ESSENTIAL PROPERTIES REALTY TRUST, INC.

Current report

Tax protection agreements entered into in connection with property acquisitions may limit our operating flexibility and could result in significant payments to protected unitholders.

Current report

In connection with certain past or future property acquisitions our Operating Partnership has issued, or may issue, OP Units to contributors of acquired properties and entered, or may enter, into tax protection agreements with certain of those contributors. These agreements generally provide that, for a specified period of time, if our Operating Partnership disposes of any interest in the relevant contributed properties in a taxable transaction, subject to certain exceptions, or takes certain other actions that (or fails to take certain other actions that, if not taken) result in taxable gain to any protected contributor(s), our Operating Partnership may be required to indemnify such protected contributor(s) for the portion of their tax liabilities attributable to the built-in-gain that existed with respect to the contributed properties at the time of the acquisition, together with a gross up for tax liabilities incurred as a result of such indemnification payment. Accordingly, we and our Operating Partnership will refrain from taking certain actions that (or take certain actions that, if not taken) could trigger taxable gain to the protected unitholders. Such actions may include, among other actions, selling, transferring, or otherwise disposing of protected properties in a taxable transaction, reducing or repaying certain indebtedness that has been allocated to protected unitholders for U.S. federal, state or local income tax purposes, or engaging in other transactions that could cause the protected unitholders to recognize taxable income or gain.

Current report

Any indemnification payment required pursuant to a tax protection agreement could be substantial and could adversely affect our financial condition, results of operations, cash flows, and ability to make distributions to our stockholders. Accordingly, tax protection agreements may limit our operational and strategic flexibility and could require us to incur significant costs in connection with transactions that would otherwise be in the best interests of our stockholders.