Essential Properties Realty Trust, Inc. Announces Public Offering of Common Stock
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Insights
Essential Properties Realty Trust's decision to initiate an underwritten public offering of 8 million shares on a forward basis is a strategic move to raise capital without an immediate dilution of share value. The involvement of reputable financial institutions as joint book-running managers signals confidence in the offering's success. Forward sale agreements provide a hedge against market fluctuations, allowing the company to potentially lock in a sale price for the shares, mitigating the risk of future stock price volatility.
The option granted to underwriters to purchase an additional 1.2 million shares indicates a potential for over-allotment, which could lead to additional capital if the offering is well-received. Investors should note that while the company will not receive immediate proceeds from the initial sale of shares by the forward purchasers, the eventual settlement of these agreements within the next 12 months could inject significant capital into the company, earmarked for general corporate purposes and future investments.
It is critical to monitor the company's use of the net proceeds from the settlement of the forward sale agreements. The allocation of funds towards the company's operating partnership in exchange for OP Units suggests a reinvestment strategy aimed at fostering growth and expansion. The impact on the stock price will depend on investor perception of the company's growth prospects and the effectiveness of its capital allocation strategy.
The public offering by Essential Properties Realty Trust, Inc. appears to be a calculated effort to capitalize on current market conditions. The structure of the forward sale agreements allows the company to defer equity dilution while potentially securing capital for future use. This move could be indicative of the company's confidence in its long-term strategy and its ability to deploy capital effectively towards accretive investments.
For market observers, the key factors to watch include the response of the market to the offering, the final terms of the forward sale agreements and the subsequent investment plans outlined by the company. Success in these areas could position Essential Properties Realty Trust favorably among competitors, particularly if the proceeds are used to secure high-quality assets or to improve the company's balance sheet.
The real estate investment trust (REIT) sector is sensitive to interest rate changes and the timing of this offering may reflect an attempt to preempt any adverse market conditions stemming from rate hikes. The company's strategic use of forward sale agreements could serve as a benchmark for other REITs considering similar capital raising efforts.
The offering is conducted under the company's effective shelf registration statement with the SEC, which allows for timely capital raising under federal securities laws. The preliminary prospectus supplement, alongside the prospectus, will provide investors with necessary legal disclosures, including risks associated with the forward sale agreements and the potential impact of the underwriters' over-allotment option.
Investors and stakeholders should review these legal documents carefully to understand the terms of the offering and the obligations of both the company and the forward purchasers. The forward sale agreements' structure must comply with securities regulations and the conditions under which the forward purchasers or their affiliates may not be required to borrow and sell shares are particularly noteworthy.
It is also essential to ensure that the offering adheres to the regulations of each state or jurisdiction involved, as the press release clearly states that the securities will not be sold where it would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction.
BofA Securities, Wells Fargo Securities, Truist Securities and Mizuho are acting as the joint book-running managers for the offering.
In connection with the offering, the Company expects to enter into forward sale agreements with BofA Securities, Wells Fargo Securities, Truist Securities and Mizuho (or affiliates thereof) (the “forward purchasers”), with respect to 8,000,000 shares of the Company’s common stock.
The underwriters have been granted a 30-day option, exercisable in whole or in part from time to time, to purchase up to an additional 1,200,000 shares of the Company’s common stock. If the option to purchase additional shares of the Company’s common stock is exercised, the Company expects to enter into one or more additional forward sale agreements with the forward purchasers in respect of the number of shares of the Company’s common stock that are subject to exercise of the option to purchase additional shares.
In connection with the forward sale agreements and any additional forward sale agreements, the forward purchasers (or their affiliates) are expected to borrow from third parties and sell to the underwriters an aggregate of 8,000,000 shares of the Company’s common stock (or an aggregate of 9,200,000 shares of the Company’s common stock if the underwriters’ option to purchase additional shares is exercised in full). However, a forward purchaser (or its affiliate) is not required to borrow and sell such shares if, after using commercially reasonable efforts, such forward purchaser (or its affiliate) is unable to borrow such shares, or if borrowing costs exceed a specified threshold or if certain specified conditions have not been satisfied. If a forward purchaser (or its affiliate) does not deliver and sell all of the shares of the Company’s common stock to be sold by it to the underwriters, the Company will issue and sell to the underwriters a number of shares of its common stock equal to the number of shares that such forward purchaser (or its affiliate) did not deliver and sell, and the number of shares underlying the relevant forward sale agreement or such additional forward sale agreement will be decreased by the number of shares that the Company issues and sells.
Pursuant to the terms of the forward sale agreements and any additional forward sale agreements, and subject to its right to elect cash or net share settlement, the Company intends to issue and sell, upon physical settlement of the forward sale agreements and any additional forward sale agreements, an aggregate of 8,000,000 shares of common stock (or an aggregate of up to 9,200,000 shares of common stock if the underwriters’ option to purchase additional shares is exercised in full) to the forward purchasers. The Company expects to physically settle the forward sale agreements and any additional forward sale agreements within approximately 12 months from the date of the prospectus supplement relating to the offering.
The Company will not receive any proceeds from the sale of shares of its common stock by the forward purchasers (or affiliates thereof). The Company intends to contribute any net proceeds from the settlement of the forward sale agreements to the Company’s operating partnership in exchange for OP Units, and the operating partnership intends to use such net proceeds for general corporate purposes, including potential future investments.
All of the shares of common stock will be offered pursuant to the Company’s effective shelf registration statement filed with the Securities and Exchange Commission (the “SEC”). A preliminary prospectus supplement and accompanying prospectus relating to the offering will be filed with the SEC. When available, a copy of the preliminary prospectus supplement and accompanying prospectus relating to the offering may be obtained from BofA Securities, Inc., NC1-022-02-25, 201 North Tryon Street,
This press release does not constitute an offer to sell or the solicitation of an offer to buy nor will there be any sale of these securities in any state or other jurisdiction in which such an offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction.
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the federal securities laws. When used in this press release, the words “expect” and “will,” or the negative of these words, or similar words or phrases that are predictions of or indicate future events and that do not relate solely to historical matters, are intended to identify forward-looking statements. You can also identify forward-looking statements by discussions regarding strategy, plans or intentions. Forward-looking statements involve numerous risks and uncertainties and you should not rely on them as predictions of future events. Forward-looking statements depend on assumptions, data or methods that may be incorrect or imprecise. The Company does not guarantee that the transactions and events described will happen as described (or that they will happen at all). You are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of this press release. While forward-looking statements reflect the Company’s good faith beliefs, they are not guarantees of future performance. The Company undertakes no obligation to publicly release the results of any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date of this press release or to reflect the occurrence of unanticipated events, except as required by law. In light of these risks and uncertainties, the forward-looking events discussed in this press release might not occur as described, or at all.
Additional information concerning factors that could cause actual results to differ materially from these forward-looking statements is contained from time to time in the Company’s SEC filings, including its Annual Report on Form 10-K for the year ended December 31, 2023. Copies of each filing may be obtained from the Company or the SEC. Such forward-looking statements should be regarded solely as reflections of the Company’s current plans and estimates. Actual results may differ materially from what is expressed or forecast in this press release.
About Essential Properties Realty Trust, Inc.
Essential Properties Realty Trust, Inc. is an internally managed REIT that acquires, owns and manages primarily single-tenant properties that are net leased on a long-term basis to companies operating service-oriented or experience-based businesses. As of December 31, 2023, the Company’s portfolio consisted of 1,873 freestanding net lease properties with a weighted average lease term of 14.0 years and a weighted average rent coverage ratio of 3.8x. In addition, as of December 31, 2023, the Company’s portfolio was
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Investor/Media:
Essential Properties Realty Trust, Inc.
Robert W. Salisbury, CFA
Senior Vice President, Head of Capital Markets
609-436-0619
investors@essentialproperties.com
Source: Essential Properties Realty Trust, Inc.
FAQ
How many shares of common stock is Essential Properties Realty Trust, Inc. (EPRT) offering in the public offering?
Who are the joint book-running managers for the offering of Essential Properties Realty Trust, Inc. (EPRT)?
What is the option granted to the underwriters in the public offering of Essential Properties Realty Trust, Inc. (EPRT)?
How does Essential Properties Realty Trust, Inc. (EPRT) plan to use the net proceeds from the public offering?
Where can a copy of the preliminary prospectus supplement and accompanying prospectus relating to the offering be obtained?
