Essential Properties Realty Trust (EPRT) risk factors, FY2025 10-K

Risks Related to Our Business and Properties

1. 01We are subject to risks related to the ownership of commercial real estate that could adversely impact the value of our properties
2. 02Adverse changes in the U.S., global and local markets and related economic and supply chain conditions may materially and adversely affect us and the ability of our tenants to make rental payments to us
3. 03Our business is dependent upon our tenants successfully operating their businesses, and their failure to do so could materially and adversely affect us
4. 04Our assessment that certain businesses are more insulated from e-commerce pressure than many others may prove to be incorrect, and changes in macroeconomic trends may adversely affect our tenants, either of which could impair our tenants' ability to make rental payments to us and materially and adversely affect us
5. 05Properties occupied by a single-tenant pursuant to a single-tenant lease subject us to significant risk of tenant default
6. 06Periodically, we have experienced, and we may experience in the future, a decline in the fair value of our real estate assets, resulting in impairment charges that impact our financial condition and results of operations
7. 07Geographic, industry and tenant concentrations reduce the diversity of our portfolio and make us more susceptible to adverse economic or regulatory developments in those areas or industries26% rewritten
8. 08The vast majority of our properties are leased to unrated tenants whose credit is evaluated through our internal underwriting and credit analysis. However, the tools and methods we use, such as property-level rent coverage ratio, may not accurately assess the investment related credit risk
9. 09We may be unable to renew expiring leases with existing tenants or re-lease spaces to new tenants on favorable terms or at all29% rewritten
10. 10Our ability to realize future rent increases on some of our leases may vary depending on changes in the CPI
11. 11Inflation may materially and adversely affect us and our tenants
12. 12Some of our tenants operate under franchise or license agreements, and, if they are terminated or not renewed prior to the expiration of their leases with us, that would likely impair their ability to pay us rent
13. 13The bankruptcy or insolvency of a tenant could result in the termination or modification of such tenant's lease and material losses to us
14. 14Property vacancies could result in us having to incur significant capital expenditures to re-tenant the properties
15. 15Defaults by borrowers on loans we hold could lead to losses
16. 16We may be unable to identify and complete acquisitions of suitable properties, which may impede our growth, and our future acquisitions may not yield the returns we seek
17. 17Our real estate investments are generally illiquid which could significantly impede our ability to respond to market conditions or adverse changes in the performance of our tenants or our properties and which would harm our financial condition
18. 18Our growth depends on third-party sources of capital that are outside of our control and may not be available to us on commercially reasonable terms or at all
19. 19Loss of senior executives with long-standing business relationships could materially impair our ability to operate successfully

Risks Related to Environmental Matters, Related Compliance and Climate Change

1. 20The costs of compliance with or liabilities related to environmental laws may materially and adversely affect us
2. 21Insurance on our properties may not adequately cover all losses and uninsured losses could materially and adversely affect us
3. 22Compliance with the Americans with Disability Act of 1990 (the “ADA”), fire and safety regulations, and other regulations may require us to make unanticipated expenditures
4. 23Our business is subject to risks associated with climate change and our sustainability strategies

Risks Related to Our Indebtedness

1. 24As of December 31, 2025, we had $2.5 billion of indebtedness outstanding, which requires substantial cash flow to service, subjects us to covenants and refinancing risk and the risk of default
2. 25Our business plan depends on external sources of capital, including debt financings, and market conditions could adversely affect our ability to refinance existing indebtedness or obtain additional financing for growth on commercially acceptable terms or at all
3. 26A downgrade in our credit ratings could have a material adverse effect on our business and financial condition
4. 27We have engaged in hedging transactions and may engage in additional hedging transactions in the future; such transactions may materially and adversely affect our results of operations and cash flows
5. 28Our debt financing agreements contain restrictions and covenants which may limit our ability to enter into, or obtain funding for, certain transactions, operate our business or make distributions to our common stockholders
6. 29Mortgage debt obligations expose us to the possibility of foreclosure, which could result in the loss of our investment in any property subject to mortgage debt

Risks Related to Our Organizational Structure

1. 30We could increase or decrease the number of authorized shares of stock, classify and reclassify unissued stock and issue stock without stockholder approval
2. 31Our Board may change our investment and financing policies without stockholder approval, including those with respect to borrowing, and we may become more highly leveraged, which may increase our risk of default under our debt obligations25% rewritten
3. 32Our rights and the rights of our stockholders to take action against our directors and officers are limited
4. 33We are a holding company with no direct operations and rely on funds received from our Operating Partnership to make any distributions to stockholders and to pay liabilities
5. 34Conflicts of interest could arise in the future between the interests of our stockholders and the interests of holders of units in our Operating Partnership, which may impede business decisions that could benefit our stockholders

Risks Related to Our Status as a REIT

1. 35Failure to continue to qualify as a REIT would materially and adversely affect us and the value of our common stock, and even if we continue to qualify as a REIT, we may be subject to certain additional taxes
2. 36If our Operating Partnership fails to qualify as a partnership for U.S. federal income tax purposes, we will cease to qualify as a REIT and suffer other adverse consequences
3. 37To maintain our REIT status, we may be forced to borrow funds during unfavorable market conditions, and the unavailability of such capital on favorable terms at the desired times, or at all, may cause us to curtail our investment activities and/or to dispose of assets at inopportune times
4. 38Our ability to provide certain services to our tenants may be limited by the REIT rules or may have to be provided through a taxable REIT subsidiary
5. 39The IRS may treat sale-leaseback transactions as loans, which could jeopardize our REIT status or require us to make an unexpected distribution
6. 40Dividends payable by REITs do not qualify for the reduced tax rates available for some dividends
7. 41The tax imposed on REITs engaging in “prohibited transactions” may limit our ability to engage in transactions which would be treated as sales for U.S. federal income tax purposes
8. 42Complying with REIT requirements may limit our ability to hedge effectively and may cause us to incur tax liabilities
9. 43Complying with REIT requirements may affect our profitability and may force us to liquidate or forgo otherwise attractive investments
10. 44There is a risk of changes in the tax law applicable to REITs26% rewritten

Risks Related to the Ownership of Our Common Stock

1. 45Changes in market conditions and volatility of stock prices could adversely affect the market price of our common stock
2. 46Increases in market interest rates may result in a decrease in the value of shares of our common stock
3. 47We may be unable to continue to make distributions at our current distribution level, and our Board may change our distribution policy in the future
4. 48Sales of substantial amounts of our common stock or securities convertible into or exercisable or exchangeable therefor, or the perception that such sales might occur, could reduce the price of our common stock and may dilute your voting power and your ownership interest in us
5. 49We may be vulnerable to security breaches or cyber attacks which could disrupt our operations and have a material adverse effect on our financial condition and operating results52% rewritten
6. 50information could also result in violation of data privacy laws and regulations, proceedings against us by governmental entities or others, fines and penalties, or damage to our reputation and credibility with regulators, tenants and investorsNew
7. 51We may become subject to litigation, which could materially and adversely affect us
8. 52We depend on key personnel
9. 53Material weaknesses in or a failure to maintain an effective system of internal control over financial reporting or disclosure controls could prevent us from accurately and timely reporting our financial results, which could materially and adversely affect us
10. 54Changes in accounting standards may materially and adversely affect us