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NJ-Based Net Lease REIT Raises $455 Million in IPO

Single-Tenant Specialist Essential Properties Acquires Everything from Movie Theaters, Fast-Food and Car Washes to ER Clinics
June 22, 2018
Cushman & Wakefield isn't the only commercial real estate firm testing the public markets this week. Essential Properties Realty Trust, Inc., a real estate investment trust that owns and manages triple-net, single-tenant commercial properties, raised $455 million by offering 32.5 million shares at $14.

The $14 per-share offering was at the low end of what the company hoped to raise, which was net proceeds of $542.7 million at $17 a share. The shares began trading Thursday on the New York Stock Exchange under the symbol EPRT priced at $13.61 in after-hours trading and were trading in roughly the same range Friday morning.

With the completion of the offering, Princeton, NJ-based Essential Properties will sell 7.79 million shares of common stock and 1.14 million common units in the company’s operating partnership in a private placement to a subsidiary of Eldridge Industries, LLC, the company’s main equity provider, for $125 million.

The company intends to use the net proceeds and the private placement to repay about $288 million in payable notes and for general corporate purposes, including potential future investments.

Goldman Sachs & Co. LLC and Citigroup are acting as lead book-running managers for the offering and as representatives of the underwriters, Barclays, BofA Merrill Lynch and Credit Suisse are acting as joint book-running managers for the offering.

The company's first purchase was the June 2016 acquisition of a portfolio of 262 net-leased properties, mostly restaurants, sold as part of the liquidation of General Electric Capital for $280 million.

The company's properties include restaurants, car washes, automotive services, medical services, convenience stores, entertainment, early childhood education, health, and fitness.

As of March 31, Essential had a portfolio of 530 properties, 99.1 percent occupied by 127 tenants in 15 industries across 42 states. None of its tenants contribute more than 6.8 percent of its total annual base rent, and the average remaining lease term is a solid 13.8 years, with less than 4.5 percent of leases expiring prior to 2023.

More than 95 percent of leases providing for increases in future base rent at a weighted average rate of 1.5 percent per year. 64.8 percent of the base rent was attributable to master leases.
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