Hello, and welcome to the EPR Properties Q4 2024 Earnings Call. We ask that you please hold all questions until the completion of the formal remarks, at which time you will be given instructions for the question-and-answer session. Also, as a reminder, this conference is being recorded today. If you have any objections, please disconnect at this time. I will now hand the call over to Brian Moriarty, Senior Vice President of Corporate Communications.

Thank you, Layla. Thank you for being with us today for our fourth quarter and year-end 2024 earnings call and webcast. Joining me on the call are Greg Silvers, Chairman and CEO; Greg Zimmerman, Executive Vice President and CIO; and Mark Peterson, Executive Vice President and CFO. I want to start by mentioning that this call may contain forward-looking statements as defined by the Private Securities Litigation Act of 1995, which may use terms such as will be, intent, continue, believe, may, expect, hope, and anticipate. The actual financial condition and performance results of the company may significantly differ from those anticipated in these forward-looking statements. A discussion of factors that could cause actual results to differ materially is included in the company's SEC filings, including reports on Form 10-K and 10-Q. This call will also refer to certain non-GAAP measures, which we find useful for assessing the company's performance. Reconciliation of these measures to the closest GAAP measures is included in today's earnings release and the supplemental information filed with the SEC under Form 8-K. If you'd like to follow along, today's earnings release, supplemental information, and the earnings call presentation can be found on the Investor Center page of the company's website, www.eprkc.com. Now, I will turn the call over to Greg Silvers.

Thank you, Brian. Good morning, everyone, and thank you for joining us on today's fourth quarter and year-end 2024 earnings call and webcast. We are pleased to have delivered 3.4% earnings growth for the full year 2024 when removing the impact of out-of-period deferred rent and interest collections from both years' performance. Overall, while navigating a challenging macro-environment, our portfolio continued to demonstrate resilience as we continued to grow our experiential portfolio in a disciplined manner. The box office performance in the second half of 2024 demonstrated its strength when supported by ample titles, and we're pleased to report that it ended the year well above initial expectations. Additionally, this was the inaugural year to activate and begin to benefit from our percentage rent structure as defined in our Regal Master Lease. We anticipate continued upside of this structure in the coming years as we expect sustained growth in box office revenues as the number of wide releases grows. Additionally, we saw continued solid performance in our eat & play sector. The sector is anchored by Topgolf, which has remained resilient, and it's also supported by other differentiated successful operators, including Andretti indoor karting and gaming with whom we continue to expand our relationship. Separately, during the first half of the ski season, our ski properties benefited from improved weather conditions versus the previous year and we look forward to a solid second half of the season. Notwithstanding our capital-constrained environment during the year, we continued to expand our experiential portfolio by effectively utilizing our operating cash flow and through limited use of our line of credit. Additionally, we made further progress on reducing our theater and education investments and recycling those proceeds into other experiential assets. As we look forward to 2025, we anticipate that we will deliver approximately 3.5% earnings growth at the midpoint of our guidance through an efficient sourcing of capital, which is not dependent upon any equity issuance. Lastly, our strong balance sheet and conservative financial management have allowed us to operate successfully in the current macro environment. Within this context of this disciplined approach, we are pleased to announce a 3.5% increase in our monthly cash dividend to common shareholders. Following this increase, our dividend will remain well covered and we will retain significant financial flexibility. Now, I'll turn the call over to Greg Zimmerman, who will cover the business in greater detail.

Thanks, Greg. At the end of the quarter, our total investments were approximately $6.9 billion, with 346 properties that are 99% leased or operated, excluding vacant properties we intend to sell. During the quarter, our investment spending was $49.3 million. 100% of the spending was in our experiential portfolio. Our experiential portfolio comprises 278 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 vacant properties we intend to sell was 99% leased or operated. Our education portfolio comprises 68 properties with eight operators and at the end of the quarter, excluding the vacant property we intend to sell was 100% leased. Turning to coverage. The most recent data provided is based on a September trailing 12-month period. Overall portfolio coverage remains strong at two times, down slightly from last quarter. Trailing 12-month coverage for the non-theater portion of our portfolio was 2.5 times, again down slightly from last quarter. Trailing 12-month coverage for theaters remained at 1.5 times, evidencing stabilization from the impact on the release schedule from the writers and actor strikes. Turning to the operating status of our tenants, we continue to see a rebound in North American box office. Q4 box office totaled $2.3 billion, up 26% from Q4 2023. 2024 box office was $8.6 billion, down only 4% from 2023. After the severe impact on the strikes on the release schedule dissipated, box office recovered significantly in the second half of the year. We are confident the impact of the strikes is behind us. Box office gross ties directly to the number of titles released, particularly wide releases from the nine major Hollywood studios which typically generate around two-thirds of the North American box office gross. The current calendar reflects 138 titles for 2025, 78 major studio releases and 60 small studio releases. For context, at this point in 2024, there were 64 major studio releases on the calendar, down from 100 in 2023 because of the strikes. The 78 major studio releases currently scheduled for 2025 are forecast to gross $800 million more than the major studio releases scheduled at this point in 2024. Q1 is off to a nice start with box office through this week at $991 million. We are pleasantly surprised with the strength of Dog Man, which grossed $36 million on its opening weekend, making it the second highest grossing animated film released in January, and has grossed $80 million to date. In Q1, two titles are projected to gross over $200 million Captain America: Brave New World, which opened over President's Day weekend, generating the best overall Q1 weekend since 2020 and has grossed $143 million to date and Snow White which opens March 21. We are optimistic that the quantity and quality of the slate for 2025 and into 2026 will continue to propel an upward trajectory in box office. The 2025 slate includes The Fantastic Four: First Steps; Mission: Impossible - The Final Reckoning; How to Train Your Dragon, Superman, Jurassic World Rebirth and Avatar: Fire and Ash. We are estimating North American box office for calendar year 2025 to be between $9.3 billion and $9.7 billion. Turning now to an update on our other major customer groups. Despite some pressure in operating expenses and in select cases of revenue, we saw good results across our drive to value-oriented destinations. Both Q4 and Q4 trailing 12-month revenue and EBITDARM were up across our ski portfolio over the respective same periods in 2023. Most of the portfolio has benefited from early-season snowfall and past sales continued to help drive business. Andretti Karting is under construction in Kansas City, Oklahoma City and Schaumburg with openings scheduled for mid-2025 and early 2026. In 2025, we anticipate Topgolf will self-fund at least four refreshes at EPR Properties. The refreshes generally include replacing the outfield turf and lighting, repainting, and updating signage. While our eat & play coverage remains strong and above pre-COVID levels, both Q4 and Q4 trailing 12-month revenue and EBITDARM were down slightly over the respective same period in 2023. Many of our attractions were closed for the season in Q4. In December, the Hotel de Glace at Valcartier celebrated its 25th anniversary. We anticipate the 100,000-square-foot Indoor Waterpark addition at the Bavarian Inn in Frankenmuth, Michigan, will open in Q1 2025. Over the past two years, our customer has added a family entertainment center with an ice cream shop and laser tag, a ropes course, and bowling lanes, all of which have driven revenue growth. Construction of the extensive expansion at the Springs Resort in Pagosa Springs continues with opening scheduled for spring 2025. Across our fitness and wellness portfolio, we saw increases in both revenue and EBITDARM in the trailing 12 months through December 2024 over the same period in 2023. Our education portfolio continues to perform well. Our customers' trailing 12-month revenue across the portfolio through September was up 2%, while EBITDARM over the same period decreased by 3%, driven largely by operating cost increases. With respect to our consolidated operating properties, managed theaters continue to show improvement with the box office recovery. This improving performance is being offset by some of the revenue and expense pressures we're seeing at our Kartrite Hotel and Indoor Waterpark. We continue to work in good faith with our joint venture partners and lender to identify a path forward for our two St. Beach hotels significantly damaged by hurricanes in 2024. And as noted in our Q3 earnings call, we expect this will result in the eventual removal of the hotels from our portfolio. Additionally, during Q4, we made the decision to exit our unconsolidated equity investment in the Camp Margaritaville RV Resort in Breaux Bridge, Louisiana. The park meaningfully underperformed expectations and will require significant ongoing capital infusions to service the non-recourse debt and property operations. As a result, subsequent to the end of the quarter, we reached an agreement with our joint venture partner to exit the joint venture and our interests in the assets. We continue to have interest in two unconsolidated joint ventures that hold the Jellystone Park Warrens and Yogi Bear's Jellystone Park Kozy Rest RV parks with a total combined carrying value of $14 million as of the end of 2024. These two assets showed Q4 trailing 12-month growth in revenue and EBITDARM over the same period in 2023. We are disappointed with the performance of our operating properties. The volatility of performance and expense pressures, including significant increases in insurance are all part of the normal course of business for our tenants. However, they are not for us. Fundamentally, we have decided that the juice isn't worth the squeeze in terms of performance, especially given the depth and strength of our net lease portfolio. Accordingly, we will no longer pursue these types of investments. During Q4, our investment spending was $49.3 million to fund experiential projects, which have closed but are not yet open, bringing the total in 2024 to $263.9 million. Subsequent to the end of the quarter, we acquired Diggerland USA in West Berlin, New Jersey, 20 miles east of Philadelphia for $14.2 million. Diggerland is the only construction-themed attraction and water park in the country and is our second investment with IAM, which further diversifies our tenant base. In 2024, we added the award-winning Iron Mountain Hot Springs resort in Glenwood Springs, Colorado, to our list of outstanding Hot Springs properties. We also acquired Water Safari Resort in the Adirondacks and funded the development of three new Andretti karting locations, Greater Kansas City, Oklahoma City, and Schaumburg, Illinois. We continue to see high-quality opportunities for both acquisition and build-to-suit redevelopment and expansion in our target experiential categories. 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 the borrowing availability under our unsecured revolving credit facility. We're issuing investment spending guidance for funds to be deployed in 2025 in the range of $200 million to $300 million. We have committed approximately $150 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 $105 million of the $150 million will be deployed in 2025, which is included at the midpoint of our 2025 guidance range. In Q4, we sold a vacant former Regal, a vacant former Xscape theater, and a vacant former KinderCare school for combined net proceeds of $9.3 million, resulting in a net gain of approximately $112,000. For 2024, disposition proceeds totaled $74.4 million and the company recognized a net gain on sale of $16.1 million. Subsequent to the end of the quarter, we sold a vacant early childhood education asset for a gain of $1 million and net proceeds of $3 million. As of today, we have no vacant education assets. Also subsequent to the end of the quarter, we sold another vacant Regal theater for a gain of $2.7 million and net proceeds of $6.1 million. Since early 2021, we have sold 25 theaters. We have one remaining AMC theater for which we have an executed purchase and sales agreement. 20 months after the conclusion of the Regal bankruptcy, we have sold 10 of the 11 former Regal theaters we took back in bankruptcy. We currently have two former vacant Regals, one from the bankruptcy and one which Cinemark was operating and, as we previously announced, was closed last September. Cinemark currently manages three former Regal theaters. Coming out of the Regal bankruptcy, it was our intent to sell the vacant theaters first and once on a good trajectory, to turn our attention to selling most of the managed theaters. Because we made significant progress in disposing of the vacant Regals, we are actively marketing the remaining three Cinemark-managed theaters. We have signed purchase and sale agreements for two of these three. Although there can be no assurance, we anticipate these sales will occur in the first half of 2025. In addition, we have assigned a purchase and sale agreement to sell two theater properties to a smaller operator that currently leases both locations. Again, although there can be no assurance, we anticipate this sale will occur in the first half of 2025. We are issuing 2025 disposition guidance in the range of $25 million to $75 million. Finally, given the events of COVID and the subsequent writers and actor strikes over the past several years, we believed it was important to bifurcate our coverage universe to demonstrate the impact of these events on our theater versus our non-theater portfolio. As we are now 12 months removed from strikes and film production is normalizing, for calendar year 2025, we will return to our normal coverage reporting on the portfolio as a whole. In addition, over the past several years, we have worked closely with our tenants to get more timely and detailed report. As such, our coverage metrics will be based on a trailing 12-month basis as of the end of the quarter we are reporting, other than the education component, which will be through the previous quarter.

Thank you, Greg. Today, I'll discuss our financial performance for the fourth quarter and the year, provide an update on our balance sheet, and close with introducing 2025 guidance. FFOs adjusted for the quarter was $1.23 per share versus $1.18 in the prior year, and AFFO for the quarter was $1.22 per share compared to $1.16 in the prior year. Before I walk through the key variances, I want to explain some items excluded from FFOs adjusted and AFFO. During the quarter, we continued to make progress reducing our investments in theater and education properties and recycling those proceeds into other experiential assets. First, we recognized a net gain of $112,000 on the sale of two vacant theaters and one vacant early childhood education center for which we received net proceeds totaling $9.3 million. For the year, disposition proceeds totaled $74.4 million. We recognized a net gain on sales of $16.1 million. Second, we have two operating theater properties, as well as two theater properties leased by a smaller operator under contracts to sell, with closings expected on all four properties in the first half of 2025. During the quarter, we recognized non-cash impairment charges of $40 million related to these properties. However, we expect that the proceeds from these sales, once redeployed into other experiential assets, will be accretive to earnings while also reducing the volatility in reported earnings associated with operating properties. In addition, during the quarter, we made the decision to exit our unconsolidated equity investment in operating RV property located in Breaux Bridge, Louisiana. The RV property underperformed expectations that would have required an ongoing capital infusion to service the non-recourse debt and property operations. We finalized our exit of this investment earlier this month. Accordingly, during the quarter, we recognized $16.1 million in impairment charges on joint ventures to fully write off our carrying value. We also received $1 million in exchange for the sale of our remaining subordinated mortgage note receivable on the property. Accordingly, during the quarter, we recognized $10.3 million as provision for credit loss. We continue to have interest in two remaining unconsolidated joint ventures that hold two operating RV properties with a total carrying value of $14 million at year-end. Now, moving to the key variances. Total revenue for the quarter was $177.2 million versus $172 million in the prior year. Within total revenue, rental revenue increased $378,000 versus the prior year. The positive impact of investment spending was offset by a decrease due to a $2.5 million lease termination fee and $0.6 million in out-of-period deferral collections from cash-basis customers recognized during the prior year. Within rental revenue, percentage rents for the quarter were $4.7 million versus $6.2 million in the prior year. The decrease was due to less percentage rent recognized in the current period from two cultural properties that were sold early in the year as well as lower percentage rent from our gaming tenant and from certain attraction properties. The increase in mortgage and other financing income of $3.7 million was due to additional investments in mortgage notes over the past year. Both other income and other expense relate primarily to our consolidated operating properties including the Kartrite Hotel and Indoor Waterpark at our operating theaters. Please note that we had six operating theaters during the current period or seven during the prior year as we closed one of the operating theaters during the third quarter of '24 that we planned to sell. As I mentioned earlier, we also have two of the remaining six theater properties we are operating currently under contracts for sale. On the expense side, G&A expense for the quarter decreased to $12.2 million versus $13.8 million in the prior year due primarily to lower payroll costs including non-cash share-based compensation expense as well as lower professional fees. Interest expense, net for the quarter, increased by $3.1 million compared to prior year due to an increase in borrowings under our unsecured revolving credit facility as well as a decrease in interest income on short-term investments. Lastly, FFOs adjusted from joint ventures for the quarter increased by about $900,000 versus the prior year due primarily to the avoidance of off-season losses and interest expense from the decisions to exit joint venture investments in two hotel properties in St. Pete Beach, Florida as discussed last quarter as well as the JV investment in Breaux Bridge, Louisiana, I discussed earlier. These increases in FFO were partially offset by higher expenses including insurance and interest at the remaining joint ventures. Shifting to full year results. FFO as adjusted was $4.87 per share versus $5.18 in the prior year and AFFO was $4.84 per share compared to $5.22 in the prior year. On the next slide, I thought it'd be helpful to illustrate the impact on growth in FFOs adjusted per share for 2024 when you remove the impact of out-of-period cash basis deferral collections from 2023 of $36.4 million or $0.48 per share and from 2024 of $0.6 million or $0.01 per share. As you can see on the slide, FFO as adjusted per share growth without deferral collections from 2023 to 2024 was 3.4%. Turning to the next slide. I'll review some of the company's key credit ratios. As you can see, our coverage ratios continue to be strong with fixed charge coverage at 3.2 times and both interest and debt service coverage at 3.8 times. Our net debt to adjusted EBITDAre was 5.3 times for the quarter. If you adjust this ratio to include the annualization of investments put in service acquired or disposed of during the quarter, and the annualization of percentage rent and participating interest, as well as other items, this ratio was 5.1 times at quarter end, which is at the low end of our targeted range. Additionally, our net debt to gross assets was 40% on a book basis at year end, and our common dividend continues to be very well covered with an AFFO payout ratio of 70%, both for the fourth quarter and full year. Now let's move to our balance sheet, which is in great shape. At year-end, we had consolidated debt of $2.9 billion, of which $2.7 billion is either fixed-rate debt or debt that has been fixed through interest rate swaps with an overall blended coupon of approximately 4.4%. Additionally, we only have $300 million of debt maturing this year. As you can see, our liquidity position remains strong with $22.1 million of cash on hand at year end and only $175 million drawn on our new $1 billion revolver, which positions us well going forward and provides us great flexibility in our approach to refinancing the upcoming $300 million debt maturity. We are introducing our 2025 FFOs adjusted per share guidance of $4.94 to $5.14, representing an increase over the prior year of 3.5% at the midpoint. Note that due primarily to the timing of expected percentage rents, which are heavily weighted to the last three quarters of the year, as well as the fact that the first quarter is off-season for our operating properties, we expect results for the first quarter of 2025 to be lower than the full year divided by four by about $0.10 per share. As we have discussed previously, given our cost of capital, we are limiting our near-term investment spending. We are providing our 2025 investment spending guidance of $200 million to $300 million. We are also providing guidance for disposition proceeds for 2025 of $25 million to $75 million. We expect percentage rents in participating interest of $18 million to $22 million. The midpoint of this guidance reflects an increase of over $5 million versus the prior year. This increase is primarily related to percentage rents expected from theaters subject to the Regal Master Lease and offset by certain properties that have base rent increases in 2025, causing the breakpoint for percentage rents to go up. We expect G&A expense of $52 million to $55 million. The midpoint of this guidance reflects an increase from the prior year of about $3.4 million. This is primarily due to an increase in payroll and benefit costs, including non-cash stock grant amortization and to a lesser degree, an increase in franchise taxes due to a refund received in 2024 and an increase in costs associated with adding additional board members. On the next slide, guidance for our consolidated operating properties is provided by giving a range for other income and other expense. Since our remaining investments in joint ventures is only $14 million and the FFO impact going forward is expected to be nominal, we are no longer providing guidance for our operating joint ventures. Guidance details can be found on Page 24 of our supplemental. Finally, based on our expected 2025 performance, we are pleased to announce the 3.5% increase in our monthly dividend beginning with the dividend payable April 15 to shareholders of record as of March 31. We expect our 2025 dividend to be well covered with an AFFO per share payout continuing to be at about 70% based on the midpoint of guidance. Now with that, I'll turn it back over to Greg for his closing remarks.

Thank you, Mark. Our results continue to demonstrate the consumer demand for experiential offerings. With box office off to a strong start, we are excited about a more normalized release schedule. I want to thank all of our tenants, partners, and associates for their contributions in 2024. Facing many challenges, we delivered solid results, and we are excited about the opportunities before us in 2025 and beyond. With that, why don't I open it up for questions? Layla?

Our first question will come from Rob Stevenson with Janney Montgomery Scott. Please go ahead.

Good morning. How are the two remaining RV parks performing versus the Louisiana one that you exited?

Again, I'll let Greg jump in. I think we're seeing a better performance. If we reflect on Breaux Bridge, we can say that the Margaritaville conversion for that property did not work out; it was not the right decision. However, the others have been more established. We didn't really change the branding; we just expanded the offerings. But Greg?

I think that's great. Rob, they're both Jellystone products which have been around for a long time. On Kozy Rest, we have a number of things that have been under construction for a couple of years, so we're not really normalized yet. We expect a number of cabins that we had added last year to come online this year along with some of the amenities. So we're feeling better about those performances.

Yeah, as I said in my comments, we expect the go-forward contribution from those two for '25 to be nominal. The ones up and running and doing well and the other ones, as Greg said, is kind of normalizing. So it's was put in service this year as the full interest expense burden. But it's certainly on a good trajectory. But overall that number should be pretty nominal from an FFO point of view.

Okay, that's helpful. And then in terms of future sort of investments, how are you thinking about some of the other sort of lodging-type assets like the hot springs and other assets that aren't attached to a water park? Is that something that you're still interested in or is that not likely to be a significant investment going forward for you guys?

No, what I think you should think about this in terms of, Rob, is not the fact that we don't like that space, but we don't like operating versus net lease or fixed income structures. So where we can be in a situation of, like I said, net leasing, likewise, we have a Margaritaville RV park that's on a lease…

Pigeon Forge.

Yeah, Pigeon Forge, that's doing very well. Again, what we have experienced with whether it be insurance costs or some of these others, the volatility that that is introduced to us as a result of being the operating partner is not something I think investors value nor is it something as Greg pointed out candidly, the juice isn't worth the squeeze. So again, we still like some of these sectors, but we like them in our kind of net lease environment.

And then you had also mentioned Hot Springs resorts. I mean, we are very bullish on the Hot Springs area. I think we're one of the leading investors in the country in that. And I would say, there is a lodging component of those, but it's really part of the overall attraction, which includes the ability to do a day pass and so. So, we don't view those as pure lodging placements.

Okay, and then beyond your development pipeline, where are you seeing the best investment opportunities given your improved cost of equity and the strong balance sheet today?

We are very optimistic about fitness and wellness. We take pride in our strong portfolio, and we added Iron Mountain last year. We're experiencing positive momentum in the attraction sector. We successfully acquired Diggerland in the first quarter, and we are identifying promising opportunities across nearly all of our verticals at this time. However, we are being cautious due to our cost of capital while still recognizing numerous opportunities.

And just to add to that, in the eat & play area, we've got the Andretti Karting that we're doing three new locations and that's performing well.

Okay. Thanks, guys. Appreciate the time this morning.

Thank you, Rob.

Our next question will come from Anthony Paolone with JPMorgan. Your line is open. Please go ahead.

Good morning. Continuing on the previous topic, looking at your guidance, your growth rate is quite competitive compared to your peers. It seems that a significant portion of your capital deployment, after accounting for sales, is already secured with your commitments. What yields do you need right now to consider increasing your deployment? You mentioned what areas are most interesting, but how does the current deal flow compare to historical trends?

I would say the deal flow is fairly steady. What excites us more is that there are two different standards to consider. I don't believe our cost of equity is where it needs to be for us to raise capital effectively. However, it's possible that we could reach the higher end of our range based on the timing of some asset sales. We believe the range of opportunities available to us could support that. We do need to be mindful of our balance sheet and maintain our strong investment-grade status. Mark, perhaps you have additional insights.

Yeah. On the cost of capital side, both our equity cost has come down quite substantially recently, and our debt cost continues to come down. So if you kind of do the equity multiple approach and your debt at a 60-40 relationship, we're in the low 8s right now cost of capital, we'd like to see at least 100 basis points or 150 basis points of spread. So we're not quite there yet to do incremental over the $200 to $300 million that we're talking about here for next year and what we did this year, but it's certainly moving in the right direction.

Okay, thank you for that. And then just my second one on Kartrite. I appreciate the exit from operating and what you've done with some of the other ones. But I mean, how do you think about the long-term options with that one? Because it is, I think, still the most sizable of the pack there?

Yeah, Tony, again, we've had numerous challenges every year whether it's been shut down or last year the balcony challenge. Again, we have to remember that we entered into that transaction to activate the gaming. And on an overall basis, we look at those on a combined basis and we're doing quite well on the ground lease of that. Yes, again, we would we like to at some point in the future get out of the operating of that asset. Its performance needs to step up to allow that. But it's definitely something we will and will continue to look out and explore.

Okay, thank you.

Operator?

A question will come from the line of Bennett Rose from Citi. Please go ahead.

Hi, thanks. Appreciate the time. I wanted to ask you just on the percentage rents you mentioned, I guess continue to expect improvement in the box office, but just to achieve kind of the higher end of the range, is that really a box office dependent factor or is there something else in there that could help drive you those numbers up?

The performance involves percentage rents across various properties. There can be outperformance in different locations, but the theater box office significantly influences the Regal percentage figure, which impacts our higher end range of $18 million to $22 million. This suggests we might be looking at an additional $2 million at the upper limit.

I believe that additional investment and its timing are important factors in reaching the higher end of our earnings range. Improved performance in various operations also contributes to the potential for exceeding the midpoint. We've provided our best expectations for box office performance, and our stated range at the midpoint aligns with that outlook.

Could you provide insight on the two remaining joint venture properties? I understand they are relatively small, but are you planning to exit from the Jellystone and Yogi Bear properties you mentioned?

We will need to evaluate their relative value based on what they contribute. As you mentioned, it's fairly minor. I'm not sure we're dedicated to keeping them long-term, but they are performing adequately. If an opportunity arises to exit and reinvest that into a more favorable net lease investment, we will definitely consider it in the future.

Okay, thank you.

Thank you, Smedes.

Our next question will come from the line of Michael Goldsmith with UBS. Please go ahead.

Good morning. Thanks a lot for taking my question. First question is just, can you outline what you're assuming for credit loss for the year and just some of the thought process around that and how that compares to maybe prior years?

I'll start with mortgages. Credit loss on mortgages is accounted for using the credit loss model according to GAAP, and it's recorded on an ongoing basis. Overall, it's likely around 1% of EBITDA, which amounts to about $5 million. Therefore, we have that amount set aside as a cushion for potential bad debts.

And I think that's consistent with what we do every year.

Got it. And then just a follow-up question is on funding the 2025 investments, right? You've got a little bit of room on the revolver, but then you also mentioned kind of how you also have 2025 debt maturities of $300 million. So can you talk a little bit about how you plan on funding maybe just on the debt as well? And it sounds like you're not quite there on issuing equity. So you just talk about the interplay of those three? Thanks.

Sure. Let me outline the sources and uses of our funds. At the midpoint, our investment spending is projected at $250 million. We also have a loan maturity of $300 million, bringing our total uses to $550 million. On the sources side, we expect to have $50 million from asset dispositions and approximately $120 million in free cash flow, totaling $175 million in sources. Without additional long-term financing, this would increase our credit line by about $380 million. Adding that to the $175 million we have at year-end, we would be about half-drawn on the line. We could proceed in this manner, but our main strategy is to term out this amount and issue a bond, likely around $400 million, which would reduce our line to under $200 million. The key takeaway is that we have flexibility since we could fund everything on our line while being only half drawn. However, our goal is to ultimately term that out. We have room in our laddering for five-year, seven-year, or even ten-year bonds, giving us the flexibility to observe the market and decide the best timing for a potential bond deal.

Thank you very much.

Our next question will come from the line of Michael Carroll with RBC Capital Markets. Please go ahead.

Yeah, thanks. I wanted to touch back on percentage rents that you guys were kind of highlighting. I guess. Mark, can you kind of break out what is the non-theater percentage rents versus the theater percentage rents and do you expect the non-theater percentage rents to be largely stable in '25 or 24? I guess, how does that specifically change between the two years?

We don't provide a specific breakdown. Most of the increase is due to the Regal Master Lease and other properties. There have been some fluctuations, including a possible slight decrease in percentage rent, but the overall rental amount remains stable. This will affect its presentation on the income statement. Year-over-year, it is relatively stable, except for changes in capitalization rates. Additionally, there is an increase from box office revenue on the Regal side.

No, I would say, Michael, that it's not meaningfully different when you look at a July to July. If you look, remember, last year, we started talking about the acceleration of the box office in the second half. And so on a run rate basis, those are fairly consistent.

Okay, great. I just need clarification on Kartrite. How are those properties performing? It seems that the other income guidance suggests it's expected to remain largely flat between '25 and '24. Should we take away that your expectation for Kartrite is that it will stay about the same through 2025? Do you consider that a conservative estimate?

Again, I think the main point is that, even though we are seeing improvements in our operating properties, we are still experiencing significant insurance costs like we did this year. This makes it challenging to make steady progress. We are maintaining our current approach and continuing our efforts to advance. As I mentioned earlier, we have faced numerous challenges, including shutdowns and issues with balconies. Our operating expenses are considerably higher than we had anticipated, and we are actively working to address this situation.

Overall, other income and other expenses are decreasing as we sell the two operating theaters, and the timing of that could impact those figures. Additionally, we expect performance to improve in the theaters we operate this year due to better box office results. However, this improvement is somewhat countered by expenses, particularly insurance costs, related to Kartrite. This is why we are guiding toward a breakeven scenario at the midpoint.

Great. Thank you.

Thank you, Michael.

Our next question will come from the line of Upal Rana with KeyBanc Capital Markets.

Great. Thanks for taking the question. What do you guys think that drove the stronger second half in the movie theater business because it came in ahead of even your projection that you gave during Q3 earnings. Was it just more movies or is this something else that you think will continue into '25 and beyond?

Again, I'll let Greg contribute. Fundamentally, as we've always mentioned, the number of titles is important. We've returned to a more normalized level of titles. When there are more titles available, consumers are more inclined to go to the movies. We believe this momentum will encourage people to develop a habit of moviegoing, which we think will continue into '25 and beyond. But Greg?

No, I think that covers it, yeah.

Okay, great. That was helpful. And then of the $200 million to $300 million investment guidance you provided, how are you planning on allocating that capital across either development, asset acquisitions, mortgage notes, or JVs, given in '24 almost half year investment volumes were towards mortgages?

Yes, I always say that it's more of an art than a science. We aim to make the best deals available to us, and typically it balances out around 50-50. While that's not a target, it tends to be the outcome. We mentioned that we're wrapping up a few development projects, including the Andretti Karting deals, and of course, Diggerland, which we have already acquired, was an acquisition.

I do think it's important though that we draw a distinction. Most of our mortgages lead to ownership. So, again, most of these investments that you saw last year where we are investing in, say, a mortgage structure, it may have historic tax credits that we can't convert until we get outside the period or things of that nature. But these aren't long term mortgages. There are a structure to a path forward ownership, and that's what most of ours are.

Not short-term.

Okay. Great. That was helpful. Thank you.

Our next question comes from the line of Jane Gallen with Bank of America. Please go ahead.

Thank you. Good morning. You've had a lot of success and traction with the theater dispositions. I was hoping you could talk to kind of the depth and breadth of buyers out there. And as the box office improves and you pivot to non-vacant asset sales, kind of any cap rate expectations around that.

Thank you. First of all, I want to acknowledge my team; they are excellent at sourcing these deals. For vacant theaters, we approach them as real estate rather than specific assets. The quality of the real estate directly influences the transactions we can execute. Currently, there isn't much visibility regarding theater transactions for leased properties. We do have one under contract, and we're satisfied with the expected outcome, which is likely to be around 9%, though that is still pending closure. I believe that as the box office recovers, we will start to see more of these transactions occur.

Thank you. In your discussions with tenants and based on your experiences with the operating properties, what is your perspective on the current expense pressures? Have we already passed the peak expenses or do you anticipate some unpredictable factors, such as insurance, still impacting us?

Again, I think the insurance, what we're starting to see is that again, it seems to be kind of topping out. I mean, we just had a meeting yesterday where we were talking with insurance people who said that, again, that's going to be a function of what events occur. I mean, fortunately, the California wildfires didn't hit many commercial properties. So that one will flow back through on kind of the reinsurance issues. But again, what we're kind of 20%, 30%, 40%, 50% kind of impacts over the last two years. Hopefully, we've seen the peak of that.

I would say we've seen the peak, but there will still be challenges. It's difficult to grasp the situation fully. This is not just an issue for us; our tenants are experiencing similar difficulties every day.

Yeah. But again, what we've seen so far is they're managing through that. I mean, we saw, as we said, a slight tick down a tenth in coverage, which is really kind of driven by those kind of expenses, but still considerably higher than where we were pre-pandemic. So, I think they're managing through it, but it's not without its challenges.

Great. Thank you.

And our final question will come from the line of Ki Bin Kim with Truist. Your line is open. Please go ahead.

Great, thanks for taking the question. What do you guys think that drove the stronger second half in the movie theater business because it came in ahead of even your projection that you gave during 3Q earnings. Was it just more movies or is this something else that you think will continue into '25 and beyond?

Thank you, Layla, and thank you, everyone, for your time and attention today. We greatly appreciate it. We look forward to talking to you through the remainder of the balance of the year and look forward to another solid year. Thank you.

Thanks.

Thank you for joining EPR Properties Q4 2024 earnings call. This concludes today's call. You may now disconnect.