Q1 2022 EPR Properties Earnings Call
Gentlemen, thank you for holding your conference will begin shortly thank you for your patience.
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Welcome to the Q1 2022 EPR properties earnings call. My name is Richard and I'll be your operator for today's call. At this time all participants are in a listen only mode. Later, we will conduct a question and answer session.
During the question and answer session. If you have a question. Please press zero one.
On your Touchtone phone.
As a reminder, the conference is being recorded.
Now I'll turn the call over.
Brian Moriarty, Vice President Corporate Communications, Mr. Moriarty, you may begin.
Okay. Thank you Richard Thanks for joining us today for our first quarter 2022 earnings call and webcast participants on today's call are Greg Silvers, President and CEO , Greg Zimmerman Executive Vice President and CIO, and Mark Peterson Executive Vice President and CFO will start the call by inform.
You that this call may include forward looking statements as defined by the private Securities Litigation Act of $19 95 identified by such words as will be intend continue.
Can you believe may expect hope anticipate or other comparable terms.
Companys actual financial condition and the results of operations may vary materially from those contemplated by such forward looking statements.
Discussion of these factors that could cause our results to differ materially from these forward looking statements are contained in the company's SEC filings, including the company's reports on Form 10-K and 10-Q. Additionally, this call will contain references to certain non-GAAP measures, which we believe are useful in evaluating the companys.
Performance.
A reconciliation of these measures to the most directly comparable GAAP measures are included in today's earnings release, and supplemental information furnished to the SEC under form 8-K.
If you wish to follow along today's earnings release supplemental and earnings call presentation are all available on the Investor Center page of the company's website Www EPR Casey Dot com.
Now I'll turn the call over to the company's President and CEO , Greg Silvers.
Thank you Brian Good morning, everyone and thank you for joining us on today's first quarter 2022 earnings call and webcast.
With our first quarter results, we delivered consistent progress as our portfolio continued to recover.
Rent collections have normalized and we realized strong collections under our rent deferral agreements broadly supported by healthy tenant performance.
These collections add to our strong liquidity position.
We were also pleased that Fitch recognized our stabilization and disciplined leverage by upgrading both the company and our unsecured debt in March.
In reviewing our experiential portfolio. We are excited about the sustained demand we are seeing highlighted by our Eton play experiential lodging and ski properties.
This may be best illustrated by our newest top golf locations, which have opened at some of the top performing locations across the top golf network and our other properties other than theaters performing at or above 2019 volumes.
Fundamentally these results continue to reinforce the long term durability for out of home leisure recreation and social experiences, while supporting our focus on experiential real estate.
Turning to our theater portfolio as box office continues to regain momentum and studios are reassured of the economic benefit of theatrical exhibition. We believed the debate around the impact of streaming will continue to moderate.
It is becoming increasingly clear that theater exhibition has regained its its distinction as the platform, which maximizes revenues for studios.
With the recent Netflix Netflix news the streaming environment appears to be entering a period of rationalization.
A recent study from Deloitte highlighted the intense competitive challenge faced by streaming services and noted that social media has become a direct competitor for at home viewing time.
We continue to believe that in the in theater exhibition and at home streaming services should and will successfully coexist as they have for many years.
We are also excited to be executing on our investment pipeline on transactions with solid economics. In 2022, we are uniquely well positioned to execute on a defined set of opportunities armed with a strong balance sheet.
We are confident in the acceleration of our investment spending based upon the substantial progress we have made on a number of transactions that we expect to close in the second half of the year.
We are reaffirming our investment guidance, noting that this year's deployment will have most of its impact on next year's earnings.
Lastly, as we consider the strength of our portfolio performance results to date and expectations for the remainder of the year. We are pleased to be raising our earnings guidance for the year.
Now I'll turn the call over to Greg Zimmerman, who will discuss the business in more detail.
Thanks, Greg at the end of the first quarter. Our total investments were approximately $6 5 billion with 355 properties in service and 96% leased during the quarter, our investment spending was $24 4 million.
And including investments completed after quarter end.
Our year to date spend through May 4th is $95 million.
100% of the spending was in our experiential portfolio and included two acquisitions build to suit development and redevelopment projects.
Our experiential portfolio comprises 281 properties with 42 operators and accounts for 91% of our total investments or approximately $5 9 billion and at the end of the quarter was 96% occupied.
Our education portfolio comprises 74 properties with eight operators and at the end of the quarter was 100% occupied.
Now I'll update you on the operating status of our tenants.
Exhibitions meaningful recovery continued in the first quarter Q1 total box office was 133 billion 55, 7% of Q1 2019 box office consumers are returning to the movies. The Batman led all titles for Q1 grossing nearly 300.
Third $69 million to date Spider Man No way home continued its record breaking performance in Q1 with over $804 million in box office to date uncharted sing too and Scream all grossed over $80 million in the quarter Sonic the hedgehog to provided a strong.
Start to Q2, grossing over $161 million to lead second quarter box office.
As we move further into 2022 and box office continues its recovery. We are focused on the number of films produced by studios for wide release.
During Q1 of 129 films were released theatrically compared to 302 in Q1 2019.
As the consumer is consistently proving with Spider man Batman and Sonic the Hedgehog, we don't have a demand issue. We have a supply issue. We firmly believe box office numbers will continue to improve as studios recognize this demand and increase the product flowing to theatrical release.
The 2022 film slate is solid with with a potential for 17 tent pole titles to gross $100 million are more for the year up from 11 in 2021, the remainder of the Q2 slate includes doctor strange and the multi verse of madness, which opens tomorrow light year.
<unk> gun, Maverick and Jurassic World Dominion.
Q3, and Q4 will have the highly anticipated sequel Avatar, the way of water Black Adam with Dwayne Johnson and two Marvel Universe films, Thor <unk> Thunder and Black Panther Khanda forever.
Turning now to an update on our other major customer groups. We continue to see positive trends across all segments of our drive to value oriented destinations. In Q1. We saw continued good performance across eat and play throughout the country with strong attendance and revenue growth.
The bulk of our attractions were closed seasonally in Q1 those that were open had solid results as we roll into Q2 attractions in the southern and Western part of the country are beginning to open and we anticipate continued strong demand in 2022.
Membership in our fitness assets continued to improve in Q1 up significantly over Q1 2021, we're happy with the progress.
Across our experiential lodging portfolio ADR and revenue growth continued to grow in 2020 in Q1.
In our RV resorts, we are seeing ADR growth and strong reservations heading into the summer season.
In our ski portfolio early season weather challenges were mostly offset in the second half of the season staffing issues did impact a number of locations. Nonetheless overall revenue grew across our portfolio in part because of season pass sales, we continue to benefit from our focus on value oriented.
Drive to ski destinations.
Our education portfolio continues to perform well.
We have five vacant theaters, we have executed contracts. This sale for two and are in advanced negotiations for two others. We continue to market the fifth theater with multiple expressions of interest.
Finally, and most importantly, we are laser focused on growing the business through investments, we are seeing increasing investment opportunities throughout most of our verticals, including eat and play experiential lodging fitness and wellness and attractions our pipeline continues to build as.
As noted on our last call during the first quarter, we acquired a movement climbing yoga and fitness and Lincoln Park in Chicago for $19 $9 million. In addition, we acquired the site for the new topped off and King of Prussia, Pennsylvania, and a build to suit project, which will commence construction later in 2022.
After the end of the quarter, we acquired the Cajun palms RV resort in Breaux Bridge, Louisiana between Lafayette, and Baton Rouge, and a joint venture with North Gate resorts, a premier RV resort, operator, EPR ownership interest is 85% and our overall investment exceeds.
$60 million Cajun palms is our third RV resort investments, we're bullish on the resilient RV and RV resort space, which is supported by long term demand drivers. The median age of new RV owners is 41 and ownership comprises millennials Gen X boom.
Mers and Gen Z. We're also particularly excited to further develop our relationship with Northgate resorts as we look to grow our RV resort portfolio.
We're making substantial progress on our investment pipeline to date in 2022, we have funded $90 5 million for acquisitions and new development projects and expect to fund an additional approximately $50 million on announced projects during the balance of 2022.
Since restarting our investment spending we have made significant progress on definitive agreements for additional investments in multiple experiential verticals. The opportunities include acquisitions build to suits and redevelopment investments consistent with our historical approach cap rates remain in the 7% to 8% range.
And should create compelling long term value.
With our increased visibility and expanded investment pipeline, we're maintaining our 2022 investment spending guidance range of $500 million to $700 million and we expect that our closings and fundings will ramp as we enter the second half of the year.
We're excited about our accelerating investment progress as we move through 2022 consumers continue to engage in experiential activities and operators are growing with our broad unparalleled experience in network in experiential real estate, we're ideally positioned to take advantage of these growth.
Opportunities I will now turn it over to Mark for a discussion of the financials.
Greg today, I will discuss our financial performance for the quarter provide an update on our strong balance sheet and close with updated 2022 earnings guidance.
We had another strong quarter that exceeded our expectations.
<unk> as adjusted for the quarter was $1 10 per share versus <unk> 48 in the prior year and <unk> for the quarter was $1 16 per share compared to <unk> 52 in the prior year now moving to the key variances total revenue for the quarter was $157 5 million versus $111 8 million in the prior year.
Increase was due primarily to improved collections from certain tenants, which continue to be recognized in revenue on a cash basis were had previously received abatements.
Scheduled rent increases as well as acquisitions and development completed over the past year also contributed to the increase.
This increase was partially offset by the impact of property dispositions.
I would like to take a moment to summarize deferral collections during the quarter, we collected $10 2 million of deferred rent and interest from accrual basis tenants and borrowers that reduced receivables, leaving a balance on our books at March 31 of $17 4 million.
We expect to collect approximately $15 million of the remaining $17 4 million over the balance of 2022.
Additionally, during the quarter, we collected $1 6 million in deferred repayments from cash basis customers that were recognized as revenue when received received and which were not included in our guidance at March 31, we had approximately $123 million of deferred rent and interest owed to us not on the books. This amount is due over the next five.
Five years.
Revenue from these customers will continue to be recognized when the cash is received.
Note that through March 31, we have collected a total of approximately $91 million of rent and interest from customers that was deferred as a result of the impact of the COVID-19 pandemic. This amount is a real testament to the strength of our customers' recovery.
We had other income and other expense of $8 6 million and $5 $5 million, respectively, mostly due to the reopening of the Cartwright resort indoor water Park. During 2021 after being closed due to COVID-19 restrictions as well as from two theater properties that we operate we were encouraged to see the car Rev resort outperform our expectations.
Spectation during the first quarter driven by higher than expected revenue.
Also included in other income for the quarter was $552000 gain on insurance recovery that has been excluded from <unk> as adjusted.
Percentage rent for the quarter totaled $3 4 million <unk> 2 million in the prior year.
The increase versus prior year related to higher percentage rents from our gaming and golf entertainment tenants as well as from one cultural tenant.
This was partially offset by less percentage rent from an early education tenant based on a restructured lease which has higher base rents in 2022.
I would like to note that percentage rents for the quarter exceeded our expectations by about $1 $2 million.
Due primarily to some true ups from the prior year related to two tenants.
Property operating expense for the quarter decreased by $1 4 million compared to prior year, primarily due to fewer vacancies, resulting from disposition dispositions and re leasing.
G&A expense for the quarter increased by $1 9 million compared to prior year was due primarily to an increase in payroll and benefit costs, including stock grant amortization as well as professional fees and travel expense.
Interest expense net for the quarter decreased by $5 9 million compared to prior year due to reduced borrowings and lower borrowing costs due to the termination of our bank covenant waiver and.
In addition to the repayment of our term loan during the third quarter of 'twenty. One we had no balance on our revolving credit facility throughout the quarter.
Transaction costs increased by $1 7 million compared to prior year as we Reaccelerate. Our investments. This expense is excluded from <unk> as adjusted.
During the quarter, we recognized a credit loss benefit of <unk> 3 million versus $2 8 million in the prior year. The primary reason for the higher benefit in the prior year was due to favorable expectations in the third party model that reduced the allowance that was established back in 2020 related to the economic disruption caused by COVID-19.
The benefit for both periods is excluded from <unk> as adjusted.
During the quarter, we recognized an impairment charge of $4 $4 million related to one property that was recently vacated and that we intend to sell. This chart is also excluded from <unk> as adjusted.
Finally equity in loss from joint ventures decreased by $1 3 million compared to prior year. This was due to increased revenues at two experiential lodging properties in St. Petersburg, Florida that are performing well and was partially offset by the expected off season losses recognized that our experiential lodging property in Juarez in Wisconsin, which was acquired.
In August of last year.
Turning to the next slide I'll review some of the company's key credit ratios.
As you can see.
Coverage ratios have returned to strong levels with fixed charge coverage at three two times in both interest and debt service coverage.
Ratios at three seven times.
Our net debt to adjusted EBITDA was five one times and our net debt to gross assets was 38% on a book basis at March 31.
Lastly, our common dividend continues to be very well covered with an <unk> payout ratio for the quarter of 67%.
Now, let's move to our balance sheet and capital markets activities.
We are pleased that during the quarter Fitch upgraded our corporate and unsecured ratings to investment grade with a stable outlook.
That now gives us investment grade ratings on our unsecured debt across all three rating agencies.
At quarter end, we had total outstanding debt of $2 8 billion, all of which is either fixed rate debt or debt that has been fixed through interest rate swaps with a blended coupon of approximately four 3%.
Additionally, our weighted average debt maturity is six years with no scheduled debt maturities until 2024.
We had nearly $324 million of cash on hand at quarter end and no balance drawn on our $1 billion revolver. As you can see our balance sheet is very well positioned to fund our investment opportunities.
We are pleased to be increasing guidance for 2022, <unk> as adjusted per share to a range of $4 39 to $4 55 from a range of $4 30 to $4 50 reps.
Representing an increase of 45% at the midpoint over prior year.
We are confirming our guidance on investment spending of $500 million to $700 million and disposition proceeds of zero to $10 million.
Before concluding I would like to give some additional details regarding 2022 guidance.
Insistent with what we have done previously, we're not including any future collections of deferrals from cash basis customers in our guidance.
Such amounts will be booked as additional revenue when received over the last nine months of 2022.
However, we will continue to report each quarter on the amount of such collections as well as the collections from accrual basis customers.
As I mentioned previously during the first quarter, we recognized $3 4 million in percentage rents, which included certain amounts related to the prior year that were not anticipated. Therefore, we are raising our guidance range by $1 million on both ends and now expect percentage rent to be in a range of 9 million to $13 million for 2022.
Also consistent with the historical timing of percentage rents. We continue to expect such amounts will be weighted to the back half of the year with approximately 50% anticipated in the fourth quarter and only about $1 million anticipated in the second quarter.
We've also increased our expected G&A expense guidance by $1 million to a range of $50 million to $53 million with about half of that increase due to higher than expected noncash stock grant amortization.
We expect that our convertible preferred shares outstanding will continue to be dilutive to <unk> as adjusted per share results for each of the remaining quarters in 2022 as they were in Q1 of 'twenty two.
Guidance details can be found on page 23 of our supplemental.
Lastly, I'd like to comment on our capital plan for 2022, we are in the enviable position in this turbulent market of having over $320 million of cash on hand at quarter end nothing drawn on our $1 billion line of credit and no scheduled debt maturities until 2024.
Furthermore.
We have experienced the last several quarters, we expect to collect more of that 100% of contractual cash revenue over the remainder of the year due to ongoing deferral collections.
And combined with our conservative <unk> payout ratio, we expect to continue to generate significant excess cash flow to fund new investments.
This means we can be opportunistic as to when and how we access additional capital.
Now with that I'll turn it back over to Greg for his closing remarks, Thank you Mark.
We are pleased with the progress we've made to date as we've discussed the consumer is strongly supporting our properties or tenants are strengthening and our earnings are increasing.
We look forward to these trends continuing in the coming quarters.
With that why don't I open it up for questions Richard.
Thank you.
We will now begin the question and answer session.
If you have a question. Please press zero one on your Touchtone phone, if you wish to be removed from the queue. Please press zero two.
If youre using a speakerphone you may need to pick up the handset first before pressing the numbers. Once again, if you have a question. Please press zero one on your Touchtone phone now and we're standing by for questions.
My first question on line comes from Mr. Nick Joseph from Citi. Please go ahead.
Thanks.
You talked about the disruption with streaming.
Sit back and think about that how you think either benefits theaters or is it more of a additional competition that <unk> seen come online that may just create more competition.
Consumers broadly.
Yes, Nick I think what we think about and I'll, let Greg chime in on this is streaming it's really become effectively the competition for your in home cable TV.
Again their focus is developing series.
And kind of being a direct competitor to that now what the Deloitte study focused on was in that in home environment, whether it's tick tock or other things there is competitive pressure in there where I think we're out of home entertainment and I don't think there.
The question becomes a restate in or we go we know where the where the competition does come to play is a little bit about what Greg talked about over the last two years with so much focusing on streaming there's been a lot of content development for that to the detriment of.
Of developing.
Enough product for the theaters, we think that model is starting to change where we're getting more focus on content development for films and as that begins to pick up that will that will benefit the theater business, but it's less about.
Consumer competition as more as it is about the content competition, but Greg Yes, Nik I would also add we believe that Netflix and some of the other streaming services. We will look to put movies first run theaters Netflix announced last week that they bought Alejandro <unk> Bardot he has that.
He's the director from Bird man in the Revenant and they are committed to a first run on that six months from now so we expect that we'll see more first run releases from the streaming services.
That's very helpful. Thank you.
Thank you. Our next question online comes from RJ Milligan from Raymond James. Please go ahead.
Hey, good morning, guys just wanted to revisit the guidance here it looks like percentage rents.
Expectations went up a little bit, but so did G&A and I'm. Just is the guidance increase is just purely the deferred rent collections.
The <unk>.
No really we updated as you said G&A.
G&A kind of offset percentage rents and we increased our guidance at the midpoint by <unk> <unk>. So we said we gave original guidance that deferral collections are not in that so we had <unk> in the quarter. So that's part of it but we're not putting any future deferral of collections in our guidance. So it really is just the <unk> of the <unk> related to deferred collections from.
Cash basis customers. The other <unk> the biggest chunk of that is probably about <unk> of our.
Better performance anticipated at our Trs and JV properties, which are operating operating properties. We saw good performance in Q1.
And we expect that performance to continue throughout the remainder of the year and then there is about a penny of just sort of smaller things revenue at our Erc's Entertainment retail centers was a bit better as well. So that's really the <unk> increase <unk> deferrals for sensor so trs in Jv's and about another penny.
Sort of other other areas that were above expectations R. J I would add I think again as mark talked about some of our properties, especially operating properties. We've talked about the Cartwright before these were closed a lot of last year. So there is no doubt we have a level of conservatism that we built into that.
As we're coming into this year and kind of see.
It's really never had a.
<unk> full year operating season.
So as we're seeing that performance kind of ramp to kind of what we thought it could be.
Our guidance is reflecting some of that strong performance.
That's very helpful. Thanks, and my second question is on the.
On the pipeline for external growth.
Obviously, not a lot done so far year to date and you mentioned that the expectations are that it is going to continue to ramp in the back half of the year can you just talk about.
The pipeline what do you expect the cadence to be even in the back half of the year do you expect it to be more fourth quarter weighted and then whats the potential potential hurdles might be to achieving that goal of $500 million to $700 million for the year.
And I'll, let Greg kind of jump in I would say, it's it's probably fairly balanced in the second half of the year, probably a little more in the fourth quarter.
I think the.
Hurdles are again, just kind of getting deals kind.
Kind of finalized I think we feel confident that we have great visibility, we're in due diligence and negotiating agreements so.
Don't think these are issues of kind of finalizing terms, it's getting it from beginning to end and candidly. There is a lot of competition for third parties out there, meaning not competition in the deal but to get through due diligence and things of these nature things are taking a little longer.
In the market.
As everyone is experiencing that with Greg maybe anymore color no I think thats right. Greg I think we are seeing a lot of competition for third parties that slowing things down.
I really think we're terribly concerned about the impact of inflation I think most of our customers have already priced that and so it's just a it's just them.
Just one step at a time to get things done and we do feel comfortable about it.
<unk>.
Great. Thank you very much guys.
Thank you Ajay.
Thank you. Our next question online comes from John <unk> from Mountain breakdown.
Please go ahead.
Good morning.
Good morning, John .
Just touching on a little bit on the last answer to the question.
Previously.
You talked a little bit about.
You had mentioned that you weren't seeing a ton of competition or investments I guess, maybe why is that especially as it seems like pre COVID-19.
Seeing a lot of.
Net lease peers, maybe kind of migrating to more experiential assets is that just a psychological thing with a lot of investors from the pandemic or if there's something else maybe out there thats keeping some of that competition for investments at Bay.
I would say and I'll, let Greg also comment I think first of all we are we are seeing a real benefit of how we worked with existing tenants through COVID-19.
Mark talked about we're getting repaid on these and we're getting repaid sometimes faster than what.
Actually contractually with our tenants had agreed to but the other huge benefit as people are wanting to do business with us. So there is a significant amount of this it is with existing tenants that we are we are helping to grow their business and I think.
Think the way, Greg and his asset management team worked with these tenants and created a path that was both a success for us and a win for them is paying really big dividends now.
Well. Thank you for the compliment, yes, I completely agree I would also say that.
John we had visibility to People's pipelines during Covid people still kept thinking about what they wanted to do next even while they were shut down.
They started developing plans we were working right alongside with them until until the time was right to move forward and I think we're seeing a lot of benefit from that.
We also have pretty deep experience and build to suit side of this and people recognize that we're able to deliver its a great thing relationships are such that they're not shopped because they appreciate doing business with us and we're growing existing tenants and I think it is really.
It's really a great thing to be able to grow with your existing tenants and they are just looking to you only to fund that need.
Okay.
And then on the Trs.
<unk> side of things I know, it's probably a bespoke per each transaction, but whats the relative kind of general timeline or thought about moving those to a net lease structure eventually.
Operations continue to stabilize here.
The worst of the pandemic.
Again, we're again, we're going to take a look at all of those and kind of see.
There is two sides of that some of that is not a bad thing from an inflation protection again, an inflation environment, we probably enjoying the upside of that so I think.
We're mindful about the size of that and we'll always be thoughtful about that but I think again we.
We will kind of evaluate those as they go forward and hopefully in the future Youll see more updates on that right.
Right now we are.
Still in the acquisition mode of really trying to acquire what we think are high quality very resilient properties and then we think we've even in the JV. We've got very strong structures that protect our interest and protect our shareholders and then we will.
Look at migrating those as we get to more.
Stabilization because often several most of these properties we are improving.
No I think thats right and I think that obviously, we would prefer to be in a net lease structure, but if we need to get a quality asset through a joint venture structure, we're not afraid to do that and to your point Greg Yes. Most of these are redevelopments and improvements.
Is that going to maybe be typical as to how you invest in the experiential lodging sector at least in kind of the near term here.
I wouldn't say that yes, I mean, I think what youll see us do is some traditional straight up net lease deals as well I think as you said, it's kind of bespoke in the nature of the deal does it does it have development or redevelopment needs is it do we think it stabilizes to a much higher level. So.
I don't think there is like a generality because I know some of the investments that we're looking at in the coming future will be in that area, but it will be traditional net lease. So I think there is there is no kind of linear straight line to draw.
Okay.
That's it for me. Thank you very much thank you Jonathan.
Thank you. Our next question online comes from Mr. Michael Carroll from RBC capital markets.
Yeah.
Yeah. Thanks, Greg I wanted to touch on your comments that you made earlier regarding theaters I mean, how long will it take for studios that they have this renewed focus on theatrical releases, how long will that take to actually translate into additional tentpole films being put out to the market.
Again, and I'll, let Greg Zimmerman comment I think people are focusing on <unk> and.
And Greg will have an opinion, it's not as much tent pole films, it's actually the smaller films that we need.
The number of tent pole films are pretty good and those were we were protected with those as things kind of went into the can and were held for.
Four during Covid, it's really the <unk>.
Kind of 25% to $75 million films.
I think what we're going to see us gradually ramping of that and could that take kind of several years. It could I think we feel like.
We're going to be we're going to have positive coverage. This year, when we get through to the end of the year and that number should we believe continue to grow but I don't want to give people the impression it's the big titles, it's actually kind of some of the smaller stuff.
I agree Greg.
We're going to have Michael probably 17 as I mentioned in my script 17 films this year that exceeded $100 million.
Spider Man blister third highest grossing film of all time Doctor Strange pre pre sales are five times the pre sales of the original Doctor Strange and some of the movement you are seeing in tent pole films being pushed to 2023 are just calendar issues, where they don't want to release $2 10.
<unk> too close to each other so I agree the large theatrical releases are flowing it's the smaller films that we want to see come back.
Okay, and then in the first quarter. It looked like if you look at the weekend sales.
Sales royalties surpassed $100 million weekend and pre Covid you are consistently exceeding that number and even touching 200 plus million dollars is the difference. There is it is the smaller films or is it that they just didn't like the way that the schedule worked out there wasn't a lot of tent pole films going out this year yet.
So a little bit of both but I do think.
It is.
It is the amount of product in there as Greg mentioned, if you look at the number of titles.
You only have.
So many titles plane, it's going to affect it.
But I think clearly at the beginning of the year is not 10 pole heavy it never is first quarter is not we're moving into that period now kind of this doctor strange kind of kicked that off so we'll see a steady flow of that as we as we worked through the summer, but it is a little bit again.
As we track and we've told people here.
When you track the percent of box office and the percent of movies that are out there.
A far better tracking mechanism of saying, where we're at relative to kind of overall performance because the consumer is showing up we just need to get more product flow to them, but I think also Michael a lot of these films.
Performed very well on IMAX or other premium large format screens.
And People's viewing habits are changing and they're going to the movies midweek more because they can get a good seat and reserve it at one of the big screen. So I think.
That has also helped.
Okay, and then can you talk a little bit about how well positioned your tenants are and I know Greg I think you were highlighting that they have they're going to have positive coverage I mean are they making money today at these current these current levels.
Yes, I mean, the expectations of kind of where we're at in targeting this year. They should we think they should make money and we would have positive coverage, it's not back to where it was.
Again, we think thats going to take a little time as we talked about with more product. If you look beyond theaters, though I would tell you we are at or above where we were in 2019 well.
And we are continues our theaters continue to outperform yes, we continue to generate over 8% in the U S box office.
We have strong.
And then just last one on this topic.
How many and I know, we kind of talked about this before how many theater box is actually closed down during the pandemic was that a significant number and is your portfolio now better positioned to take more share just because theres less competition out there.
We.
I'll, let Greg comment I think we probably would say.
We just had.
Conference for theater operators.
I think we've probably seen about.
10% kind.
Tenant closures.
I think we probably if not for governmental assistance, we probably would have expected that to be closer to 20%.
But there is no doubt our theaters are going to benefit from this because as Greg said, we have kind of a market dominant portfolio.
And so we think that process that weaning process will continue.
As people start to explore higher and better uses for their buildings, but we feel good about how our portfolio is positioned relative to competition.
Great. Thank you.
Thank you Mike Smith.
And I'm showing we have no further questions at this time I will now turn the call over to Greg Silvers for closing remarks.
Well, we again, thank you for everyones time, we're very proud of the accomplishments. This quarter. We look to continue the trends that you saw and we look forward to meeting many of you in the next month at NAREIT. So everyone have a great day, and we look forward to talking to you next time. Thank you.
And thank you ladies and gentlemen. This concludes today's conference. Thank you for participating you may now disconnect.
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[music].
Okay.