Epr Properties (EPR) June 2, 2026 Conference Transcript

Maybe we'll get started here today. Good afternoon, everyone. My name is Upul Rana. I'm the senior REIT analyst at KeyBank Capital Markets. Thank you for joining the EPR presentation. We are joined here by Greg Silvers, chairman and CEO. I'll have him introduce the rest of the team.

Sure, thank you. To my right is Ben Fox, who is our chief investment officer, and to my left is Mark Peterson, who is our chief financial officer.

Great. Greg, you know, for those in the room who are not familiar with EPR, maybe you can give us a quick overview of the company, what you own, you know, how the portfolio is structured, and maybe what differentiates EPR from the rest of the net lease REITs.

Sure. First of all, it feels a little bit like my college classes, everybody sitting in the back of the room. There's plenty of seats up here in the front. We won't call you out. But EPR, we're organized as a net lease REIT. Again, that's our primary. But our focus is different than most of what I would call the retail world our focus is on what we call experiential assets those are generally not where you're buying a product but you're creating an experience we deal in the in the world of memories and so whether that's the movie theaters whether it's amusement parks whether it's water parks whether it's ski properties whether it's eat and play attractions fitness and and well-being that is our focus so we're unique in that way. We're the only diversified experiential REIT that's out there and have delivered what we think are really strong and exciting returns and feel like our unique space gives us an opportunity to recreate those returns for the foreseeable future.

Great. And, you know, the experiential economy has been, you know, a popular secular trend recently.

Can you talk about the durability and the resilience of your portfolio today, especially in today's economic environment sure i i think first of all uh remember when we talk about the experience of economy if you look at now what will be 24 to 25 the experience economy grew by seven percent in the face of what was a challenged consumer it continued to grow uh people uh the economy of experiences as opposed to the economy of stuff is continued to be valued and continue to grow in value with the consumer uh our overall portfolio has been incredibly resilient our uh coverage you know which is four wall uh ebitda compared to our rent has been remarkably stable over the last two years generally in and around two times uh so again uh it we really haven't seen the degradation the consumer seems to be hanging in very well with our properties and if you look across the board I mean in different areas yeah you know the theater space right now box office is up 12% through the through May 31st so again if you look you know across a lot of our categories we're seeing actually positive trends so notwithstanding that we're not not not acknowledging the stress in the consumer it's just not manifesting itself in our

experiential properties great it seems like growth has been a central part of the PR story lately you know the company has had a great start to the year you beat earnings raise your guidance you know earnings is implying about six and a half percent which is at the high end of some of the net lease peers you know you've also raised investment guidance up to 550 million and what's driving that acceleration, and how sustainable is that?

Again, I think for us it's really getting a cost of capital that makes driving investment volumes greater. As we came in this year, we created a focus on driving those volumes. The opportunity set is there. Like I said, we're unique in the property types that we pursue, so we think that we're uniquely positioned to take those. So last year we did probably 270, 280 million. This year our targeted range right now is close to 550. So again, but last year we did 5.1% growth. This year I think right now at our guidance range midpoint is about 6.5%. So I think we're well positioned not only to continue to replicate that and given our size that with the investment volumes that we're able to attract that we can do that for the foreseeable future.

And I wanted to touch on your recent acquisition, the $300 million Six Flags acquisition. It was one of the company's largest post-COVID. Six properties have already closed. There's one left. Can you give us the latest update on where things stand and how those parks are performing relative to your underwriting and how that's impacting your growth this year?

They've opened all within the last two weeks, so the performance to date is looking really well. I mean, again, it's nice. So remember, those are parks that generally, Memorial Day to Labor Day, they have certain weekends after that, but that's primarily. Now, again, I'm probably the only person who's out reading Yelp reviews of amusement parks, and it seems like things are going quite well. I think what we suspected was that Six Flags and Cedar Fair merged, merged and they created a company of about 55 parks that some of those were not getting the attention that they they needed so when Six Flags came to us and talked to us about a transaction we we selected some parks to do to work with operators that we felt had a strong underlying consistency in their performance that just needed someone that that was their priority to that so we worked with various operators who could who could meet all three the criteria one they had expertise in running parks of this size two they could bring capital not only to pay for the operations but to pre-fund both deferred maintenance and maintenance capital reserves for the parks and so the operators that we worked with were able to do that I think clearly they've they've got a real focus on making these parts stronger uh like i said we bought them at we think are very very attractive pricing and and uh we feel like we're well positioned as as it moves into their operating season great that was helpful and maybe we can touch on the golf segment uh it's been a meaningful new vertical for the company uh you know epr has acquired five property um golf

course late last year in Dallas for $91 million, which is part of the health and the fitness and wellness category. Topgolf is part of the Eat and Play categories and one of your largest tenants. So how are you thinking about the golf thesis and what the pipeline looks like there?

Yeah, and we'll segregate those just a little bit for one, what we call traditional golf, which really has caught our attention mainly because of the supply-demand dynamics. There's been about since about 2008 there's been about 4 000 golf courses that have come offline and so the demand dynamics have totally changed and therefore we're able to uh to what we think purchase non-replicable assets that have tremendous amount of demand and so we feel like we're able to buy these attractively uh we like the setup the operators again consistent with what we've said before bring your bringing capital they're committed to uh to the property signing long-term leases so we feel like we're we're in a good position on our top golf or not golf again it's been very very resilient for us high coverages uh again when we think about top golf there's a lot of noise but remember this is a company for the first 15 years they never even marketed they just opened the doors and people showed up and waited in long lines so now they're they're having to get out there and compete for time so they're they're dynamically pricing they're looking at their marketing but the underlying fundamentals as far as foot traffic and everything remain very high so we're pleased with both of those options great so beyond six flags and golf you know what else are you seeing that's uh you know the most compelling new opportunities today are there any other verticals or property types that you're actively exploring uh yes but i'm gonna as you guys have heard enough from me i'm gonna let ben who runs our our investments kind of give us a little bit about what what he's finding exciting now i think what we're finding exciting greg right

is that there are just ample opportunities across all of the sectors and i think a theme that greg is touching upon whether it's in golf or attractions is the experience economy is benefiting from uh secular tailwinds from demographics whether that's gen z on one end or the baby boomers on the other end, whether that's across fitness and wellness, other experiences of eat and play, attractions, consumers are voting with their wallets, and they're choosing to spend on these experiences. And with that, there are a lot of entrepreneurs and existing businesses looking to continue to capitalize on this spending, and we are the partner of choice given the depth of our investment team's relationships and breadth. We're often the first and many times the only call being received in order to partner with these operators as they look to grow their businesses and expand. Yeah, and Ben, maybe we can touch on that a little bit more on just the sourcing of the deals. you know is there something that you guys do that's unique in terms of sourcing more of these deals and top-of-funnel opportunities yeah well that's really what what the team has done so well is foster relationships over multi-year periods right so hang on just get a picture we got to look good here the you know it's the rare exception for us to have a shiny package put in front of us most of the time it's our team working with folks in the industry who might be new to doing sale leaseback or using net lease capital and we are working with them and creating these relationships some of which take two three years to develop and it creates a very uh attractive moat for our business in these relationships yeah that was really helpful and then maybe we can touch on capital recycling a little bit you know we um you've had some success in reducing some exposure to theaters and some your education portfolio um you know maybe you can talk a little bit about the progress you've made over the last few years and what's really left to do there yeah i will i'll take a little bit i think part of our

kind of our capital planning really comes into form is we talk about three buckets if you think about our free cash flow which is about 140 million dollars if you talk about dispositions capital recycling and then you talk about raising equity and we talked about in the first quarter we raised about 50 million dollars on our ATM program so you look at those three buckets and and of does the dispositions is really that in the ATM is one that we can expand greater you know we've said there's two categories that we're looking to reduce our exposure into one is our education which really is not as much a as a risk issue is it just strategically doesn't fit in an experiential focus so we were committed to kind of recycling that capital and then lowering our theater concentration so the last couple of years we've done a significant amount in the theater side we've probably sold 35 theaters this year coming through i think you'll see us a little bit more on the education side selling some of that but all of that is to build that pot upon which we can reinvest there's been really good you know in our in our education side a real good spread for us to sell and then redeploy that capital. So we think that creates really good opportunistic recycling.

That was helpful. And then maybe we can just touch on the theaters segment of the portfolio. It's typically one of the largest segments within the portfolio. And it seems like the industry is starting to pick back up again since COVID. Maybe you can talk about some of the dynamics of the theater industry and relative to your portfolio and what's sort of changing there?

Sure. I think there's just generally some overall positive that have occurred in the last couple of years as we've kind of gotten through COVID and then through the strikes. We've got a much more recognition of how streaming and the theater system are going to exist. And you've got all of the studios now recognizing that they actually exist quite comfortably. So this last year, we've had Paramount announced that they want to do 30 films a year. you had universal who was a different in the shorter window period they used to say that some period would be 17 days they announced that they're going back to a full release window 45 day window you have netflix who just announced they're going to do their first full theatrical release with narnia so again another part of content you have and then what you've also seen is what were some smaller studios now really gaining traction with what you saw over the last weekend two weekends with obsession and backroom you know two a24 studios that uh releases that did both did over a hundred million dollars so i i think what fundamentally the the ecosystem has realized is that the consumer doesn't punish you for releasing to theaters and then showing on streaming platform so it gets the studios two bites at the apple to revenue sources so they're all sort of embracing that that mantra so again what it really has is created a really kind of positive outlook in the space uh and so the forecast not only for this year but next year and beyond is for escalating box office which should play very well to our underlying portfolio and then maybe you can talk about where is a theater business today relative to prior to the covid um maybe some of the the economics and maybe there's a food and beverage component that foot traffic content that you've already touched on sure it's it's really if you look at the business on that ebitda standpoint from a uh from a box office standpoint in 2019 we had 11.3 billion dollar box office but we also had a food and beverage component that was about four dollars and twenty cents that's per person if you forward now we have a box office this year that's expected to be about nine and a half billion but a food and beverage component that's eight dollars and seventy five cents and notwithstanding what you may know or believe that it's pretty high margin business in that food and beverage that coke has got a lot of good margin in it and so actually from an EBITDA standpoint those two are equal the EBITDA is the EBITDA from an 11-3 box office with a 45 percent margin and a food and beverage now in nine and a half billion with a 875 with an 80 percent margin the total amount of EBITDA that those two sides correct are equal so we are back we will be back to the same level of EBITDA that we achieved at pre-COVID this year so again and now as we start to move past that like this year's expectation is somewhere between nine five and nine seven box office next year pundits say 10 billion now we're moving ahead as far as where we're at it's as total EBITDA contribution and how do you expect the the theater business to train over the for the rest of the year in terms of content it should be I mean again the content is pretty well laid out right now what's really exciting from somebody who's in this business is the depth and breadth of the content so if you think about just in June we we really have it's not dominated by a superhero really you've got family product with Toy Story and minions then you've got full-on dramas with a Steven Spielberg film called disclosure day followed up by another um uh christopher nolan product called you know the odyssey so again and now we just had 200 million dollar horror pictures in there so it's really expanding the depth and breadth of the offerings which is really it's we've always said it's a content business meaning the more content flows the greater the box office results will be Great.

That was really helpful. And maybe, Ben, if we can bring you back in. Could you walk us through how EPR underwrites new investment? What are some of the key attributes you look at and how you decide to pursue or pass on certain properties?

Yeah. The underwriting process is really rigorous. And to put it in perspective, the underwriting team and investment team, I'd say probably 80% of our team has a CFA, right? That's the starting point. And in terms of the process, before we enter into any new industry, you know, we're often, we talk about the demographic themes and that. So we write a white paper on the industry covering all of those dynamics from a macro perspective down to a micro thinking about the landscape of operators total addressable market and even down to the you know unit level economics so that we set a very strong framework within which we construct our investments uh when you then fast forward into reviewing the actual opportunities given those relationships we talked about earlier, we see a really great breadth of opportunities which allows us to be selective in what we're pursuing with a very high focus on the credit of the operator, those unit level economics that we have already kind of identified what works and what doesn't and then of course heavy emphasis on the underlying real estate and finding those opportunities to check the boxes across all of those categories okay great that was helpful maybe we can touch on tenant health today you know coverage remains pretty solid at two times are there any tenants you're monitoring or anyone on your watch list maybe you can discuss some of the metrics monitor to stay ahead of any kind of potential credit issues uh i mean generally speaking like

i said it it's it's we're in a pretty good space right now again coming out of covid we kind of dealt with a lot of issues we're always on the theater space looking at amc uh you know they're they're they're performing on a on a unit level basis but when you ask about how we monitor and and i'll let ben add if you want it's not only looking at your properties but it's looking at your tenant so is and then your industry what's the industry doing what's your property doing what's your uh what what is your tenant doing because your tenant you can have great properties but your tenant gets in trouble you can have a not so great property but i mean or you can have a great tenant but a not so great property and then the industry so those are the ways by which somebody gets our attention um but i i think overall we feel like we're in in a as good a places we've been for a while and maybe we can touch on the consumer bit with tariffs elevated gas prices and a bit of uneven performance across income cohorts you know are you seeing any impact from guest visitation or spending from your tenant locations we haven't yet like I said I and we do this generally through conversations with our tenants again it's easy to look at the theater businesses reported daily you know you know kind of what box office is doing so as i said it's up 12 through last sunday so again it's it's clearly doing but it has a history of outperforming during recessions if you go back and match it to every recession the theater business outperforms the attractions business has just really as i said got started it's really a kind of a memorial day to labor day kind of business now when we talk to our tenants they're actually excited because they think that most of our properties are located somewhere two to three hours in around major metropolitan areas and that people will be doing more staycations you know you know we're not driving as far so they're they're actually encouraged by that but knock on wood right now we're not seeing it but we're very mindful of that out being out there and we're monitoring.

Maybe you can touch on some of the different types of, you know, Gen Z versus some of the boomers or millennials. How are they kind of playing into how your portfolio fits together?

Yeah, and I'll let Ben add, I think for us, it's really important to understand that those are the two largest demographic groups, and therefore, and what makes them very interesting is one has all the money and the other one wishes they had all the money and so there there are and what we're seeing now is multi-generational opportunities meaning if you go to our ski properties you will see multi-generations there somebody's putting the bill for it but they're they're there and that's the way that's the way they're they're coming together and especially what we see in fitness and wellness it's two different perspectives one for millennials most of their lives they they have incorporated fitness and wellness into their lives it's no longer consumer discretionary it is just what they do uh for those of us who are a little a little bit older we just want to live longer so we're doing everything that we can to do to do that and and it but that's more on the wellness side of that so some of our our businesses focused on different aspects of that but it's a way to lean into those both of those phenomenons that allows us to capture both ends of that spectrum but ben i don't know if you have anything more no i think that's exactly right and just add on that really you know the wellness side captures all of it and when you think about the gen z and the youngest cohort even alpha and the concept

of ipad kids and in the children wanting to be plugged in the the opposite is really happening They are 40% of attendance in movie theaters. They are craving and seeking in-real-life experiences, and the properties in which we invest facilitate that human connection where groups of friends can gather away from devices and cannot be disintermediated through the Internet or artificial intelligence.

That was really helpful, and maybe we can bring Mark into the conversation. maybe we'll talk about the balance sheet a little bit you know we've talked about the company is on its way to growing earnings you know maybe you can discuss your funding strategy and the overall balance sheet strategy today sure maybe given that there's only six minutes left it tells you maybe our balance sheet's in great shape there's not a whole lot of questions but we are we are in great shape we finished the quarter at 4.8 times leverage our range we generally operate is five to six times so we're under levered at the end of Q1 we had nothing drawn in our line of credit and 68 million dollars of cash in the bank if you roll forward our investment guidance on the use side and our debt maturities we do have debt maturities in august and december this year on the use side and then on the source side the cash flow that greg talked about the 140 million 140 million of cash flow on an annual basis and you run through that dispositions it kind of points to at least one debt deal let's call it 500 million would put us at about 300 million dollars on our line at the end of the year so one debt deal is kind of what in our plan and we still end up in the low fives below the midpoint of our leverage now given the growth and given the um the pipeline that we have we would look to raise we raised 50 million of equity as greg said in the first quarter we would look to incrementally raise more equity should our stock price allow and potentially also look at a second bond deal or debt deal that could be in the nature of a term loan because we have that capacity pre-COVID we had a term loan so we have that source and of course we could do a second public bond so we have a lot of flexibility we don't need to raise equity which is a good place to be but we will look to incrementally raise equity if the price makes sense to accretively raise that and do additional volume we've got a few minutes left if anyone has any questions please feel free to raise your hand or ask away sure yeah you're you're I know you got questions you're up not going away the

dinosaur again we'll factor it in it may end up how we what we pay for them I don't think I think we think these trends are long-term trends that people are not giving up these activities it may factor into what we pay for them as a as that but I wouldn't see us changing up what we're buying yes generally it's about one and a half to two percent that's kind of changed if you said that's remember this is our 28th year so again over time that's changed here lately we're probably accelerating that a little bit probably two to two and a half but if you look at the whole kind of portfolio 12 yeah anyone else yeah i can add uh one more question on my side you know

So I kind of have to ask the AI question. You know, how are you guys utilizing AI in either asset management or underwriting, or, you know, could it be a potential differentiating factor in the future for the company?

Again, I think we're trying to incorporate it in both of those areas. I mean, again, one example is we generally have a report that talks about, you know, what's going on in our tenants or our industries, and our asset managers used to kind of compile these reports. Now it's like the push of a button. it's daily so that's amazing and we're using it in in in assistance with our underwriting so I would say it's more of an enhancement I don't think we've eliminated any positions as a result of it but I think we are seeing how it can be a tool that can expedite what we're doing and get further efficiencies got it okay yeah maybe tying it all together you know what should investors and the people in this room take away about epr and where it's heading i think it's really positive i'll give you i give you four numbers that you could take away 65 71 51 65. these are not our ages these are that's our two year our three year our four year and our five year total shareholder return that's top of the group that's an average on any year if you look at it of at least 13 percent that is what we have delivered consistently and the best indication of what we we're going to do in the future is what we've done in the past if you look at if you look at pre-covered to 2019 that was our 20th anniversary 1999 to 2019 the number two tsr of all reads so again being in what we do and being able to i i own a space to underwrite it to identify and to deliver on that allows us to produce these kind of results so we want to thank you for your time and attention and as always if you have any questions don't hesitate to reach out to us thank you