Q3 2019 Earnings Call
This time all participants are in listen only mode. Later I will become Docker question answer session and instructions will follow that time.
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A reminder, use conference is being recorded I wouldn't like to turn the conference over to your host Mr., Brian GRT, Vice President of corporate Communications, Sir you may begin.
Thank you operator, hi, everyone and welcome thanks for joining us today for third quarter 2019 remains cool.
Our call today by inform you that this call may include forward looking statement as defined in the private Securities Litigation Act.
1995 identified by such words as will be intend continue believe may expect cope anticipate for other comparable terms.
The company's actual financial condition and the results of operations may vary materially for most contemplated by such forward looking statement.
Discussion do these factors that could cause results to differ materially from these forward looking statements are contained in the company's actually see 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 are included in the company used in todays earnings release and supplemental information furnished to the FCC under form 8-K.
If you wish to follow along todays earning release supplemental and earnings call presentation or all available on the Investor Center page of the company's website Www DPR Casey Dot com.
Now I'll turn the call over to the company's President and CEO , Greg Silvers.
Thank you Brian .
With me on the call today, or the company CFO , Mark Peterson and making his debut our CIO Greg Zimmerman.
I'll start with our quarterly headlines and then pass the call to Greg to discuss the business in greater detail Mark will then follow with a review of the Companys financial summary.
So let's get started our first headline strong quarter anchored by continued demand for experience will assets. Our focus on the experience economy continues to sustained solid portfolio performance and consistent rent rent coverages as evidenced by the third quarter box office results and the positive results.
And our attraction properties the consumer continues to support our tenants in properties devoted to the experience fuel economy.
This trend of increasing consumer demand for our tenant offerings should translate into opportunities to fuel our future growth.
Our second headline record low bond yield and spread.
During the quarter, we issued new 10 year senior notes in the larger size and at the lowest yield and spread and the company's history and we completed the redemption of higher price senior notes that were due in 2022.
As a result, we have lowered our cost of debt and signet significantly extended our average debt maturity.
Our third headline well positioned balance sheet with ample capacity.
In addition to our debt activity, we continue to raise common equity during the quarter and we have nearly 120 million of unrestricted cash on hand at quarter end and nothing outstanding on our 1 billion line of credit.
Clearly, we are well positioned for growth.
Our fourth headline increasing earnings and investment spending guidance.
Consistent with the strong results year to date and our forecast for the remainder of the year, along with a robust pipeline of attractive opportunities in the experience will space, we are increasing our guidance for FFO as adjusted per share as well as investment spending.
Mark will provide the detail on guidance in his comments.
With that I'll turn it over to Greg Zimmerman and then rejoin you after marks comments before.
Thanks, Greg at the end of the third quarter, our total investments, where nearly 7.2 billion with 416 properties and service that were 99% occupied during the quarter investment spending was 118.1 million and our proceeds from dispositions were 294.4 million our company level.
Rent coverage was 1.89 times, demonstrating the continuing strength and consistency of our portfolio.
At quarter end, our entertainment portfolio comprised approximately 3.4 billion of total investments with two properties under development 195 properties and service and 26 operators, our occupancy was 99% and our rent coverage was 1.76 times.
Strong movie product continues to be the key driver of solid box office results with a third quarter box office up by approximately 3% year over year. The momentum is anticipated to extend with the fourth quarter expected to exceed 2018, which should drive 2019 box office close to the 2018.
All time high.
The fourth quarter open strongly with the jokers record breaking opening weekend to be followed by a strong film slate, including Star Wars, the rise of Skywalker frozen too and jumanji the next level.
Our entertainment investment spending totaled 10.9 million, a third quarter, consisting primarily of development and redevelopment projects across our portfolio of theaters entertainment retail centers and family Entertainment centers.
At quarter end, our recreation portfolio comprised approximately 2.3 billion of total investments 83 properties and service and 19 operators, our occupancy was 100% and our rent coverage was approximately 2.28 times the operators in our attractions portfolio, which is part of our.
Recreation segment have delivered solid results. This season with visits and revenue through the August trailing 12 months period up approximately 4% and 7% respectively versus the trailing three year average.
Investment spending in our recreation segment totaled approximately 89.6 million, which included 68.7 million of new mortgage loans for recreational properties 6.6 million on the Cartwright Waterpark hotel and the balance consisting primarily a build to suit developments of golf entertainment complexes.
Attractions.
The primary new investment was 64.2 million dollar mortgage loan as opposed to the traditional Riet hotel operating structure secured by the recently opened Margaritaville Nashville Hotel in the heart of Nashville's sober of district, one of the country's hottest experience will destinations within walking distance of bridge shown.
Arena, the Ryman auditorium, and the Nashville Convention Center.
On the disposition disposition front.
On July Onest as previously announced we receive payment in full on our $189.8 million Schlitterbahn mortgage note. This pay off was facilitated by Cedar fairs purchase of two of the Schlitterbahn groups, Texas Waterparks for 261 million, including both the operating business and the real estate.
Also in the third quarter they'll resorts closed on their previously announced acquisition of peak resorts they'll operates our North Star, California resort and as reflected in our supplemental with the addition of the six peak resorts investments Vale is now our fifth largest customer.
At quarter end or education portfolio comprised approximately 1.3 billion of total investments 137 properties and service and 55 operators, our occupancy was 98% and our rent coverage was 1.51 times.
We continue to make excellent progress on the transition of our CLA schools to cram della Crown through the end of October we have successfully transferred 17 of our 21 properties to crown and they anticipate taking over the remaining for CLA schools during the fourth quarter.
Investment spending in our education segment totaled approximately 17.6 million, primarily consisting of acquisitions build to suit developments and redevelopments of public charter schools private schools in early childhood education centers.
During the quarter, we received 104 million and disposition proceeds related to the sale of four operating charter schools. One early childhood Education center and the pay off of a mortgage note secured by a charter school. These proceeds included 11.3 million of termination fees and 1.8 million a prepayment fees.
The transactions reflect the strength of the municipal bond market available to charter schools.
The consumer continues to evidenced strong demand for experiences we have a deep pipeline of opportunities to expand our already broad based portfolio. This experian chill assets, we continue to shift our focus from non experience rural areas of business toward Experientially properties and asset class that we have been successfully investing in for.
Over 20 years, and one that will be the primary growth driver going forward.
That I turn it over to Mark for discussion of the financials.
Thank you Greg I'll begin today by discussing our financial performance for the quarter.
FFO as adjusted for the quarter was $1.46 per share versus $1.58 per share in the prior year.
During the third quarter of 2018, we recognize 20 million in prepayment fees related to the payoff of a mortgage note that was secured by ski properties.
You exclude this income or FFO as adjusted per share for the quarter increase by about 10% versus prior year.
Note that ffos adjusted per share amounts for both periods include the impact of education related lease termination fees, which I will discuss later in my comments.
Total revenue for the quarter increased by about 18% when you exclude the 20 million a prepayment fees from the prior year that I just discussed.
This revenue increase was driven primarily by revenue from new investments that have dispositions.
Percentage rents and participating interest for the quarter totaled 3.6 million first 2.7 million in the prior year.
As previously reported we receive payment in full on mortgage notes receivable totaling 189.8 million related to Schlitterbahn Waterparks on July Onest and during the quarter. We also received 17.8 million related early payoff of mortgage notes secured by a charter school, which as anticipated included a pre.
The payment fee of 1.8 million.
Note also that the Cartwright resort and indoor Waterpark opened during the second quarter and continues to be operate under traditional right lodging structure, which impacts other income included in total revenue as well as other expense finally about 7.5 million of the revenue increase relates to the adoption of the new lease.
Accounting standard, which is offset by higher property operating expense as I've discussed on previous calls.
The income tax benefit of point 6 million versus income tax expense of point 5 million in the prior year related primarily to the deferred tax benefit resulting from the operations of the Cartwright.
Additionally transaction costs were 6 million for the quarter related primarily to the transfer of nine CLS to cram.
As a reminder, deferred taxes and transaction costs are excluded from FFO as adjusted.
Severance expense was 1.5 billion for the quarter and 1.9 million year to date. This expense was the result of a shift in resources from not experiential areas of our business toward experience will properties.
Finally during the quarter. We also completed property sales for net proceeds totaling 86.8 million.
And recognize the comply a combined gain on sale of these properties of 14.3 million.
Included in the property sales were three charter school properties sold pursuant to tenant purchase options for net proceeds of 59.4 million.
And the related termination fees totaling 11.3 million included in gain on sale have been added FFO to get to FFO as adjusted.
These fees were higher than anticipated as an operator, one larger public charter school elected to exercise its option that was not in our plan.
I'll have more on both our expected disposition and termination fee levels later, when I discuss our revised guidance.
Now, let's move to our balance sheet and capital markets activities.
Our debt to adjusted EBITDA ratio was 5.2 times at quarter end.
Our net debt to gross assets was 40% on a book basis and 32% on a market basis at September Thirtyth.
At quarter end, we had total outstanding debt of 3.1 billion, all of which as either fixed rate debt or debt that has been fixed or interest rate swaps with a blended coupon of approximately 4.3%.
During the quarter, we issued 500 million of new tenure unsecured notes.
At a coupon of 3.75% and redeemed all 350 million of EUR, 5.75% senior unsecured notes at the make whole cost.
Strong investor demand allowed us to upsize the amount on the notes beyond our original plan as we took advantage of a very attractive coupon the lowest in the company's history.
Additionally, Additionally, we paid in full a secured mortgage note payable totaling 18.6 million.
And fix the interest rate on our only remaining secured debt of 25 million for a period of five years at 1.39%, which was lower than the previous variable rate.
We are pleased now have a weighted average debt maturity of approximately seven years and no debt maturities until 2023.
I think extending our average debt duration as well as fixing variable interest rate debt in todays low interest rate environment makes a lot of sets.
Also during the quarter. We once again took advantage of the market supportive our experience will strategy and issued approximately 52 million in common equity under a direct share purchase plan as well as another $17 million subsequent to quarter end at a combined average price of $76 a 59 cents.
This brings our year to date issuance under this plan to approximately 306 million.
The decision to take on the additional long term debt proceeds versus airliner credit.
As well as raising incremental equity both of which were not in our previous plan had the impact of reducing near term earnings.
However, with low leverage 116 million of unrestricted cash and the bank at quarter end nothing outstanding on our $1 billion line of credit and no near term debt maturities. Our balance sheet is now even better position to fund our growing pipeline of opportunities as we finished the year and move into 2020.
Based on the results to date and our expectation for the fourth quarter, we're raising our guidance for 2019 FFO as adjusted per share to a range of 544 to 552 from a range of 532 to 548.
And raising our guidance toward the upper end for investment spending to a range of 775 million to 825 million from a range of 700 million to 850 million.
We're also increasing our expected disposition proceeds for 2019 to a range of 400 million to 475 million.
From a range of 300 million to 400 million.
Guidance can be found on page 30 of our supplemental.
There you will also see that we are raising our guidance for 2019 termination and prepayment fees related to education properties by a total of 88.2 million to what we have earned through 930.
Note that this means that we are expecting no additional such fees in the fourth quarter.
Note that overall our guidance for the full year 2019, FFO as adjusted per share is increasing by eight cents at the midpoint, which is to reflect 10 cents more and education related fees and three cents more related to the strength of our core business.
Offset by two cents related to the impact of additional capital capital raising activities and three cents related to higher dispositions than previously expected.
Finally note that when you exclude the non education related prepayment fees of $71.3 million. We received for the full year 2018, or 93 cents per share the midpoint of our increased FFO as adjusted per share guidance for 2019 of 548 reflects about 6% growth.
Now with that I'll turn it back over to Greg for his closing remarks, Thank you Mark.
As we've discussed today, the third quarter was very productive for LCR, whether that be from asset performance investments or balance sheet management, we continue to position the company to take advantage of the many opportunities that the experience fuel economy is creating.
With that I'll open it up for questions Sarah.
Ladies and gentlemen.
At this time these brass thus far and in a number one key on your Touchtone telephone. If your question have been answered are you wish to remove yourself from the Q expressed it Bankey. Your first question comes from the line of Craig Melman from Keybanc capital markets.
Morgan Your line is open.
Yes.
So you guys are bringing down leverage here kind of bolstering capacity, raising 2019 investment spending a bit I mean could you talk about I know, you're not giving guidance here for for 20, but I mean.
Are you guys anticipating a ramp in investment spending in 20, and that's what you're trying to kind of lower leverage here in anticipation that caters to the market choppiness or can you just give some insight into the I know you hit on a little bit, but maybe a little bit more insight into what you're seeing on the opportunity from that prompted.
The extra capital raises.
Sure and this is Greg silvers since we have to Greg.
Probably kind of I'd have to distinguish ourselves, but I think it's a little of both I think one I think we think the opportunity set is is getting stronger I think also just kind of prudent balance sheet management and understanding the way. The 10 year is bounced around the day.
When we have a.
Price that works for us and works for our tenants, it's prudent Abbas to take advantage of that and we're always looking forward.
In the way that we're preparing for I think overall I do believe that we've got a we've kind of its over the last couple of years changed the dynamic to where we're kind of run rate.
You know somewhere around that seven to 800, maybe more million of of investment spending and I think you're going to see that.
At least coming out of forward, but Greg I don't know if you have anything to add to that no I don't obviously, because we have a robust pipeline and we need to be prepared.
I mean, given where the stock is there anything else baked into guidance for potential incremental capital raises to give you even more capacity.
At the at the midpoint no, but in the range that we could decide to raise capital. If we decided to as we did this quarter to kind of took kind of create a war chest, but no our guidance doesn't assume any more equity issuance firming in the fourth quarter beyond the 17 million, we already did in the fourth quarter.
Gotcha, Okay, and and Greg the other Greg maybe could you talk about kind of the areas, where you're seeing the best opportunity flow.
Among your kind of different segments.
Sure I think we're seeing.
As Greg mentioned, I think we're seeing opportunities across all of our investment opportunities, we're still seeing opportunities in theaters opportunities and family Entertainment centers experiential lodging a lot of opportunities as as reflected in our in our investment in Nashville, which is one of the one.
Of the hottest experiential places in the country.
With 15.2 million visits a year. So those are the kind of opportunities, we're looking for and we're seeing them.
And then on CLA could you guys just talk about.
No it maybe a little bit early but just how those transition schools are doing in terms of.
Retaining.
You know students.
Yes.
Great.
Yes. This is Greg silvers I think you can interpret the the rate at which we we originally forecast that would be March of 2020, and we pulled that number back I think thats a reflection of the success that this this new operators enjoying the fact that they wanted to accelerate it so.
So I don't think that we don't report on individual kind of assets or tenants, but I think there their actions are indicating that they are successful with this and want to get them under their umbrella faster and I think that bodes well for their performance.
I mean, when you guys recall the rents I guess could you give a sense of where you thought pro forma coverages would come in versus maybe where CLA.
Original coverage Thats kind of indicated on the $20 million.
Right remember.
If you remember Craig our coverages on those properties were actually not bad we just had a tenant that was seven structure from other properties that were own.
So I think we would think that those coverages would at least be where they were at before which was around the one five range if not increasing with what we think is an operator, that's not an stressed as CLA was.
Great. Thank you.
Thank you.
Your next question comes from the line of Nick Joseph from C. D.
You May ask your question.
Thank you.
Can you just walk through what makes the Margaritaville Nash Phil.
Hello attracted from an experiential standpoint.
Sure. This is Greg Zimmerman.
One thing we like about it is it has a lot. It has a lot of amenities as got the Margaritaville brand. It's got a rooftop bar on it is right in the heart of the so borough district near Broadway in downtown Nashville, So its walkable to Ryman auditorium, it's walkable to the Bridgestone arena, where the predators play.
And it's walkable to the Convention Center and Broadway Street. So they are 15 million visits a year in Nashville, 40, 44% or for leisure travel in the average stay is almost four nights. So for us it's exactly the kind of experiential lodging that we're looking to invest in the other.
Thing I would add Nick is as we've talked about again, we got this into a fixed income and type investment being a mortgage so our commitment to stay out of the variability of all of a hotel model I think weve honored in the way that we've done. This we think that on an on an LTV.
Bases. This asset is were significantly.
On the lower end of the leverage relative to it. It's also where the the Cirrus Margaritaville station is actually broadcasting from this hotel. So again, it's got a lot of experienced Joel lifestyle brand to it and we think that it's consistent kind of.
Being in an entertainment district with Directionally, what we said the strategic focus of our efforts in this area are directed.
Thanks, That's helpful. And then maybe just on gaming and can you give an update on where you are in terms of entering that space and then if you did on any assets in the 30 in the pipeline currently today.
We don't talk about specific whether we're bidding or not I again, we continue to make progress in that area. We were just out at the G. Two we conference and had 17 or 18 meetings. So I think hopefully in the near term, we'll have something Theres nothing then as Mark said.
Nothing in our guidance that would indicate that we have something plan.
But.
It's we're making efforts people are very interested in talking to us so hopefully that will translate into opportunities sooner rather than later.
Thank you.
Your next question comes from the line of Tony follow on from Jpmorgan. Your line is open.
Okay. Thank you good morning.
Just mers a clarifying question for Mark the three cents of strength from the core business is that just.
Investment activity or is that like percentage rents like on that kind of wide side what is the three cents.
The combination of number of things on one of the things was Cartwright ramped a little better to during the quarter than we had anticipated. So that was one of the major things behind that but theres a number of things that's kind of everything else. Besides whats indicated there, but cartwright was the main the main kind of driver there.
Okay, but some of it's there's kind of organic in some of it just being.
Dollars out the door. The investment income is that just trying to get dollars out the door were pretty consistent I mean, we're raising our guidance 25 million at the midpoint. So investment spending is slightly higher but I just think we had better kind of performance.
Kind of driven by Cartwright, particularly so thats, an operating asset is that a little better during the quarter than we had planned.
Okay.
And then.
Crush categories in education. It seems like there there is almost three distinct businesses within the category.
What's the you commented a couple times I guess about the pivot towards more experienced Joel assets like would how should we think about just education as we look out the next year or two could there be more sales candidates in that bucket do you want to be in all three of those subcategories, how you're thinking about that.
Again I think at at this time, it's a fair question. Tony I think we are we've clearly said that the charter, especially the charter school opportunity is is very competitive with the municipal bond market and we don't see the risk reward return for that so.
Again, right now, we're seeing that naturally come down with the sales.
I don't know that we're prepared to talk about anything about accelerating that but what we have said is at least for the for the foreseeable future, we're not going to be devoting a lot of time or investment dollars in that area given that risk reward equation right now.
Okay, and so we and I know, you're not giving the 2020 guidance, but this did turn out to be a pretty heavy year in terms of dispositions and paybacks on mortgages and such.
You think this level of portfolio recycling is something you'd continue with into the future.
I think its adds abnormally high this year. If you look at the Schlitterbahn asset Thats, an asset that we had owned for 14 years I think given the noise around that we were we were happy with the outcome, we'd always maintained that the value was there and what Cedar fair paid kind of demonstrated that.
But those if you go back and look I think we kind of our cost of capitals working now so it's that we will probably be doing more dispositions in kind of portfolio improvement, but I don't think they're going to raise to near the level that we saw this year.
Okay and can you walk through yields that you're achieving on the.
Major types of investment markets.
Yes, I think consistent with what we've said, yes, most of our properties are trading or again kind of mid sevens to low eights.
As we've said you know on the coast. Some of those kind of are very thing that can get down to the to the low sevens or seven and then we're seeing theater transactions that are trading below seven.
So in that space, given our cost of capital that creates a very attractive spread and given our relationships and greg's work in this area, we've been able to harvest a lot of those opportunities and continue to be excited about those that are being presented to us.
No you're are you build to suits that those same kinds of levels are generally as always there generally got to be 50 to 100 basis points wide of that just to accommodate for the risk associated with kind of a build to suit.
Okay, great. Thank you.
Thank you Tony.
Your next question comes from the line of Rob Stevenson from Janney. Your line is open.
Good morning, guys.
Original Greg.
In terms of.
Lodging lodging deals going forward.
First ones I think where.
Resort was added JV Nashville is in a note.
Eight is that likely to be one of those two type of structure is likely to be how you approach lodging and I guess also possibly gaming going forward or is there a likelihood is there a value and as our likelihood that you're going to wind up having you know this stuff on balance sheet and as an ownership position at some point.
Sure first of all Rob first it's the only time I've been called the original OTG. So thats [laughter] that it would that again I'm going to I'm going to take advantage of that but I actually think if you look at our portfolio. We have all three and if you look at what we did it like Bogoso Springs, that's in a lease if you look at what we did here.
Good Nashville, it's a mortgage few look I think what you will see us be either in the lease or the mortgage our preference is to be in the lease.
But there are there certain times, where for tax reasons or otherwise that may not be work, but what we want to be is in a fixed income like instrument as opposed to the variability.
The hotel reef model so to go back our preference will be to the lead to the triple net lease and be in that fashion occasionally we may have mortgages.
You'll see us a significant amount in the in the hotel REIT model.
Okay.
Then I would also that would also apply for the casino space. So yeah. I think if we were the casino face it would be the net lease space in a restart.
Okay.
This quarter or the the briegel exposure went up how comfortable are you and continuing to increase the exposure over all to movie theaters in sort of do you guys have at this point from a diversity standpoint.
Not specifically to AMC or Regal, operator wise, but just how much you guys are sort of willing to do.
At the upper end in terms of theaters within the portfolio.
Again like I said I think we've always said if we can find high quality theaters, we'd like that business. It's been a very very stable business for us for 22 years and last year. We set an all time record in box office, So I think we'd like to space.
Not as much exposure to AMC Regal or set of Mark it's about finding the right asset with really good coverage and often this involves theaters that have been recently renovated and so we if we like to trajectory, we like that exposure will continue to invest in that space.
All right and then last one for me how many cop costs do you still have under construction or are there any more behind this and the pipeline.
I think we have adamos began to turn but a couple that are that are still we just put one in service. Okay that was our last okay. So but as we've said we pretty much see almost every top golf opportunity.
We are being.
Not because the opportunities are good but because we are managing exposure a little more selective.
I would think that we will have top golf in the future as part of that and that will continue it probably won't be as robust given the level of where we have them exposure, but we will selectively add new assets to our portfolio. When we think the opportunity is really strong.
Okay. Thanks, guys.
Thank you.
Your next question comes from the line of Brian how far in from RBC capital markets. Your line is open.
Hi.
On the.
Lease expiration schedule in education, the ones that are due the 12 point whatever million. That's due this year does that all tied to CLA.
Yeah, Yeah that those that's the eighth that were left as of quarter ends we had taken that number down from 17 as you saw last quarter down to eight and then since that time. Another four had been converted so what those are moving from.
What a near term leases all the way to subsequent to 2038. So there that's exactly what that is so those should by the end of the or that should be zero.
Okay, Great and then.
On top of all filling public I know you decide that stock at your investment won't be as robust with them, but does or potentially going public I guess does that change your ability to invest.
And in nominal.
Again, I think remember our our limitation is a self imposed limitation on on an exposure I think.
So I think we'll just have to evaluate whether or not they go public is probably not as big an issue in that I mean clearly.
People will have a view to their profitability at that point, but trust me, we have that view already because we get kind of those level of financial details. So it's really kind of managing exposure, which we set kind of when they are they were the only participant in this type of space.
What may change some of that is as more operators get in there and there is.
More ease of transferring operations and different operator options, we may take a broader view of that.
Okay. Thanks for taking my questions.
Thank you. Thank you.
Your next question comes from the line of Josh.
From Bank of America.
Okay.
Good morning, guys, just maybe one bigger picture from me.
Yes.
How comfortable are you with your tenant industry concentration.
Your level, there I guess relative to peers pretty high.
I think generally speaking we feel really good about the experience will sectors that were in I mean, if you look if you look in any metric what we're spending on these type of expenditures as opposed to traditional retail is doing nothing but accelerating.
So as compared to some of our competitors who are more focused in the retail space, we actually think were more well well positioned.
And that the durability of that is going to only be come more valuable.
Hi, Thank you guys.
For me.
Your next question comes from the line of Shine muscle from Ladenburg Thalmann. Your line is open good morning.
Good morning, Jain So I know you kind of commented a little bit already on the Margaritaville.
Investment you made during the quarter, but maybe how much of the margaritaville kind of underlying revenue is tied to kinda rooms, I'm just trying to get there another like revenue driver there. Besides some of the traditional kind of lodging drivers that maybe you.
You know, it's kind of going to be underlying the interest payments do you guys.
Yes, I think there there's a significant FNB component to this.
Again, you know, there's a rooftop kind of bar lounge like I said, there's a lot of activity planned. There. So I think this is not at all positioned as kind of the traditional business traveler.
This is tapping into what we think is an exciting and dynamic entertainment district and that there's there's not only a lot of activity in the actual lodging offering, but there's a lot of activity going in and around the area, which is kind of significantly driving demand.
And for what we think is this experience fuel or lifestyle brand.
Okay, and then you commented on a little bit but to the extent you can you maybe provide some more color on the LTV on the loan I mean did that sub 50 or.
Lower than that it just kind of how you guys got comfortable.
Maybe on the security of the end of the interest.
I think it's probably.
Again, I think what we would say is that on a relative to appraisal that in that 55% to 65% range, we feel very comfortable in this space.
Okay.
And then given the commentary on the on the severance charge, what or maybe some of the non experience all assets or investment verticals that you guys are moving away from.
I mean, what we've talked about John pretty openly is that we're spending less and less than not devoting resources to the charter schools space. So theres no doubt that our focus is more and has continued to trend more toward the experience will assets for the reasons I said earlier about.
Whether it's a broadening the diversity of our product or the durability of that product as we've seen and you look at like I said at a number of studies correlated to the economy that these assets actually outperform others. So it's primarily in that and what I would say broadly.
The education space, but more specifically in the charter schools space.
Okay, but the other two kind of sub verticals would still be giving investments or is education in general kind of being moved away and I think it's primarily in the charter school because even in the other two those are long term leases. We don't I mean, you know there is a lot of focus that we've had like I said in the charters.
School space in the end the turnover in that in the termination fees and the and the volatility that that brings whereas in the other space. The other parts of our education. Those are long term leases without that volatility. So we still think that that that and it's not nearly there's not a municipal bond market in those other two.
Spaces, So I I would say, it's right now focused in the charter school space, Okay understood and then I'm sorry, if he has already commented on this but I know you talked about the education assets that are on kind of near term lease expirations, but maybe the.
Three theater assets any potential there for releasing or how you guys feel about those assets going forward I know, it's a relatively small number but just any commentary.
Two of the three were already extended in the fourth quarter.
Okay perfect. That's it for me thank you.
Thanks, Jeff.
Again, ladies and gentlemen, if we have a question at this time. Please press the star Unvended number one key I touched on telephone.
Your next question comes from the line of calling from Raymond James Your line is open.
Thanks, Good morning, everyone.
Good morning headcount.
First one just a big picture question, Greg just Steve you've made a point in the path, but just how focused you are on data and I'm. Just curious just recognizing the broader tailwinds for your experience will focus are there any subsets, where maybe you've seen some weakness or do you as you've done more due diligence on again weve spoken in the past a lot about potential areas of future growth.
So that you've maybe decided to take a step back from engaging and just kind of curious as you paint this broader brush around experience Joel just some more nuance trend you might be picking up on there.
Yes to date, it's been it's been like I said really strong.
I think what we're trying to and focus on as always in an economic we're always trying to underwrite the downturn. So trying to see how things are you know how they operate I think where we are at least can not concerned but aware and following is the high.
Your price point activities.
Again, if you think about the movies Theyre almost counter cyclical a lot of these things are low cost alternatives.
And so we're very closely aware of where the various price points of the offerings that we have and as you move up into higher points of.
Kind of what the cost of the activity is that you see some more core correlation to economic downturn as opposed to counter cyclical.
Got it Okay. That's helpful color there and then I just wanted to go back to Rob's question earlier, just recognizing it was much smaller but I'm just curious what the other mortgage investment on the recreation front was during the quarter and then just as you look at your pipeline just how many other opportunity kind of mortgage investment opportunities are currently in the pipeline.
And is there anything of the magnitude of Margaritaville.
The other there other mortgage investment was a fitness.
Center in Kansas City that we invested in a Genesis fitness center and then as far as the mortgage versus I don't think there. So there's a significant I mean like I said.
A lot of these are tax motivated.
As a way to to manage that issue, but if you look at these mortgages.
Often have escalators and everything else that to the kind of read like leases, but you can get a lot of tax efficiency by using that structure like Greg said, we target leases, but we use mortgages and cases, maybe there's a tax issue, but like you said we tried to.
Structure, those just like leases so it's hard to predict the mix, but we certainly have done a lot more leases than we've done mortgages and expect that trend to continue I think.
Okay. Thank you.
Thanks Carl.
[noise].
I'm showing no further question at this time I would like to turn the conference back to Mr. Greg.
Well again, thank you all for your time. This morning. We appreciate you guys all tuning in and we look forward to seeing many of you at ne read and talking to you again on our fourth quarter call. Thank you. Thank you.
Ladies and gentlemen. This concludes today's conference. Thank you for your participation and have a wonderful day you may all disconnect.