Essential Properties Realty Trust

The firm sources properties primarily through direct relationships with regional operators, franchisees, and developers rather than through institutional brokerage channels. This relationship-heavy approach lets the underwriting team access properties before they come to market broadly, and it keeps the pipeline aligned with middle-market tenants — typically operators running 5 to 50 locations — rather than public-company sale-leaseback transactions.

Essential runs a deliberately granular portfolio with roughly 1,900 properties and a top-ten tenant concentration below 16% of rent, whereas Realty Income concentrates more rent in larger, investment-grade tenants. The bigger structural difference is underwriting: Essential's credit committee reviews individual franchisee unit economics rather than relying on corporate parent credit ratings, which means the firm accepts more operator-level risk in exchange for higher cap rates and avoids the single-brand blow-ups that have hit peers when large tenants file for bankruptcy.

A triple-net lease requires the tenant to pay property taxes, insurance, and maintenance costs in addition to rent. For Essential, this structure means the rent it collects carries almost no property-level operating expenses — the tenant bears the cost of roof repairs, parking lot resurfacing, and insurance premiums — so the income stream converts into free cash flow at a very high rate and the firm needs minimal property-management staff.

Essential targets industries where the property is operationally essential to the tenant — quick-service restaurants, car washes, medical and dental services, automotive repair, and early-childhood education. The firm has explicitly avoided office properties, pure industrial assets, and sectors with high obsolescence risk or heavy capex requirements. The guiding principle is whether a tenant would find it difficult to relocate their business quickly; if the answer is no, the property is less likely to generate stable long-term rent.

Pete Mavoides, the CEO and founder, leads the investment process alongside an internal credit committee that evaluates every acquisition. The firm operates as an internally managed REIT, meaning there is no external advisor or management fee structure — the investment team are direct employees of Essential, and their compensation aligns with the REIT's total shareholder return rather than asset-gathering incentives.

The firm has historically maintained a largely fixed-rate debt stack, consistent with the long-duration, predictable income stream its triple-net leases produce. This posture protects the dividend coverage ratio when short-term rates rise and distinguishes Essential from some leveraged net-lease acquirers that carry floating-rate credit-line exposure into rising-rate environments.

Essential actively manages the portfolio and will sell properties when a tenant's credit profile deteriorates or when a location no longer meets the firm's underwriting standard. The disposition process is handled by the same internal team that sources acquisitions, which gives the firm visibility into the resale market and helps them recycle capital into higher-yielding transactions without relying on a separate asset-management division.