ESSENTIAL PROPERTIES REALTY TRUST INC

Previous wording

We are an internally managed real estate company that acquires, owns and manages primarily single-tenant properties that are net leased on a long-term basis to middle-market companies operating service-oriented or experience-based businesses. We generally invest in and lease freestanding, single-tenant commercial real estate facilities where a tenant services its customers and conducts activities that are essential to the generation of the tenant’s sales and profits. As of June 30, 2024, 93.3% of our $412.2 million of annualized base rent was attributable to properties operated by tenants in service-oriented and experience-based businesses. "Annualized base rent" means annualized contractually specified cash base rent in effect on June 30, 2024 for all of our leases (including those accounted for as loans or direct financing leases) commenced as of that date and annualized cash interest on our mortgage loans receivable as of that date.

Current wording

We are an internally managed real estate company that acquires, owns and manages primarily single-tenant properties that are net leased on a long-term basis to middle-market companies operating service-oriented or experience-based businesses. We generally invest in and lease freestanding, single-tenant commercial real estate facilities where a tenant services its customers and conducts activities that are essential to the generation of the tenant’s sales and profits. As of September 30, 2024, 93.2% of our $438.0 million of annualized base rent was attributable to properties operated by tenants in service-oriented and experience-based businesses. "Annualized base rent" means annualized contractually specified cash base rent in effect on September 30, 2024 for all of our leases (including those accounted for as loans or direct financing leases) commenced as of that date and annualized cash interest on our mortgage loans receivable as of that date.

Previous wording

Our primary business objective is to maximize stockholder value by generating attractive risk-adjusted returns through owning, managing and growing a diversified portfolio of commercially desirable properties. As of June 30, 2024, we had a portfolio of 2,009 properties (inclusive of 147 properties which secure our investments in mortgage loans receivable) that was diversified by tenant, industry, concept and geography, had annualized base rent of $412.2 million and was 99.8% occupied. Our portfolio is built based on the following core investment attributes:

Current wording

Our primary business objective is to maximize stockholder value by generating attractive risk-adjusted returns through owning, managing and growing a diversified portfolio of commercially desirable properties. As of September 30, 2024, we had a portfolio of 2,053 properties (inclusive of 149 properties which secure our investments in mortgage loans receivable) that was diversified by tenant, industry, concept and geography, had annualized base rent of $438.0 million and was 99.9% occupied. Our portfolio is built based on the following core investment attributes:

Previous wording

Diversification. As of June 30, 2024, our portfolio was 99.8% occupied by 395 tenants operating 568 different brands, or concepts, in 16 industries across 49 states, with none of our tenants contributing more than 4.7% of our annualized base rent. Our goal is that, over time, no more than 5% of our annualized base rent will be derived from any single tenant or more than 1% from any single property.

Current wording

Diversification. As of September 30, 2024, our portfolio was 99.9% occupied by 407 tenants operating 583 different brands, or concepts, in 16 industries across 49 states, with none of our tenants contributing more than 4.3% of our annualized base rent. Our goal is that, over time, no more than 5% of our annualized base rent will be derived from any single tenant or more than 1% from any single property.

Previous wording

Long Lease Term. As of June 30, 2024, our leases had a weighted average remaining lease term of 14.1 years (based on annualized base rent), with 4.1% of our annualized base rent attributable to leases expiring prior to January 1, 2029. Our properties generally are subject to long-term net leases that we believe provide us a stable base of revenue from which to grow our portfolio.

Current wording

Long Lease Term. As of September 30, 2024, our leases had a weighted average remaining lease term of 14.1 years (based on annualized base rent), with 3.9% of our annualized base rent attributable to leases expiring prior to January 1, 2029. Our properties generally are subject to long-term net leases that we believe provide us a stable base of revenue from which to grow our portfolio.

Previous wording

Significant Use of Sale-Leaseback Investments. We seek to acquire properties owned and operated by middle-market businesses and lease the properties back to the operators pursuant to our standard lease form. During the three months ended June 30, 2024, 100% of our investments were sale-leaseback transactions.

Current wording

Significant Use of Sale-Leaseback Investments. We seek to acquire properties owned and operated by middle-market businesses and lease the properties back to the operators pursuant to our standard lease form. During the three months ended September 30, 2024, 89% of our investments were sale-leaseback transactions.

Previous wording

Significant Use of Master Leases. As of June 30, 2024, 70.3% of our annualized base rent was attributable to master leases.

Current wording

Significant Use of Master Leases. As of September 30, 2024, 65.6% of our annualized base rent was attributable to master leases.

Previous wording

Contractual Base Rent Escalation. As of June 30, 2024, 98.9% of our leases (based on annualized base rent) provided for increases in future base rent at a weighted average rate of 1.7% per year.

Current wording

Contractual Base Rent Escalation. As of September 30, 2024, 98.6% of our leases (based on annualized base rent) provided for increases in future base rent at a weighted average rate of 1.7% per year.

Previous wording

Healthy Rent Coverage Ratio and Tenant Financial Reporting. As of June 30, 2024, our portfolio’s weighted average rent coverage ratio was 3.7x, and 98.9% of our leases (based on annualized base rent) obligate the tenant to periodically provide us with specified unit-level financial reporting. "Rent coverage ratio" means, as of a specified date, the ratio of (x) tenant-reported or, when unavailable, management's estimate (based on tenant-reported financial information) of annual earnings before interest, taxes, depreciation, amortization and cash rent attributable to the leased property (or properties, in the case of a master lease) to (y) the annualized base rental obligation.

Current wording

Healthy Rent Coverage Ratio and Tenant Financial Reporting. As of September 30, 2024, our portfolio’s weighted average rent coverage ratio was 3.6x, and 99.0% of our leases (based on annualized base rent) obligate the tenant to periodically provide us with specified unit-level financial reporting. "Rent coverage ratio" means, as of a specified date, the ratio of (x) tenant-reported or, when unavailable, management's estimate (based on tenant-reported financial information) of annual earnings before interest, taxes, depreciation, amortization and cash rent attributable to the leased property (or properties, in the case of a master lease) to (y) the annualized base rental obligation.

Previous wording

Carefully Constructed Portfolio of Recently Acquired Properties Leased to Service-Oriented or Experience-Based Tenants. We have strategically constructed a portfolio that is diversified by tenant, industry, concept and geography and generally avoids exposure to businesses that we believe are subject to pressure from e-commerce. Our properties are generally subject to long-term net leases that we believe provide us with a stable and predictable base of revenue from which to grow our portfolio. As of June 30, 2024, we had a portfolio of 2,009 properties, with annualized base rent of $412.2 million, which was purposefully selected by our management team in accordance with our focused and disciplined investment strategy. Our portfolio is diversified with 395 tenants operating 568 different concepts across 49 states and in 16 distinct industries. None of our tenants contributed more than 4.7% of our annualized base rent as of June 30, 2024, and our strategy targets a scaled portfolio that, over time, derives no more than 5% of our annualized base rent from any single tenant or more than 1% from any single property.

Current wording

Carefully Constructed Portfolio of Recently Acquired Properties Leased to Service-Oriented or Experience-Based Tenants. We have strategically constructed a portfolio that is diversified by tenant, industry, concept and geography and generally avoids exposure to businesses that we believe are subject to pressure from e-commerce. Our properties are generally subject to long-term net leases that we believe provide us with a stable and predictable base of revenue from which to grow our portfolio. As of September 30, 2024, we had a portfolio of 2,053 properties, with annualized base rent of $438.0 million, which was purposefully selected by our management team in accordance with our focused and disciplined investment strategy. Our portfolio is diversified with 407 tenants operating 583 different concepts across 49 states and in 16 distinct industries. None of our tenants contributed more than 4.3% of our annualized base rent as of September 30, 2024, and our strategy targets a scaled portfolio that, over time, derives no more than 5% of our annualized base rent from any single tenant or more than 1% from any single property.

Previous wording

•We focus on investing in properties leased to tenants operating in service-oriented or experience-based businesses such as car washes, restaurants (primarily quick service restaurants), early childhood education, medical and dental services, convenience stores, automotive services, equipment rental, entertainment and health and fitness, which we believe are generally more insulated from e-commerce pressure than many others. As of June 30, 2024, 93.3% of our annualized base rent was attributable to tenants operating service-oriented and experience-based businesses.

Current wording

•We focus on investing in properties leased to tenants operating in service-oriented or experience-based businesses such as car washes, restaurants (primarily quick service restaurants), early childhood education, medical and dental services, convenience stores, automotive services, equipment rental, entertainment and health and fitness, which we believe are generally more insulated from e-commerce pressure than many others. As of September 30, 2024, 93.2% of our annualized base rent was attributable to tenants operating service-oriented and experience-based businesses.

Previous wording

•Our senior management team has been responsible for our focused and disciplined investment strategy and for developing and implementing our investment sourcing, underwriting, closing and asset management infrastructure, which we believe can support significant investment growth without a proportionate increase in our operating expenses. As of June 30, 2024, exclusive of our initial investment in a portfolio of 262 net leased properties, consisting primarily of restaurants, that we acquired on June 16, 2016 as part of the liquidation of General Electric Capital Corporation for an aggregate purchase price of $279.8 million (including transaction costs) (the "Initial Portfolio"), 91.2% of our portfolio’s annualized base rent was attributable to internally originated sale-leaseback transactions. The substantial experience, knowledge and relationships of our senior leadership team provide us with an extensive network of contacts that we believe allows us to originate attractive investment opportunities and effectively grow our business.

Current wording

•Our senior management team has been responsible for our focused and disciplined investment strategy and for developing and implementing our investment sourcing, underwriting, closing and asset management infrastructure, which we believe can support significant investment growth without a proportionate increase in our operating expenses. As of September 30, 2024, exclusive of our initial investment in a portfolio of 262 net leased properties, consisting primarily of restaurants, that we acquired on June 16, 2016 as part of the liquidation of General Electric Capital Corporation for an aggregate purchase price of $279.8 million (including transaction costs) (the "Initial Portfolio"), 91.8% of our portfolio’s annualized base rent was attributable to internally originated sale-leaseback transactions. The substantial experience, knowledge and relationships of our senior leadership team provide us with an extensive network of contacts that we believe allows us to originate attractive investment opportunities and effectively grow our business.

Previous wording

Extensive Tenant Financial Reporting Supports Active Asset Management. We seek to enter into lease agreements that obligate our tenants to periodically provide us with corporate and/or unit-level financial reporting, which we believe enhances our ability to actively monitor our investments, manage credit risk, negotiate lease renewals and proactively manage our portfolio to protect stockholder value. As of June 30, 2024, leases contributing 98.9% of our annualized base rent required tenants to provide us with specified unit-level financial information, and leases contributing 98.9% of our annualized base rent required tenants to provide us with corporate-level financial reporting.

Current wording

Extensive Tenant Financial Reporting Supports Active Asset Management. We seek to enter into lease agreements that obligate our tenants to periodically provide us with corporate and/or unit-level financial reporting, which we believe enhances our ability to actively monitor our investments, manage credit risk, negotiate lease renewals and proactively manage our portfolio to protect stockholder value. As of September 30, 2024, leases contributing 99.0% of our annualized base rent required tenants to provide us with specified unit-level financial information, and leases contributing 99.0% of our annualized base rent required tenants to provide us with corporate-level financial reporting.

Previous wording

Focus on Relationship-Based Sourcing to Grow Our Portfolio by Originating Sale-Leaseback Transactions. We plan to continue our disciplined growth by originating sale-leaseback transactions and opportunistically making acquisitions of properties subject to net leases that contribute to our portfolio’s tenant, industry and geographic diversification. As of June 30, 2024, exclusive of the Initial Portfolio, 91.2% of our portfolio’s annualized base rent was attributable to internally originated sale- leaseback transactions. In addition, we seek to leverage our relationships with our tenants to facilitate investment opportunities, including selectively agreeing to reimburse certain of our tenants for development costs at our properties in exchange for contractually specified rent that generally increases proportionally with our funding. We believe our senior management team’s reputation, in-depth market knowledge and extensive network of longstanding relationships in the net lease industry provide us access to an ongoing pipeline of attractive investment opportunities.

Current wording

Focus on Relationship-Based Sourcing to Grow Our Portfolio by Originating Sale-Leaseback Transactions. We plan to continue our disciplined growth by originating sale-leaseback transactions and opportunistically making acquisitions of properties subject to net leases that contribute to our portfolio’s tenant, industry and geographic diversification. As of September 30, 2024, exclusive of the Initial Portfolio, 91.8% of our portfolio’s annualized base rent was attributable to internally originated sale-leaseback transactions. In addition, we seek to leverage our relationships with our tenants to facilitate investment opportunities, including selectively agreeing to reimburse certain of our tenants for development costs at our properties in exchange for contractually specified rent that generally increases proportionally with our funding. We believe our senior management team’s reputation, in-depth market knowledge and extensive network of longstanding relationships in the net lease industry provide us access to an ongoing pipeline of attractive investment opportunities.

Previous wording

Internal Growth Through Long-Term Triple-Net Leases That Provide for Periodic Rent Escalations. We seek to enter into long-term (typically with initial terms of 15 years or more and tenant renewal options), triple-net leases that provide for periodic contractual rent escalations. As of June 30, 2024, our leases had a weighted average remaining lease term of 14.1 years (based on annualized base rent), with only 4.1% of our annualized base rent attributable to leases expiring prior to January 1, 2029, and 98.9% of our leases (based on annualized base rent) provided for increases in future base rent at a weighted average of 1.7% per year.

Current wording

Internal Growth Through Long-Term Triple-Net Leases That Provide for Periodic Rent Escalations. We seek to enter into long-term (typically with initial terms of 15 years or more and tenant renewal options), triple-net leases that provide for periodic contractual rent escalations. As of September 30, 2024, our leases had a weighted average remaining lease term of 14.1 years (based on annualized base rent), with only 3.9% of our annualized base rent attributable to leases expiring prior to January 1, 2029, and 98.6% of our leases (based on annualized base rent) provided for increases in future base rent at a weighted average of 1.7% per year.

Previous wording

As of June 30, 2024, the net investment value of our income property portfolio totaled $5.0 billion, consisting of investments in 2,009 properties (inclusive of 147 properties which secure our investments in mortgage loans receivable), with annualized base rent of $412.2 million. Substantially all of our cash from operations is generated by our investment portfolio.

Current wording

As of September 30, 2024, the net investment value of our income property portfolio totaled $5.3 billion, consisting of investments in 2,053 properties (inclusive of 149 properties which secure our investments in mortgage loans receivable), with annualized base rent of $438.0 million. Substantially all of our cash from operations is generated by our investment portfolio.

Previous wording

The liquidity requirements for operating our Company consist primarily of funding our investment activities, servicing our outstanding indebtedness and paying our general and administrative expenses and dividends as declared by our board of directors. The occupancy level of our portfolio is high (99.8% as of June 30, 2024) and, because substantially all of our leases are triple-net (whereby our tenants are generally responsible for all maintenance costs for operating the property, and insurance and property taxes associated with the leased properties), our liquidity requirements are not significantly impacted by property costs. When a property becomes vacant, we are required to pay the property costs not paid by a tenant, as well as those property costs accruing during the time it takes to locate a new tenant or to sell the property. As of June 30, 2024, five of our investment properties were vacant, significantly less than 1% of our portfolio, and all remaining properties were subject to a lease or mortgage loan receivable. We expect to incur property costs from time to time in periods during which properties that become vacant are being marketed for lease or sale. In addition, we may recognize an expense for certain property costs, such as real estate taxes billed in arrears, if we believe the tenant is likely to vacate the property before making payment on those obligations. The amount of such property costs can vary quarter-to-quarter based on the timing of property vacancies and the level of underperforming properties; however, we do not expect that such costs will be significant to our operations.

Current wording

The liquidity requirements for operating our Company consist primarily of funding our investment activities, servicing our outstanding indebtedness and paying our general and administrative expenses and dividends as declared by our board of directors. The occupancy level of our portfolio is high (99.9% as of September 30, 2024) and, because substantially all of our leases are triple-net (whereby our tenants are generally responsible for all maintenance costs for operating the property, and insurance and property taxes associated with the leased properties), our liquidity requirements are not significantly impacted by property costs. When a property becomes vacant, we are required to pay the property costs not paid by a tenant, as well as those property costs accruing during the time it takes to locate a new tenant or to sell the property. As of September 30, 2024, three of our investment properties were vacant, significantly less than 1% of our portfolio, and all remaining properties were subject to a lease or mortgage loan receivable. We expect to incur property costs from time to time in periods during which properties that become vacant are being marketed for lease or sale. In addition, we may recognize an expense for certain property costs, such as real estate taxes billed in arrears, if we believe the tenant is likely to vacate the property before making payment on those obligations. The amount of such property costs can vary quarter-to-quarter based on the timing of property vacancies and the level of underperforming properties; however, we do not expect that such costs will be significant to our operations.

Previous wording

We intend to continue to grow through additional investments in stand-alone single tenant properties. To accomplish this objective, we seek to invest in real estate utilizing a combination of debt and equity capital and with cash from operations that we do not distribute to our stockholders. When we sell properties, we generally reinvest the cash proceeds from our sales in new single tenant properties. Our short-term liquidity requirements also include the funding needs associated with 95 properties where we have agreed to reimburse the tenant for certain development, construction, or renovation costs or to provide construction financing in exchange for contractual payments of interest or increased rent that generally increases in proportion with our level of funding. As of June 30, 2024, we agreed to provide construction financing or reimburse the tenant for certain development, construction and renovation costs in an aggregate amount of $548.4 million, and, as of such date, we have funded $344.5 million of this commitment. We expect to fund the remaining commitment totaling approximately $203.9 million by June 30, 2025.

Current wording

We intend to continue to grow through additional investments in stand-alone single tenant properties. To accomplish this objective, we seek to invest in real estate utilizing a combination of debt and equity capital and with cash from operations that we do not distribute to our stockholders. When we sell properties, we generally reinvest the cash proceeds from our sales in new single tenant properties. Our short-term liquidity requirements also include the funding needs associated with 103 properties where we have agreed to reimburse the tenant for certain development, construction, or renovation costs or to provide construction financing in exchange for contractual payments of interest or increased rent that generally increases in proportion with our level of funding. As of September 30, 2024, we agreed to provide construction financing or reimburse the tenant for certain development, construction and renovation costs in an aggregate amount of $621.7 million, and, as of such date, we have funded $415.1 million of this commitment. We expect to fund the remaining commitment totaling approximately $206.6 million by September 30, 2025.

Previous wording

Additionally, as of July 19, 2024, we were under contract to acquire seven properties with an aggregate purchase price of $32.5 million, subject to completion of our due diligence procedures and satisfaction of customary closing conditions. We expect to meet our short-term liquidity requirements, including our construction financing and tenant reimbursement obligations and potential investment in future single tenant properties, primarily with our cash and cash equivalents, net cash from operating activities, issuance of common stock subject to outstanding forward purchase commitments, borrowings under the 2030 Term Loan and Revolving Credit Facility and potentially through proceeds generated from asset sales and our 2024 ATM Program, under which we may issue common stock with an aggregate gross sales price of up to $472.4 million as of July 19, 2024.

Current wording

Additionally, as of October 18, 2024, we were under contract to acquire 13 properties with an aggregate purchase price of $31.5 million, subject to completion of our due diligence procedures and satisfaction of customary closing conditions. We expect to meet our short-term liquidity requirements, including our construction financing and tenant reimbursement obligations and potential investment in future single tenant properties, primarily with our cash and cash equivalents, net cash from operating activities, issuance of common stock subject to outstanding forward purchase commitments, borrowings under the Revolving Credit Facility and potentially through proceeds generated from asset sales and our 2024 ATM Program, under which we may issue common stock with an aggregate gross sales price of up to $160.0 million as of October 18, 2024.

Previous wording

An additional liquidity need is funding the required level of distributions, generally 90% of our REIT taxable income (determined without regard to the dividends paid deduction and excluding any net capital gain), that are among the requirements for us to continue to qualify for taxation as a REIT. Holders of OP Units are entitled to distributions per unit equivalent to those paid by us per share of common stock. During the six months ended June 30, 2024, our Board declared total cash distributions of $0.575 per share of common stock/OP Unit totaling $101.4 million and $51.1 million is payable as of June 30, 2024. To continue to qualify for taxation as a REIT, we must make distributions to our stockholders aggregating annually at least 90% of our REIT taxable income, determined without regard to the dividends paid deduction and excluding any net capital gain. As a result of this requirement, we cannot rely on retained earnings to fund our business needs to the same extent as other entities that are not REITs. If we do not have sufficient funds available to us from our operations to fund our business needs, we will need to find alternative ways to fund those needs. Such alternatives may include, among other things, selling properties (whether or not the sales price is optimal or otherwise meets our strategic long-term objectives), incurring additional indebtedness or issuing equity securities in public or private transactions. The availability and attractiveness of the terms of these potential sources of financing cannot be assured.

Current wording

An additional liquidity need is funding the required level of distributions, generally 90% of our REIT taxable income (determined without regard to the dividends paid deduction and excluding any net capital gain), that are among the requirements for us to continue to qualify for taxation as a REIT. Holders of OP Units are entitled to distributions per unit equivalent to those paid by us per share of common stock. During the nine months ended September 30, 2024, our Board declared total cash distributions of $0.865 per share of common stock/OP Unit totaling $152.5 million and $51.1 million is payable as of September 30, 2024. To continue to qualify for taxation as a REIT, we must make distributions to our stockholders aggregating annually at least 90% of our REIT taxable income, determined without regard to the dividends paid deduction and excluding any net capital gain. As a result of this requirement, we cannot rely on retained earnings to fund our business needs to the same extent as other entities that are not REITs. If we do not have sufficient funds available to us from our operations to fund our business needs, we will need to find alternative ways to fund those needs. Such alternatives may include, among other things, selling properties (whether or not the sales price is optimal or otherwise meets our strategic long-term objectives), incurring additional indebtedness or issuing equity securities in public or private transactions. The availability and attractiveness of the terms of these potential sources of financing cannot be assured.

Previous wording

As of June 30, 2024, all of our long-term debt was fixed-rate debt or was effectively converted to a fixed-rate for the term of the debt though hedging strategies, and our weighted average debt maturity was 4.1 years. As we continue to invest in real estate properties and grow our real estate portfolio, we intend to manage our long-term debt maturities to reduce the risk that a significant amount of our debt will mature in any single year in the future.

Current wording

As of September 30, 2024, all of our long-term debt was fixed-rate debt or was effectively converted to a fixed-rate for the term of the debt though hedging strategies, and our weighted average debt maturity was 4.3 years. As we continue to invest in real estate properties and grow our real estate portfolio, we intend to manage our long-term debt maturities to reduce the risk that a significant amount of our debt will mature in any single year in the future.

Previous wording

Future sources of debt capital may include public issuances of senior unsecured notes, term loan borrowings, mortgage financing of a single-asset or a portfolio of assets and CMBS borrowings. These sources of debt capital may offer us the opportunity to lower our cost of funding and further diversify our sources of debt capital. Over time, we may choose to issue preferred equity as a part of our overall strategy for funding our business. As our outstanding debt matures, we may refinance it as it comes due or choose to repay it using cash and cash equivalents or borrowings under our Revolving Credit Facility. We believe that the cash generated by our operations, together with our cash and cash equivalents at June 30, 2024, our borrowing availability under the 2030 Term Loan and Revolving Credit Facility, issuance of common stock subject to outstanding forward purchase commitments, and our potential access to additional sources of capital, will be sufficient to fund our operations for the foreseeable future and allow us to invest in the real estate for which we currently have made commitments.

Current wording

Future sources of debt capital may include public issuances of senior unsecured notes, term loan borrowings, mortgage financing of a single-asset or a portfolio of assets and CMBS borrowings. These sources of debt capital may offer us the opportunity to lower our cost of funding and further diversify our sources of debt capital. Over time, we may choose to issue preferred equity as a part of our overall strategy for funding our business. As our outstanding debt matures, we may refinance it as it comes due or choose to repay it using cash and cash equivalents or borrowings under our Revolving Credit Facility. We believe that the cash generated by our operations, together with our cash and cash equivalents at September 30, 2024, our borrowing availability under the Revolving Credit Facility, issuance of common stock subject to outstanding forward purchase commitments, and our potential access to additional sources of capital, will be sufficient to fund our operations for the foreseeable future and allow us to invest in the real estate for which we currently have made commitments.

Previous wording

Revolving Credit Facility and Credit Facility Term Loan

Current wording

Revolving Credit Facility and Credit Facility Term Loans

Previous wording

Through our Operating Partnership, we are party to an Amended and Restated Credit Agreement with a group of lenders, which was amended on July 11, 2024 (the "Credit Agreement") and provides for revolving loans of up to $600.0 million (the "Revolving Credit Facility") and an additional $1.3 billion of term loans, consisting of a $400.0 million term loan (the "2028 Term Loan"), a $450.0 million term loan (the “2029 Term Loan”) and a $450.0 million term loan (the "2030 Term Loan" and, together with the 2028 Term Loan and 2029 Term Loan, the “CF Term

Current wording

Through our Operating Partnership, we are party to an Amended and Restated Credit Agreement with a group of lenders, which was amended on July 11, 2024 (the "Credit Agreement") and provides for revolving loans of up to $600.0 million (the "Revolving Credit Facility") and an additional $1.3 billion of term loans, consisting of a $400.0 million term loan (the "2028 Term Loan"), a $450.0 million term loan (the “2029 Term Loan”) and a $450.0 million term loan (the "2030 Term Loan" and, together with the 2028 Term Loan and 2029 Term Loan, the “CF Term Loans”). All principal amounts available under the 2028 Term Loan were drawn in the third and fourth quarters of 2022. All principal amounts available under the 2029 Term Loan were drawn in the third and fourth quarters of 2023. All principal amounts available under the 2030 Term Loan were drawn in the third quarter of 2024.

Previous wording

The borrowings under the 2027 Term Loan, as amended, bear interest at an annual rate of applicable Adjusted Term SOFR (as defined in the Credit Agreement) plus an applicable margin. The Adjusted Term SOFR is a rate with a term equivalent to the interest period applicable to the relevant borrowing. The applicable margin was initially a spread set according to a leverage-based pricing grid. In May 2022, the Operating Partnership made an irrevocable election to have the applicable margin be a spread set according to the Company’s corporate credit ratings provided by S&P, Moody’s and/or Fitch. The 2027 Term Loan is pre-payable at any time by the Operating Partnership without penalty. The 2027 Term Loan has an accordion feature to increase, subject to certain conditions, the maximum availability of the facility up to an aggregate of $500 million.

Current wording

The borrowings under the 2027 Term Loan, as amended, bear interest at an annual rate of applicable Adjusted Term SOFR (as defined in the Credit Agreement) plus an applicable margin. The Adjusted Term SOFR is a rate with a term equivalent to the interest period applicable to the relevant borrowing. The applicable margin was initially a spread set according to a leverage-based pricing grid. In May 2022, the Operating Partnership made an irrevocable election to have the applicable margin be a spread set according to the Company’s corporate credit ratings provided by S&P, Moody’s and/or Fitch. The 2027 Term Loan is pre-payable at any time by the Operating

Previous wording

As of June 30, 2024, we had $23.6 million of cash and cash equivalents and approximately $0.9 million of restricted cash, as compared to $14.1 million of cash and cash equivalents and no restricted cash as of June 30, 2023.

Current wording

As of September 30, 2024, we had $32.7 million of cash and cash equivalents and $6.1 million of restricted cash, as compared to $36.1 million of cash and cash equivalents and $5.9 million of restricted cash as of September 30, 2023.

Previous wording

Cash Flows for the six months ended June 30, 2024

Current wording

Cash Flows for the nine months ended September 30, 2024

Previous wording

During the six months ended June 30, 2024, net cash provided by operating activities was $147.9 million and our net income was $98.8 million. Our cash flows from operating activities are primarily dependent upon the occupancy level of our portfolio, the rental rates specified in our leases, the interest on our loans and direct financing lease receivables, the collectability of rent and interest and the level of our operating expenses and general and administrative costs. Our cash inflows from operating activities reflect adjustments to net income for non-cash items of $51.2 million, including i) depreciation and amortization of tangible, intangible and right-of-use real estate assets and amortization of deferred financing costs and other non-cash interest expense of $61.2 million, ii) our provision for impairment of real estate of $6.6 million and iii) non-cash equity-based compensation expense of $5.6 million, reduced by i) our $1.6 million gain on dispositions of real estate, net, and ii) $20.2 million related to the recognition of straight-line rent receivables. An additional outflow was our decrease in accrued liabilities and other payables of $0.3 million, offset by the inflow caused by the decrease in our rent receivables, prepaid expenses and other assets of $1.8 million.

Current wording

During the nine months ended September 30, 2024, net cash provided by operating activities was $221.4 million and our net income was $148.1 million. Our cash flows from operating activities are primarily dependent upon the occupancy level of our portfolio, the rental rates specified in our leases, the interest on our loans and direct financing lease receivables, the collectability of rent and interest and the level of our operating expenses and general and administrative costs. Our cash inflows from operating activities reflect adjustments to net income for non-cash items of $82.1 million, including i) depreciation and amortization of tangible, intangible and right-of-use real estate assets and amortization of deferred financing costs and other non-cash interest expense of $93.9 million, ii) our provision for impairment of real estate of $12.3 million and iii) non-cash equity-based compensation expense of $8.2 million, reduced by i) our $1.4 million gain on dispositions of real estate, net, and ii) $31.5 million related to the recognition of straight-line rent receivables. Additional outflows were from our decrease in accrued liabilities and other payables of $2.5 million and the increase in our rent receivables, prepaid expenses and other assets, net of $6.2 million.

Previous wording

Net cash used in investing activities during the six months ended June 30, 2024 was $560.9 million. Our net cash used in investing activities generally reflects our investment in real estate, including capital expenditures and construction in progress, and in loans receivable, which totaled $585.9 million in the aggregate for the quarter. These cash outflows were partially offset by $20.1 million of proceeds from sales of investments, net of disposition costs, and $4.9 million of principal collections on our loans and direct financing lease receivables.

Current wording

Net cash used in investing activities during the nine months ended September 30, 2024 was $848.5 million. Our net cash used in investing activities generally reflects our investment in real estate, including capital expenditures and construction in progress, in lease incentives and in loans receivable, which totaled $892.7 million in the aggregate for the quarter. These cash outflows were partially offset by $36.2 million of proceeds from sales of investments, net of disposition costs, and $8.0 million of principal collections on our loans and direct financing lease receivables.

Previous wording

Net cash provided by financing activities of $388.5 million during the six months ended June 30, 2024 reflected net cash inflows of $244.7 million from the issuance of common stock and $255.0 million of borrowings under the Revolving Credit Facility. These cash inflows were partially offset by the payment of $97.4 million in dividends, repayment of $10.0 million of borrowings under the Revolving Credit Facility and the payment of $3.3 million in taxes related to the net settlement of equity awards upon vesting.

Current wording

Net cash provided by financing activities of $616.8 million during the nine months ended September 30, 2024 reflected net cash inflows of $244.7 million from the issuance of common stock, $360.0 million of borrowings under the Revolving Credit Facility, and $174.6 million of borrowings under the 2030 Term Loan. These cash inflows were partially offset by the payment of $148.5 million in dividends, repayment of $10.0 million of borrowings under the Revolving Credit Facility and the payment of $3.3 million in taxes related to the net settlement of equity awards upon vesting.

Previous wording

(2)Includes $21.3 million of rental payments due under ground lease arrangements where our tenants are directly responsible for payment.

Current wording

(2)Includes $21.1 million of rental payments due under ground lease arrangements where our tenants are directly responsible for payment.

Previous wording

As of June 30, 2024, we had a portfolio of 2,009 properties, including 147 properties that secure our investments in mortgage loans receivable, that was diversified by tenant, concept, industry and geography and had annualized base rent of $412.2 million. Our 395 tenants operate 568 different concepts in 16 industries across 49 states. None of our tenants represented more than 4.7% of our portfolio at June 30, 2024, and our top ten largest tenants represented 18.6% of our annualized base rent as of that date.

Current wording

As of September 30, 2024, we had a portfolio of 2,053 properties, including 149 properties that secure our investments in mortgage loans receivable, that was diversified by tenant, concept, industry and geography and had annualized base rent of $438.0 million. Our 407 tenants operate 583 different concepts in 16 industries across 49 states. None of our tenants represented more than 4.3% of our portfolio at September 30, 2024, and our top ten largest tenants represented 17.7% of our annualized base rent as of that date.

Previous wording

As of June 30, 2024, our five largest tenants, who contributed 11.5% of our annualized base rent, had a rent coverage ratio of 7.1x while our ten largest tenants, who contributed 18.6% of our annualized base rent, had a rent coverage ratio of 5.7x.

Current wording

As of September 30, 2024, our five largest tenants, who contributed 10.8% of our annualized base rent, had a rent coverage ratio of 6.5x while our ten largest tenants, who contributed 17.7% of our annualized base rent, had a rent coverage ratio of 5.1x.

Previous wording

Our tenants operate their businesses across 568 concepts. (i.e., generally brands). The following table provides information about the top ten concepts in our portfolio as of June 30, 2024 (dollars in thousands):

Current wording

Our tenants operate their businesses across 583 concepts. (i.e., generally brands). The following table provides information about the top ten concepts in our portfolio as of September 30, 2024 (dollars in thousands):

Previous wording

As of June 30, 2024, our tenants operating service-oriented businesses had a weighted average rent coverage ratio of 3.7x, our tenants operating experience-based businesses had a weighted average rent coverage ratio of 2.8x, our tenants operating retail businesses had a weighted average rent coverage ratio of 4.2x and our tenants operating other types of businesses had a weighted average rent coverage ratio of 7.4x.

Current wording

As of September 30, 2024, our tenants operating service-oriented businesses had a weighted average rent coverage ratio of 3.5x, our tenants operating experience-based businesses had a weighted average rent coverage ratio of 2.7x, our tenants operating retail businesses had a weighted average rent coverage ratio of 4.1x and our tenants operating other types of businesses had a weighted average rent coverage ratio of 9.0x.

Previous wording

Our 2,009 properties are located in 49 states. The following table details the geographical locations of our properties as of June 30, 2024 (dollars in thousands):

Current wording

Our 2,053 properties are located in 49 states. The following table details the geographical locations of our properties as of September 30, 2024 (dollars in thousands):

Previous wording

As of June 30, 2024, the weighted average remaining term of our leases was 14.1 years (based on annualized base rent), with only 4.1% of our annualized base rent attributable to leases expiring prior to January 1, 2029. The following table sets forth our lease expirations for leases in place as of June 30, 2024 (dollars in thousands):

Current wording

As of September 30, 2024, the weighted average remaining term of our leases was 14.1 years (based on annualized base rent), with only 3.9% of our annualized base rent attributable to leases expiring prior to January 1, 2029. The following table sets forth our lease expirations for leases in place as of September 30, 2024 (dollars in thousands):

Previous wording

Generally, we seek to acquire investments with healthy rent coverage ratios, and as of June 30, 2024, the weighted average rent coverage ratio of our portfolio was 3.7x. Our portfolio’s unit-level rent coverage ratios (by annualized base rent and excluding leases that do not report unit-level financial information) as of June 30, 2024 are displayed below:

Current wording

Generally, we seek to acquire investments with healthy rent coverage ratios, and as of September 30, 2024, the weighted average rent coverage ratio of our portfolio was 3.6x. Our portfolio’s unit-level rent coverage ratios (by annualized base rent and excluding leases that do not report unit-level financial information) as of September 30, 2024 are displayed below:

Previous wording

Rental revenue. Rental revenue increased by $22.6 million for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023. The increase in rental revenue was driven primarily by the growth in our real estate investment portfolio which grew by 262 rental properties, or 16%, since June 30, 2023. A portion of our real estate investments were acquired throughout the periods presented and were not all owned by us for the entirety of the applicable periods; accordingly, a significant portion of the increase in rental revenue between periods is related to recognizing revenue in 2024 from acquisitions that were made during 2023 and early 2024.

Current wording

Rental revenue. Rental revenue increased by $23.5 million for the three months ended September 30, 2024 as compared to the three months ended September 30, 2023. The increase in rental revenue was driven primarily by the growth in our real estate investment portfolio which grew by 249 rental properties, or 15%, since September 30, 2023. A portion of our real estate investments were acquired throughout the periods presented and were not all owned by us for the entirety of the applicable periods; accordingly, a significant portion of the increase in rental revenue between periods is related to recognizing revenue in 2024 from acquisitions that were made during 2023 and early 2024.

Previous wording

Interest on loans and direct financing lease receivables. Interest on loans and direct financing lease receivables increased by $0.3 million for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023, primarily due to the increase in our mortgage loans receivable portfolio during 2024, which led to a higher average daily balance of loans receivable outstanding during the three months ended June 30, 2024.

Current wording

Interest on loans and direct financing lease receivables. Interest on loans and direct financing lease receivables increased by $1.9 million for the three months ended September 30, 2024 as compared to the three months ended September 30, 2023, primarily due to the increase in our mortgage loans receivable portfolio during 2024, which led to a higher average daily balance of loans receivable outstanding during the three months ended September 30, 2024.

Previous wording

Other revenue, net. Other revenue decreased $0.1 million during the three months ended June 30, 2024 as compared to the three months ended June 30, 2023, primarily due to the receipt of loan prepayment fees during the three months ended June 30, 2023.

Current wording

Other revenue, net. Other revenue increased by approximately $23,000 during the three months ended September 30, 2024 as compared to the three months ended September 30, 2023, primarily due to the receipt of lean termination fees during the three months ended September 30, 2024.