EPR Properties(EPR) - 2019 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - FFO as adjusted for the quarter was $1.46 per share, down from $1.58 per share in the prior year, but increased by about 10% when excluding prior year prepayment fees [27][28] - Total revenue for the quarter increased by approximately 18% when excluding $20 million of prepayment fees from the prior year, driven primarily by new investments and dispositions [29] - The debt to adjusted EBITDA ratio was 5.2 times, with total outstanding debt of $3.1 billion at a blended coupon of approximately 4.3% [35][36] Business Line Data and Key Metrics Changes - The entertainment portfolio comprised approximately $3.4 billion of total investments with 99% occupancy and a rent coverage of 1.76 times [16] - The recreation portfolio had approximately $2.3 billion of total investments, 100% occupancy, and a rent coverage of approximately 2.28 times [19] - The education portfolio comprised approximately $1.3 billion of total investments with 98% occupancy and a rent coverage of 1.51 times [23] Market Data and Key Metrics Changes - The third quarter box office was up approximately 3% year-over-year, with expectations for the fourth quarter to exceed 2018 levels [17] - The operators in the attractions portfolio reported visits and revenue up approximately 4% and 7% respectively, compared to the trailing three-year average [19] Company Strategy and Development Direction - The company is focused on the experiential economy, shifting from non-experiential areas towards experiential properties, which have been a primary growth driver for over 20 years [26] - The company is well-positioned for growth with nearly $120 million of unrestricted cash and no outstanding amounts on its $1 billion line of credit [12][41] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strength of the experiential economy and the opportunities it presents for future growth [9][26] - The company is raising its guidance for 2019 FFO as adjusted per share to a range of $5.44 to $5.52, reflecting strong performance and a robust pipeline of opportunities [42][44] Other Important Information - The company issued $500 million of new 10-year unsecured notes at a coupon of 3.75%, the lowest in its history, and redeemed higher-priced senior notes [36][38] - Investment spending guidance for 2019 has been increased to a range of $775 million to $825 million, with expected disposition proceeds raised to a range of $400 million to $475 million [43][44] Q&A Session Summary Question: Anticipation of ramp in investment spending in 2020 - Management indicated that they believe the opportunity set is strengthening and are preparing for increased investment spending in 2020 [48][49] Question: Areas of best opportunity flow among different segments - Management noted opportunities across all investment segments, particularly in theaters and experiential lodging [52] Question: Transition of CLA schools to Crème de la Crème - Management reported successful transitions and indicated that the new operator is performing well, leading to an accelerated transition timeline [53][54] Question: Attractiveness of Margaritaville Nashville Hotel - The hotel is attractive due to its location, amenities, and the experiential nature of its offerings, which align with the company's investment strategy [57][58] Question: Comfort with tenant industry concentration - Management expressed confidence in the experiential sectors, noting that they are better positioned compared to competitors focused on traditional retail [88]