Good day, and thank you for standing by. Welcome to the Q2 2024 EPR Properties Earnings Conference Call. Please be advised that today's conference call is being recorded. I would now like to hand the conference over to your first speaker today, Brian Moriarty, Senior Vice President of Corporate Communications. Please go ahead.

All right. Thank you. Thanks for joining us today for our second quarter 2024 earnings call and webcast. Participants on today's call are Greg Silvers, Chairman and CEO; Greg Zimmerman, Executive Vice President and CIO; and Mark Peterson, Executive Vice President and CFO. I'll start the call by informing you that this call may include forward-looking statements as defined in the Private Securities Litigation Act of 1995, identified by such words as will be, intend, continue, believe, may, expect, hope, anticipate, or other comparable terms. The company's actual financial condition and the results of operations may vary materially from those contemplated by such forward-looking statements. Discussion of those factors that could cause results to differ materially from these forward-looking statements are contained in the company's SEC filings, including the company's reports on Form 10-K and 10-Q. Additionally, this call will contain references to certain non-GAAP measures, which we believe are useful in evaluating the company's performance. A reconciliation of these measures to the most directly comparable GAAP measures are included in today's earnings release and supplemental information furnished to the SEC under Form 8-K. If you wish to follow along, today's earnings release, supplemental and earnings call presentation are all available on the Investor Center page of the company's website, www.eprkc.com. Now I'll turn the call over to Greg Silvers.

Thank you, Brian. Good morning, everyone, and thank you for joining us on today's second quarter 2024 earnings call and webcast. For the quarter, we are pleased to deliver solid results that demonstrate continued momentum and progress in building the leading diversified experiential REIT. Our sustained rent coverage numbers illustrate broad consumer demand across our customer industries in both our triple net leased and mortgage portfolios. In our managed operating properties, we are working to recapture market share of the previously closed managed theaters, and aligned with the broader industry, we're seeing some demand normalization from post-COVID highs and expense pressures in our experiential lodging. Box office continues to show its time-tested resiliency. Whether it's surprising the industry by over delivering with a film like Twisters or meeting high expectations with the greatly anticipated Deadpool & Wolverine, the box office is maintaining momentum. We look forward to additional titles making their way to the big screen for the remainder of the year. Additionally, last week, AMC announced several refinancing transactions that extend the majority of their 2026 debt maturities to 2029 and 2030, while also providing the potential to reduce their overall net debt position. We view this as a very positive event as it substantially mitigates their near-term debt maturity risk. While theater exhibition remains a vital part of our business, it's important to remind everyone that our growth in experiential real estate is focused outside of theaters. We remain committed to acquiring creative, compelling, and often award-winning experiential properties. Our recent investments in natural hot springs, resorts, spas, climbing gyms, and indoor karting exemplify such investments. We remain confident that consumer spending on experiential activities will continue to consistently grow, and we have proven our ability to identify enduring concepts and capture that growth for the benefit of our shareholders. As we move into the second half of 2024 and into 2025, we feel very optimistic about our potential. At a macro level, we're seeing a moderation of inflation and the expectation of interest rate reductions. We are also very well positioned with strong liquidity and significant financial flexibility. Additionally, while improved, our multiple remains historically low, and we offer a well-covered strong dividend. As we continue to execute our plan and perceived risks such as the AMC refinancing are mitigated, we are confident we will see multiple expansion. We look forward to rewarding our investors with the strong total shareholder returns that we've historically delivered. Now I'll turn the call over to Greg Zimmerman to go over the business in greater detail.

Thanks, Greg. At the end of the quarter, our total investments were approximately $6.9 billion with 354 properties that are 99% leased excluding properties we intend to sell. During the quarter, our investment spending was $46.9 million. 100% of the spending was in our experiential portfolio. Our experiential portfolio comprises 284 properties with 51 operators and accounts for 93% of our total investments or approximately $6.4 billion, and at the end of the quarter, excluding the properties we intend to sell, was 99% leased. Our education portfolio comprises 70 properties with eight operators, and at the end of the quarter, excluding the properties we intend to sell, was 100% leased. Turning to coverage, the most recent data provided is based on a March trailing 12-month period. Overall portfolio coverage remains strong at 2.2 times, unchanged from last quarter. Trailing 12-month coverage for theaters is 1.7 times with box office at $8.8 billion for the same period. Theaters’ coverage reporting assumes that the Regal deal was in place for the entire trailing 12-month period. Trailing 12-month coverage for the non-theater portion of our portfolio is 2.6 times. Now I'll update you on the operating status of our tenants. Our theater coverage is at 2019 levels, even though North American box office remains well below 2019 levels. Turning to box office and the state of the industry, North American box office was $1.9 billion for Q2 and $3.6 billion for the first half of the year. The first six months of 2024 were down 19% over the same period in 2023 due to the impact of the actors' and writers' strikes, but led by strong performances by Inside Out 2 and Bad Boys: Ride or Die, June's $965 million gross was only down 4% from June 2023. Inside Out 2 dramatically outperformed expectations to become the highest-grossing animated movie ever, earning over $613 million to date in North America and outgrossing both Barbie and Top Gun: Maverick worldwide. July's box office gross exceeded $1.1 billion and serves as a solid kickoff for the second half of the year. Despicable Me 4 grossed $291 million to date, and the eagerly anticipated Deadpool & Wolverine grossed $211 million on its opening weekend, substantially outpacing estimates, delivering the highest-grossing opening weekend ever for an R-rated movie and the biggest domestic opening weekend since Spider-Man: No Way Home in December 2021. Through Monday and Tuesday of this week, Deadpool added an additional $50 million. Despite the encouraging uptick in box office results since June, we estimate box office for the Regal lease year, the trailing 12-month period ending July 31st, will be around $7.9 billion, which is approximately $400 million less than our original forecast. The impact on the release schedule from the writers' and actors' strikes made predicting box office results for this period extremely challenging. On the plus side, we expect the shortfall in Regal percentage rent to be made up by outperformance from other tenants. So we have not adjusted our percentage rent guidance. As we have said repeatedly, box office gross is directly tied to the number of titles released. To date, 12 films have grossed more than $100 million in 2024; another 11 have grossed between $60 million and $100 million, and an increase in major releases is already underway. Titles currently projected to gross over $150 million in the second half of the year include Deadpool & Wolverine, Beetlejuice 2; Joker: Folie a Deux; Venom 3; Gladiator II, Wicked; Moana 2, and Mufasa: The Lion King. The June and July results demonstrate that we have finally reached the end of the negative impact on content from the writers' and actors' strikes and have returned to box office growth. And more importantly, they show that when there is a strong cadence of good movies to see, consumers will go to see them on the big screen. We are optimistic that the quantity and quality of the slate for the second half of the year and into 2025 and 2026 will continue to propel an upward trajectory in box office. Based on the results in June and July, we are increasing our guidance for box office in calendar year 2024 from between $8 billion and $8.4 billion to between $8.2 billion and $8.5 billion. Turning now to an update on our other major customer groups, we continue to see good results across our drive-to, value-oriented destinations. Our Eat & Play assets were down slightly in revenue and EBITDAre quarter-over-quarter but continue to perform well. Andretti Karting is under construction in Kansas City and Oklahoma City and finalizing entitlements and plans for Schaumburg, Illinois. Six Flags and Cedar Fair concluded their merger as of July 1st. We do not expect any changes to operations at our parks in the near term and continue to believe that, longer term, this strengthens the credit and operating profile of the company. Our attractions are now open for the summer season, but it's too early to draw conclusions about performance for the season. Construction on the extensive expansion at The Springs Resort in Pagosa Springs continues with opening scheduled for spring 2025. We're confident this expansion will drive growth at this outstanding asset. Percentage rent from a ski tenant exceeded our expectations following a strong ski season. During the off-peak summer season, our Alyeska Resort in Alaska will complete lobby renovations. Both the Margaritaville Hotel, Nashville, and our Camp Margaritaville RV Resort and Lodge in Pigeon Forge continue to perform well. Our education portfolio continues to perform well with year-over-year increases across the portfolio through Q1 of 2% in revenue and 5% in EBITDAre. Turning to our operating properties, as with many in the lodging industry, in our joint venture operating properties, we are seeing some softness in ADR, and cost pressures are negatively impacting EBITDAre. Also, we continue to face expense pressures in the operating theaters as we attempt to recapture market share loss as part of the Regal bankruptcy and transition to Cinemark and Phoenix. During Q2, our investment spending was $46.9 million, and year-to-date is $132.7 million. We closed on a third new build-to-suit location for Andretti Karting in Oklahoma City, providing $5 million for the acquisition of land and a total commitment of $32 million for completion of the build-to-suit project. As previously announced, we are providing build-to-suit financing for Andretti Karting locations in the greater Kansas City area and Schaumburg, Illinois. We're maintaining investment spending guidance for funds to be deployed in 2024 in a range of $200 million to $300 million. Through quarter-end, we have committed approximately $180 million for experiential development and redevelopment projects that have closed but are not yet funded to be deployed over the next two years. We anticipate approximately $96 million of this $180 million will be deployed in the remainder of 2024, which amount is included at the midpoint of our 2024 guidance range. In most of our experiential categories, we continue to see high-quality opportunities for both acquisition and build-to-suit redevelopment and expansion. Given our cost of capital, we will continue to maintain discipline and to fund those investments primarily from cash on hand, cash from operations, proceeds from dispositions, and with our borrowing availability under our unsecured revolving credit facility. In Q2, we sold four theaters; three vacant former Regals and a Cinemark that was reaching the end of term. The combined net proceeds were $10.3 million with a gain of approximately $1.5 million. For the first six months of the year, disposition proceeds totaled $56.5 million. Subsequent to the end of the quarter, we sold another vacant Regal theater for $1.9 million. Less than one year after the conclusion of the Regal bankruptcy and taking possession of eleven former Regal theaters, we have sold seven of them. We have signed purchase and sale agreements in place for two of the remaining four vacant former Regal theaters. Beyond those four vacant former Regal theaters, we have a vacant Xscape theater we terminated in Q4, which is under a signed purchase and sale agreement, and one remaining vacant AMC theater. We are pleased with our overall disposition cadence and particularly pleased with the pace of selling the vacant former Regal theaters. Based on that progress, we are updating our 2024 guidance for dispositions to $60 million to $75 million. Finally, we have made the decision to close one of the four former Regal theaters managed for us by Cinemark. We anticipate closure around Labor Day and are already underway with marketing to sell the theater. We constantly review the performance of our operating assets, and in consultation with Cinemark, came to this decision based on theater-level performance. The asset required significant deferred maintenance and capital expenditure to meet ours and Cinemark's operating standards and to recapture and grow market share. After careful evaluation and consultation, we jointly concluded the level of expenditures did not make economic sense and that it was better to close the theater. I now turn it over to Mark for a discussion of the financials.

Thank you, Greg. Today I will discuss our financial performance for the second quarter, provide an update on our balance sheet, and conclude with our 2024 guidance. FFO as adjusted for the quarter was $1.22 per share compared to $1.28 in the prior year, and AFFO for the quarter was $1.20 per share versus $1.31 in the prior year. It's important to note that there were no out-of-period deferral collections from cash basis customers included in income for the quarter, as opposed to $7.3 million in the previous year, leading to a decline of nearly $0.10 per share year-over-year. Now, regarding the key variances, total revenue for the quarter stood at $173.1 million, slightly up from $172.9 million in the prior year. However, within total revenue, rental revenue experienced a decrease of $6.8 million compared to the previous year. The year-over-year increase in net investment spending was offset by the reduction in out-of-period deferral collections as well as lower rental revenue tied to the Regal restructuring that occurred in August 2023. In rental revenue, percentage rents for the quarter came in at $2 million versus $2.1 million last year. It's worth noting that percentage rent for theaters under the Regal master lease is anticipated to be recognized in July of Q3, the final month of the lease year. Additionally, straight-line rent saw a sequential increase of $1.6 million compared to the last quarter, largely due to a fitness and wellness property that was placed in service in March. According to the lease terms for this asset, rent for the first six months, from March to August, is being accrued for future cash rent calculations. Consequently, straight-line rent will remain somewhat elevated into Q3, but is expected to decrease in Q4. Keep in mind that straight-line rent is included in FFO as adjusted but excluded from AFFO. The growth in mortgage and other financing income of $2.7 million is attributed to additional investments in mortgage notes over the past year. Both other income and other expense relate mainly to our consolidated operating properties, including The Kartrite Resort & Indoor Waterpark and seven operational theaters. The rise in both other income and other expenses compared to last year was primarily due to the addition of five theaters returned by Regal, which have been operated by third parties on EPR's behalf since early August 2023. On the expenses side, G&A costs for the quarter dropped to $12 million from $15.2 million the previous year, mainly due to reduced professional fees associated with the Regal resolution and lower payroll expenses, including non-cash share-based compensation and a decrease in franchise taxes following a state legislative change. During the quarter, we recorded impairment charges of $11.8 million related to one operational theater property we plan to sell, which is excluded from FFO as adjusted. Interest expense for the quarter rose by $1.2 million compared to last year, mainly due to a decline in interest income on short-term investments and a reduction in capitalized interest on projects in development. Moving to the next slide, our key credit ratios show strong coverage, with fixed charge coverage at 3.2 times and both interest and debt service coverage ratios at 3.8 times. Our net debt to adjusted EBITDAre was 5.2 times for the quarter. Furthermore, net debt to gross assets stood at 39% on a book basis as of June 30, and our common dividend remains well-supported with an AFFO payout ratio for the second quarter of 71%. Now, onto our balance sheet, which is in excellent shape. At the end of the quarter, we had consolidated debt of $2.8 billion, all of which is either fixed-rate or has been hedged through interest rate swaps, at a blended rate of about 4.3%. Additionally, our weighted average consolidated debt maturity is just under four years, with only $136.6 million maturing in 2024, which we plan to pay off using our line of credit. We had $33.7 million in cash at quarter-end and no balance drawn on our $1 billion revolver, placing us in a strong position moving forward. We are reaffirming our 2024 FFO as adjusted per share guidance of $4.76 to $4.96 and our investment spending guidance of $200 million to $300 million. We are also updating our disposition proceeds guidance to a range of $60 million to $75 million from the previous $50 million to $75 million. Additionally, our percentage rent and participating interest guidance remains at $12 million to $16 million. We are reducing our general and administrative guidance to a range of $49 million to $52 million, down from $52 million to $55 million, due to lower expected professional fees and payroll costs, along with the recent change in state law that lowered franchise tax expenses. On the next slide, we have outlined the guidance for our wholly-owned operating properties and those held in joint ventures. We are revising the guidance for other income to $55 million to $65 million from $57 million to $67 million and confirming our guidance for other expenses at $54 million to $64 million. The decrease in other revenue primarily stems from the decision to close one of our operating theaters around Labor Day. However, we do not expect a reduction in other expenses due to increased costs at our other operating properties. Finally, we are adjusting our equity and loss from joint ventures to a range of $10 million to $7 million from $9 million to $6 million, and the FFO from joint ventures to a range of zero to $3 million from $1 million to $4 million. As Greg mentioned, this reduction is largely due to expense pressures, particularly those related to insurance and normalizing demand consistent with the wider experiential lodging industry. Detailed guidance can be found on page 24 of our supplemental. On the next slide, I wanted to illustrate the anticipated impact on FFO as adjusted per share growth for 2024 at the midpoint of guidance, excluding the effect of audit period cash basis deferral collections for 2023 of $36.4 million or $0.48 per share and the $0.6 million or $0.01 per share collected in 2024. As the schedule shows, FFO as adjusted per share without deferral collections is still expected to grow by 3.2%. Now, I'll turn it back over to Greg for his closing remarks.

Thank you, Mark. As we've discussed today, our business remains solid, and consumer demand continues to support our experiential properties. As Greg mentioned, we're further encouraged that we've gotten past the lack of theatrical content that was caused by the strikes and impacted the first half of the year. We view these developments as well as the AMC refinancing as catalysts to continue to propel us forward to a more reasonable equity multiple. We look forward to this progression as it allows us to once again capitalize on the many opportunities that our experiential platform offers and to continue to deliver outstanding results for our shareholders. With that, let's open it up for questions. Carine?

Our first question comes from Joshua Dennerlein of Bank of America. Your line is now open.

Hi, good morning. This is Farrell Granath on behalf of Josh. Thanks for the question. I wanted to just first ask, how are you seeing, currently in your investment pipeline, one, how it is in the competition, the market set as well as cap rates that you're seeing going forward compared to what you're seeing today and what you may be seeing going forward?

Yes, and I'll let Greg add some color to this, but I think in our world, which we've said, to a large degree, is acquisitions in that kind of $25 million to $125 million range in the experiential area. We're still seeing not a tremendous amount of competition. And while I think our operators are being thoughtful about their growth, they're still growing, as indicated by our recent kind of Andrettis undertaking, as we've said, we've opened some recent top golfs in the last year. So they continue to grow, and we continue to be supportive of that. But Greg?

Yes. And to also answer the cap rate question, the cap rates we're seeing are solid in the 8s, and I don't see a lot of change in that over the near term. The other thing I would add with respect to competition in the marketplace is, we're just very good at finding deals that other people probably don't find. So in the first quarter, we were able to acquire a waterpark in upstate New York. And again, I don't know that there was much competition for that. So those are the kind of deals that we're able to find based on our experience and the quality of our portfolio.

Great. Thank you. And also, I guess, kind of bigger picture, we're thinking about the consumer, many especially on the lower end are facing higher pressures. Are you seeing that flow through to your tenant base, or is there an area that is maybe being impacted the most?

Like I said, and as we talked about coverage being a quarter delayed, we're still not seeing that. And I would say, I think anecdotally what we're hearing is at the very low end of the consumer, where there's probably more pressure, our properties are generally solid, middle-class kind of offerings. And what we're seeing is everyone has been dealing with cost pressure, whether it's insurance or wages. Those are starting to work their way through the system and kind of dissipate a little bit, but so far we've seen continued solid results. Greg?

Also, I think if you look at our portfolio, probably the most value-oriented proposition we have is theater tickets. And you can see from Deadpool & Wolverine this weekend, people are not shy about going to the theater. So yes, I would agree with Greg. We're not really seeing that yet.

Great. Thank you so much.

Thank you.

Thank you. One moment for our next question. Our next question comes from Smedes Rose of Citi. Your line is now open.

Hi. Thank you. I just wanted to ask a little bit more about the Regal percentage rents falling short. And I guess that's really just a function of their fiscal year, including the back half of last year, so they wouldn't get the sort of incremental improvement you're seeing in the box office. I just want to see if I'm thinking about that correctly. And I guess what gives you confidence that your other tenants will be able to make up the shortfall. Like where are you seeing kind of incremental strength, I guess, that would offset the Regal shortfall?

Thank you, Smedes. Remember, the lease year for Regal runs from August 1st to July 31st. This year, they were significantly affected by the strikes. As Greg mentioned, we are starting to see some recovery in June and July. We had a strong couple of months as we rebound from that, but it's really about the lease year. If you look at the estimates for the rest of the year compared to the first half, the theater industry shows more strength in the second half. This reflects the impact from the strikes and our ability to recover from it. Regarding how we will make up for this, we already discussed it, and as noted in Greg's and Mark's comments, we have unexpected percentage rent from our ski industry. We are also observing strengths in various other areas. Therefore, we are confident in our ability to recover and have not changed our guidance.

Okay. When you mention strengths in various areas, I recall that last quarter you discussed some of the joint ventures having percentage rents in their structure, including exposure in St. Petersburg and RVs. I understand there's a quarter lag, but consumer confidence is clearly declining and this trend is apparent across the board. I'm curious if you remain confident that in those areas where you anticipate weakness, there won't be any shortfalls regarding percentage rents.

I understand you’re saying the consumer is weakening, but we recently had a ski tenant that exceeded our estimates, and we just opened a theater that generated $200 million. So, although there may be some weakness, we’re still observing strength in certain areas.

Yes, I think in those JVs we don't get percentage rents from those. So that doesn't impact the percentage rents, the St. Petersburg and the RV parks.

It would be in our net lease.

Yes, we have acknowledged a few times that there is some weakness in the industry affecting experiential lodging, particularly in terms of average daily rates as we move away from COVID highs. We are also experiencing some cost pressures, especially with insurance, notably in Florida where we have two joint venture hotels. This has contributed to our decision to slightly lower our guidance, but it does not affect our percentage rents.

Thank you for clarifying. I wanted to ask one last question. When you close a theater due to a lack of capital expenditure investment, is that something in your contracts going forward that would be avoided? Are the operators required to continue investing to keep a theater up to operating standards?

Yes. Keep in mind, those were in an operating theater that we had taken back. So again, the lack of maintenance capital expenditures was probably a direct result of that. Now, like Regal being in bankruptcy and some things they should have done during that time but did not. Our normal lease provisions do require ordinary maintenance and upkeep, but these were in one of the operating properties that we had taken back.

Yes, Smedes. The other thing I would say is it wasn't just maintenance CapEx. It was also CapEx to improve the experience because during the Regal bankruptcy, some competing theaters had substantially upgraded in the trade area, and we just found it was going to be very expensive to try to keep up. So again, one of the things we value about Cinemark is they look at the portfolio and tell us what they really think and we came to a joint conclusion about it.

Okay. All right. Thank you, guys.

Thanks, Smedes.

Thank you. Our next question comes from John Kilichowski from Wells Fargo. Your line is now open.

Hi. Thank you. If we could circle back to the opening remarks, you talked about AMC putting out that 8-K, detailing some of the refinancing they did with two creditor groups. It sounded like a positive, pushing out some of those maturities to '29 and '30, but maybe could you talk about the structure a little bit more? I'm just curious your thoughts on the execution there. I'm looking at the 8-K now. It's a bit complicated, very lengthy. I'm seeing things like 10% cash, 12% pick on some of this. And I'm just curious what you think about the execution overall or if this is just giving them a little bit of breathing time before inevitable issues down the road.

I think it's clear that this situation is providing them some breathing room. They've been able to continue raising capital for deployment. While their balance sheet remains overly leveraged, the main concern we heard from them was related to their upcoming debt maturity. They appear to be managing to meet their debt obligations, which allows them the time to prepare for a stronger performance in 2025 and 2026 in the film calendar. This might give them the opportunity to execute more effectively. Additionally, they still retain the ability to raise equity and reduce debt, as they have done in previous years. Your description of it as breathing room is spot on, but perhaps Greg or Mark would like to add more insights on this.

No, I think, as Greg mentioned, we have an improving box office moving forward, and now they've positioned themselves to navigate that period successfully without the risk of bankruptcy. From our standpoint, we have our master lease and the best properties. We feel confident about our collateral and the situation regardless of what happens.

Got it. Thank you. And then maybe just jumping over to the transaction market, I guess, more generally, have you seen seller willingness change as we approach a potential fed cut?

I believe there is no doubt that people are considering the impact of this situation. As we continue to remind everyone, a 25 basis point Fed cut may not have as significant an effect as some might expect. However, we have entered a period where everyone is acutely aware of the 10-year yield since it is a key factor for most in our industry. People are increasingly focused on growing their businesses. This environment tends to eliminate marginal projects, but strong projects that tenants are committed to are still moving forward. As for those marginal projects, I think they face greater challenges. But Greg?

Yes. I completely agree, and the fact that we were able to execute NNN ready deals this year shows that people are still in the market growing. I agree with Greg. Obviously, people are being cautious, as are we, given our cost of capital.

Got it. Thank you.

Thank you.

Thanks, John.

Thank you. Our next question comes from Michael Carroll of RBC. Your line is now open.

I wanted to discuss what is causing the decline in other income and other expenses this quarter. I believe it relates to your TRS business. Mark, during your prepared remarks, you mentioned some expense pressure at experience lodging. If you could provide more details on what led to the decrease in earnings for those items, I would appreciate it.

Certainly. For the quarter and year-to-date, our consolidated financials include the seven operating theaters in Kartrite. Two of those theaters were in operation during both periods, and box office earnings were lower for both the quarter and the six months compared to the previous year. As a result, we saw decreased results in that area. The other theaters we took back from Regal had lower box office performance than anticipated due to the impact of the strikes. We anticipated some offset in expenses, but it may not have been as significant as expected. Part of the expense pressure came from the new operators investing to regain market share as they adjust to managing those theaters post-Regal. Additionally, while revenue from Kartrite was in line, they faced cost pressures from insurance, utilities, and a few other items. Overall, year-to-date has shown lower box office results alongside some expense pressures. On a positive note, we expect the operating theaters to perform significantly better in the latter half of the year as box office numbers improve. However, we will see a drop in revenue due to the closure of one theater, which will impact overall revenue despite expectations of rising box office figures. The expenses are remaining elevated due to theater transition costs and management challenges, as well as some expenses related to Kartrite. Our guidance reflects a decrease of about $2 million. The commentary regarding experiential lodging pertains to both Kartrite and our unconsolidated joint ventures, including the St. Petersburg hotels and RV parks. There are industry-wide pressures in experiential lodging on the expense side, particularly with insurance costs rising significantly for the St. Petersburg hotels. Additionally, we have seen some softness in average daily rates across both hotels and RV parks in this sector. This summarizes the impact we experienced this quarter and our outlook for the year concerning both our consolidated operations and joint ventures.

Okay. And then within the operating theater bucket, I know that you decided to kind of shut one down. I guess, what about the other assets within those buckets? I mean, how are they performing and how are they positioned in the market? I mean, is there any concern or thought that you're going to need to kind of shift strategies in any of those specific theaters?

I think we're constantly assessing the situation. Clearly, we have specific views depending on the market. As Greg mentioned, we need to determine if investment is necessary to remain competitive. When looking at other theaters, many are newer and more modern. However, that doesn't rule out the possibility of considering offers or pursuing real estate opportunities that could yield greater profits. Our priority is to drive value, and we will consistently evaluate the best options available. For instance, the decision to close the property in Los Angeles made sense in the context of exploring real estate solutions.

Yes. Michael, the other thing I would add is, obviously the box office recovery will weigh into this. I mean, we just made the decision before Deadpool, not that it would have changed it, because we didn't see a path, but it'll be interesting to see how the others perform with the box office recovering as strongly.

Okay, great. And then just last one from me is, I know you increased your box office guidance for this year. What specifically drove that increase? Was it just the performance that you've seen over the past few months, or is it the expectation of better performance in the back half of the year? So I guess what drove that increase? And then also, can you kind of touch on what you're expecting for 2025, if you have any early read-throughs on what you think the box office can do next year?

We don’t have any guidance for 2025 yet, but the calendar looks promising. Generally, we believe it will exceed this year’s box office, and I hope it will be solidly in the $9 billion range. We'll likely have more to discuss towards the end of the year. As for this year, we’ve seen a significant outperformance from several recent titles. Deadpool made $261 million, Despicable Me reached $293 million, Twisters surprised with $159 million, and Inside Out 2 brought in $615 million. All of these performed exceptionally well. Additionally, there are several titles projected to make $150 million by year-end, so we are quite confident in the revised guidance. This ties back to the consistent stream of strong releases: the more films that are available in theaters, the more reasons people have to attend, leading to return visits even if they weren’t initially planning to see a movie. The key takeaway is that audiences are returning to theaters.

Okay. Great. Thank you.

Thank you, Michael.

Thank you. The next question comes from Rob Stevenson of Janney Montgomery Scott. Your line is now open.

Good morning, guys. Greg or Greg, have you seen any solid income-producing theaters with term left and leased to one of the major operators trade in the marketplace over the last quarter or two?

It's still uncommon, but there have been some discussions reported. I believe the market is beginning to open up as people notice the visibility and expected returns. A couple of data points are influencing this; for instance, Cinemark's recent debt agreement at 7% and their reaffirmed credit rating. We're starting to observe some thawing in the market. As we progress through the remainder of this year and especially into next year, where the recovery is anticipated to be stronger, we should see further improvement. But Greg?

Yes, I agree. I can't say that we've seen an actual transaction, but I agree. There's certainly thawing.

Okay. Mark, you mentioned that the $137 million of debt maturing in a few weeks will be handled on the line. If you were to choose between that and the $300 million due in April in the unsecured market, what would be your pricing for debt in the current environment with all its uncertainty?

Yes. The good news is spreads are low, and for us, I think the latest quote I got is a little over 210 as far as the spread. So it would put us under 6.25 to do a 10-year right now. As I mentioned, the $136 million, we have cash in the bank, nothing drawn on the lines. We'd intend to take that out with the line of credit. As we move to next year and have that $300 million maturity and start to grow our investments, we'll start to look at the debt market as we move into 2025 to term out what's on the line of credit. But it'd be, like I said, a little over 200 spread right now. Hopefully, treasuries come down as people's hopes and so that we're maybe a little lower when we go to need to issue in 2025.

Okay. And then last one for me, in the prepared remarks, you guys talked about the 71% payout ratio of AFFO. How much cushion do you guys have right now to keep the dividend at that $0.285 per month and not have to raise it to keep it in REIT compliance? Or is that something the Board's going to have to address here in the near term?

I mean, we always look at taxable income relative to our dividend. We're in good shape with respect to that. I think we're going to keep on the cadence of keeping in that range of AFFO per share payout ratio. And I think as we move forward, we can comfortably do that with our taxable income. So I don't think there's pressure, but I think we will grow the dividend, can measure it with increase in AFFO per share and kind of keep at that same percentage.

Okay. That's helpful. Thanks, guys.

Thanks.

Thanks, Rob.

Thank you. Our next question comes from Upal Rana. Your line is now open.

Great. Thank you for taking my questions. With most of the vacant dispositions largely complete, what's the next bucket of dispositions that you may be targeting?

I would say, and we've always maintained that the education is not strategic long term for us, and we'll look at that. And likewise, we've said, as that market returns, we want to lower exposure to theater. So I would say those two buckets, operating theaters, meaning those that have leased and have an income stream and our education, if we're looking to recycle.

Great. Thank you. And then appreciate your comments on the AMC restructuring, but I'm assuming this now takes any kind of risk off the table with AMCs escalator slated to hit next year.

We didn't think there was any risk to it anyway, so yes. We feel very confident with the strength of our portfolio that there was no risk to that, but yes, I mean, I think what this does is those people who were worried about bankruptcy risk or a wall of maturity hitting, forcing that, that has removed that issue.

Okay, great. Thanks. And then I was wondering, who's buying the vacant theaters? And what are the plans with that kind of space? Will that space, you can get redeveloped into updated theaters or other uses? I just want to kind of see if there's any read-through on the ongoing consolidation across the theater industry.

Yes. I don't believe you can derive much from this. Since COVID, we've sold 21 theaters, and about a third of them continue to operate as theaters. Typically, these are acquired by smaller local operators who recognize the opportunity due to the existing setups and equipment. Others have been repurposed for industrial, office, multifamily, and retail uses, so there are various redevelopment options. The specific use really depends on the location of the property, and that's how we approach marketing them. We don't promote them exclusively as theaters; instead, we release a marketing piece and let the market determine the best use for the space.

Okay. Great. Thank you.

Thank you.

Thank you. This concludes the question-and-answer session. I would now like to turn it over to Greg Silvers, Chairman and CEO.

Thank you, everyone. We appreciate your time and attention and look forward to talking to you in the near future. Thanks, everyone.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.