2024-05-07 13:02:17 ET
Summary
- EPRT's business model focuses on sale and leaseback transactions with middle market, non-investment grade rated businesses in service-oriented and experience-based industries.
- This tenant profile usually translates to EPRT commanding higher cap rates than its peers. Unfortunately, this also means that EPRT has a higher cost of capital.
- The current negative investment spread and elevated interest rate environment suggest that investors should wait for a positive spread to be demonstrated at a minimum before investing in EPRT.
- EPRT is also trading at the upper range of their net asset value per share, which also points to limited upside from here.
Introduction
In their Q1 2024 earnings call , Essential Properties Realty Trust, Inc.'s ( EPRT ) CEO updated the 2024 adjusted funds from operations (AFFO) guidance to a range of $1.72 to $1.75 which implies a 5.15% growth in AFFO at the midpoint as compared to 2023. Please take a look at Table 1 for EPRT's AFFO yield using the AFFO estimate and the stock's closing price on May 6th 2024.
Table 1: AFFO Yield | |
2024 AFFO guidance at midpoint | $1.735 |
Share price at the close on 5/6/24 | $27.15 |
AFFO Yield | 6.39% |
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For further details see:
Essential Properties: Exposure To Consumer Discretionary Is Hurting Investment Spreads