Yahoo Finance EPR Properties (EPR) Q1 2024 Earnings Call Transcript Highlights: Strategic Investments and ...
Total Investments: Approximately $6.9 billion.
Properties Leased: 358 properties, 99% leased.
Investment Spending: $85.7 million in Q1, focused on experiential portfolio.
Experiential Portfolio: 288 properties valued at approximately $6.4 billion, 99% leased.
Education Portfolio: 70 properties, 100% leased.
Overall Portfolio Coverage: 2.2x for trailing 12 months.
Theater Coverage: 1.7x, with box office at $8.9 billion.
Non-Theater Coverage: 2.6x.
Q1 North American Box Office: $1.6 billion, down 6.6% from Q1 2023.
2024 Box Office Estimate: Between $8 billion and $8.4 billion.
Q1 Investment Spending: $85.7 million, including acquisition of Enchanted Forest Water Safari.
FFO as Adjusted: $1.13 per share for Q1 2024.
AFFO: $1.12 per share for Q1 2024.
Total Revenue: $167.2 million for Q1 2024.
Rental Revenue: Decreased by $9.3 million from the previous year.
2024 FFO Guidance: $4.76 to $4.96 per share.
2024 Investment Spending Guidance: $200 million to $300 million.
Release Date: May 02, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
EPR Properties (NYSE:EPR) continued to execute investment spending across target experiential property types, maintaining strong coverage levels indicative of the resilience in customer experiences.
The company has diversified and strengthened its portfolio of experiential properties, which now comprises 288 properties with 51 operators, accounting for 93% of total investments.
EPR Properties (NYSE:EPR) reported a high-quality balance sheet with significant free cash flow, allowing funding for anticipated investment spending and support for a well-covered monthly dividend.
The company has a robust pipeline with new and existing customers and concepts, maintaining investment spending guidance for 2024 in the range of $200 million to $300 million.
EPR Properties (NYSE:EPR) achieved a strong box office rebound last year and anticipates a significant improvement in 2025, with the box office expected to be between $8 billion and $8.4 billion for 2024.
Negative Points
EPR Properties (NYSE:EPR) faces constraints in capital deployment, which limits the company's ability to fully capitalize on new investment opportunities.
The 2024 box office is projected to be slightly down compared to 2023, attributed to delays in title releases rather than a decrease in consumer demand.
Increases in fixed costs, including labor, insurance, and taxes, continue to pressure EBITDARM for many operators within EPR Properties (NYSE:EPR)'s portfolio.
Some locations have experienced a pullback in attendance from post-COVID highs, which could impact revenue and profitability.
The company is still dealing with vacant properties that are not income-producing and incur costs, which impacts overall financial performance.
Q & A Highlights
Q: Greg, you mentioned in your prepared remarks, you're capital constrained, but I also noticed you have 3 categories of properties you want to reduce the early childhood education, private school and theaters. How do you think about tapping those for capital recycling? A: Gregory K. Silvers (President, CEO & Board Chair, EPR Properties) responded that the company is exploring options, prioritizing dealing with vacant properties first due to their non-income producing nature and associated costs. However, they are open to opportunities in markets for other properties, particularly the theater market which remains challenging. Greg Zimmerman added that the Education portfolio is strong and actionable at the right time.
Q: Can you discuss the pipeline for new acquisitions and sale leasebacks? Are you seeing yields trend higher above the 8% discussed for new deals? A: Gregory E. Zimmerman (Executive VP & CIO, EPR Properties) mentioned that there is upward pressure on cap rates and they continue to see actionable opportunities across most of their verticals. Gregory K. Silvers added that they are selective in deploying capital, balancing good deals with the potential for higher yields.
Q: Are your tenants, particularly on the operating side, voicing any concerns about consumer spending given the economic outlook? A: Gregory K. Silvers noted that while there is a broad concern, it has not yet impacted the numbers. Consumer spending remains strong, particularly in the Eat & Play areas, and recent reports from cinema operators like Cinemark also reflect continued strong spending on food and beverage.
Q: Regarding the vacant theaters remaining for sale, has there been any progress since the last quarter? A: Gregory E. Zimmerman reported that one theater was sold in Q1, and three of the remaining eight Regal theaters are under contract. Interest is also growing in the AMC and Xscape theaters, indicating positive movement in disposing of these assets.
Q: What does the refresh of TopGolf locations entail, and who funds these refreshes? A: Gregory E. Zimmerman explained that TopGolf funds the refreshes themselves, which include replacing outfield grass and updating restaurants. These refreshes represent a significant investment by the tenant, demonstrating their commitment to the location.
Q: How are you managing investment opportunities and strengthening tenant relationships in the current capital-constrained environment? A: Gregory K. Silvers highlighted the importance of relationship agreements that provide EPR Properties with the right to participate in future deals of their tenants, creating a pipeline for future growth. This strategy helps the company to be selective and maintain a balance in deploying capital.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
