EPR - Earnings call transcript Q2 2019

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Operator

Hello, ladies and gentlemen. Welcome to the Second Quarter EPR Properties 2019 Earnings Call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host, Brian Moriarty.

Brian Moriarty

Thank you, operator. welcome. and everybody, Hi, us our joining earnings quarter call. today for second for XXXX Thanks call you anticipate Private by may start believe, words today I'll the intend, be, informing comparable XXXX, by statements continue, terms. defined as will Act expect, include as that other by Litigation the hope, Securities may, identified such or forward-looking call this of forward-looking The company's by materially such statements. from vary actual financial operations condition those may and results contemplated forward-looking statements to reports Discussion these of XX-Q. differ could SEC company's results factors on and company's contained these materially are filings, that cause XX-K the the in from including Form

Now the over and President I'll turn to Greg company call Silvers. CEO,

Greg Silvers

available Thank call Peterson, www.eprkc.com. discuss XXXX you, I'd then everyone the with like get everyone. Welcome and are via turn the detail, the morning, remind started the headlines, who CFO, earnings will follow summary. website our to to to our financial I'll our along at call. business good second quarterly Mark company's to greater company's quarter slides over review in Brian, that

get We productive strong of headline. theaters. by year, half anchored We've the $XXX had spending nearly deployed, highlighted for XX-theater with million our acquisition started with of volume. momentum quarter strong investment our established the a first by investment Let's spending first Regal

we're In addition to assets we seeing. of Recreation volume, be continue very to quality the and pleased with Entertainment the

years of strong assets. focused continues experiential position leader are consumer space, relationships, Our over in forging the for as XX pay experiential demand unique the as strong the to capturing on operators dividends built

Enhanced Our portfolio second headline: profile. credit

respective our of time, their which operations generate largest Parks, of Resorts of strengthened. The cash highly strong profile of both Resorts, assets and credit our acquiring portfolio recent flows, that anticipated Six year, certain players Flags are consistently desired Vail over announcement past in has to the the Over industries. earlier announcement of the process of by high-quality speak Peak identifying acquisition our Premier

continue by the they assets and demonstrate the as Experiential continues reflected million nearly it's Our to that ski with rents, for third continue perform. opening dollars performance our assets season, their can family, outstanding our experiences to the King's headline: desire whether Lion consumer live-action experiences for deliver, The assets to increased share $XXX spend on friends weekend, percentage colleagues. their consumers or this

and our Our take balance positioning capacity. advantage headline: us. fourth the before the of strength opportunities balance importance sheet recognize to sheet of We

This equity us million The upsized market the to support quarter allowed of favorable equity issuance provides guidance. all pricing, equity the $XXX year-to-date. very of experiential our to nearly spending and fund during has strategy had million investment our $XXX issue need nearly we

of take presented. well are advantage and experiential assets the positioned We the interest in to opportunities increasing

are to we We spending increasing guidance on to with investment that this execute plan. increasing spending are and spending our our investment we're report headline: fifth investment guidance. Our pleased about narrative, Consistent confident are ability our

Now quarter more let me go the in detail. into

the occupied. in of the billion, total were were XX% At properties $X.X investments XXX with second our service quarter, over end that

$XX.X million. worth During dispositions $XXX.X proceeds investment the was and spending our million quarter, from

and our rent X.XXx, at of our strength portfolio. company-level Additionally, demonstrates coverage the was which consistency

XX X Now end, of our quarter on development, properties Recreation I'll and X segments: total update included portfolio provide properties operators. approximately $X.X Entertainment, and XXX Education. investments, Entertainment an service in our At billion with under

X.XXx. occupancy Our our XX%, and was was rent coverage

include with industry full and or to Lion million, Entertainment At of acquisition of prior in Skywalker. optimistic the at a Regal of end, back total year slightly included XX XX Rise million by segment remains Investment King, theaters XXXX levels. billion half under The benefit record above Regal year portfolio million half sale-leaseback demonstrates Office investments, the of all-time totaled Recreation acquisitions and record and II operators. The industry highlighted about Box for to in Wars: $XXX.X part but live-action spending driven continues $XXX.X to and the acquisitions. XXXX Frozen the Key perform our executing X by Cineworld. theater XX $XXX.X the of development, for our back Star titles with transaction continues quarter large deep sophistication aforementioned in the $X.X approximately expect large-scale in year, our the relationships and our property of of the releases our scheduled year-to-date year The service the properties the results lag

XXX%, coverage occupancy approximately rent our Our and was was X.XXx.

XX Our received water and been May its the opening guests. had park hotel our community, grand on in Kartrite, local journalists well The by has Catskills, and the resort travel

Now season for we this summer new increasing are started that demand the offering. Northeast, seeing has resort the in

the The on We through building various expect and in $XX.X included segment to park of and year operations of developments while the million of continue totaled hotel golf of $XX one primarily ramp-up, the attraction consisting balance Kartrite properties: to at first Investment be entertainment X which complexes Recreation for the attractions. approximately $XX channels. build-to-suit water our marketing million awareness acquisition million, spending

On the of the anticipated, front. facilitated water we estate. parks million and Cedar of purchase operating payoff on the including Group's $XXX.X This disposition real business Fair's $XXX mortgage Schlitterbahn On in Schlitterbahn by full our both was for X million, received July payment note. as X, Texas

financials, became Additionally, announced per day where and is double, still Vail customer fifth-largest the a the operator our were of would a Resorts announcement, $XX shares XXX%. peak dovetails top-tier our Vail of customer conditions, as shareholders. demand the such experiential assets revenues. operators. properties recognized credit and and entity customer. second valuations Parks shows This the Peak X highlight ski in premium tend we price the more rising Vail XX approval History at XXXX share been have acquired to the time on to The they resort. and Northstar, of transaction Vail being operators. based on the our than subject Cedar with California The closing to a Premier before over approval best from the premium that Flags quality industry's various migrate by that our closed best upgrade is top last The and placed Peak was credit Peak Based regulatory week, Fair on Resorts. combined quarter industry's assets the our when assets Six for transactions purchased by

our quarter operators. and As billion with approximately in development, these total real At X included experiential REIT our market-leading of the experiential portfolio under real validate transactions further $X.X estate, investments, XX in owning estate. thesis Education market-dominant service properties of end, properties XXX investment

our consisting of build-to-suit rent X.XXx. $XX.X and approximately primarily and Education schools, XX% was occupancy was redevelopments education coverage schools million, totaled and childhood Our our centers. segment public developments early charter spending of Investment in private

related and disposition parcel. in million During quarter, we the X charter of including fees. disposition The operating $X.X received to segment, $XX Education land the X second schools properties termination million proceeds included

months. transition schools of are CLA their remaining substantial successfully on over to the of CLE they progress and XX our end X Creme. to creme. excellent over anticipate July, our la we applications, Creme schools transferred We the creme have de next the remaining with CLA progress taking making continues the make XX properties license X -- of Through to

both tenants respective schools. are rent on Additionally, timely paying their their

will for to I discussion it the turn of Mark a financials. over With that,

Mark Peterson

our that I'd quarterly our you, website. be downloaded Greg. from Thank the investor to supplemental on like call remind can everyone

year. Now the prior share million quarter or $X.XX million $XXX in $X.XX $XX.X compared turning was compared the to year. FFO $XX.X the income to second per the for in to net was or slide; share million first million prior per $XX.X

$X.XX for per FFOs Lastly, $XXX.X share versus adjusted the the in versus million and share per $X.XX in $XXX.X year. the prior year quarter million was was prior

quarterly During by the Och-Ziff secured of the prepayment fees by real of mortgage properties. large results. year the note skews in XXXX, of million second $XX.X the estate we that quarter primarily a ski This related to prior prepayment payoff recognized was comparative

adjusted you almost per exclude our FFOs increased this by If prior year. share versus X% income,

through I X to FFO adjustments as come key adjusted. want Before discuss to variances, walk to FFO the I to

X to $XX.X recognized FFO for fees the million gain including our year. of been the options, sale most although to the which of quarter, increase of have that most of second is will proceeds timing-related we fees, revised the the These year. FFO expected and -- is this on quarter than tenet net for termination of as to half on versus get I First, charter in has purchase I guidance which this this million, schools discuss higher pursuant added we during for completed when were the more adjusted. had expected later $X.X earnings of sale, public a to

transfer indoor related costs this million transaction to Second, $X.X of million during resort the related water to million of quarter. quarter, Creme the with X and the preopening and The $X.X $X.X for amount expenses CLAs to park in connection were Kartrite

item prior through versus variances line the for year. walk me let Now the quarter key the

prior $XXX.X $XXX.X from Our total million to revenue the decreased year to million. compared

Within the rental by offset partially $XX.X resulted revenue the prior million of increase year revenue $XXX.X dispositions. This revenue related and to million. was rental the new category, by from versus investments to increased impact

increase of higher is operating the discussed offset last that of million Additionally, lease by quarter to expense. new relates $X.X the the property accounting I adoption standard

and also and properties, quarter education performance $X.X year. our schools. million This ski included related the versus exceeded revenue strong our for the private rent to our percentage early $X.X in expectations rental million Additionally, increase properties prior a at of CLA

as leases. was $XX.X last $X.X prepayment prior million for financing the discussed million prior to versus and operated well lodging year. versus the the other of in XXXX the related were and that year revenue as the fees $XX.X including no Kartrite, earlier being and the related structure. I sale $XX.X is the quarter our Schools primarily income classified July to in quarter that which by due Other million year $X.X of increased during of received payoffs, opened in financing traditional from REIT direct The to Imagine investment million was primarily Mortgage as income The under million X decrease

operations On tax other benefit was and Kartrite. $X.X tax expense the to Canadian the to mostly increase $X.X to for benefits is The of quarter The $XXX,XXX expense properties. expense in year. due higher This related related side, primarily our the of versus million of the Kartrite deferred prior the million Income in

credit are next some the as I'll a excluded of reminder, deferred adjusted. Through from FFO taxes key slide, As the company's ratios. review

strong, to This large $XXX used to debt-to-adjusted Regal proceeds be debt coverage were X.Xx, earnings at transaction, as payoff the see, slightly XX in of X.Xx not only with our higher to July EBITDA a were X.Xx well coverage stated interest thus, received proximately of June coverage continue that of fixed month you and to the the our As our the of ratio quarter our on due at X.Xx and notes end. of and at X.Xx, a service range that was can coverage had pay at quarter. million X also and we ratio charge X.Xx until was ratios net credit which Schlitterbahn from impact expecting down had closed were as the of line partial than

net X our you lower EBITDA impact If at forma debt the of X.Xx. XX, to transactions adjusted pro June these at was

Our assets at a book on XX% basis net XX% was to June a and on market debt XX. gross basis

of markets for $X billion pay debt I'll swaps $X.X $X of either which that hand. total liquidity debt We the on unrestricted blended reflect billion, through capital with million quarter a our $XXX fixed proceeds Now $XXX our been discussed, we on outstanding had of that which rate $X.X received line note we of X.X%. from interest million does million turn the approximately and of I of had on cash credit, million end, At X July debt or slide update. at outstanding coupon quarter just to has down course had the of next end is not fixed-rate and

years maturities a average debt of pleased XXXX. until X are maturity We to debt weighted approximately have no and

DSPP our with have we investment along common at under share. Year-to-date, price During to our we stock maintaining enviable over a at in very of per opportunities. common the our in approximately issued million advantage plan million an while to equity raise pipeline $XXX prudent equity This took we earlier $XXX we investment and over cost. $XX low think have This had seen needing in of a market of us direct in the stock of raised quarter, was our level share average But the price strong plan per under leverage fund remainder approximately move puts the issuance our not was equity spending we substantially the now conservative volatility our year any despite share higher on this earnings the what the in near-term upsized impact and recent of position targets. our than attractive of plan, given plan. purchase

next Turning slide. to the

of our a $X.XX a to narrowing guidance to guidance million spending $XXX $X.XX increasing for of a FFOs $X.XX range $XXX of share range adjusted $X.XX million. per $XXX investment to We million of range million to for and from XXXX to range a are to from $XXX

last for million, payroll compensation that professional costs, are There, the our of million. $XXX expected than that primarily still We expense year. are by raising you of well G&A $X.X million and proceeds see confirming including supplemental. XXXX percentage rents to expected we Page be our Guidance G&A expense found million year for as is increasing $X.X interest disposition our incentive our due to increased can and XX fees. also to lower estimates as by of on will be participating Note $XXX

slide. next the to Turning

is FFO from to previous summary plan. be and our changing, a of changes the midpoint our the of share adjusted thought I expectations latest per provide it'd Although guidance not as helpful our

$X.XX, previous related then for a percentage participating share the then per rents for timing and $X.XX We Starting increase the per add with for share all the $X.XX for midpoint our add net. we G&A equity $X.XX of in of and $X.XX and size changes in timing favorable expected to earlier, in increase and spending per share and increase interest. other discussed issuance investment increase expected that $X.XX expense subtract the the per in I share

FFOs non-Education-related X% per for XXXX is other in to the expectation guidance no conclude, year continues over per we received our million as our To prepayment total for adjusted or note related these to for each prepayment for growth. for share, fees XXXX share offset Finally, in change excluding and of properties there of that $XX.X the year. such the reflect full midpoint changes $X.XX the termination fees $X.XX the Education of

I'll Greg Now back his over it turn with closing remarks. to that, for

Greg Silvers

company Thank quarter of equity quality our has EPR substantial its for incredible XX you, base, the as Mark. grown and prices Overall, an raised the attractive at this has asset been top materially capital list. customer upgraded

sheet and continue experiential and us front growth, in of and substantial well are team we're our upgrade by balance Our the estate of real for to opportunities our to excited grow positioned assets. portfolio

that, With I turn questions. why over it Operator? for don't

Operator

Markets. Please Your first go KeyBanc is of from Instructions] ahead. [Operator response Craig Mailman Capital

Craig Mailman

little on one fees of term Good this Kind you'd pulled do morning see guys, higher forward Mark, XQ lease you trending because mentioned the quick you how some. that one guidance. quarter's in were a balance XQ? and

Mark Peterson

Yes.

the fees collect predict quarters. hard both to expect in We It's always to timing.

think earlier. fees the good predicting we we for to to year quarter quarter, but unchanged for year. I terminations expect exactly the be prepayment for it -- don't and what the We control guided fees close they the termination from do we're to at when

Craig Mailman

here is to quarter. Okay. rates and or a you And help and year went low dilution. and the uncertainty when then to year equity was around the buy picture, get what's if to is end cost things. there just against want it of of year? But think trade and Och-Ziff back with on the market bring next capacity the restarted. when a bigger election investment you you balance guys, internally, kind range was head leverage a plenty NAV, more build thought are harder towards that you But the into the a to this of two kind have to your horizon I it to you at of with clearly ago discussion attractive raised overequitizing acknowledge good -- the trading $XX today, you you But that would in that guys you have as your we're premium you pipeline. than sitting of

Greg Silvers

mean, Craig. of the said, the quarter. is advantage we're at month priorities, practically a Mark our question, good it. clearly, looking hit one of It's second of kind our managing top sheet -- quarter balance I the we so that every and of always took DSPP within as And

So come but for the I managing we're not the for haul. Again, those quarter-to-quarter into think things of play performance us. long all

the us in that. would when and think issue mind there, it, to that a I more not warrants say it and we're I of exists the put top play. And long a for position -- is all so for second to situation us volatility that And our afraid, quarter that is equity out demonstrated

Craig Mailman

on us And I kind And guys the most pipeline. casino you In update just are acquisition just give attractive then opportunities? also Okay. here? are what mean, just could generally, you on better the opportunities? where an yields of segments seeing the

Greg Silvers

Yes.

Recreation think and consistently in with said still what I it's Entertainment we've kind area. the of

to best? is where opportunities and mid-Xs, and the at around I where I we're that we is mid-Xs a seeing depth lie, those think really -- there think or are seeing. we think quality X midpoint good

Additionally, as in continuing we We're that. talked gaming. to explore about

forward to as apprised announce. definitely market We that, keep nothing we have we'll with But move the of it.

Craig Mailman

guys. Thanks

Greg Silvers

you. Thank

Operator

Nick is Your Please from go response with next ahead. Joseph Citi.

Nick Joseph

Maybe did Cincinnati? Casino you. staying just Century or you transactions the on recent Thank bid on JACKS either gaming;

Greg Silvers

I And already our great that mindful larger Actually, overall transaction that not. deal I deal necessarily but the it think group of intention JACKS in we not a the Century for to we in assets, Missouri. we're was to the was us not well mean, -- think we at I really for probably rural probably play announced That's interesting want part look message transaction the a of send. an before on those space. comment it's did VICI, is a

Nick Joseph

expertise in been in REITs in for how sector about do gaming the have sector And the longer? game Excellent. other just who think you against competing

Greg Silvers

Yes.

And consulting a that to give we'll space, we properties. out, have into a knows are people we Shanks, -- that and has that us There also or everyone that are of and that. additional into fact of those basis if if expertise, who yes, allow -- these us of notice who would think points. will the well of it's our to I with the aware insight Board over hire -- we didn't years, long-time made on can you clearly I all XX Virginia that for couple point veteran a addition an gaming groups didn't move business, we when on and is

headcount commitment to So you'll that available resources we to move as we think But reflect and the are us of our I have a into space, get us. to your adding question, Nick, lot to it. see

Nick Joseph

Thank you.

Operator

next ahead. Please of RBC Your Brian go Hawthorne is Capital from Markets. response

Brian Hawthorne

Vail its is think my estate. wanting One out? real of they'd has a of answered. questions history Do EPR to you own want own to

Greg Silvers

Again, you'd several, to have about history been -- several we've I where Vail in by them I talk been with the Northstar had for we've to a leased -- that. leased has them years. asset a mean,

So entered relationship know. at up I in They in a into just don't leasing Utah. -- --

them So I would for direct us mindset don't opposed but as know if continuing, I you to to to that talk speaking them. is

Brian Hawthorne

Sure.

Okay. the more on And one at Has transaction the market all gaming. then competitive activity? one quick changed become given or recent

Greg Silvers

to materially think we I that know truly move competitive we're than date. different more that. if And think to it's makes net other function the it's that see it's -- it sense that you've we transaction the no can a and player capital, fourth become X lease, don't hoping become in sense in to seen I've don't players. I to it's that a got of fund But cost

Brian Hawthorne

you. Thank

Operator

Please from Mings James. Collin response is Raymond ahead. next of go Your

Collin Mings

the just Good Thanks. two attraction you acquired on properties the expand from quarter? question Can during you morning me. First everyone,

Greg Silvers

concessions market two admissions taking that we'll histories. is But what into roll large, we business wider experiential driving on properties we as again, again, we that. -- we and we'll not advantage with were but deeper -- think and museum more that space long color is got that what and think I put overall out, is of did additional

Collin Mings

the Okay, but just can shift the any And to there specifically? in talk then market you're some fair negative enough. front, just if you out just prepared Cedar headlines of seeing given there back going the transaction remarks, maybe the on

Greg Silvers

exceed be like I I is year a still solid And year's really. record this Not we -- going year last it's to and a year. said, that meet very or think believe

it Collin. we're about X%. to very the I sat and theater in go difficult the see business, you down one about just different any were and when quarter here a is talked at. we've where to in think it's we nearly Remember, -- now this, And we first XX% down quarter quarter, quarter

always going the was a of we be to So half this the year summer. knew building second through

content of has I we'll like it we that said, And this quality Hobbs It'll So the Fast the the but the we've content see that be referenced there, I the Lion audiences and on deliver King, with when coming we'll show up. that, was hold I Furious takeoff where until think is resiliency again Shaw judgment the get there. seen weekend. been there this end the the audience proven -- will and to always of we & year when

Collin Mings

any Got I I of hasn't it. movement point market, of understand that appetite really in transaction that an operational there? like standpoint, that the cap is out or caused from of terms in of just there guess terms anything buyer or rates but it sort kind your

Greg Silvers

No.

think I market. competitive still it's a

very read kind I the years us lease. all go of the And and kind move driving you space accepted I business guys, think with by what and think, demand will -- forward. Entertainment over strip and the I all relationships whether bode are is guys, those XX as well segments it's lease, said, still our it's almost of the and net in their mall Recreation talk of, peers, for forged our much net by and comments, as think, theater I about tenants, is back forged we widely

Collin Mings

the I you. again. Thanks, color. Okay, appreciate Thank

Operator

from of the ahead. response Ladenburg a John Massocca Thalmann. Instructions] go line of Please [Operator You have

John Massocca

morning. Good

'XX a in ranges how the you And maybe have kind do performance the like guidance? on the performance are has color you any both maybe property So at general XQ what and July? in for Kartrite from into of baking to contribution just performed AFFO

Greg Silvers

a as on what we comment -- out you numbers don't as specific this guidance, changed is is, a knew pursuant performing especially the to originally, of I capacity this was want the -- to management haven't to first we of mean, story. anticipated. can even the property put it operate a marketing the we hotel key. asset. part we the ramping efficiencies we opened didn't Morning, that We recommendation, getting -- operational It's out and I the because We the tell understanding was when John. story, put in year. open, I all how that We there.

we see a see So What contribution. of this be our really But is in I we think don't story And we in means planned 'XX. fact, in about what consistent plan, XXXX. that how we in that's is with that part can it. drag hope

John Massocca

kind a be may of low little guidance size the and Is end the it bit contributing between difference the of to high though? of

Greg Silvers

that, doubt have we no There's account the for. that to that volatility is

I And going went reflect said, was so But this that knowing what a we as to is year Kartrite XXXX try this information that ramping accurately we the a a story. XXXX not to into that have, best environment. be The story understanding we

Mark Peterson

Yes.

other think I contribute Termination really of range. it wire, a as percentage up. the is ramping part just have as Kartrite's a range, you rents that it said, X fees went have over there's because Greg and to things

really primary So of we range have things. X that accommodate those to level

John Massocca

over cap switching maybe Okay. portfolio? was the What the Regal rate And on theaters. then to

Greg Silvers

it consistent the that theaters said before. was bought say We disclose we with we but cap think range could don't any we rates on have transaction, I

John Massocca

might least this my marketing, understanding, tranche What of Regal a couple particular has for at that versus from been given of attractive be assets made out assets other theater And there Okay. sale? portfolios.

Greg Silvers

relationship a exposure, master Again, We Texas, presented. above long-standing them as put the the across We portfolio. together that portfolio portfolio. lease over with The was, like. coverage Regal. a for Florida, like California, too, this us, had we is which We've we well really areas it Their the has was XX-theater with demographic that structured this exposure. on

And feel I wanted shaped looked group some of to this has at the California in meaningful. So Again, if that demographic had if that it a would with went Whether would of of did, this compared they think we profile that it and were concentration things transaction how you has it, went other portfolio, properties. think you we we I you kind we see I they like highest off. properties, we different did you the hand a think like. this see

John Massocca

the back of that has kind on moving Are to market additional the to Okay. amenity built-to-suit say, XX And they side. ago? to some kind then a tenants the a your getting, your in of of XX competition returns see Or same continuing or of as little from kind maybe for returns high were format months scaled bit conversions?

Greg Silvers

first is XX-plus Yes. returns the the market. very very through And work mover really about returns that we've what fourth you're mover. percent a a to what function those function probably in -- mover they it's of are in a talked a It's And you are market. still strong and high, if

-- you So competition relative that market. again, making in much that your to what is it's competition so the are at not point

John Massocca

for your just much additional speaking, own kind of convergence of how kind generally So nationally? is there portfolio even or maybe runway within

Greg Silvers

that think in overall than still you nationally, conversions. I slightly We're ours. XX% if above that less mean, we're

else starting what of of a high-performing and to I away quality starting are very in them. the see is someone share front conversion think theater theaters with -- do you're from take of some going at operators evolution to lower to of letting start a their and to get the look very, kind

months conversations I deal we so theaters were we with. that or would and front experience in you of XX told about even trying about proactive high XX more highest-performing So talking their discussions. have with in engaging difficult are in that we're starting have some of get their have we're to operators ago; to now, to some performing it's that least at theaters. But and consumer be drive

John Massocca

me. That's helpful. it Very for

Greg Silvers

you. Thank

Operator

questions would over no Silvers. like to I this in the turn to showing I'm at conference time. back you. Thank further queue the Greg

Greg Silvers

Well, thank we you. forward you, next to look everyone, Thank for your talking quarter. to interest you this morning, and

Mark Peterson

Thank you.

Operator

have Thank concludes gentlemen, this and participation, and conference. your day. you Ladies for a today's wonderful

disconnect. all may You now

EPR Properties (EPR) 1 Aug 192019 Q2 Earnings call transcript