Today, Essential Properties Realty Trust , Inc. (NYSE:) announced the initiation of a new at-the-market (ATM) equity offering program, allowing for the sale of up to $750 million in common stock. This move comes as the company terminated its previous program, which had $160 million in unsold stock remaining.
The real estate investment trust, which operates under the industrial classification of “Real Estate Investment Trusts,” has entered into a Sales Agreement with a consortium of financial institutions, including BofA Securities and Goldman Sachs, to facilitate the sales. These institutions will act as sales agents or principals in transactions that may occur on the New York Stock Exchange or other platforms, at prevailing market prices.
The sales agreement outlines that the company may sell shares directly to the agents or through negotiated transactions, including block trades. The agents are entitled to a commission of up to 2.0% of the gross sales price for their services.
Furthermore, Essential Properties may enter into forward sale agreements with certain agents, termed Forward Purchasers. These agreements would involve the Forward Purchasers or their affiliates borrowing and selling shares to hedge their exposure. While the company won’t initially receive proceeds from these borrowed shares, it anticipates settling these agreements fully by delivering its common stock, thereby receiving cash equal to the product of the number of shares settled and the forward price per share.
The net proceeds from these offerings, whether from direct sales or forward agreements, are intended to be used by Essential Properties for general corporate purposes. This includes repaying or repurchasing debt, working capital, capital expenditures, and potential future investments.
The offering is made under a prospectus supplement and related prospectus as part of the company’s shelf registration statement filed on June 17, 2024. Legal validity for the common stock issued has been provided by Venable LLP, as documented in the SEC filing.
This strategic financial move is based on a press release statement and does not constitute an offer to sell or a solicitation of an offer to buy any securities. The description of the Sales Agreement is summarized, with the full details available in the attached exhibit to the SEC filing.
In other recent news, Essential Properties Realty Trust reported strong operational performance for the third quarter of 2024. The company’s portfolio expanded to 2,053 properties with a high occupancy rate and positive same-store growth. Notably, the lease rate stood at 99.9% across 16 industries. Essential Properties also indicated over 7% growth at the midpoint in its adjusted funds from operations (AFFO) per share guidance for 2025.
In terms of investments, Essential Properties reported a total of $308 million at an 8.1% cash yield for the third quarter. The company also provided its outlook for 2025, setting the AFFO per share guidance between $1.84 to $1.89 and expected investments to range between $900 million and $1.1 billion. However, acquisition guidance was lowered to $250 million per quarter due to market uncertainties.
Despite the damage reported on five out of 103 properties affected by recent hurricanes, the company maintains a commitment to a strong balance sheet and a conservative growth outlook. In the recent developments, the tenant base expanded from 100 to 400, increasing predictability in deal flow, and the company sold nine properties for $17 million in the quarter. Essential Properties is also actively working to build new relationships and expand the acquisition and underwriting team.
InvestingPro Insights
Essential Properties Realty Trust’s new ATM equity offering program aligns with its strong financial performance and growth trajectory. According to InvestingPro data, the company has demonstrated impressive revenue growth of 27.83% over the last twelve months, with a robust gross profit margin of 98.78%. This financial strength supports the company’s decision to initiate a larger ATM program.
InvestingPro Tips highlight that Essential Properties has raised its dividend for 6 consecutive years, indicating a commitment to shareholder returns. This is particularly relevant given the company’s intention to use the proceeds from the ATM program for general corporate purposes, which could include enhancing shareholder value.
The company’s stock has shown a significant price uptick over the last six months, with a total return of 32.15% during this period. This positive momentum, combined with analysts’ expectations of continued profitability, suggests that the market may be receptive to the new equity offering.
For investors seeking more comprehensive analysis, InvestingPro offers 8 additional tips for Essential Properties Realty Trust, providing deeper insights into the company’s financial health and market position.
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