||||||||||||
| Expenses: | |||||||||||||||||
| Interest | 6,718 | 7,382 | 30,192 | 22,574 | |||||||||||||
| General and administrative | 3,891 | 2,163 | 13,762 | 8,775 | |||||||||||||
| Property expenses3 | 759 | 470 | 1,980 | 1,547 | |||||||||||||
| Depreciation and amortization | 8,510 | 6,275 | 31,352 | 19,516 | |||||||||||||
| Provision for impairment of real estate | 977 | 941 | 4,503 | 2,377 | |||||||||||||
| Total expenses | 20,855 | 17,231 | 81,789 | 54,789 | |||||||||||||
| Other operating income: | |||||||||||||||||
| Gain on dispositions of real estate, net | 345 | 3,012 | 5,445 | 6,748 | |||||||||||||
| Income from operations | 8,140 | 3,247 | 19,879 | 6,408 | |||||||||||||
| Other income: | |||||||||||||||||
| Interest | 211 | 26 | 930 | 49 | |||||||||||||
| Income before income tax expense | 8,351 | 3,273 | 20,809 | 6,457 | |||||||||||||
| Income tax expense | 52 | 128 | 195 | 161 | |||||||||||||
| Net income | 8,299 | 3,145 | 20,614 | 6,296 | |||||||||||||
| Net income attributable to non-controlling interests | (2,519 | ) | — | (5,001 | ) | — | |||||||||||
| Net income attributable to stockholders and members | $ | 5,780 | $ | 3,145 | $ | 15,613 | $ | 6,296 | |||||||||
| Basic weighted-average shares outstanding | 43,057,802 | ||||||||||||||||
| Basic net income per share | $ | 0.13 | |||||||||||||||
| Diluted weighted-average shares outstanding | 62,217,218 | ||||||||||||||||
| Diluted net income per share | $ | 0.13 | |||||||||||||||
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________________ |
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| 1. |
Includes contingent rent (based on a percentage of the tenant's
gross sales at the leased property) of |
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| 2. |
Includes reimbursable income from our tenants of |
|
| 3. |
Includes reimbursable expenses from our tenants of |
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| Consolidated Balance Sheets | ||||||||||
| (in thousands, except share, per share, unit and per unit amounts) |
|
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||||||||
| (Unaudited) | (Audited) | |||||||||
| ASSETS | ||||||||||
| Investments: | ||||||||||
| Real estate investments, at cost: | ||||||||||
| Land and improvements | $ | 420,848 | $ | 278,985 | ||||||
| Building and improvements | 885,656 | 584,385 | ||||||||
| Lease incentive | 2,794 | 2,275 | ||||||||
| Construction in progress | 1,325 | 4,076 | ||||||||
| Intangible lease assets | 66,421 | 62,453 | ||||||||
| Total real estate investments, at cost | 1,377,044 | 932,174 | ||||||||
| Less: accumulated depreciation and amortization | (51,855 | ) | (24,825 | ) | ||||||
| Total real estate investments, net | 1,325,189 | 907,349 | ||||||||
| Loans and direct financing lease receivables, net | 17,505 | 2,725 | ||||||||
| Real estate investments held for sale, net | — | 4,173 | ||||||||
| Net investments | 1,342,694 | 914,247 | ||||||||
| Cash and cash equivalents | 4,236 | 7,250 | ||||||||
| Restricted cash | 12,003 | 12,180 | ||||||||
| Straight-line rent receivable, net | 14,255 | 5,498 | ||||||||
| Prepaid expenses and other assets, net | 7,712 | 3,045 | ||||||||
| Total assets | $ | 1,380,900 | $ | 942,220 | ||||||
| LIABILITIES AND EQUITY | ||||||||||
| Secured borrowings, net of deferred financing costs | $ | 506,116 | $ | 511,646 | ||||||
| Notes payable to related party | — | 230,000 | ||||||||
| Revolving credit facility | 34,000 | — | ||||||||
| Intangible lease liabilities, net | 11,616 | 12,321 | ||||||||
| Intangible lease liabilities held for sale, net | — | 129 | ||||||||
| Dividend payable | 13,189 | — | ||||||||
| Accrued liabilities and other payables | 4,938 | 6,722 | ||||||||
| Total liabilities | 569,859 | 760,818 | ||||||||
| Commitments and contingencies | — | — | ||||||||
| Stockholders' equity: | ||||||||||
|
Preferred stock, |
— | — | ||||||||
|
Common stock, |
431 | — | ||||||||
| Additional paid-in capital | 569,407 | — | ||||||||
| Distributions in excess of cumulative earnings | (7,659 | ) | — | |||||||
| Members' equity: | ||||||||||
|
Class A units, |
— | 86,668 | ||||||||
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Class B units, 8,550 issued, 1,610 vested and outstanding as of
|
— | 574 | ||||||||
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Class C units, |
— | 94,064 | ||||||||
|
Class |
— | 96 | ||||||||
| Total stockholders' / members' equity | 562,179 | 181,402 | ||||||||
| Non-controlling interests | 248,862 | — | ||||||||
| Total equity | 811,041 | 181,402 | ||||||||
| Total liabilities and equity | $ | 1,380,900 | $ | 942,220 | ||||||
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| Reconciliation of Non-GAAP Financial Measures | ||||||||||||||||||
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Three Months Ended |
Year Ended |
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| (unaudited, in thousands except per share amounts) | 2018 | 2017 | 2018 | 2017 | ||||||||||||||
| Net income | $ | 8,299 | $ | 3,145 | $ | 20,614 | $ | 6,296 | ||||||||||
| Depreciation and amortization of real estate | 8,496 | 6,274 | 31,335 | 19,513 | ||||||||||||||
| Provision for impairment of real estate | 977 | 941 | 4,503 | 2,377 | ||||||||||||||
| Gain on dispositions of real estate, net | (345 | ) | (3,012 | ) | (5,445 | ) | (6,748 | ) | ||||||||||
| Funds from Operations | 17,427 | 7,348 | 51,007 | 21,438 | ||||||||||||||
| Adjustments: | ||||||||||||||||||
| Straight-line rental revenue, net | (2,499 | ) | (1,178 | ) | (8,214 | ) | (4,254 | ) | ||||||||||
| Non-cash interest expense | 816 | 574 | 2,798 | 1,884 | ||||||||||||||
| Non-cash compensation expense | 1,042 | 260 | 2,440 | 841 | ||||||||||||||
| Amortization of market lease-related intangibles | 52 | (196 | ) | 336 | 531 | |||||||||||||
| Amortization of capitalized lease incentives | 43 | 38 | 159 | 139 | ||||||||||||||
| Capitalized interest expense | (11 | ) | (93 | ) | (225 | ) | (242 | ) | ||||||||||
| Transaction costs | (1 | ) | — | 57 | — | |||||||||||||
| Other non-cash items | 84 | — | 84 | — | ||||||||||||||
| Adjusted Funds from Operations | $ | 16,953 | $ | 6,753 | $ | 48,442 | $ | 20,337 | ||||||||||
| Net income per share1: | ||||||||||||||||||
| Basic | $ | 0.13 | ||||||||||||||||
| Diluted | $ | 0.13 | ||||||||||||||||
| FFO per share1: | ||||||||||||||||||
| Basic | $ | 0.28 | ||||||||||||||||
| Diluted | $ | 0.28 | ||||||||||||||||
| AFFO per share1: | ||||||||||||||||||
| Basic | $ | 0.27 | ||||||||||||||||
| Diluted | $ | 0.27 | ||||||||||||||||
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_____________ |
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| 1. |
Calculations exclude |
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||||||
| Reconciliation of Non-GAAP Financial Measures | ||||||
| Three Months Ended | ||||||
| (in thousands) |
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|||||
| Net income | $ | 8,299 | ||||
| Depreciation and amortization | 8,510 | |||||
| Interest expense | 6,718 | |||||
| Interest income | (211 | ) | ||||
| Income tax expense | 52 | |||||
| EBITDA | 23,368 | |||||
| Provision for impairment of real estate | 977 | |||||
| Gain on dispositions of real estate, net | (345 | ) | ||||
| EBITDAre | 24,000 | |||||
| Adjustment for current quarter acquisition and disposition activity1 | 1,396 | |||||
| Adjusted EBITDAre | 25,396 | |||||
| General and administrative | 3,891 | |||||
| Adjusted net operating income ("NOI") | 29,287 | |||||
| Straight-line rental revenue, net1 | (2,542 | ) | ||||
| Amortization of market lease-related intangibles | 52 | |||||
| Amortization of capitalized lease incentives | 43 | |||||
| Other non-cash items | 5 | |||||
| Adjusted Cash NOI | $ | 26,845 | ||||
| Annualized EBITDAre | $ | 96,000 | ||||
| Annualized Adjusted EBITDAre | $ | 101,584 | ||||
| Annualized Adjusted NOI | $ | 117,148 | ||||
| Annualized Adjusted Cash NOI | $ | 107,380 | ||||
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______________ |
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| 1. |
Adjustment assumes all acquisitions and dispositions of real estate
investments made during the three months ended |
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||||||
| Reconciliation of Non-GAAP Financial Measures | ||||||
| (dollars in thousands, except per share amounts) |
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| Secured debt: | ||||||
| Series 2016-1, Class A | $ | 255,078 | ||||
| Series 2016-1, Class B | 17,244 | |||||
| Series 2017-1, Class A | 227,129 | |||||
| Series 2017-1, Class B | 15,669 | |||||
| Total secured debt | 515,120 | |||||
| Unsecured debt: | ||||||
| Revolving credit facility1 | 34,000 | |||||
| Total unsecured debt | 34,000 | |||||
| Gross debt | 549,120 | |||||
| Less: cash & cash equivalents | (4,236 | ) | ||||
| Less: restricted cash deposits held for the benefit of lenders | (12,003 | ) | ||||
| Net debt | 532,881 | |||||
| Equity: | ||||||
| Preferred stock | — | |||||
|
Common stock & OP units (62,805,644 shares @ |
869,230 | |||||
| Total equity | 869,230 | |||||
| Total enterprise value ("TEV") | $ | 1,402,111 | ||||
| Net debt / TEV | 38.0 | % | ||||
| Net debt / Annualized EBITDAre | 5.6 | x | ||||
| Net debt / Annualized Adjusted EBITDAre | 5.2 | x | ||||
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_____________ |
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| 1. |
The Company’s revolving credit facility provides a maximum aggregate
initial original principal amount of up to |
|
| 2. |
Common equity & units as of |
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View source version on businesswire.com: https://www.businesswire.com/news/home/20190227005935/en/
Investor/Media:
Senior Vice President, Capital Markets
609-436-0619
info@essentialproperties.com
Source: