EPR PROPERTIES Q4 FY2024 earnings call

Management Statement and Operational Highlights

• Financial Growth: Delivered 3.4% earnings growth for full year 2024 after removing out-of-period deferred rent and interest collections. Box office performance in 2H 2024 was strong, with 2025 North American box office estimated $9.3B-$9.7B.
• Portfolio Expansion: Expanded experiential portfolio using operating cash flow, reduced theater/education investments, and recycled proceeds. Benefited from Regal Master Lease percentage rent structure in inaugural year.
• Dividend Increase: Announced 3.5% increase in monthly cash dividend, well covered and with financial flexibility.
• Investment and Disposition Guidance: 2024 investment spending $263.9M; 2025 investment guidance $200M-$300M; 2024 disposition proceeds $74.4M, 2025 disposition guidance $25M-$75M.
• Reporting Change: Bifurcated coverage universe to show theater vs non-theater impact, returning to normal portfolio reporting in 2025.

Segment Performance

• Experiential Portfolio: Approximately $6.4 billion, accounting for 93% of total investments. Comprises 278 properties with 51 operators, 99% leased or operated (excluding vacant properties intended for sale).
• Education Portfolio: 68 properties with 8 operators, 100% leased (excluding vacant property intended for sale).
• Ski Portfolio: Q4 and trailing 12-month revenue and EBITDARM up vs same periods in 2023; benefited from early-season snowfall.
• Eat & Play Sector: Q4 and trailing 12-month revenue/EBITDARM slightly down vs same periods in 2023; anchored by Topgolf, with Andretti Karting expanding relationships.
• Fitness and Wellness Portfolio: Trailing 12-month revenue and EBITDARM increased.
• Education Portfolio: Trailing 12-month revenue up 2%, EBITDARM down 3% due to operating cost increases.

Guidance

• FFO Adjusted: 2025 guidance $4.94-$5.14 per share, midpoint 3.5% growth.
• Investment Spending: 2025 guidance $200M-$300M.
• Disposition Proceeds: 2025 guidance $25M-$75M.
• Quarterly Expectations: First quarter 2025 results expected to be ~$0.10 per share lower than full year divided by four.
• Dividend: 3.5% increase in monthly cash dividend, well covered by AFFO.

Risks

• Macro Environment: Challenges affecting performance.
• Expense Volatility: High insurance costs and other operating expenses pose challenges.
• Asset Sales Uncertainty: Uncertainty in theater asset sales and RV park investments.
• Strike Impact: Writers/actors strikes previously affected box office and theater performance.

Question and Answer

• Q: How are the two remaining RV parks performing vs the exited Louisiana one?

A: Breaux Bridge RV park underperformed, while others like Jellystone are more established; Kozy Rest is normalizing with new cabins and amenities.

• Q: Future investments in lodging assets?

A: Prefer net lease structures over operating; still bullish on hot springs as part of attraction but not operating structures.

• Q: Yields needed for investments?

A: Cost of capital considerations; equity and debt costs down, looking for 100-150 basis points spread.

• Q: Kartrite performance and long-term options?

A: Facing challenges like shutdowns, balconies, high operating expenses; working to improve but needs better performance to exit operating.

• Q: Percentage rents and box office dependency?

A: Theater box office drives Regal percentage rents; other properties contribute, better operating performance could drive higher end.

• Q: Credit loss and funding 2025 investments?

A: Credit loss ~1% of EBITDA; sources include dispositions, free cash flow, and potential bond deals to manage debt maturity.

• Q: Exit from Jellystone/Yogi Bear JV properties?

A: Relative value will determine; contribution is insignificant, may exit if redeployable into net lease.

• Q: Drivers of stronger second half movie theater?

A: More normalized number of titles, consumer habit formation.

• Q: Capital allocation for 2025 investments?

A: Generally 50-50 between development and acquisitions, with projects like Andretti Karting and Diggerland.

• Q: Depth of buyers for theater dispositions and cap rates?

A: Agnostic on vacant theaters; better real estate leads to better transactions; leased properties in market, one under contract with ~9% cap rate.

• Q: Expense pressures and insurance?

A: Insurance costs starting to top out but still a wildcard; managing through challenges.