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DATE

Thursday, February 12, 2026 at 10 a.m. ET

CALL PARTICIPANTS

  • President and Chief Executive Officer — Peter M. Mavoides
  • Chief Financial Officer — Robert W. Salisbury
  • Chief Investment Officer — A. Joseph Peil
  • Chief Operating Officer — R. Max Jenkins
  • Director of Investor Relations — Cheryl Call

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TAKEAWAYS

  • GAAP Net Income -- $68,300,000 for the quarter, as reported in the opening remarks.
  • Adjusted Funds from Operations (AFFO) -- $99,700,000 for the quarter, per the earnings release.
  • Quarterly AFFO per Share -- $0.49, indicating 9% growth compared to 2024.
  • 2026 AFFO per Share Guidance -- Raised to a range of $1.99 to $2.04, representing 7%-8% projected growth at the midpoint and high end, respectively.
  • Total Quarterly Investments -- $296,000,000 deployed in 34 transactions across 58 properties, all structured as sale-leasebacks, with an average property investment of $4,600,000.
  • Initial Cash Yield on Q4 Investments -- Weighted average of 7.7%; GAAP yield of 9.1%.
  • Portfolio Size -- Ended the period owning 2,300 properties leased to over 400 tenants.
  • Weighted Average Lease Term -- Maintained at approximately 14 years for 19 consecutive quarters, with only 5.2% of annual base rent set to expire within the next five years.
  • Portfolio Occupancy -- 99.7%, with only six vacant properties reported.
  • Same-Store Rent Growth -- 1.6% for the quarter, aligned with prior periods and supporting updated guidance.
  • Portfolio Rent Coverage Ratio -- 3.6 times, reflecting tenant cash flow resilience.
  • Credit Watch List -- Reduced to below 1% of annual base rent, with all listed tenants current on obligations.
  • Tenant Concentration -- Top 10 tenants made up 16.5% of annual base rent; top 20 tenants 27.1%, described as "industry leading" tenant diversity.
  • Disposition Activity -- 19 properties sold for $48,100,000 at a 0.9% weighted average cash yield, contributing to a decrease in car wash industry exposure to 13.7% of the portfolio.
  • Liquidity Position -- Began the year with $1,400,000,000 of available liquidity and pro forma leverage of 3.8 times.
  • General and Administrative Expense (G&A) -- $8,400,000 for the quarter, including a $2,400,000 one-time compensation reversal excluded from AFFO and core G&A metrics.
  • Full-Year Cash G&A -- $28,800,000, equal to 5.1% of total revenue, down from 5.4% in 2024.
  • Dividend Declaration -- Quarterly cash dividend of $0.31, resulting in a 63% AFFO payout ratio.
  • Free Cash Flow Retention -- Nearly $40,000,000 retained after dividends in the quarter, available to fund new investments.
  • Gross Assets -- Surpassed $7,000,000,000 in income-producing assets at period end.
  • ATM and Forward Equity Activity -- $170,000,000 raised via ATM sales on a forward basis; $359,000,000 in forward equity settled during the quarter and $332,000,000 in unsettled forward equity remaining at quarter end.
  • Cost of Debt vs. Investment Spreads -- CFO Salisbury noted unsecured bond pricing at 5.3%-5.5% compared to a "high 7%" cap rate on the current investment pipeline, providing a "really big spread."
  • Investment Sourcing -- 85% of quarterly investment volume sourced from existing relationships, supporting management's relationship-driven strategy.
  • Weighted Average Lease Escalation -- 2% for new investments in the quarter; management expects some compression toward a historical average of 1.6% in upcoming quarters.
  • Subsequent Investment Activity -- Record follow-on investment activity exceeding $200,000,000 in the next quarter cited.
  • Industry/Deal Mix -- Average investment per property in line with historical norms, attributed to quarterly sector mix rather than a shift in asset strategy.

SUMMARY

Management raised its 2026 AFFO per share guidance, highlighting improved portfolio credit and robust rent coverage trends. The company achieved substantial quarterly deployment across diversified sale-leaseback transactions while actively reducing tenant and sector concentration. Free cash flow retention, significant liquidity, and disciplined capital markets activity provided strategic flexibility entering the year.

  • Executives referenced maintaining a conservative approach in credit assumptions and guidance processes to address potential credit loss scenarios.
  • Robert W. Salisbury said, "with the leverage capacity that we have right now, we really could go through the entire year without issuing any more equity, and hit the midpoint of our acquisition targets."
  • Quarterly rent coverage in sub-1.5 times buckets increased due to timing of development assets coming online, with expectations of normalization as properties stabilize.
  • Portfolio diversity initiatives have resulted in industry exposure ceilings, with "car wash" holdings deliberately kept below 15% and current exposure at 13.7%.
  • Management expects opportunistic asset dispositions to revert to the trailing eight-quarter average, normalizing post-bonus depreciation activity.
  • Recent investments in the industrial outdoor storage segment reflected the trend toward granular assets with diverse land-to-building ratios.
  • No material change in underwriting or industry focus was indicated, with relationship-driven investment strategy projected to continue.
  • Current capital markets conditions, including a stable cap rate environment and access to unsecured debt, may sustain earnings momentum.

INDUSTRY GLOSSARY

  • Sale-leaseback: A real estate transaction in which a company sells a property and simultaneously leases it back from the buyer, enabling the seller to free up capital while maintaining operational control of the site.
  • Cap rate: The capitalization rate, representing the expected initial yield on an investment property based on its purchase price and annual income.
  • Rent coverage: A measure of a tenant's ability to pay rent, typically calculated as a ratio of the tenant's income to its rent obligations for a given portfolio.
  • ATM program: At-the-market equity offering program, allowing the company to issue shares incrementally to raise capital as market conditions allow.
  • Forward equity: A financing arrangement in which shares are sold for future delivery, often used to match capital raises with anticipated investment needs.
  • Bonus depreciation: A tax provision allowing accelerated depreciation of certain property types—here specifically referenced for car wash properties—impacting buyer demand in sale-leaseback markets.
  • Annual Base Rent (ABR): The annualized contractual rental revenue from tenants, a key metric for assessing portfolio income concentration and stability.

Full Conference Call Transcript

Cheryl Call: Thank you, operator. Good morning, everyone, and thank you for joining us today for Essential Properties Realty Trust, Inc. fourth quarter 2025 earnings conference call. During this conference call, we may make statements that may be considered forward-looking statements under federal securities law. The company's actual future results may differ significantly from the matters discussed in these forward-looking statements, and we may not believe revisions to those forward-looking statements to reflect changes after the statements were made. Factors and risks that could cause actual results to differ materially from expectations are disclosed from time to time in greater detail in the company's filings with the SEC and in yesterday's earnings press release.

In our earnings release last night, for the quarter, we reported GAAP net income of $68,300,000 and AFFO of $99,700,000. With that, I will turn the call over to Peter M. Mavoides.

Peter M. Mavoides: Thanks, Cheryl, and thank you to everyone joining us today for your interest in Essential. The fourth quarter capped off another year of solid performance by the team that delivered compelling earnings growth and solid returns for shareholders. It has been ten years since we started this company, and I am extremely proud of the team, that we have developed the dominant position that we have established as a real estate capital provider to middle market operators that are growing in our targeted industries, and most importantly, the returns that we have delivered for shareholders, and over 200% total shareholder returns since our IPO in 2018.

In the fourth quarter, we continued to execute our differentiated investment strategy, sourcing 85% of our $296,000,000 of investments through existing relationships while continuing to add new operator relationships to our platform. This robust investment volume was generated with a disciplined pricing, including an average initial cash yield of 7.7% and a compelling GAAP yield of 9.1%. This large spread to our cost of capital is a key driver of our earnings growth. Our portfolio once again demonstrated resilient tenant credit trends with same-store rent growth of 1.6%, strong rent coverage of 3.6 times, and an improvement in our watch list.

With better-than-budgeted credit trends, and a large investment pipeline with cap rates consistent with past quarters, we have increased our 2026 AFFO per share guidance range to $1.99 to $2.04, which implies a growth rate of about 7% at the midpoint and 8% at the high end. Our year-to-date closed investments and our current pipeline are supportive of our previously communicated investment guidance of $1,000,000,000 to $1,400,000,000. While we continue to expect modest cap rate compression in the back half of 2026, competition appears to be stabilizing based upon our current visibility. Regarding our capital position, we started the year with pro forma leverage of 3.8 times and liquidity of $1,400,000,000, providing ample runway to fund our investment pipeline.

Turning to the portfolio, we ended the quarter with investments in 2,300 properties that were leased to over 400 tenants. Our weighted average lease term continued to be approximately fourteen years for the nineteenth consecutive quarter, with just 5.2% of annual base rent expiring over the next five years. With that, I will turn the call over to A. Joseph Peil, our Chief Investment Officer, who will provide an update on our portfolio and asset management activities. AJ?

A. Joseph Peil: Thanks, Pete. Overall, our portfolio credit trends remain healthy. With same-store rent growth in the fourth quarter of 1.6%, consistent with last quarter, and occupancy of 99.7% with only six vacant properties. Portfolio rent coverage remains robust at 3.6 times, reflecting durable cash flow generation across our asset base. Additionally, our credit watch list declined from last quarter to under 1%, and the tenants within our watch list remain current on all obligations. Realized credit events in the quarter were limited, with just one notable tenant issue in the home furnishing industry. American Signature represented about 20 basis points of our ABR as of September 30 across two sites.

We expect our recovery to be within the normal range of outcomes, having fully anticipated this situation and incorporated it into our guidance range provided last quarter. On dispositions, during the fourth quarter, we sold 19 properties for $48,100,000 in net proceeds at a 0.9% weighted average cash yield. Disposition activity increased as we opportunistically capitalized on elevated buyer demand created by the reinstatement of bonus depreciation tax benefits for car wash properties, resulting in a continued reduction in our exposure to this industry to 13.7%. Over the near term, we expect our disposition activity to normalize and align with our trailing eight-quarter average, driven by opportunistic asset sales and ongoing portfolio management activity.

Tenant concentration continues to decline with our top 10 tenants only 16.5% of ABR, and our top 20 representing only 27.1% of ABR at quarter end, which is industry leading. Tenant diversity is an important risk mitigation tool and a direct benefit from our focus on middle market operators. With that, I will turn the call over to R. Max Jenkins, our Chief Operating Officer, who will provide an update on our investment activities and the current market dynamics.

R. Max Jenkins: Thanks, AJ. On the investment side, during the fourth quarter, we invested $296,000,000 at a weighted average cash yield of 7.7%. Our capital deployment was broad-based across most of our top industries with no notable departures from our investment strategy. During the fourth quarter, our investments had a weighted average initial lease term of 19.4 years and a weighted average annual rent escalation of 2%, generating a strong average GAAP yield of 9.1%. Our investments this quarter had a weighted average unit-level rent coverage of 4.7 times, reflecting a conservative rent level and healthy unit profitability for our operators. We closed 34 transactions comprising 58 properties, of which 100% were sale-leasebacks.

The average investment per property was $4,600,000 this quarter, consistent with our historical range, with our deal activity characterized by granular freestanding properties, one of the core elements of our strategy. Looking ahead, our investment pipeline remains strong. Supported by record subsequent-quarter investment activity of over $200,000,000. The cap rate environment remains stable today with our pricing and our pipeline in the high 7% range, which represents a compelling spread to our cost of capital and is consistent with our updated guidance range. With that, I would like to turn the call over to Robert W. Salisbury, our new Chief Financial Officer, who will take you through the financials for the fourth quarter.

Robert W. Salisbury: Thanks, Max. Before I begin my prepared remarks, I would like to thank the Board of Directors for the exciting opportunity to lead the company's finance group alongside my partner, the company's Chief Accounting Officer, Tim Earnshaw. As Pete mentioned earlier, our well-established platform is in a great position to deliver shareholder value, with the largest net investment spread in the industry today. And half of our value creation comes from optimizing our cost of capital, which is something my team has been and will continue to be laser-focused on over the coming years in service to our focus on shareholder value creation over the long term.

Turning to the fourth quarter results, our AFFO per share totaled $0.49, representing an increase of 9% versus 2024. This performance was consistent with the high end of our expectations, as reflected in our previous guidance range. Total G&A in the quarter was $8,400,000, representing a sequential decline due to a one-time compensation reversal related to an executive departure. Notably, this one-time benefit to net income of $2,400,000 is reversed out of our core FFO, AFFO, and cash G&A as a non-core item. For the year 2025, cash G&A was $28,800,000, which ended near the low end of our guidance range and represents just 5.1% of total revenue, down from 5.4% in 2024.

We declared a cash dividend of $0.31 in the fourth quarter, which represents an AFFO payout ratio of 63%. Our retained free cash flow after dividends continues to build, reaching nearly $40,000,000 in the fourth quarter, representing a substantial source of internally generated capital to support our future growth. Turning to our balance sheet. Our income-producing gross assets increased to over $7,000,000,000 at quarter end. The increasing scale and diversity of our portfolio continues to build, enhancing our credit profile. We, on the capital markets front, remained active on our ATM program in the quarter, completing the sale of approximately $170,000,000 of equity, all on a forward basis.

We settled $359,000,000 of forward equity in the fourth quarter, with a portion of the proceeds utilized to repay our revolving credit facility balance. Our balance of unsettled forward equity totaled $332,000,000 at quarter end. We expect to utilize these funds in the near term to support our investment program and retain balance sheet flexibility by keeping capacity available on our revolver. Our pro forma net debt to annualized adjusted EBITDAre remained low at 3.8 times at quarter end. We remain committed to maintaining a well-capitalized and conservative balance sheet, low leverage, and significant liquidity to continue to fuel our external growth.

Lastly, as we noted earlier, we have increased our 2026 AFFO per share guidance to a new range of $1.99 to $2.04, reflecting a growth rate of approximately 7% at the midpoint and 8% at the high end. With that, I will turn the call back over to Peter M. Mavoides.

Peter M. Mavoides: Thanks, Rob. Congratulations on your promotion to CFO. I have appreciated your partnership over the last two and a half years, and we are all grateful for your leadership in the finance group and across the broader organization. In summary, we are happy with the fourth quarter and full-year results. The portfolio is performing well. The investment market remains compelling, and the capital markets continue to be supportive. Operator, please open the call for questions.

Operator: Thank you, Mr. Mavoides. Ladies and gentlemen, at this time, if you do have any questions, please press 1 at this time. If you find your question has been addressed, you may remove yourself from the queue by pressing 2. Once again, that is 1 for questions. We will go first this morning to Michael Goldsmith of UBS. Michael, please go ahead.

Michael Goldsmith: Good morning. Thanks a lot for taking my questions. Rob, you took the guidance range slightly higher at the bottom end. So can you just walk through what has changed over the month or so since you, or since the third quarter, I guess, since you put out your initial guidance and how that has impacted the outlook for this year?

Robert W. Salisbury: Hey, good morning, Michael. Thanks for the question. So as we have talked about in prior years, it is still really early in the year to do a whole lot of changes with our guidance range, just given we still have ten and a half months to go. That being said, as we updated all of our numbers and reviewed our portfolio credit trends, everything had been coming in a lot better on the portfolio credit side relative to our initial guidance back in October. We tend to be pretty conservative when we build that initial range. And so as a result, we are just feeling a lot better about the health of the portfolio.

I think you saw some of the stats in the fourth quarter. Same-store rent growth of 1.6%. Credit watch list is down sequentially. So it was really in recognition of that. You saw the subsequent events that we have, a lot of acquisitions that we closed in the early part of this year, but it is still early in the year. And it felt appropriate to take the bottom end of the prior range off the table just given where portfolio credit is, but we will see how the rest of the year develops in terms of the pipeline and deployment.

Michael Goldsmith: Thanks for that. And just quickly, you know, the initial remarks mentioned that the expected competition or you are seeing competition stabilize. So does that, what is the impact of that? Do you see cap rates stabilizing from here? Or, and then, like, I guess, also, does that mean that you would be willing to, you know, I guess with stabilizing cap rates or less competition, could also go with the safer tenant base. And so just trying to understand, like, what are the implications of that stabilizing competition comment made at the opening of the call. Yeah. And, Michael, this is Pete. I would say I certainly reject your premise that we are going with a safer tenant base.

We feel pretty good comfort in our tenant base and the guys we are investing and the risk-adjusted returns we are getting, and we think the durability of the portfolio has certainly proven that out. But you are right. I think the stabilization in competition has really resulted in, you know, a slower decrease in cap rate than we have anticipated. You know, certainly, we model some conservatism into our future cap rates, particularly as the ten-year comes in and capital markets stabilize. And, you know, as we indicated on the call, we are seeing cap rates kinda stable, which is great for us.

And, you know, I think that is certainly gonna help drive earnings, but it is not gonna change the way we invest or how we think about risk. Thank you very much. Good luck in ’20. Thanks, Michael.

Operator: Thank you. We will go next now to Greg McGinniss at Deutsche Bank.

Greg McGinniss: Hey. This is Greg McGinniss at Scotiabank.

Peter M. Mavoides: Still.

Greg McGinniss: Sorry. You have had a busy beginning to the year. Should we not be reading anything into that? Is that holdovers from Q4 that fell into the early part of this year? I mean, you know, at this trend, you are well over one and a half billion for the year and above the guidance range. I know you are telling us not to necessarily read too much into that, but this is a pretty strong start so far. So just kinda curious what the driver was to date on some of those transactions. Yeah.

And, I think if we saw something different in our investment expectations, we would have bumped the guidance range, and to Rob’s comment earlier, certainly early in the year.

Peter M. Mavoides: You know, the fourth quarter was kind of a little light relative to our trailing average, and so there is certainly some deal slippage that you would see. And so, you know, we feel great. We feel good that we have a good start to the year. But, you know, a lot of year left to play. I think more encouraging driving, you know, earnings is just the stabilization in the cap rate.

Robert W. Salisbury: And just to dig into that a little bit more, are you seeing that stabilization in cap rate across all the industries that you tend to invest in? Or are there certain industries that are deviating from that norm? And on top of that, is there anything that you are kind of particularly looking to increase acquisitions in from an industry perspective?

Peter M. Mavoides: Yes, I think it is stabilization across the entire industry set that we invest in. Obviously, there is a range of cap rates across our industry from a low of seven to a high of call it eight and a half depending on the specific industry. But there is good stabilization there. And I think that speaks to the broader capital markets. In terms of our targeted growth, you know, we are really following our relationships, which mirror our portfolio. You know, with 85% plus relationship business, we are going to go where our relationships take us and where our reliability as a counterparty is rewarded.

So I would not expect a material shift in the portfolio composition as we think about, you know, 2026. Great. Thank you. Thanks, Greg.

Operator: Thank you. We will go next now to Caitlin Burrows at Goldman Sachs.

Caitlin Burrows: Hi. Good morning, everyone. I guess maybe just on portfolio credit, the prepared remarks mentioned that you guys are feeling good on that topic right now. You also mentioned American Signature was the only credit event in 4Q. Could you give us any detail on how that played out versus your expectation and what that can kinda tell us about your process and your visibility?

Peter M. Mavoides: Yeah. You know, I would start by that is still playing out. And, you know, I think it certainly will come in within our expectations as we tend to be conservative. But, AJ, you want to tackle that?

A. Joseph Peil: Yeah. Hey, Caitlin. As Peter mentioned, that bankruptcy happened late in Q4, and so we are early in the process of marketing the asset. I do believe based on what we are seeing in the marketplace that it is going to be a normal outcome for us and recovery should be well within the range which we historically have disclosed. I would not expect that asset to be on our balance sheet. It is vacant. For too long.

Caitlin Burrows: Okay. Got it. And then, Rob, you mentioned how Essential Properties Realty Trust, Inc. generates, I think it was $40,000,000 of free cash flow now. So how do you think about or balance retaining more cash versus increasing the dividend? Would you expect dividend to grow in line with AFFO per share from here or more or less?

Robert W. Salisbury: Yeah. Thanks, Caitlin. So as you point out, the retained free cash flow is certainly a great source of internally generated capital for our very accretive investment program. I think it is going to be a Board decision as to where the dividend goes over time. But, from a broad standpoint, you know, it is certainly a balance between delivering current return to shareholders and retaining that capital. I think a reasonable expectation would be that our dividend payout ratio probably does not go down from here at 63%.

And, you know, we seek to have a good balance between those two things and, as you know, having followed the REIT space for a long time, dividends are an important part of total shareholder return, we certainly recognize that. So I would expect the dividend to grow, but do not have a lot of guidance for you at this point.

Caitlin Burrows: Thanks.

Peter M. Mavoides: Thanks, Caitlin.

Operator: Thank you. We will go next now to Jana Galan at Bank of America.

Jana Galan: Thank you. Good morning. You know, just good to hear that you are seeing this cap rate stabilization and just wanted to ask about your comment where you are saying you may see modest cap rate compression in the back half of the year. And then also curious if there is anything else within the kind of sale-leasebacks you are discussing with your relationships in terms of term or escalators or other type of changes?

Peter M. Mavoides: Yeah. I think, you know, we have been expecting a normalization in the capital markets, you know, a slight decline in the ten-year and an increase in competition to drive cap rates down. We have been expecting that for quite some time now, and, you know, as we sit today, we just really have not experienced it in a material way, which is great, but we continue to have some conservatism around those factors as we think about the business plan going forward. And as we said, that, you know, shades from a high sevens to a mid sevens sort of cap rate in our expectations.

But, you know, obviously, where the market goes and the cap markets and the ten-year will ultimately drive that. You know, competition drives cap rate. It also drives the other terms that you refer to, Jana, like term and escalations. These are all sensitive terms to tenants, and they are also a key part of our economics, and you can see those kinda ebb and flow over time. I would expect, you know, some compression in our weighted average escalations. You know, certainly, you know, when we were seeing 2.2%, 2.3%, that is, you know, kinda pretty high relative to historical averages. And, you know, with the historical average kinda being 1.6%-ish.

So we are seeing some, you know, downward pressure there, but again, nothing material. Thank you.

A. Joseph Peil: Thank you.

Operator: We will go next now to Eric Martin Borden at BMO Capital Markets.

Eric Martin Borden: Pete, I just want to go back to your comments around the stabilization in competition. In your view, what factors are driving the stabilization? And what would need to change for competitive intensity to increase from here?

Peter M. Mavoides: You know, I think it is really driven by the access to debt capital, which is, you know, going to be driven by cost of that capital and availability of that capital. And, ultimately, you know, that is pricing, you know, these are long-dated assets and that people tend to finance in the ABS market. And so I think a large driver, that is going to be the ten-year Treasury rate. So as we have said on prior calls, higher for longer on the ten-year is probably a better scenario for us. And certainly, you know, 4.2, 4.3, you know, 4.1 is helping.

I think if you saw, you know, mid to high threes on the ten-year, you know, we would see a material amount of increase in competition. All that said, you know, we very much, you know, go to market with an investment strategy deliberately designed to avoid competition by doing granular deals, follow-on transactions with relationships, leaning into sale-leasebacks to deliver capital to operators that have a capital need. And so I think, you know, we hopefully have built a moat around that competition by transacting in a differentiated, value-added way, and we will continue to focus on that.

Eric Martin Borden: Thank you. And one for Rob. Congrats, by the way. How should we be thinking about the cadence of forward equity issuance this year as you manage that cushion between the unsettled shares and acquisitions? And then with the remaining $322,000,000 of unsettled equity, is there any near-term expiration or settlement constraints that we should be aware of?

Robert W. Salisbury: Thank you. Thanks for the comments, Eric. Yeah, we do not have anything in the very near term from an expiration standpoint. So that is probably not going to be a consideration. From a funding standpoint, we tend to make an assumption that we fund equity first and then do debt later. However, as we sit here today with 3.8 times leverage at the end of the year and a ton of liquidity, I think, as we have mentioned on prior calls, having just reentered the unsecured bond market over this past summer, we are very much focused on the unsecured bond market.

That pricing today is pretty attractive relative to the high 7% cap rate that Max mentioned in prepared remarks on the pipeline right now. So, you know, in the 5.3% to 5.5% territory for cost of debt, really big spread. So, you know, we will certainly be spending some time focusing on the unsecured bonds over the course of this year. And then from an equity standpoint, you know, with the leverage capacity that we have right now, we really could go through the entire year without issuing any more equity, and hit the midpoint of our acquisition targets.

And that is a combination of just starting the year at a low point, but then we also have, you know, as we mentioned in the prepared remarks, over $150,000,000 retained free cash flow after dividends. We tend to do about $100,000,000 a year of dispositions and, you know, we have lots of forward equity as well. So, from a liquidity and a leverage standpoint, we are in a really good spot. And from a modeling standpoint, you know, we would assume that gets settled in the near term just as a conservative point, but we will see how everything plays out.

Operator: Thank you. We will go next now to Smedes Rose at Citi.

Nick Joseph: Thanks. It is Nick Joseph here with Smedes. Maybe just following up on that, Rob. Obviously, balance sheet in a really good position, robust acquisition pipeline and volume thus far in the first quarter. Have you issued any ATM equity or forward ATM equity year to date?

Robert W. Salisbury: Yeah. We did a little bit earlier in the year. I do not think it is part of our disclosure package, but there are a few days before we go into the black period. So it tends to never really be a huge amount in a particular quarter, but it was about $10,000,000 that we did at the beginning of the year. So extended the runway a little bit, but again, as we sit here today with such a low leverage point, we did not feel like we needed a whole lot.

Nick Joseph: Got it. Thanks. And then just on rent coverage, obviously, it was flat sequentially, well covered at 3.6 times. But the sub-one and sub-one-and-a-half buckets moved up a bit. What drove that? What moved into those buckets?

Peter M. Mavoides: AJ, what do you got on that? Yeah. So it is a—

A. Joseph Peil: It is a good question. On the sub-one bucket, it really is within the range of over the previous four quarters where we have been as low as 2.7% and as high as 3.9%. So there are a few tenants that are always kinda migrating in and out of that category. More on the one to one-and-a-half bucket, over the last few years, you have noted that we have done a lot of development deals. And as those deals come online and are entered into, oftentimes added to a master lease, it creates some noise around that coverage.

So we had a couple of tenants where we had assets come online that pulled the coverage out of the 1.5 to 2 bucket into the one to one-and-a-half. But I think what you will see over the coming quarters is they ramp and stabilize, and we revert back to our historical norm where that cohort tends to kinda range between 7% to 11%. So it is more of a timing issue. What I would say to add to that is it is a data point. But what you would really see if the credit was starting to erode is our watch list would be increasing. And, actually, quarter over quarter, it decreased by about 35 basis points.

And to refresh you, the watch list is the intersection of shadow rated B minus and less than 1.5 times unit-level coverage. So the one to one-and-a-half bucket certainly increased, but it tends to be more of a timing issue when assets are coming online out of development than anything else.

Nick Joseph: Thanks, AJ.

Operator: Thank you. We will go next now to Richard Allen Hightower with Barclays.

Richard Allen Hightower: Good morning, guys.

Peter M. Mavoides: So I want to go, I guess, back to the transaction environment. I am just curious, you know, as we have kind of seen some hiccups in the broader private credit market kind of, you know, in different pockets, you know, does that help or hurt your business? Does it create opportunities that did not previously exist? Does it reduce, you know, sort of sponsor-backed deal flow in any way? How do we figure that out?

Robert W. Salisbury: For your business?

Peter M. Mavoides: Yeah. We really have not seen an impact over the last couple of years with the kind of advent and proliferation of private credit. I would say those borrowers tend to be of a size and a scale that are a little larger than we are focusing on and not generally in our industries. You know, certainly, you know, we are real estate investors and we are senior and, you know, our leases are in front of unsecured debt. But it really has not driven incremental investment opportunities. And, you know, to the extent that it dries up, I do not think it is going to change our investment market.

A. Joseph Peil: Okay. That is helpful. And then—

Peter M. Mavoides: You made a point to point out that you did dispose of a little more of your car wash exposure last quarter, and I would probably expect that to continue again based on some of the tax law particulars that kicked in on January 1. So where do you see that exposure ticking down to over time? What is sort of a longer-term target there? Yeah. I would not create the expectation that is going down materially. You know, we have always operated with a soft ceiling of 15% for any one industry. Car wash has been a great industry from a risk-adjusted return for us perspective.

So I would not expect it to, you know, we are not driving that down to 10%. And, you know, to the extent that we find compelling risk-adjusted opportunities in that sector, we can continue to grow it. So, you know, we will just have to see what the market brings.

A. Joseph Peil: Got it. Thank you.

Operator: We will go next now to Haendel St. Juste with Mizuho.

Ravi Vaidya: Hi there. Good morning. This is Ravi Vaidya on the line for Haendel. Hope you guys are doing well. Can you please describe the impact of the One Big Beautiful Bill on the single-tenant transaction market? How do you think that is gonna impact broader industry pricing and volumes? And how are you guys seeing it within the sandbox that you are operating in going forward?

Peter M. Mavoides: Did Haendel write that question for you?

Ravi Vaidya: No. I wrote it. I sent it to him.

Peter M. Mavoides: Come on. He approved it. Listen, you know, the bonus depreciation that I mentioned earlier has certainly had an impact. You know, I do not think that bill really is gonna have a material impact on our business or the way we operate. And so I really do not see anything material coming out of that will impact us.

Nick Joseph: Is it creating—

A. Joseph Peil: Maybe more liquidity in transaction markets? Are there buyers that are looking to take advantage of maybe bonus depreciation or anything like that is leading to moves in cap rates?

Peter M. Mavoides: Not materially. I mean, as AJ mentioned in his remarks, we were able to sell some car washes to tax-motivated buyers at the margin. But that is, you know, it is really at the margin and not a driver of our industry.

A. Joseph Peil: Got it. Thank you.

Operator: Thank you. We will go next now to John Kilichowski at Wells Fargo.

John Kilichowski: Thank you. Good morning. I would like to start by saying that Cheryl did a great job with the opening remarks, and, Rob, congrats on the new role. My first one is for you, Pete. You know, we have talked about the competitive landscape a lot on this call, but I guess I am curious. Who are the entrants that maybe you thought you would be seeing that you are not seeing right now?

Jana Galan: I would start, I do not want to name specifics—

Peter M. Mavoides: You know, because we just do not know. You see platforms stand up. You see, you know, capital commitments to those platforms, whether it is, you know, Apollo, TPG, Angelo Gordon, Black— you go down the list of big asset managers and you are just conservative about their ability around your assumptions of driving your business and their ability to, you know, take business away from you. And, you know, we fight hard to win deals. We fight hard to add value to our counterparties such that they choose to do business with us. And, you know, we are very protective of our relationships. So, you know, there are a bunch of new platforms out there.

You saw Starwood motor platform. And, you know, it is just broad-based. Got it. And then my second one is just, given the current macro environment, how is that affecting the way you are underwriting or influencing sectors you might be pivoting more towards or away from?

Peter M. Mavoides: Yeah. You know, as I mentioned earlier, with 85% repeat business, our relationships really drive our opportunity set. And, you know, we started this platform, you know, ten years ago. We had a very focused service and experience-based sale-leaseback middle market model. And we are really sticking to that. And, you know, current trends in the market really have not shifted that materially one way or the other.

A. Joseph Peil: Very helpful. Thank you.

Peter M. Mavoides: Thank you, John.

Operator: We will go next now to Ryan Caviola with Green Street Advisors.

Ryan Caviola: Thank you. Good morning, everyone. It looks like the average investment per unit was record high for this quarter. I know you mentioned still close to historical norms, but could you share any details there? Or is that simply a function of acquisition mix? Or is there a slight appetite to purchase larger asset classes going forward? What led to that?

Peter M. Mavoides: Yeah. It is really going to be transaction mix and industry mix. You know, some of our sectors like early childhood education, our industrial outdoor storage sites and service sites tend to have a higher price point than, you know, our QSR sites or casual dining sites. And so it is not a material move, and it really is not indicative of a change in our underwriting or our risk appetite for larger assets. It is more just industry mix in that quarter.

Ryan Caviola: Got it. Appreciate it. And then just a quick one. Could you remind us of the tenant credit assumptions included in the 2026 guide, and just any, you know, color on if there is industry-specific in there or if it is broad-based. And anything you can share on the tenant credit. Thanks.

Peter M. Mavoides: Yeah. So we do not guide to tenant credit losses. You know, we guide to AFFO growth and investments. I would say we take a very sharp pencil to our credit assumptions, really looking at specific situations and properties where we may have a credit event that results in a loss in ABR. And that tends to be around our historical average and our norm. And then we make a generic assumption for unknown events that may come at us. And we run a range of scenarios in the credit loss that support our guidance. So, you know, with a historical credit loss of 30 basis points, you can probably assume we are a little more conservative than that.

But there is a wide range of scenarios in underlying guidance.

Ryan Caviola: Great. Appreciate the color.

Peter M. Mavoides: Thank you.

Operator: We will go next now to Jay Kornreich with Cantor Fitzgerald.

Jay Kornreich: I guess just following up on your comments sticking to your relationships, which make up 85% of business. How do you assess kind of that balance between growing with current partners and forming new ones? Really the point is, does the 85% provide enough runway for investments and earnings growth for multiple years into the future that you do not need to rely on new relationships?

Peter M. Mavoides: No. Listen. As I said in the past, we like to kinda be seventy-five/twenty-five, ideally, and we spend a lot of effort and make a lot of investments to source and build new relationships that we can grow with over time. Because we certainly see relationships grow out of us as they get bigger and establish, you know, access to more alternative forms of capital. It is a balance. And, you know, I think we have done a good job of balancing that and have an ample pipeline of opportunities. And I think we have demonstrated great ability to continue to source and deploy capital.

Jay Kornreich: Okay. And I guess just following up on that, you know, the strong sourcing and ample opportunities. You also referenced some deal slippage in the fourth quarter. So I guess just wondering about the overall investment pipeline outlook, if your cost of capital were to improve throughout the year, do you feel like there is ample opportunity to expand the investment volume? Or is it a little bit more constrained as the outlook may have—

Peter M. Mavoides: As we always say, you know, the opportunity set is not what is driving our investment volume. Our desire to create compelling growth for shareholders is what drives it, and what we believe to be compelling is, you know, our current guidance both in terms of AFFO per share, with growth of, you know, call it 6% to 8%, supported by investments of, you know, conservative investments of, you know, $1,000,000,000 to $1,400,000,000. And which is, you know, frankly, at the midpoint down from what we did last year. So, the opportunity set is not a constraint of ours.

You know, really our appetite and our desire to create stable growth over a prolonged period of time is what is driving that.

A. Joseph Peil: Understood. Okay. Thanks very much.

Robert W. Salisbury: Thank you.

Operator: We will go next now to Daniel Edward Guglielmo with Capital One Securities.

Daniel Edward Guglielmo: Hi, everyone. Thank you for taking my questions. I know based on our conversation at REITworld that you all are focused on same-store metrics for your tenants. Have there been any diverging trends in kind of same-store between tenant types or any changes that you have noticed this year versus last—

Peter M. Mavoides: Yeah. Well, same-store ABR and same-store rent is really driven by the contracts and the leases that we have. And, you know, that can vary from, you know, low of 1.5% to a high of 2.3%, and that really more depends upon what we negotiate going into those deals and when we negotiated those deals than anything on an industry-specific basis. In terms of, you know, same-store improvement in sales and margin and EBITDA, you know, that is something we track across all our industries and all our tenants. And there are, you know, there are a lot of ebbs and flows within each sector and each specific operator.

I would say most of those ebbs and flows are idiosyncratic around the operator and less around the industry. But, and there is nothing really I would call out materially changing in that—

Daniel Edward Guglielmo: Okay. Great. Appreciate that color. And then I would, as I would make—

Peter M. Mavoides: I would make a point on that and, you know, with public comps in most of our industries, whether it be Mister Car Wash in car wash or the restaurant operators or KinderCare in childcare, you know, investors can look at those public comps and get a general read-through about what is going on in the overall industries that we invest in and, you know, there tends to be a very strong correlation between those public comps and their performance and what is going on in our portfolio.

Daniel Edward Guglielmo: Great. Yeah. That is very helpful. And then as a follow-up from one earlier, thinking about the size of the company with the kind of mid- to high-single-digit growth each year? Is there a certain size down the road where it gets harder to source the right deals at the kind of volumes needed? And when you think about that, how far out is that?

Peter M. Mavoides: Yeah. I would not put a number on that. I think we have, you know, five to ten years of solid performance and opportunity in front of us to continue to grow our relationships and our investable universe and our portfolio and generate that sort of growth. You know, as you get bigger, you have got to do more and, you know, I think we continue to invest in the team and the infrastructure to do that. I think this company has great runway, without really too much concern around that. Particularly, because as we have done, you know, not growing too fast. Right?

And then, you know, growing moderately at a very measured pace over a long period of time has been our ambition, and I think we have got great runway in front of us.

Daniel Edward Guglielmo: Appreciate that. Thank you.

Operator: We will go next now to John James Massocca at B. Riley Securities.

John James Massocca: Good morning. We talked about it a little bit last quarter, but you added again the kind of the other industrial bucket, but it seems like the assets had a bit of a different kind of rent and footage profile per property. Just kind of curious maybe what those were in terms of acquisitions during the quarter. And I guess, with a couple of subsequent quarters of strong investment in that particular industry sector, what do you think is driving that as a growth vehicle in the current market?

Peter M. Mavoides: Yeah. You know, we just see good opportunities in the industrial outdoor storage space. Those assets tend to be granular, tend to have a large land component, and, you know, the rent per square foot in that space varies wildly depending upon the amount of building prorated over the size of the land. And so, you know, a 10-acre lot with a 20,000 square foot building is a whole lot different than a 5-acre lot with a 20,000 square foot building. And so we see good opportunities there with middle market operators and, you know, it is not growing at an outsized pace. And we will continue to invest there. And we certainly like that space.

John James Massocca: But the assets that were kind of acquired in the quarter were those kind of industrial outdoor storage type of properties?

Peter M. Mavoides: Yes, sir.

John James Massocca: Okay. And then, you may have mentioned before, so apologies. But given the size of the subsequent quarter investment volume and maybe kind of characterization of that being a little bit of, you know, transactions that maybe slipped from a 4Q closing, what was kind of the rough timing on that as we are thinking about modeling? Was it a little bit front-end loaded in the year, or was it kinda spread out over the quarter to date?

Peter M. Mavoides: January 21, John. I need an hour, Pete. I am just kidding, Rob. You got a response to that?

Robert W. Salisbury: You know, we are a month and almost a month and a half into the year. I would just assume that January is probably a reasonable ballpark estimate.

John James Massocca: Okay.

Robert W. Salisbury: I appreciate that.

John James Massocca: That is it for me. Thank you.

Peter M. Mavoides: Thank you, John.

Robert W. Salisbury: Thank you. Enjoy your—

Operator: We are, Mr. Mavoides. I will turn it back to you, sir, for any closing comments.

Peter M. Mavoides: Great. Well, thank you all. We look forward to seeing you all. I know Citi’s conference is right around the corner, and we will have a very active calendar down there. And stay warm. Talk to you soon.

Operator: Thank you, ladies and gentlemen. Again, that will conclude the Essential Properties Realty Trust, Inc. fourth quarter earnings conference call. Again, thanks so much for joining us, everyone. We wish you all a great day. Goodbye.