Epr Properties (EPR) March 3, 2026 Conference Transcript

Citi's 2026 Global Property CEO Conference. I'm Smedes Rose of Citi Research. We're pleased to have with us EPR and CEO Greg Silvers. This session is for Citi clients only, and disclosures have been made available at the Corporate Access Desk. To ask a question, you can raise your hand or go to liveqa.com and enter code GPC26 to submit questions. Greg, I'm going to turn it over to you and ask you to introduce your colleagues that you're with today, give a few opening remarks about the company, and tell us a few reasons why investors should buy your stock, and then we'll go into some Q&A. Thanks, Meets.

I appreciate it. First of all, let me thank Citi and everything you guys do putting on this event. We really appreciate the ability to participate. To my left is Mark Peterson, our Executive Vice President and CFO. To my right, I'd like to introduce everyone to our Executive Vice President and Chief Investment Officer, Ben Fox, who has just recently succeeded, Greg Zimmerman, who announced and formally retired earlier this month. And to his right is Brian Moriarty, our Senior Vice President of Corporate Communications. As far as things that I think make EPR attractive, a couple of ideas. One, we believe a strong value proposition. When you think about 6% dividend, 5% growth, and still an opportunity for multiple expansion. So, again, when you look at it on the short term or any time during the last five years, we have consistently delivered outside results and have been at the top of the group. Secondly, I think is, again, when we think about the spaces that we're in, if you look at the latest BAE data on consumer spending, experiential spending went up 7% from 24 to 25. So even in a period of time where there is a question about the consumer, we actually had increased spending in the experiential. And my third thing would probably be the team. We have a unique team that has really developed longstanding relationships that allows us to uniquely identify, underwrite, and secure and acquire these assets. So I think all of those things are really what kind of drives our value proposition.

When you talk about the consumer experiential spending, do you know what the sort of major categories of that are? Are we talking theme parks? I think it's a general, and I'll let Brian, who works with that data.

Yeah, it's government data. So it's personal consumption expenditures, and it cuts across everything that you'd kind of consider experiential, whether it's theaters, clubs, fitness and wellness, museums, attractions, just really kind of the broad.

But not restaurants, I assume.

Not restaurants per se. We thought that was a little bit too broad. So we don't include that.

So this is your data that you're cutting from the BA?

Yeah, we looked at the BA data. We try to align it as closely as possible to the segments that we focus on. It's not perfect, but it's a pretty good assimilation. It's proxy.

And that spending was up 7%?

Interesting.

All right. So just in terms of recapping the reasons that you noted, so valuation, you mentioned 5% AFFO growth, 6% dividend yield. consumer experiential spending is up and you have a tenured team and the relationships to kind of harness into that that those verticals and categories of experiential okay um so this will be we're gonna go over some tried and true ground here but the questions that typically come up. The first, you know, I think your largest tenant is Topgolf. Now, I think 60% owned by private equity. Was that the outcome that you were kind of hoping for with that tenant? And kind of maybe you can talk about your relationship with them and with the new majority owner?

Sure. I think it's a very good outcome for us in this sense. And you should know, we spent time with Leonard Green before they announced the deal. They wanted to talk to us. I think, one, One, Callaway was really born as a manufacturer, and I think they struggled with the consumer-facing actual experience part of the business, where Leonard Green has a lot of experience with multi-unit retail and in the kind of experiential fitness and wellness space. They were the lead on the lifetime fitness, so they've been in these categories. I think the 60-40 ownership split is really attractive in the sense that, A, Callaway is very mindful of their credit rating and will not let, their intent is to not lever up the entity. And so, both Leonard Green and Callaway have informed us that they intend to keep this below two times levered. Again, I think that speaks well. And if you talk to Leonard Green, they have indicated the same thing we talked to them about, that they needed to slow the growth down and focus on fewer quality locations, not multiples of locations. So they're headed back to doing three to five locations a year that meet a very defined criteria. The other thing they do is they recently announced the hiring of their new CEO, who is the former CEO who just kind of turned around Chuck E. Cheese, and they've recruited him because one of the issues they talked to us about, and we thought they could improve their F&B operations, and that's one of his strengths. So everything they're doing so far is very much closely aligned with kind of our thoughts on where things are going. And candidly, if you go look in the second half of the year, their performance was quite strong. So it looks like they're on the right track. Topgolf's performance was. Above projections, if you look at Callaway and their presentations.

And, I mean, do you think that they'll kind of regroup a little bit and potentially shut some locations?

I don't think there's anything. I mean, again, I think the question is, we have a pretty high standard on what success looks like, a really high coverage. I think all of their locations that we're aware of are making money. It's just they may not be making as much money as they make on our locations, which have been demonstrably high coverage.

Okay. And I know you have two times coverage portfolio-wide, but is it higher for just – They are higher. They are higher than that. and it's been sort of consistently higher so yes okay all right so anything else we should talk about for top golf anybody any concerns i want to go down the list of keep going let's do it um let's talk about um uh movie theater exposure i think it's still about 35 percent of your comes from amc and regal i guess the main two and cinemark um maybe just kind of talk about where you are there there's some media stories about amc sort of doing debt restructuring how would that or maybe not impact you and kind of what are your thoughts there

again yeah we'll talk top i think one of the things we we've talked with people about is first of all i think people sometimes forget that of that group we talked about a movie but cinemark is double b credit and um regal is a single b credit so again those are on par with kind of the gaming companies out there that many people forget that but they're they're doing that well uh and then for amc the thing that's interesting for us about basically they're extending their maturities they're taking their maturities out to 2031 and lowering their debt rate uh so they're in the market to do that what's interesting for us and we look for it doesn't really have any effect on us other than i would say some degree of positivity is s&p is rating that that rating is b with a one recovery which means an expectation of a 90 to 100 percent full recovery of any amounts related to that we think we actually set in front of that meaning we have the same obligor and we are secured with hard assets they are secured with our leases so again when i i think we believe it looks it's a very positive that they're getting new money into the company, that it's at a rate that's lower than the rate that they're replacing. So it doesn't have any direct impact on us. But again, extending their maturities and getting new investors in at more favorable rates, generally a positive for us.

Yeah. Okay. And you've decided to no longer kind of do the North American box office forecasting.

What was kind of the reasoning behind that again primarily it created a lot of confusion i say this most everybody were really trying to track regal and regal because they're the major percentage rent contributor uh there is a lease year not a calendar year so people were confusing a at what period of time there was there is a lot of third party resources out there that do the full year and so we were giving a full-year forecast, that's duplicative of what other experts are doing, and it was confusing the idea that people were trying to see how is that impacting into Regal. What we said this year is that Regal's number should be up over last year. That would imply implicitly that we think for the Regal year that box office will be higher than it was. It's just we don't want to create a confusion and how people kind of react to things that really have no impact.

Okay. I guess over time, what would you like to see theater exposure be reduced to?

We've said that we'd like it 20% or below. That's generally kind of what it represents in the experiential world. And what do you think the timeframe is to get there? I think it's probably kind of somewhere in the next three to five years as we work through things and grow others.

Okay. And that's primarily by adding versus selling.

I mean, we've sold 33 theaters over the last year, over the last year and a half. So we've done, we're doing both and we'll continue to look and do both. So again, it's not, you know, if there's an opportunity to sell and accelerate that, we'll take a look at that. So it's really about pulling both levers.

Okay.

But just in terms of identified assets to sell you've kind of worked through theaters right no we tell people all the time if anybody here today would like to buy some theaters we're open to for discussion we've said we want to reduce those so i mean again in the first we i think we talked about in our call we sold two theaters here recently so again we're continuing to to actively look at that those were two operating theaters i think one difference is we're down to one vacant theater where we were working through those and so now we're only down to one vacant theater so that's why the the pace of those theaters is selling uh is is slowing i should say okay and then anything you know with a uh consolidation of theater of movie makers in hollywood does that have any impact to you for you think or again it's always interesting what's really been i don't know if anybody saw the bloomberg article that was published monday from ted serendos from netflix who who said this was after they decided they were out he said the one interesting thing that we didn't appreciate that we've come to change our opinion is we're going to look at the movie theater business differently and maybe we should be in that that is a change and so again that's an exciting development that maybe netflix is going to begin to look there remember they've started dabbling in that uh this year they're going to release a narnia movie into the into the theaters they did k-pop demons If I get that right, I'm not sure that, but my kids are no longer that age to where they did that in the theaters. So we're starting to see them dabble. So this may be a new revenue generation opportunity for them, which is pretty exciting.

I just wanted to switch back one second to Topgolf. Would you be willing to commit more capital into that sector right now?

We'll have to see. We'll have to see. again if we if we can get some really really strong coverage assets that we like like i said we did two years ago we did king of prussia uh we did suburban los angeles if we could get kind of high coverage with really strong performing and you know 15 to 20 acres of really quality we'll take a look at it i can't say we're not being presented anything right now but i wouldn't say we're adverse as we grow to grow small additions with them okay okay Okay.

Maybe let's circle up on the other issue that comes up a lot, which is the Sullivan County. I don't know how much you can say on that, but maybe kind of recap where you were and where we are, and maybe what a couple of the different archives could be.

Again, as we talked about on our call, we don't really have any meaningful update. What occurred, for those who don't know, is we were approached by the tenant of our ground lease in Sullivan County. They were structuring a deal with the county to do municipal bonds to basically refinance their existing debt and take us out of the ground lease. That process then got a little bit more convoluted in the sense that they decided to add a guarantor on there. Then they had a parent kind of M&A deal that they were – anyway, they got delayed twice. They now have been awarded – again, TIN has been awarded the downstate license. We don't know if they're going to try to finance everything together and do that. We just haven't had meaningful discussions with them, Smead. So it's not part of our plan. It would be positive for us if it did happen, but it's not needed for our capital plan, nor do we have it built in there. So all the estimates that you're looking at and dealing with do not have its status quo.

So right now, you just, you've received your rent. What is that annually? Yeah. How much is it? Probably 10, 12 million. Okay. And they were looking at, the buyout was like 200 million or something, right? Okay. All right. So that potentially is on the come. We'll see what happens. Could be. It could be very favorably. Okay. Maybe we can just switch a little bit then to, you know, you've talked for a while now about an accelerating pipeline acquisition opportunities. You've got a much better cost of capital, obviously, which allows you probably to be more aggressive in that arena. Um, maybe just talk about the pipeline first, kind of where are you seeing opportunities, kind of what kind of pricing are you seeing and, you know, how are they coming to you?

And I'll give a little bit and then I'll let Ben speak to this. I think overall, we've said all along the three bigger categories were fitness and wellness attractions and eat and play. I think all of those were still, I mean, one of the things that's always interesting when we have somebody new is I think Ben's really kind of energized the team, new faces, getting things and everybody moving and really through the six months he's here has been really accelerating building that pipeline and and positioned us through the third and fourth quarter to to kind of take advantage of that but ben if you want to give a little more color on that you know thank you um

it's really right it's just taking a lot of the momentum and deals but get deals right and so the team has been very active having conversations and as you saw uh in the fourth quarter, we announced an acquisition in the fitness and wellness arena of golf courses.

And putting that into the market just really unleashed a lot of inbound inquiries and also provided access to our team to invitation-only events where the investment professional leading that transaction, was able to participate with operators in the sector in a very exclusive invitation-only environment, and those kind of conversations have been happening, and as that dovetails with our improving cost of capital, is really unlocking incrementally more opportunities, and the pipeline just continues to build, both in breadth and depth across the verticals that Greg mentioned and really across the spectrum.

Where roughly do you think your weighted average cost of capital is and kind of what's kind of the spread to where you're investing ballpark?

Yeah, again, I'll let Mark cut. I think we're somewhere in the neighborhood about 100 basis points on issuing new capital, but Mark?

Yeah, I mean, high 50s, low 60s, you do the math, 60-40 with the cost of debt probably puts us in the low sevens. And then if we do call it eight and a quarter, you had 100 basis points of spread, initial spread. And, of course, the IRR would be even higher. So we're kind of in the right at the cusp here and in the green light area in terms of cost of capital that works for incremental. OK.

And you put in an ATM program, right? And I don't think you've used it yet. But how are you thinking or how are you thinking about that?

We couldn't tell you if we had. What we did say is here's the thing. We start the year with $90 million of cash, nothing drawn on our line of credit, 4.9 times lever. So we start in a great place. When we look at our plan, as we said on the call, we could do it entirely without raising equity and still be below the midpoint of our debt range, which is 5 to 5.6, so below 5.3 at the end of the year. And kind of looking at sources and uses, you know, we've got free cash flow of roughly $150 million. We do have one bond deal in our plan to refinance the debt that's due. We have about $630 million of debt due in August and December. And then we have a modest amount of dispositions that will help fund that. So if you do all the math, we finish the year, about $300 million drawn on the line of credit, assuming no equity, and at a leverage point that's below the midpoint. Now, that said, opportunistically, we could raise equity, as we just said, the cost of capital works. either for delevering or to support incremental volume. You know, we look at both of those opportunities should they present themselves. And we think with our range of earnings, we think we can handle that, particularly if some of it were on a forward basis. Okay. And what was the acquisitions guidance for this year? $400 million to $500 million. So in my math, I was using $450 million, just midpoint.

Okay. And so how does a first quarter look? What have you identified so far, that $400 million to $500 million?

Again, what we said in our call was that that number was more front loaded. So again, to the front half of this, we've announced that we did roughly 35 million. We also have, we came into the year with roughly 85 million of build the suit, either projects that have started or will start. So, again, when you start to think about that, we're probably sitting at $119,000, $120 million. And so I think we're under a good place.

And maybe just talk a little bit more within kind of the fitness and wellness space. You know, with some other companies pursuing similar kinds of assets, I guess, maybe talk about what does fitness and wellness mean for you guys?

What do you look for? because you're not really doing like lifetime fitness for saying we looked at that deal i mean that deal was presented to us uh again so it's not what made you pass on it i'm sorry why didn't what because we probably weren't ready to do 10 okay and they again uh there was again i'll be candid we've been on a number less than 10 and somebody said i'll take them all and that was that was i think kind of the easiest thing for them to do i'm probably speaking out of turn but But again, Lifetime is an operator that we would be interested in. Lifetime is in the space. It's not what we would think as commodity space, but as a much more community and sense of place. We did announce, as I said, a new vital acquisition on the Lower East Side. Again, we continue to look in the, what I would say, the wellness space. As we think about the two major demographic groups that are driving that, the millennials, which hopefully a lot of people here, I'm in the other one, which are the boomers, which, again, wellness means something different in that side of the space. It's a lot more of the, think of, like I said, the hot springs, the spa, the golf, things of that nature. And we're leaning into both sides of those. And I think, you know, our team has developed kind of the relationships that allow us to access both. We talked about kind of in the golf space, we've been quite successful early on in that and getting kind of the, how we define what we want to do in there. We've also, if you look in that kind of spa fitness area, we've been very, very good at kind of these kind of concepts, whether it's Vital, Mirabeau. You know, if you think about last year, I want to speak this, top four hot springs resorts in the country, we had three of the four.

So, again, so I think we've been very good at both identifying and securing those, and we continue to look at developing that. um i wanted to circle back just for on the golf for a moment i think that's something you did in the in the fourth quarter some texas courses uh you know golf has had kind of a boom and bust kind of history big picture i you know i'm sure yours will be great but just how do you think about um valuation of a golf course like what you're willing to pay and i guess underneath you know how do you think about just the real estate and maybe this is a broader question Because, you know, concepts, themes, brands all, you know, come and go over time. So you might get, if you've just stuck with the real estate, how do you think about that underlying?

Again, it's interesting. I think the golf space has really changed and really changed over the last probably 10 years. If you think about on a supply demand, there's probably 2,000 courses that have been eliminated. And the only thing that's really growing in golf right now, I would say, is destination golf. And by destination golf, you know, it's the abandoned dunes. It's the, you know, that kind of, that's not the space that we're in, candidly. That is, that's very expensive. What really happened is you can't build a golf course reasonably priced now. We can. We can buy golf courses, generally speaking, 50% of original cost. It's about running and operating and partnering with people who can do that. I don't think what we're seeing is the idea of changing and getting the operating metrics to a call it a 24 to 28 percent kind of margin business and getting our rent to kind of a 10 to 4, 12, 14 percent business. So we have that kind of two times cover that's with an appropriate maintenance CapEx reserve as part of that so that you really are, like I said, the dynamics have changed and you're correct, Smeeds, that these are $30 million courses that we're buying for 15. Now, again, when somebody originally may have done those as part of a home development, they looked at it and said, I'm willing to spend $30 million to sell homes. Those are not getting built anymore. There's not. There's very few non-destination courses being built in the U.S. right now. But there is opportunity to recap some of those, purchase them right, and be part of that. If you look at, we'll give you an example of ours, the one before in Georgia that we bought before this group. It's a 2000 home development. If you own a home, you have to be a member of the club. every time you sell the home a new membership is sold and if you don't pay your dues it becomes a lien on your house okay you know what we like that structure that's a pretty good credit structure we're happy with that and we think those are there are opportunities now that course it's a beautiful course he spent a ton of money doing it but he did it to sell houses and now he's sold all the houses and he's willing to sell it at a and we're able to get the right operator in there and make those numbers work so we think there are ways in the space to be smart to be thoughtful if you look at demand demand is very very strong right now uh and i think it it the supply dynamics are really good did demand to play golf is strong or you mean demand for the houses on the golf course stronger than it's been in the last 20 years okay again across multiple demographic groups If you look and if you can look at the numbers, if you look at the number of people who are on waiting lists to join private clubs, it's never been higher in the existence of tracking.

So you mentioned you're sort of underwriting to two times coverage on a golf course. And that's assuming they can get the margin up to like the 28% or are you going in it two times and then hoping that it gets better?

No, no, no. We're – that's from the go and hoping that things can get beyond – So if they can get to 28, they'll get better.

Okay. Okay. And what sort of cap rates do you find these at? What we said is kind of low to mid-eighths. Low to mid-eighths. And is there anyone else discovering this renaissance of golf?

Clearly, right now, there is a large, almost, there's probably eight private equity-backed golf owners out there, large out there. They range from Apollo at the biggest end to Arcus to all of these things. I think from a public, the only guy who's really dabbling in golf, I think Vici does it, but with Destination Golf. they're doing the cabot and things like that but i don't think they're just doing normal play golf yeah i mean they got a few courses kind of as part of their legacy but i know they did the cabot thing yeah but i think that's it's more destination that was that would be in your destination you did mention land value which i want to go back to which was another area of our portfolio which is our attraction space which most people don't realize or maybe they do but when you think about amusement parks in this country most of them are in and around major metropolitan areas and they're 200 to 300 acre tracts of land generally located on major thoroughfares interstates it it represents probably one of the more interesting land bank plays now we can't access it until the lease is done but from a land bank play it's incredible relative to you know what you have in in the overall investment the um just kind of on that some of the major public theme park companies have um you know been undergoing some challenges there's been talks about maybe you know selling some of their smaller assets i mean do you think you are you participating in any conversations around that could you be a beneficiary there we would always be think we would participate in there in the sense that we're very we know and deal with those we're six flags as large as landlord uh united parks which is kind of the uh you know bush gardens there we've known that group i mean there's the interesting thing where park ryanites which just sold to the hirschen family again we're we're probably the only reed that participates in all those conversations just because we've known those group for years so if you look at you know richard zimmerman who used to run six flags i've known for years the gentleman who just john riley who just become the ceo used to be the ceo of palace entertainment which was owned by park rianitas so again if you don't i mean we know this is a world that we that's what i talked about on our value proposition you know and and work with everybody in these industries so if six flags said i want to reposition some of my assets some of the kind of less than $20 million EBITDA assets, we would probably be a call they would make. And we would probably, we would be the one who would probably help put that deal together.

And you bought an attraction in, I think you said, Virginia during the fourth quarter? Yes, we did. Okay. And then you have one in New Jersey, I think that's relatively new as well. So are you happy with the way that's performing?

They're all above 2-0 covers and exceeding our underwriting.

You see what?

Exceeding our underwriting.

Okay, okay. It sounds like everything's above two times. So what's bringing down the portfolio of two?

Again, honestly, if you think about, we talked about this, theaters when we last reported, they're kind of probably kind of a 1.7 to 1.8. And that was what they were in 2019. But that's, if you think about 35, 37%, that's. Okay, that's the math.

That's where you end up, you know.

Okay, all right. um you suspect that coverage will get better for theaters as we move it should i mean if you think about that the interesting thing about the theater business is going back to that is what's kind of changed is the food and beverage spend is as like is phenomenal relative if you think in 2019 on average the per wrap customer per spin was about four dollars and a quarter cinemark reported last week that it was $8.75. That is 80% margin business. So it has meaningfully changed on an EBITDA contribution relative to the overall box office. And therefore, literally, on an EBITDA contribution, the $11 billion box office needs to be low nines to be the exact same EBITDA than we were before.

As a New York resident, I can tell you it's astounding what they charge, A. B, we participate. I'm sure they appreciate that. We have a few minutes left, and I did want to ask you kind of how you're thinking about AI internally, and is it helping you underwrite, find deals? Where's the puck moving in real estate or other efficiencies that you might be finding internally?

Again, I think it's operational efficiency. I think we're using it in our asset management and our underwriting. I don't think it's helping us necessarily find deals, but it's helping us. I'll give you an example. We used to have people, I like to come into the office and say, what happened to any of our tenants over the last 24 hours? That used to be a lot of asset managers looking and checking. Now it's one button push and AI synthesizes all that data and says, okay, look, here's any of your name tenants that came out or anything that happen in your industry, we can have that information for you. So in our asset management, it's every able, in our underwriting, it's able to support our underwriting, both in terms of model building, but also in terms of the research that we look at. I don't think we're looking at eliminating anything, but I do think operational efficiency is being, it's helped candidly in our legal and how we're looking at things in that nature. So efficiency and we're deploying it. I think everyone has AI at their desk or an AI component at their desk, so we're trying to be thoughtful about it.

Yeah, we've heard a few times that people are kind of reducing their legal bills. We're trying. We're trying. It seems like it's coming for all of us one way or the other. We can kind of close out here unless there's any questions from the audience, but we have two closing questions. Juan, as you think about the net lease space, just yourselves, but traditional net lease space, what do you think Samestro NOI can be in 2027?

27, probably 1.5%, 2%.

1.5%, 2%.

So we'll go with 175?

Thank you. It's AI. And do you think there'll be more, fewer, or the same number of net lease companies, public net lease companies a year from now? My guess is the same. same okay well thanks for your time today we appreciate your being here i appreciate it