Hello, and welcome to the EPR Properties Q2 2025 Earnings Call. 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, Corporate Communications.

Thank you, Abigail. Thanks for joining us today for our second quarter 2025 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 identified 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 these 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 is included in today's earnings release and supplemental information furnished to the SEC under Form 10-K. If you wish to follow along, today's earnings release, supplemental, and earnings call presentation are available in 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 2025 earnings call and webcast. Our second quarter results underscore sustained momentum across our diversified portfolio, highlighted by solid earnings growth and a disciplined approach to capital allocation. Additionally, we've seen a significant improvement in our cost of capital, supported by the strong appreciation of our equity valuation. During the first half of the year, our elevated cost of capital dictated a measured approach to capital deployment. However, we have a robust pipeline of opportunities, including more than $100 million committed to experiential development and redevelopment projects in the coming quarters. While our investment spending guidance remains unchanged, our improved cost of capital positions us to accelerate our future investment spending. Although the full impact of these efforts will play out over future quarters, our employment strategy has clearly shifted within the last 60 days as our team has taken a more aggressive growth posture to pursue new opportunities. Our pipeline includes both existing and new partners, spanning a broad range of deal sizes. However, with an improved cost of capital, larger deals are now becoming a possibility. We are also pleased with our ongoing progress in our strategic capital recycling, which is advancing ahead of our expectations. This initiative is pivotal as we further position our portfolio with productive and diversified experiential assets. Turning to our existing portfolio, our second quarter consolidated coverage was up slightly versus the first quarter from 2.0 to 2.1. The box office remains a source of meaningful optimism. We are seeing sustained momentum and resilience as major releases have generally met or exceeded their expectations, reinforcing positive consumer demand for theatrical exhibition. Notably, we anticipate that the Regal master lease will land near our percentage rent expectations, which is expected to generate a significant increase from 2024. An encouraging outcome driven by continued box office recovery and the enhanced economic alignment embedded in the revised lease structure. While the broader macroeconomic environment presents ongoing crosscurrents, our differentiated strategy provides both resilience and opportunity anchored by a sustained consumer orientation toward experiential spending. Now I'll turn it 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 329 properties that are 99% leased or operated, excluding vacant properties we intend to sell. During the quarter, our investment spending was $48.6 million. 100% of the spending was in our Experiential portfolio. Our Experiential portfolio comprises 274 properties with 52 operators and accounts for 94% of our total investments or approximately $6.5 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 55 properties with 5 operators, and at the end of the quarter, was 100% leased. Turning to coverage, the most recent data provided is based on a June trailing 12-month period. Overall portfolio coverage remains strong at 2.1x, an increase over last quarter. Turning to the operating status of our tenants, the rebound in North American box office continues. Q2 box office was $2.7 billion, up 37% compared to Q2 2024, driven by a full slate of strong performing titles. Six titles grossed over $175 million, including a Minecraft Movie at $424 million to date, Lilo & Stitch at $419 million to date, Sinners at $279 million to date and How To Train Your Dragon at $254 million to date. For Q3, 3 titles are projected to gross over $200 million: Jurassic World Rebirth, Superman, and The Fantastic Four: First Steps. Jurassic World has already grossed over $286 million and Superman is at $260 million. Fantastic Four opened last weekend to $118 million. We are also very pleased with the success of Apple's F1, which has grossed nearly $160 million to date, making it the most successful Apple theatrical release. The slate for the fourth quarter is anchored by 3 additional films projected to gross over $200 million: Zootopia 2; Wicked: For Good; and Avatar: Fire & Ash. Box office through the first half of the year was $4.1 billion, a 15% increase over the first half of 2024. Our estimate of North American box office for calendar year 2025 remains between $9.3 billion and $9.7 billion. Turning now to an update on our other major customer groups. Andretti Karting opened in Oklahoma City on July 15. Construction continues in Kansas City and Schaumberg with openings scheduled, respectively, for late 2025 and early 2026. Notwithstanding some macro pressures on consumers, our Eat & Play coverage remains strong and above pre-COVID levels. Importantly, across our portfolio, our operators are continually refining and developing promotional initiatives to attract customers and deliver value. Our attractions are open for the summer. We are very pleased with the performance of the Bavarian Inn. Our major expansion was open for all of Q2 and is driving performance. Throughout the rest of the portfolio, early season performance has been varied because of weather conditions, but historically, they tend to even out over the course of the season. USA TODAY recently ranked each of our 3 hot springs resorts in the top 10 of all hot springs resorts in the United States. Our recently expanded Springs Resort at Pagosa Springs is #1. Our Murietta Hot Springs Resort in Murietta, California is #3. And our Iron Mountain Hot Springs in Glenwood Springs, Colorado is #5. We are leaders in this industry and have spent a lot of time focused on building a foundation with strong performing assets. We see a lot of momentum and investment potential in the hot spring space as people across the demographic spectrum focus on wellness. The expansion at our Jellystone Kozy Rest RV Resort near Pittsburgh is complete and early season performance shows gains over Q2 2024, driven by the increased number of available rental units. Our Education portfolio continues to perform well. Our customers' trailing 12-month revenue and EBITDAre across the portfolio for Q1 was essentially flat. Our investment spending for Q2 was $48.6 million, entirely experiential assets and includes funding for projects that we have closed but are not yet open. Our year-to-date investment spending is $86.3 million. During the quarter, we made our first investment in the traditional golf space, acquiring the land for $1.2 million and providing $5.9 million in mortgage financing, secured by the improvements to Evergreen Partners for an existing private club in Georgia. We have spent a lot of time analyzing traditional golf while building deep relationships, and we are delighted to announce our foray into what we think is an exciting growth opportunity in a resilient space with a growing operator. We also acquired our second Pinstack Eat & Play venue in Northern Virginia for $1.6 million with a commitment to provide build-to-suit financing for $19 million. This project is expected to open in 2026. Pinstack features bowling, food and beverage, and redemption games. As our cost of capital continues to recover, we are increasing our investment spending cadence as we head into the second half of 2025 and for 2026. We continue to see high-quality opportunities for both acquisition and build-to-suit development in our target experiential categories. As we have mentioned frequently, we are especially bullish on the fitness and wellness space, given our relationships, the increased focus on fitness and wellness among multiple generations and demographics, and a wide range of investment opportunities from hot springs to spas to fitness. Ramping up takes time, so we are maintaining our investment spending guidance for funds to be deployed in 2025 in the range of $200 million to $300 million. We have committed over $100 million for experiential development and redevelopment projects that have closed but are not yet funded to be deployed over the next 18 months. We anticipate approximately $43 million of this amount will be deployed in 2025, which is included at the midpoint of our 2025 guidance range. We continue to execute our strategy to focus our portfolio on diversified experiential assets. To that end, in Q2, we sold a vacant former Regal theater in California to Costco for net proceeds of $24 million, demonstrating the value of good real estate. We also sold 2 theater properties at a 9% cap to a smaller operator who leased those locations from us. Total proceeds from these 3 theater transactions were $35.6 million, with a net gain of $16.8 million. Finally, subsequent to the end of the quarter, we sold our last vacant AMC theater in Hamilton, New Jersey to the Children's Hospital of Philadelphia for net proceeds of approximately $16 million and a gain of approximately $3 million. In the past 4 years, we have sold 31 theaters. We have 1 remaining vacant theater. Year-to-date, we have sold approximately $130 million of assets. We are revising our 2025 disposition guidance to the range of $130 million to $145 million from a range of $80 million to $120 million. I'll now turn it over to Mark for a discussion on the financials.

Thank you, Greg. Today, I'll discuss our financial performance for the second quarter, provide an update on our balance sheet, and close with an update on 2025 guidance. FFO as adjusted for the quarter was $1.26 per share versus $1.22 in the prior year. And AFFO for the quarter was $1.24 per share compared to $1.20 in the prior year, both an increase of 3.3%. Now moving to the key variances. Total revenue for the quarter was $178.1 million versus $173.1 million in the prior year. Within total revenue, rental revenue increased $5.3 million versus the prior year, mostly due to the impact of investment spending and higher percentage rents. Percentage rents for the quarter were $4.6 million versus $2 million in the prior year, and the increase was due primarily to percentage recognized from one of our theater tenants. The increase in mortgage and other financing income of $1.9 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 & Indoor Waterpark and our operating theaters. The decrease in other income and other expense versus prior year is due primarily to the sale of 3 operating theater properties in the first half of this year. On the expense side, G&A expenses for the quarter increased to $13.2 million versus $12 million in the prior year due primarily to higher payroll costs, including non-cash share-based compensation expense, as well as higher franchise taxes. As you may recall, in the prior year, there was a legislative tax change that created a one-time benefit in franchise taxes. Interest expense net for the quarter increased by $426,000 compared to the previous year due to an increase in our weighted average interest rate on outstanding debt due to additional borrowing on our unsecured revolving credit facility to pay off a lower rate senior unsecured notes at their maturity. With regard to dispositions for the quarter, net proceeds totaled $35.6 million, and we recognized a net gain on sale of $16.8 million. Note that this gain is excluded from FFO as adjusted and AFFO. FFO as adjusted for the 6 months ended June 30 was $2.45 per share compared to $2.34 in the prior year, and AFFO for the same period was $2.44 per share compared to $2.33 in the prior year, both an increase of 4.7%. 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 3.3x and both interest and debt service coverage ratios at 3.9x. Our net debt to adjusted EBITDAre was 5.1x for the quarter. If you adjust this ratio to include the annualization of investments placed in service, investments required or disposed of during the quarter, and the annualization of participating interest as well as other items, this ratio was 5x at quarter end, which is at the low end of our targeted range. Additionally, our net debt to gross assets was 39% on a book basis at quarter end, and our common dividend continues to be very well covered with an AFFO payout ratio of 71% for the second quarter. Now let's move to our balance sheet, which is in great shape. At quarter end, we had consolidated debt of $2.8 billion, of which $2.4 billion is either fixed-rate debt or debt that has been fixed through interest rate swaps with an overall blended coupon of approximately 4.3%. On April 1, we repaid $300 million in senior unsecured notes at maturity using funds available under our revolver. We have no other debt maturities in the next 12 months. Our liquidity position remains strong with $13 million cash on hand at quarter end and $405 million drawn on our $1 billion revolver. We are pleased to see the recent significant improvement in our cost of capital. While our leverage is at the low end of our range and our 2025 guidance continues to have no equity issuance assumed, we are excited to announce that we are in the process of establishing an ATM program, which will provide us an additional tool in our toolbox for sources of capital. We are confirming our 2024 FFO as adjusted per share guidance of $5 to $5.16, represented an increase over the prior year of 4.3% at the midpoint. We're also confirming our 2025 investment spending guidance of $200 million to $300 million. We're increasing guidance for disposition proceeds for 2025 to a range of $130 million to $145 million from a range of $80 million to $120 million. On the next slide, we are confirming our percentage rent and participating interest income of $21.5 million to $25.5 million. And our G&A expense of $53 million to $56 million. We're also confirming the guidance for our consolidated operating properties, which is provided by giving a range for other income and other expense. Guidance details can be found on Page 23 of our supplemental. Now with that, I'll turn it back over to Greg for his closing remarks.

Thank you, Mark. Lastly, I wanted to comment on Greg Zimmerman's planned retirement and the transition of the Chief Investment Officer role to Ben Fox, who will join the company in August as Executive Vice President. We are pleased that Greg will stay into the first quarter of 2026 to ensure a smooth transition. Although it's not quite yet time to say goodbye to Greg, I would like to thank him for the significant contributions he has made to the company. While instilling a disciplined and thoughtful approach as CIO, he has also helped to navigate the company through some very challenging times, and we are thankful for his efforts. We are also very pleased to welcome Ben Fox to EPR Properties. Ben brings substantial experience and expertise in the net lease REIT business, having served in senior positions at Realty Income and most recently in the net lease division of Ares Management Corporation. Ben will work with Greg during his remaining tenure, helping to ensure continuity, knowledge sharing, and continued success. With that, why don't I open it up for questions? Abigail?

Our first question comes from Rob Stevenson with Janney Montgomery Scott.

So Greg or Greg, is there a significant amount of assets out there for sale at reasonable prices that you want to own? Or does expanding your pipeline going forward here, at least in the near term, mean expanding the development pipeline as much or more than acquisitions? How should we be thinking about the acquisition market that you guys are in for quality assets at this point?

Sure. And I'll let Greg comment as well, but I think we're still seeing a robust amount of opportunities. I mean, again, as we've talked about, when you have a limited amount of capital, you're being very discerning in what is the best targeted use of that. It doesn't mean they're not good deals; you're trying to deploy that in the best manner supporting existing tenants and otherwise. But I think we still feel there's really good opportunities. And I think Greg would say that we're starting to see that growing.

Yes, 100%, Greg. Rob, I would say well over half of our pipeline is acquisitions. To Greg's point, we've been unable to participate in some higher deal volume acquisitions just because we were being careful. And again, we're always mindful of balancing development with acquisitions. So to answer your question directly, I don't see us turning to a lot more development in the future to grow the pipeline. I don't think that will be necessary.

Okay. And then how are you guys thinking about dispositions in the back half of this year and the early part of next year? You guys have been selling a decent amount of assets. Is there still more stuff that you want to do there and take advantage of the market and use that as capital? Or were dispositions this year sort of more front-end loaded and we'll see that sort of petering out in the back half of this year and into '26?

I believe we have already reached the low end of our guidance regarding this, but we are strategically aiming to reduce our theater exposure. We've started selling operating theaters as the first step in this process and will continue to explore such opportunities as a way to achieve our strategic goals and generate significant capital. However, our range indicates that we are nearing completion of our targeted disposals, though we will persist in pursuing our strategic objectives.

And Rob, that would also include education. So we sold an Education portfolio this year, and we're always just opportunistic about that. So if we get a good deal, we'll execute one.

The positive news is that we have only one remaining vacant theater, and there are no unoccupied education facilities. The asset management team has effectively sold the vacant theaters. As Greg mentioned, there's not much left to achieve in our plan, considering the midpoint of our range is only slightly above what we've already accomplished at $130 million. There will be some additional activity for the remainder of the year, but not much more is planned.

Okay. And then last one for me, Mark. Since I've got you, how are you thinking about the balance sheet over the next year? You moved the $300 million of notes onto the line. You've got another $630 million of notes coming due next year in August to December. Are you thinking about doing something in the near term? Do you wait until sometime in '26 and potentially lower rates to do something? How are you sort of thinking about balance sheet strategy over the sort of short and intermediate term here?

Sure. That's a good question. Looking ahead for the remainder of the year, we have approximately $164 million left to reach our midpoint guidance for investment spending. We anticipate generating over $630 million from remaining asset sales, along with nearly $100 million in free cash flow, resulting in a net use of about $64 million. Our line stands at $405 million, which gives us some flexibility, as we would be less than half drawn even without a bond transaction. However, we do plan to execute a bond transaction in the latter half of the year, which should reduce that line balance going into next year. Additionally, as we approach bond maturities in late '26, we will likely conduct another bond transaction to refinance those as well. That's our perspective on the near-term outlook.

Our next question comes from John Kilichowski with Wells Fargo.

On the disposition activity, it looked like pretty good execution on the theaters that you sold out at 9%, and these are noncore assets. How should we think about the demand for these assets and maybe pricing for your more core assets?

We are starting to see some activity in the theater sector with a recovery in box office numbers. Although these events were not in major markets or involving a major operator, we will have to wait and see how this develops. There is evidently growing interest in this area, and we're beginning to observe increased acceptance of theaters as an investment category. But Greg, perhaps you can add more.

Yes. And more broadly, John, I would say, within the past 2 years, we sold 2 Titanic museums for a cap rate in the low 6s, and we sold the theater portfolio for a cap rate in the low 7s, if that helps on the non-theater portion.

Or in Education portfolio.

Got it. And then maybe on the percentage rent side of things, just to sort of bifurcate it into the theater and non-theater portion. It sounded like your commentary around theaters felt very positive. I'm curious how the box office today stands maybe from your beginning of the year expectations and if there's some conservatism in not moving up your expectations around it? And then sort of part 2 of that would be what comprises maybe the other half or the other part of percentage rent? And are there any maybe opportunities for upside that you're seeing that you just haven't baked in yet?

I believe we've got a strong team led by Greg that understands the market and is skilled at making predictions. As I mentioned earlier, we're meeting or closely aligning with our initial expectations. However, it's been unpredictable; some films we expected to perform well haven't, while others that we didn't anticipate have done surprisingly well, balancing each other out. Overall, we feel optimistic about that aspect. Looking ahead for the rest of the year, we're seeing contributions from various sources, including ski resorts, attractions, and education. We'll observe how that develops and whether there's potential for further growth. As I've said, Greg and Mark's teams have put together solid ranges and estimates, and we're confident in our approach, which is why we haven't adjusted our expectations yet.

And from a mix perspective, theaters represent about roughly 1/3 of our midpoint of guidance. So you kind of get a perspective that a lot of it's coming from a lot of other categories, as Greg mentioned, Eat & Play, ski, attractions, gaming, fitness. We get it from a lot of different areas. So that puts some context around it.

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

Greg, you mentioned larger deals are more likely in your remarks...

We probably lost you.

Can you hear me now?

Yes, we can hear you now. Sorry, could you start your question over, please?

Sure. Greg, you mentioned that larger deals are becoming more probable. Can you share your insights on what opportunities exist in the market that appeal to you? Additionally, what do you anticipate the potential cap rates on those deals to be?

Again, I'll let Greg jump in. I think we are seeing opportunities across the board without going into detail about specific transactions. We are still comfortably in the 8s regarding what we are looking at. Greg?

Yes, 100% comfortably in the 8s. And we're always looking at deals in a wide spectrum of ranges. So we're looking at deals in the $10 million range, and we're looking at deals in the several hundred million range, and there are deals in those categories. And as we both said in our scripts, we're seeing opportunities in all of our verticals other than...

Okay, great. That was helpful. And then I had a question on fuel costs. It's down about 10% this year. And I'm curious if there's any impact on your customers and their willingness to either visit more of your properties or spend more on your properties. So I just wanted to hear your thoughts there.

Again, I think anything that creates additional discretionary income is positive, and it's helping to offset some inflationary factors for the consumer. So I don't know that there's any direct correlation that we're seeing, but it's probably welcome in the pocketbooks of our consumers, and that's much appreciated.

And I'd say in today's world, we feel like being in the experiential space is a positive because people still want to get out and do things.

And the next question will come from Anthony Paolone with JPMorgan.

The first question relates to just the deal pipeline. You mentioned some larger transactions that you're starting to see as well. Can you maybe just give us some sense as to what definition of larger would be for you all?

I think for us, we would consider it to be over $100 million. When we were thinking of a midpoint of $250 million, a $100 million transaction would represent nearly 40% of our deal. So we were a bit cautious about committing that much in one go. However, with our cost of capital becoming more favorable, we are looking into those opportunities. That's how I would frame it. But Greg?

No, I agree. Yes. Tony, I think the best way to think of it is in relation to our guidance. So yes, $100 million, and some in the high tens of millions, yes.

Okay. And then on these transactions, you mentioned your better capital costs make you more competitive. But if we think about the last, I don't know, a few quarters or so, have these deals been occurring away from you in the market? Or have they just not happened and they might still be out there? Just trying to understand like who's being competitive as before your capital costs improved here.

Yes. I actually think that these have been more that are just starting to come to the market that people are gaining more acceptance, that we're not going back to substantial low cap rates. But there have been kind of major transactions that have occurred. If you look in the attraction space, Park Greene did a $700 million attractions deal that we were solicited for a bid on it and really couldn't participate. So there were big transactions. I think that ended up going on a debt route, but there were transactions that were occurring out there, and we were asked to be part of a solution and really just couldn't. But we feel now that those are starting to open up for us.

Okay. And if I could just sneak one in for Mark. Given where the stock is now, I think you're kind of in the money on the 2 convertible prefs. Is there anything for you all to do there? Like can you convert them? Does that make sense? Or can you call them, just noticing that it's been a while since spending the money on those?

Yes, they're not really callable. You could go on the market and tender for them, but that would be at a premium to market price, it really doesn't make sense. It's also hard to cobble together any meaningful amount. We've looked at that in the past. So I wouldn't expect anything happening on those 2 preferreds.

Our next question will come from Smedes Rose with Citi Global Markets.

I wanted to ask you just a little bit more about establishing the ATM program. As you think about potentially raising new equity, what kind of spreads or sort of like maybe a minimum between cap rates and how you think about your weighted cost of capital? Do you look at kind of consensus NAV or an internal NAV? Kind of maybe just help us think about when you would pull the trigger on issuing new equity.

Yes. I'll let Mark add to this. In the past, we have considered all of these factors. It's really about balancing the cost of acquiring assets and how we deploy them effectively. Historically, we've aimed for a minimum spread of 100 basis points. Mark will explain further, but we are preparing for future opportunities. This doesn't mean, as he mentioned earlier, that we will be issuing equity in the near term. However, we want this option available as we move forward and continue to implement our plan, which will provide us with the flexibility we need. But Mark?

I agree. We typically evaluate the cost of capital and assess whether investing equity in a deal is beneficial, usually aiming for a 60-40 split between equity and debt. Raising equity doesn’t seem logical in this context. As Greg mentioned, we look for an initial spread of about 100 basis points. This doesn’t mean we can’t consider other options for diversifying our portfolio, but it’s generally our approach. The ATM gives us another source of capital, and we have utilized the direct share purchase plan to distribute shares gradually. Since I joined, we've raised over $700 million through that plan. The ATM allows for larger block issuances and provides the option to do forward transactions. As Greg noted, we don’t have any immediate issuance plans, we're at the lower end of our leverage, and there's no equity in our current plans. However, this offers us an additional tool moving forward.

Okay. I wanted to ask if your guidance still includes a bond deal later this year to pay down the credit line.

Yes, it still does.

Our next question comes from Jana Galan with Bank of America.

It's encouraging to see that rent coverage has improved from quarter to quarter, especially considering the ongoing challenges faced by consumers. Could you provide some insight on how coverage varies across your different concepts or segments? Additionally, regarding the Eat & Play locations, you mentioned last quarter that while attendance was high, consumption may not have been. Is that trend continuing this summer?

Again, I believe that the consumer is increasingly aware and seeking value. Our Eat & Play tenants are responding accordingly by finding new ways to engage with consumers and add value. Overall, our coverage has remained relatively stable. The increase is likely tied to the recovery in the theater sector, but since that only represents 37%, the other segments must also be stable, which I believe they are. While consumer conditions such as weather and rain have affected some attractions, these fluctuations are normal. Nonetheless, we are still witnessing strong resilience from consumers, as indicated by recent Fed reports and GDP growth.

Our next question will come from Kathryn Graves with UBS.

So my first question, you mentioned that you have no vacant education centers at this point. You didn't sell any in the second quarter. I was wondering if you could just talk a little bit more about what makes an education center a good candidate for sale. What you're seeing as far as interest in those assets? And would you be looking to do primarily more portfolio sales? Or would you be willing to sell some on a one-off basis?

Yes, I believe that a good sale opportunity is characterized by a very attractive cap rate. We are receiving continued interest from potential buyers in this sector. Looking at our remaining tenants, it seems likely that they will be sold as part of portfolios, meaning we would sell them together rather than individually. This likely means that the sales will be in the range of $40 million to $100 million as we proceed with these disposals. Some of this, honestly, is just us being opportunistic. The sector has shown remarkable resilience, particularly strengthened by the impact of COVID, which reduced many at-home childcare options. We are quite satisfied with how this space is performing. As Greg mentioned, it is doing well, and we plan to continue evaluating opportunities presented to us to determine if they are beneficial for us.

And to amplify that there's a broad market for them. So we're not really concerned about the ability to transact.

Got it. That's helpful. And then my second question, there's a couple of headlines and Six Flags closing or preparing to close a couple of their parks. And I was just wondering if you could provide some color on how you're thinking about your exposure to that tenant and just sort of your comfort with that tenant going forward?

Yes. I mean, I think we see those in our discussions with them, and they will comment on their own as this is a continuation of the merger of kind of rationalizing their fleet of locations and candidly opportunistically selling and deployment of what we think will be accretive transactions for them. I mean people forget that often these locations are in and around major metropolitan areas with somewhere in the neighborhood of 300 to 400 acres. And when you look at some of the areas they're in, sometimes there's just a higher and better use that generates a great sale price. And I commend them for aggressively looking at their overall strategy to lower their debt level. And when they can sell out a property and make substantial gains and lower and create a better credit tenant for us, that's positive.

Our next question will come from Ryan Caviola with Green Street.

It's Spenser here. Just one for me. I was hoping you guys could provide an update on the competitive landscape. And then I was also wondering, do you guys tend to see more or less competition for deals as you go up in check size?

Again, I think it changes. What we observe is that especially for deals of $50 million or less, we see a mix of other REITs and family offices. As the deal size increases, that group tends to diminish because private equity firms typically ask how they can exit in three to five years, whereas many of these investments require long-term capital. Therefore, we start encountering a different set of competitors. This isn't new for us; it has been the case for our 27 to 28 years. I wouldn’t say that the overall number of competitors has increased significantly. However, it is interesting to note that credit funds, driven by their need to deploy capital, become more involved as the deal size gets larger. But Greg, I'm not certain...

Okay. That's helpful. And do you guys get inbounds from sellers often, especially maybe just for some of the larger deals and wherever just get like a first look just given your brand in the space?

No doubt. Those are the calls we love.

And I'd say, well, obviously, more often than not. I mean we see most deals, for sure.

Our next question will come from Michael Carroll with RBC Capital Markets.

Mark, given that we're pretty much at the end of July right now, will the Regal percentage rents that were reported in prior presentations and after the bankruptcy be matching what the box office is doing? Is that still a pretty good ballpark of what we expect could be reported in July related to those percentage rents?

Yes, correct. I think that chart that we put out initially is still in line with our expectations.

How much percentage rents have been reported so far in the second quarter? I understand that it will largely span between the second and third quarters. What kind of increase can we anticipate in the third quarter concerning the percentage rents and the box office we have already observed?

Yes. We don't get that specific as far as tenants and what's in one quarter versus the next. I could tell you, overall for the quarter, we had $4.6 million of percentage rents. Obviously, looking at our midpoint, that's going to ratchet up in Q3 and Q4, probably fairly evenly between the 2 to achieve that midpoint of $23.5 million. So the bigger chunk of Regal hits in Q3. But I think between Q2 and Q3 regarding Regal, it's kind of in line with our expectations.

Okay. And then just lastly on the Regal topic. I know you get paid based off of what the revenue is at the Regal boxes, right? So how have those assets been performing relative to market? I mean is it largely in line? And do you typically see a lot of deviations between specific theaters within a market depending on how well they're doing or not? Does that vary very much?

No, that's exactly correct because it ends up being what is the market share of the individual theaters. Now some of this, both good and bad, is impacted. And this is really positive as we go forward is Regal is investing back into these theaters and adding features and some of those that cause some disruption. So there may be auditoriums that are shut down. But as we've talked about, we still think we're hitting plan, but we're getting new IMAXs put in at some of our theaters and things like that, which really bode well as we go forward because the consumer has kind of clearly demonstrated the demand for that type of product. But Greg...

Yes, and Michael, I would say we're very pleased with how they've recaptured market share coming out of bankruptcy, returning to the levels we anticipated. As we’ve mentioned before, it's very detailed; it comes down to the number of large-format screens in each theater for specific films, and we keep a close watch on that. So the key point is that we are satisfied with how they've regained market share and their overall performance.

And those investments are Regal largely making those investments by themselves?

Well, there's Regal making investments. And then remember, as part of our deal, we agreed to make certain investments with them limited over a period of years. But it's at least 50% or more of Regal's investment.

Yes. And again, they're required to prove that it will be revenue enhancing before we are required to invest. In other words, so that we get more percentage rent. That's the idea.

Our last question will come from Kyle Bonci with Truist Securities.

So the box office guidance implies some acceleration into the second half of the year. And I think most of that was addressed in the opening comments. But curious how the production pipeline looks today, more of a forward basis versus where you guys were last year and if you expect to see a continued acceleration in the number of releases?

I think we're very encouraged. If you saw what came out of the industry kind of discussions is that more films are being developed. And as Greg said, the success for Apple having an F1 is encouraging for them. So it's too early for us right now to give you our opinion on '26, but nothing has changed our optimism about the direction that the industry is moving.

And I would add significantly, Amazon a couple of months ago announced that they were going to participate more in theatrical production over time.

I understand. It seems that some of the performance at the TRS operating properties is ahead of last year. I believe a portion of this can be attributed to the improving theater performance, suggesting it may be trending beyond neutral earnings contribution. Would you agree with that assessment at this time?

I believe the second quarter was strong for theaters compared to the same period last year, which was rather challenging. It's important to note that we sold three theaters since last year, making comparisons a bit tricky. However, we did see significant improvement quarter-over-quarter, primarily driven by theaters. For the entire year, the contribution is expected to be relatively similar to last year. There was only a slight difference last year between other income and other expenses. We anticipate similar results going forward, as our guidance suggests a break-even scenario with theaters performing well while Kartrite may lag a bit in terms of FFO. Our guidance indicates certain net results for the year, but for the quarter, we certainly saw a substantial improvement in theater performance compared to the previous quarter.

Our last question will come from Anthony Paolone with JPMorgan.

Just 2 for me. One is just, is there any cap rate spread between larger and smaller deals?

Go ahead, Greg.

Yes, for sure, Tony. I mean, I think you're probably looking at 25 basis points to 50 basis points spread. And I think Mark mentioned, obviously, we're always looking for a spread of 100 basis points, but there are some strategic decisions we have to make too, in terms of expanding our diversity and getting into spaces.

So 25 to 50 basis points better on larger deal...

No, I think that's realistic.

Okay. Regarding Kartrite, it continues to represent a significant portion of the other revenue and expenses, and it appears to be breaking even at this point. Can you provide some insight on whether there are opportunities to monetize it or perhaps share an estimate of its value, even though it's not contributing much to earnings at the moment?

Yes. We've acknowledged that we've had challenges with operating costs, particularly due to the union, which complicates things compared to how our other waterpark hotels operate. Regarding value, we can't speculate on that at the moment. We view the entire project in connection with the gaming ground lease, as one was intended to activate the other. It's not due to a lack of effort on our part to improve the situation; rather, we are facing certain challenges. We're continuing to address these responses.

There are no further questions. So I will now turn the call back over to Greg Silvers for any closing remarks.

I just want to say thank you, everyone. We look forward to talking with you in the coming months, and have a great day. Thanks, everyone.

Thank you, guys.