Q3 2022 EPR Properties Earnings Call

The conference will begin shortly to raise your hand during Q&A you can dial star one one.

[music].

Good day, and thank you for standing by and welcome to the E. R. P. Q3, 2022 earnings conference call. At this time, all participants are in a listen only mode.

The speaker's presentation, there will be a question and answer session.

Ask questions. During the session you will need to press star one on your telephone.

We'll then hear an automated message advising us at your hand is raised.

Please be advised that today's conference is being recorded I would now like to hand, the conference over to your first speaker today, Brian Moriarty VP of corporate Communications, Brian you have the floor.

Thank you Stacey and thanks to everybody for joining us today on the EPR properties third quarter 2022 earnings call and webcast.

Participants on today's call are Greg silvers.

Chairman and CEO , Greg Zimmerman Executive Vice President and CIO, and Mark Peterson Executive Vice President and CFO .

I will start the call by informing you that this call may include forward looking statements.

As defined in the private Securities Litigation Act of 1995 identified by such words as will be intend continue believe may expect hope anticipate or other comparable terms.

The 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 results to differ materially from these forward looking statements are contained in the Companys SEC filings, including the company's reports on.

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 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 will turn the call over to Greg Silvers.

Thank you Brian .

Good morning, everyone and thank you for joining us on todays third quarter 2022 earnings call and webcast.

In the third quarter, we delivered healthy earnings growth as we continue to see resilience at our customers' businesses.

Good sustained consumer demand for the experiences provided by our customers.

Additionally, we have yet to see any meaningful impact on demand from inflationary pressures.

Today, we are also reintroducing rent coverage disclosures.

As Greg will highlight we believe this data demonstrates the strength of the recovery of our non theatre properties, while providing a baseline for our theater portfolio.

Even as the recovery is still taking shape. Our overall rent coverage is above the 2019 pre pandemic level.

Our theater coverage demonstrates that consumers want to see films in theaters and as studios ramp up their production schedules, we anticipate that coverage will improve as well.

In 2019, we introduced our strategic focus on properties, which support the experienced economy.

While we could not have foreseen that our properties would have been tested so severely by a pandemic. We believe the experience economy is alive and well and are investing thesis remains intact.

As evidenced by the variety of properties, we are highlighting today and have discussed throughout 2022.

We are uniquely positioned to gain access to and pursue the broader set of experiential properties within our target set.

Everyone is painfully aware of the current disruption in the capital markets and our job as stewards of capital is to be prudent with its deployment.

As a result, we've decided to moderate our growth in the near term in response to our increased cost of capital.

This moderation is not a reflection of fewer opportunities rather our disciplined given current conditions, we will not grow simply to get larger rather we will demand earnings accretion with our investments.

We continue to generate significant excess cash flow, which combined with our Undrawn line of credit will support a more limited investment spend without sacrificing our investment grade credit.

Lastly, it is clear that the center world restructuring and the broader market turbulence have combined to create a significant dislocation of our stock price.

Our current stock price earnings multiple is significantly discounted relative to historical levels, even as we are paying a well covered dividend that is supported by our free cash flow.

As we pursue a resolution with center World, We remain focused on the fundamentals of our business. We appreciate the support of our investors who are focused on the fundamentals and we look forward to delivering strong total shareholder return over the long term.

Now I'll turn it over to Greg Zimmerman, who will cover the business in greater detail.

Thanks, Greg at the end of the second quarter. Our total investments were approximately $6 6 billion with 356 properties in service and 97% leased during the quarter, our investment spending was $82 million, 100% of the spending was in our experiential portfolio and included the acquisition of <unk>.

Project for redevelopment and additional financing for an existing asset.

Our experiential portfolio comprises 282 properties with 47 operators and accounts for 91% of our total investments or approximately $6 billion and at the end of the quarter was 97% occupied our education portfolio comprises 74 properties with eight operators and at the end of the.

The quarter was 100% occupied.

Seven $1 billion for the same period.

In 2019 theater coverage was one seven times with 11.4 billion in box office.

For the non theater portion of our portfolio trailing 12 months coverage is 2.8 times compared to 2.2 times for 2019.

Now I'll update you on the operating status of our tenants.

Q3 total box office was $1.9 billion total North American box office further <unk> first three quarters was $5.6 billion.

Our high quality theater portfolio continues to outperform the industry is mentioned on our second quarter call. At 1.13 billion July was the highest grossing months since December 2019 led by minions. The rise of grew Thor loving Thunder top gun Maverick, Elvis and nope.

As expected due to a lack of Tentpole product August and September results were muted with no releases generating 100 million Q4 is anchored by three major releases Black Adam with Dwayne Johnson, which has grossed over $115 million since opening on October 21 the.

Marvel Universe film Black Panther will conduct forever, putting November 11th and Avatar the way of water opening December 16th the.

2023 slate is beginning to take shape, the top five announced titles each of which could exceed $200 million in North American box office include Ant man and the Wasp Guardians of the Galaxy three little Mermaid, Captain Marvel to and Aquaman too.

As this year's results demonstrate when there are movies to see consumers of all ages are returning to the theater. They still want to see good films on the big screen with studios recognizing the economic benefit of a theatrical run and more films beginning production post Covid, we are confident supply will improve.

Finally, as previously disclosed on September 7th 2022 Senate World filed for bankruptcy protection in the United States bankruptcy Court for the Southern District of Texas.

While we did not receive September rent or September deferred rent, we did receive our entire October and November rent payments, along with the October and November differed rent payments.

This week there have been headlines in the press, suggesting that Cineworld reached a bankruptcy settlement with its landlords and lenders.

Without mentioning EPR specifically this appears to have created the impression that we and sent a worlds other landlords have resolved any discussions about leases with Senate world, While we can't speak for other landlords. We are in the early phase of discussions with soon a world and have not reached any agreements of any kind.

The settlement referred to by the media was limited to the approval of a modified and improved $1.9 billion debtor in possession or dip financing, which included several protection slipped by soon world's landlords. In addition, cineworld agreed to pay its landlords a portion of the unpaid.

<unk> petition September stubborn over four months. This settlement did not address issues regarding assumption or rejection of leases future rent or the future management and operation of properties.

Because of the bankruptcy process is ongoing beyond those updates we will not comment about this in the world.

Turning now to an update on our other major customer groups. We continue to see good results and ongoing consumer demand across all segments of our drive to value oriented destinations.

<unk> eat and play assets continued their strong posts for them pandemic performance with portfolio revenue up 15% and EBITDA arm up 9% over Q3 2021.

Through much through much of our attractions and cultural portfolio attendance and EBITDAR. We're up over Q3 2021, we are particularly pleased with the performance of our recently acquired Canadian Parks villages Volk, Constar, Carty and Calypso Waterpark construction of the hotel the glass Icehotel.

Will begin in the coming weeks with opening scheduled for January 4th.

We continue to see extremely strong occupancy and continued ADR growth at the Springs resort.

Based on reported solid season pass sales, we are anticipating a good ski season during the off season lift replacements were completed at five of our assets.

Revenue growth continued across our experience you'll lodging portfolio with continued ADR growth, we are seeing uplift from our renovations at the beach Comber and Bellwether Beach resort in Saint Pete Beach, we prepared for the impact of Hurricane Ian at both properties, but when the past shifted south we avoided any.

Thickened damage.

We celebrated the Grand opening of the second phase of our successful camp Margaritaville RV resort and lodge in Pigeon Forge, Tennessee and are making progress with the planned enhancements at our Jelly Stone Park, Warren's and Cajun palms RV resort.

Our education portfolio continues to perform well with year over year increases of 17% in revenue, 28% in EBITDAR and 24% in enrollment across the portfolio.

After the close of the quarter or early childhood education tenant <unk>, which operates 21 of our early childhood education assets was acquired by Kindercare. We view this as a positive credit enhancement.

Turning to a quick update on Capitol recycling during the quarter, we sold two vacant theaters in a vacant land parcel for total net proceeds of nine $9 million and recognized a combined gain of 300000.

We have executed contracts of sale for two of our three remaining vacant theaters and expect them to close in 2022 or 2023.

We continue discussions with multiple parties on the third theater.

During the quarter or investment spending was $82 million, we closed on the acquisition of a former conference Center and Murray at a California, four approximately $43.6 million in a sale leaseback transaction.

<unk> as in Riverside County, Midway between Los Angeles, and San Diego The asset has natural Hot Springs and was originally developed in 19 O. Two is a hot springs resort and operated for many years as a wellness center.

In partnership with the operator of our very successful Springs resort and Pagosa Springs, Colorado, EPR, we'll invest another approximately $50 million over the next two years to redevelop the existing buildings into a brand new Hot Springs resort.

As discussed on last quarter's call in Q3, we also closed on an additional approximately $26 million in financing for our premier for season, Alyeska resort and Goodwood Alaska.

After the end of the quarter, we closed on the acquisition of additional land and Pagosa Springs for the expansion of the Springs resort for approximately $5.6 million.

<unk> is committed to invest in additional approximately $58 million over the next two years for the expansion.

And finally again after quarter and we closed on a commitment with a new partner to provide up to $68 million and long term mortgage financing to fund. The addition of an indoor waterpark as part of the expansion of an existing project. We are excited about the opportunity and will share more details after our.

New partner has publicly announced the project.

We've made substantial progress on investment pipeline coming out of the Covid pandemic cap rates are around 8% and should create compelling long term value. We're pleased with the investment cadence and diversity, we will achieve through 2022 and beyond we're seeing a lot of high quality opportunities to fund bill.

To suit redevelopment and expansion projects and many of our experiential categories.

By their nature redevelopment and expansion projects tend to stretch over several years and as a result, there was a timing lag for capital deployment after commitment.

We're updating our investment spending guidance for funds deployed in 2022 to a range of $375 million to $425 million.

Through the end of Q3, we have funded over $321 million for acquisition refinancings, and new development projects and eaten play attractions ski health and wellness and experiential lodging.

In addition, with transactions that have closed through October 31 that are not yet funded we have committed an additional approximately $250 million for experiential development and redevelopment projects to be deployed over the next two years.

Finally, given our cost of capital and the current inflationary economic environment, we have consciously decided to reduce our near term investment spending and to fund those investments primarily from cash from operations and with our borrowing availability under our unsecured revolving credit facility, we are being more judicious with.

Future investments and acquisitions to Shepherd capital under economic until economic conditions improve and our cost of capital returns to historical levels.

Among the positives of our focus on development redevelopment investments as we restarted our investment pipeline. In 2022 is increased revenue in 2023 and 2024 as they fully come online I now turn it over to Mark for a discussion of the financials.

Thank you 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.

<unk> adjusted for the quarter was $1 16 per share versus 86 cents in the prior year, an asset bow for the quarter was $1 22 per share compared to 92 in the prior year.

Now moving to the key variances.

Total revenue for the quarter was $161.4 million versus $139 $6 million in the prior year.

This increase was due primarily to improve collections from certain tenants, which continued to be recognized and revenue on a cash basis or had previously received abatements.

It's a regal received all rent and deferral payments for July and August , but as Greg mentioned, we did not receive the rent or the deferral payment for September .

Also contributing to the increase for the quarter was scheduled rent increases as well as the effect of acquisitions and developments completed over the past year. This increase was partially offset by the impact of property dispositions.

During the third quarter, all deferred rats and interest was collected as scheduled except Regal September deferral payment that I just mentioned.

We collected $4.5 million, a deferred rent from accrual basis tenants in borrowers that reduced receivables, leaving a balance on our books that September 30th of $7 million.

We expect to collect approximately $5 million of this remaining balance in the fourth quarter.

Additionally, during the quarter, we collected for $6 million of deferred rent and point $8 million a deferred interest from cash basis customers that were recognized as revenue and received.

And which were not included in our guidance.

Number 30, we had approximately $143 million a deferred red owed to us not on the books.

Which will continue which will continue to be recognized only as cash has received <unk>.

<unk> makes up approximately $92 million of this balance and is subject to the bankruptcy bankruptcy negotiation that Greg mentioned.

Oh will provide more on cash basis deferral collections when a reviewer updated earnings guidance.

Moving on we had higher other income and other expense of $3.3 million and $1.3 million, respectively. Due to improved performance of the car right resort, an indoor Waterpark and two theater properties that we operate.

Mortgage and other financing income was nine 6 million for the quarter versus $8.5 million in the prior year. The increase was primarily due to point $8 million deferral collections from a cash basis borrower I mentioned previously.

Percentage rent for the quarter totaled 1.5 million versus $3 $1 million in the prior year.

The decrease risk prior year related to less percentage rent from an early education tenant based on a restructured lease which has higher base rents in 2022.

That this was partially offset by higher percentage rents recognize from our golf entertainment tenants.

G&A expense increased by $1.4 million versus prior year.

Primarily due to an increase in payroll and benefit costs, including stock right amortization.

As well as an increase in travel expenses and professional fees.

Lastly episodes adjusted from joint Ventures increased by 2.1 million first prior year to $2.7 million.

This was due primarily to the performance of our investment in the Jelly Stone RV parked in Wisconsin that was purchased in late August of 2021 and.

And our new investment in the Cage and palms RV resort in Louisiana.

Turn to the next slide a review some of the companies key credit ratios.

As you can see our coverage ratios continue to be strong with fixed charge coverage at three two times and both interest in debt service coverage ratios it frequently peak times.

Our net debt to adjusted EBITDA.

Was five two times in our net debt to gross assets was 39% on a book basis at September 30th.

Lastly are common dividend continues to be very well covered within a SFO payout ratio for the third quarter of 68%.

Now, let's move to our balance sheet, which is in great shape.

A quarter and we had a consolidated dead of $2.8 billion, all of which is either fixed rate debt or that that has been fixed through interest rate swaps with the blended coupon of approximately four 3%.

Additionally are weighted average consolidated that maturity is five and a half years with no scheduled debt maturities until 2024.

We had over $160 million of cash on hand at quarter end and no balance drawn in our $1 billion.

We are revising our guidance for 2022 <unk> adjusted per share to a range of 450 to 468 from a range of 450 to 460.

Reflecting an increase of four per share at the midpoint.

Shown on the slide revised guidance at the mid point includes full rental payments for Regal leases of approximately seven $1 million per month.

For October November and December .

Note that our policy regarding deferral payments from cash basis customers is to including guidance only if already received.

Accordingly for Q4, we ever included deferral payments of $1.5 million per months received from Regal for October November and point $5 million per months received from non Regal tenants for October and November .

The lower end of guidance among other things reflects the uncertainty of the timing and amount of rent for December from Regal, giving it's pending bankruptcy.

The upper end of guidance among other things reflects the potential to collect additional deferral payments from Regal and non Regal customers for December not included in the mid point.

As well as the potential to collect a portion of Regal September rent before year end.

With that background I thought it would be helpful to provide a reconciliation of the increase in the mid point of our <unk> adjusted per share guidance of four cents.

Two 459 from the prior mid point of 455.

As you can see on the slide the increase is due to two including 12 cents of additional deferral collections for Q3, and Q4 from cash basis customers.

All of which has been received to date.

It is not in prior guidance.

Plus one sent from an increasingly expected percentage Reds, primarily from certain attraction properly properties.

Offset by nine for Regal September rent.

Note also that the mid point of our guidance for the year implies <unk>.

Per share for Q4 that is similar to that of Q3.

While we do expect an additional month, a regal minimum rent and higher percentage rents for Q4. This.

This is expected to be offset primarily by seasonal losses at our manage properties and joint ventures.

Finally, we are reducing our guidance for investment spending to a range of $375 million to $425 million from a range of $500 million to $700 million.

This is due primarily to the mix of deals being more skewed towards development and redevelopment, where we are finding better risk adjusted returns versus acquisitions.

As a result, we have approximately $250 million of commitments on closed experiential development and redevelopment projects as of October 31 that we expect to fund over the next couple of years.

Given our strong balance sheet and liquidity as well as our anticipated significant cash flow generation, we do not anticipate the need to raise additional capital to fund these commitments.

Guidance details can be found on page 24 of our supplemental now.

Now with that I'll turn it back over to Greg for his closing remarks.

Thank you Mark.

As our quarterly performance indicates the experiential economy continues to perform despite the headwinds of inflation.

Our company written coverage driven primarily by our non theater portfolio is now above 2019 levels and we continued to be pleased with the recovery of the exhibition business.

Overall, we had a very productive quarter with strong results and quality investments.

As Greg discussed with approximately $250 million a future commitments. We are again, demonstrating the depth of our investment pipeline, yet we remain prudent and our capital deployment, given the backdrop of challenging capital markets.

Our confidence is grounded in the resiliency of the experiential sector and our ability to execute on our strategy.

With that why don't I opened it up for questions.

Thank you at this time, we will conduct a question and answer session. As a reminder to ask a question you will need to press Star One line on your telephone and wait for your name to be announced.

Please stand by while we compile the Q&A roster.

Our first question comes from Joshua generally at VNA Casually go ahead with your question.

Yeah, good morning, everyone.

Orange.

I wanted to kind of carry a little bit more on I don't know if there's any more you can kind of share on on the discussions with the video and how you're thinking about.

The bankruptcy and that kind of risk.

To your assets.

Josh It really not in the sense that were.

So.

It is a legal process. We are actively engaged it doesn't it's not good for us to negotiate on an open line like this with without our partner being part of it.

We've said before we feel that we have an above average rebuild portfolio.

As as coverages indicate that the industry is recovering.

We.

I appreciate that everyone's questions and concerns and warning resolution of this sooner rather than later.

Wanting to know more details about it it's just something that until we're considerably further in this process, we are really not able to discuss.

Is there.

You can kind of handicap like the time frame that we might be able to kind of hear some like further details on.

How long do these processes.

Okay.

Again, I would love to tell you that there is a defined but if anybody has been involved in bankruptcy before the debtor has a heart.

Going on we know they have a significant number of landlords that they need to.

With and work through.

Again, I will tell you we are <unk>.

Wanting to resolve this as expeditiously as we can but with that said, we're really not in control of the of the timeframe they've got a lot of interested parties both on their capital their balance sheet side as well as landlords that I think they're working through and what I can.

Commit to you as as we get.

More clarity on our situation will be will be glad to share that.

Okay, and how should we think about it our coverage.

As we head into three Q, because it's I know it.

One quarter lag.

Is that going to dip further just based on the commentary on on that.

I guess in August and September .

I think I think if you look about and this is this is I'm going to quote Kenneth industry and Ellis Greg to say this that was based upon a $7.1 billion trailing 12 months I think most.

People think that for the 12 months calendar year that it will be higher than that number. So overall box office should be higher.

So hopefully that pretends to to better than what we're showing right now but Greg.

Absolutely I think overall box office will be higher and Josh If you look at the three films that are opening.

[noise] blackout them perform extremely strongly out of the gate and Black Panther will khanda forever is getting rave reviews. So we anticipate a really strong end of the year.

Okay I'll jump back in the queue.

Thanks, guys.

Thanks, Josh.

Next question.

Comes from Nick Joseph with City. Nick Go ahead with your question.

Thanks, and good morning, everyone. So attraction to occur on for Nick Joseph right now and.

And the question on those 8% yields I think you mentioned so is that across the whole portfolio and then specifically in experiential portion how'd you get trembling in twenty-three and if there is any specific vertical set deviate from that 8%.

Greg I'll, let you take the yes Nick.

I think.

It's generally across all of our verticals.

8% cap rates some may be slightly under that some may be slightly over that I don't think that we're seeing any meaningful.

Compression and cap rates for sure and any of our verticals and we're seeing slight expansion.

As the economy slows down.

And again, we're not investing in any theater, so or education. So all of our investments are in our experiential portfolio.

Thanks, and then.

Just on.

If you guys are changing your underwriting assumptions on.

Future capital commitments, given sort of where we stand right now any color and that would be appreciated.

I think I'll, let Greg comment as well I think we've always approached these very conservatively again, we never really took into consideration. The Kennedy bump of whether you call. It Reuben spending we were underwriting to what we think are long term trends I.

I think.

There is always as we go into a challenging environment, you probably added tinged work conservatism, but remember we're generally leasing. These for 15 to 20 years. So you are looking at this over a prolonged period of time in multiple economic cycles. So you are always going to have.

Standard deviations from your mean underwriting that you want to look at and stress those but Gregg I think thats what footprint.

Thanks.

Thanks, Nick.

Next question is coming right up.

Next is Anthony Pogany with J P. Morgan Anthony go ahead with your question.

Okay. Thank you and good morning.

His first on Regal can you give us what the annualized or monthly scheduled rent is I know you gave like kind of a per share we can kind of back into a rough number but just to kind of make sure. We have the right figures there.

Yeah, it's about seven $1 million in terms of regular rent and the deferral payment.

Previously was about $1.5 million per month.

Okay, and that and that 1.5 that relates to I think the $92 million, you said that that they kind of owed and that they were shipping rat does that what that is.

Yeah correct.

Okay got it just wouldn't understand it then just second with regards to thinking about the guidance and those swing factor for the rest of the year.

The I guess $31 million difference between 123, and the 92 related to Regal is any of that factored into the guide.

Sorry, I'm not following what number you're referring.

Yeah 23, Yeah, I think you said that if you yeah.

I think Tony if you look at the slide what's factored in the guide.

If you see March I thought did a really good job of telling people, what's in and out of the guide. So the rent is in but the deferral for December is not in.

Right right I see what you're saying you think that's seven one and added the one five and you're talking about the whole thing yet we tried to lay that out as Greg setup Slide were October November regular rent and deferral payments are in the guide that we got subsequent to the end of the quarter.

And then regular rent for December , but not the deferral payment because our policy with respect to deferral payments is to not include until we have them in hand.

Okay, I understand I'm, sorry, I, probably wasn't being very clear.

Beyond Regal now just with the other potential.

Rent you might correct sort of the rest of that 123 million.

Outside of.

Regal.

None of that is contemplated in the guide right now.

You see right below that are the same slide non Regal deferral payments. We did include.

Half a million dollars in October 5 million November that we've already received that could be another half million for December that's not in our guidance.

Part of the upside from the mid point, but right right below that you see the non regal cash basis deferral of payments on the slide.

That's outlined.

Got it Alright, and then just last question just you mentioned yields at.

<unk> been a date for a pretty long time, but then you'd also said.

Reason to be disciplined was was sort of this bid ask ask spreads so just wondering where.

What would get you to deploy more capital I guess nine or is it.

Eight and a half or kind of like how big is that spread right now for you.

I think Tony now, let Greg comment on this as well we're very focused on.

What I would call relationship transactions, where we're supporting our existing tenants.

Again, it's probably not that quarter point, but also.

What we feel will fuel future growth as we move forward Gregory.

Greg and his team are really good at negotiating kind of the ability to see.

A plethora of deals as we move beyond these turbulent periods. So.

We're focused probably not on that next quarter point, but what helps fuel our pipeline as we move forward either through relationships or relationship agreements that give us access to more product as we get out of this kind of.

Get beyond this turbulent period.

Tony I think that's absolutely correct I mean, we're focused this year.

Are expanding pagosa we.

Marietta in conjunction with our partner it Pogos, we did additional financing.

And going forward there is a lot of focus on either existing relationships or building new relationships and I completely agree with Greg that's more important to us than a quarter turn.

Okay, great. Thank you.

Thanks, Tony.

As a reminder, please keep your question and one question and one follow up please.

Next question.

Is coming from.

R J Milligan with Raymond James J go ahead with your question.

Thanks, and good morning.

We appreciate the updated coverage information.

Greg in the past you've talked about the profitability of the Regal theaters.

Relative to the to the other regional theatres in the country and I was just curious if you could give any color on the coverage levels for those specific assets or or at least comment if they are running in trend with the rest of the portfolio when that coverage is above 2019 levels.

Again.

Well the coverages on all theaters are not above 2019 levels, let's be clear what we've tried to say is <unk>.

First of all I think we do have an above average regal portfolio. So on average yes, I think they are they are running better than than most.

Regal in there in fact, probably as a percent outperforming there what was their percentage of the box office in 2019.

When we look at we look at coverage is now what we talked about earlier. If you recall was coverage about a one O cut a breakeven it around the 6 billion in we had said at the levels. We thought we would be at one and a quarter to 135 on where.

Things were being protected predicted on where box office.

Yeah, I think this points to how well, we understand and Greg and his team understands that industry to indicate kind of where we are landing out.

I also think that it.

It points to the theater business is healthier than people think even at these reduced levels.

I believe there were a lot of investors when we spoke to them that they thought coverages were like below one at these levels and we're showing that it's not we don't have to necessarily get back to 11 billion to have a healthy portfolio because of the strength of our portfolio.

And I think that's the message we wanted to convey but yeah and to be clear RJ. The coverage is one three times against it seven $1 billion trailing 12, and a 2019 at was one seven times against an $11.4 billion box ups and as we said earlier.

Expect the.

Box office to continue.

Poverty and through the year, the trailing 12 months numbers, probably a little low for the full year.

Got it.

And then we've heard from some of your peers more of an a one off basis about the ability to retain some of these series of just curious what's the demand out there.

For me they are local operators are national operators too.

<unk> or <unk>.

We're profitable locations.

Again, I think there's going to be.

Yeah.

This isn't the site, but its location by location I mean, I think Greg and his team. This year, we've done a really good job of transferring theaters to non theaters and selling off for other uses as we've talked about on previous calls I think good locations, there's always going to be demand because most.

Of the operators in the studio see this business recovery.

Recent.

Council.

By a lot of studios have continued to reiterate that.

The streaming model is really just the replacement for the networks and that this is.

They need films to perform well in theater generate excess cash flow. So.

It's it's just as we've talked about before production ramping back up and getting back to a level that works, but everybody through this testing period has seen the power of it but Greg but no I think that's the only thing I would add is that Paramount just earlier this week reaffirmed the best <unk>.

Model for them economically as theatrical release to streaming.

The <unk> first then just two strength with a window sorry, yeah. Thanks.

Great. Thank you guys.

Thanks project.

Our next question.

Michael Carole with RBC capital market. Mike go ahead with your question.

Yeah. Thanks.

I know last quarter, you guys were pretty optimistic about the 2023 box office. Another has been some reshuffling with some Marvel movies being delayed and I think there's a star wars movie the delayed and how should we think about that that does that reduce the optimism for 2023 or is that just kind of normal things that we should.

Typically expect.

Just given that we're so far out still from some some of those movies being released.

Yes, and I think there's a lot of moving things it's never.

Candidates never great to see what you think is a big title moving out of the year into a different year, but we're still kind of in the early stages of how 2023 will look so I don't think.

That.

Think we still think there's there can be improvement and.

But.

As we've said before it's getting better it's just not quickly getting better it's gradually and building, but it just takes time to restart the pipeline and clearly Hollywood is in the midst of doing that and I think you'll see continued ramp up through twenty-three into 24 Michael.

Great and I was Greg Zimmer and you're kind of highlighting obviously several movie titles. I mean is there a good way for us to think about it like how many 10 pulled type films do we need to see a quarter or a year for that to be a good for a good box off this year or is there a way that we can think about that.

Yeah, probably the best metric is we're probably down about 50% in total titles. This year, so as that number of title increases titles increase.

The box office will increase that's the real issue.

Okay, and I can just sneak one more in there can you talk a little bit about that coverage ratio of highlighted I know you have several tended to mean historically I think that Epr's line was that all your tenants are right around that that average coverage number I mean is that true today I mean, how big is that bands of the.

Individual tenants right around that average coverage number.

Again.

There is dispersion.

Again, I think we think on a relative basis of the performance of our properties that it's all.

Fairly strong getting into specific coverages.

Is is very very loose.

As we're dealing with Regal right now something that we'd rather not do because we're for specific information.

It becomes a little problematic, but like I said overall.

Calculation that we did in two.

2019, and how we talked about it then is the exact same way as it is right now.

Okay, great. Thank you.

Thanks, Michael.

Our next question.

Comes from John <unk> from Landenberger County.

Can go ahead with your question.

Good morning.

Good morning, John .

Finished.

Just to clarify the high end of the new guidance range contemplates.

Collection of all of the rent and deferral payments from cash basis tenants, perhaps but I know that right.

Yes, that's correct, that's part of and contribute to the upside along with the fact, we may get a portion of september's rent that we didn't collect yet.

And then if I'm thinking about this guidance the high end versus prior guidance, what amounts of kind of cash rent and deferral payment was contemplated in that prior high and number.

Well, we'll know deferral cash basis deferral payments were unless they had been received right. We didn't we didn't we just did not include so previously and our guidance at the end of June we counted only deferral payments through June and in our guidance upper.

Alpha brand and lower and did not contemplate deferrals deferral payments. Okay. Now we move to third quarter, we're including just because we want to talk about what will receive subsidies under the quarter, particularly with respect to Regal. So we're including what we've received not only through September but also October November so the upside.

To our guidance now since we are kind of dealing with post quarter and deferral payments really becomes the Regal deferral for one month, which is $1.5 million for December and a half a million dollars for the non rebuild customers for the month of December and then as I mentioned, there's this September rent payment out there that in our mid.

Point of guidance, we don't anticipate getting but we could get a portion of that yet this year. So that that contributes to the upside and then along with the fact that we do have managed properties and so forth.

There is a band that those could come in at higher low which impact the guidance as well.

Okay.

Then switching gears, a little bit the myriad of California investment.

Apologies if I missed that.

The prepared remarks.

But.

How would that investment structure to that.

At least initially or is that going to be in kind of a JV or operator model.

Just kind of how are you looking at that investments in infrastructure perspective.

Yes, John it's a sale leaseback.

Okay.

That's for me thank you very much.

Thanks, John .

So that was our final question.

Now like to turn it back over 18.

For some closing remarks.

Thank you and thank you everyone.

Time and attendance.

Wanted to reiterate again I appreciate and understand that we have a lot of questions that go on about our theater portfolio, but as we've met with many of you talked about the strength the resiliency of our non theater kind of experiential portfolio and as these coverages today.

We talked about those properties, we're doing incredibly well and that coverage indicates we're talking about moving from 22228 overall and remember that still represents 62% of our portfolio. So with that I. Appreciate your time and attention and we look forward to <unk>.

On our year end.

Thank you.

Thank you for your participation in today's conference.

Does conclude the program you may now disconnect.

The conference will begin to.

To raise your hand during <unk> one one.

[music].

Mmm.

[music].

Mhm.

[music].

[music].

[music].

Good day, and thank you for standing by and welcome to the E. R. P. Q3, 2022 earnings conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask questions.

During this session you will need to press star one on your telephone you will then hear an automated message advising you that your hand is Reyes. Please.

Please be advised that today's conference is being recorded I would now like to hand, the conference over to your first speaker today, Brian Moriarty VP of corporate Communications, Brian you have the floor.

Thank you Stacey.

Thanks to everybody for joining us today on the EPR properties third quarter 2022 earnings call and webcast.

Participants on today's call are Greg silvers.

Chairman and CEO , Greg Zimmerman Executive Vice President and CIO, and Mark Peterson Executive Vice President and CFO .

I'll start the call by informing you that this call may include forward looking statements.

As defined in the private Securities Litigation Act of $19 95 identified by such words as will be intend continue believe may expect hope anticipate or other comparable terms.

The 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 results to differ materially from these forward looking statements are contained in the Companys 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 company's 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 will turn the call over to Greg Silvers.

Thank you Brian .

Good morning, everyone and thank you for joining us on todays third quarter 2022 earnings call and webcast.

In the third quarter, we delivered healthy earnings growth as we continue to see resilience at our customers' businesses.

Sustained consumer demand for the experiences provided by our customers. Additionally.

Additionally, we have yet to see any meaningful impact on demand from inflationary pressures.

Today, we are also reintroducing rent coverage disclosure.

As Greg will highlight we believe this data demonstrates the strength of the recovery of our non theatre properties, while providing a baseline for our theater portfolio.

Even as the recovery is still taking shape. Our overall rent coverage is above the 2019 pre pandemic level.

Our theater coverage demonstrates that consumers want to seek films in theaters and as studios ramp up their production schedules, we anticipate that coverage will improve as well.

In 2019, we introduced our strategic focus on properties, which support the experienced economy, while we could not have foreseen that our properties would have been tested so severely by a pandemic. We believe the experience economy is alive and well and are investing thesis remains intact.

As evidenced by the variety of properties, we are highlighting today and have discussed throughout 2022, we are uniquely positioned to gain access to and pursue the broader set of experiential properties within our target set.

Everyone is painfully aware of the current disruption in the capital markets and our job as stewards of capital is to be prudent with its deployment.

As a result, we decided to moderate our growth in the near term in response to our increased cost of capital.

This moderation is not a reflection of fewer opportunities rather our disciplined given current conditions, we will not grow simply to get larger rather we will demand earnings accretion with our investments.

We continue to generate significant excess cash flow, which combined with our Undrawn line of credit will support a more limited investment spend without sacrificing our investment grade credit.

Lastly, it's clear that the center world restructuring and the broader market turbulence have combined to create a significant dislocation of our stock price our.

Our current stock price earnings multiple is significantly discounted relative to historical levels, even as we are paying a well covered dividend that is supported by our free cash flow.

As we pursue a resolution with center World, We remain focused on the fundamentals of our business. We appreciate the support of our investors who are focused on the fundamentals and we look forward to delivering strong total shareholder return over the long term.

Now I'll turn it over to Greg Zimmerman, who will cover the business in greater detail.

Thanks, Greg at the end of the second quarter. Our total investments were approximately $6 6 billion with 356 properties in service and 97% leased during the quarter, our investment spending was $82 million, 100% of the spending was in our experiential portfolio and included the acquisition of <unk>.

<unk> for redevelopment and additional financing for an existing asset.

Our experiential portfolio comprises 282 properties with 47 operators and accounts for 91% of our total investments or approximately $6 billion and at the end of the quarter was 97% occupied our education portfolio comprises 74 properties with eight operators and at the end of the.

Quarter was 100% occupied.

While broadly there is increasing macro uncertainty and concern around inflation and the possibility of a recession, we believe our value oriented drive to destinations will prove to be resilient because they provide a compelling value proposition for families to date, we have not seen meaningful impact on our operators from.

Inflation or gas prices and our expectation is that this will be the case in the event of continuing challenging economic conditions.

As noted last quarter with the stabilization of our portfolio. After Covid. We are re instituting coverage disclosure, we thought it would be helpful to compare our most recent coverage data.

Most recent data is based on a June trailing 12 month period, except for attractions, which is August and ski which is April as noted on the slide.

Importantly, overall portfolio coverage exceeded 2019 overall portfolio coverage for the trailing 12 months is two times compared to one nine times for 2019 four theaters trailing 12 month coverage is one three times with box office at $7 1 billion for the same period.

In 2019 theater coverage was one seven times with $11 4 billion in box office for.

For the non theater portion of our portfolio trailing 12 month coverage is two eight times compared to two two times for 2019.

Now I'll update you on the operating status of our tenants.

Q3, total box office was $1 9 billion.

Total North American box office for the FERC first three quarters was $5 6 billion.

Our high quality theater portfolio continues to outperform the industry as mentioned on our second quarter call at one $1 3 billion July was the highest grossing months since December 2019 led by minions. The rise of grew 11.

11, Thunder top gun Maverick pelvis and nope.

As expected due to a lack of tent pole product August and September results were muted with no releases generating $100 million Q4 is anchored by three major releases Black Adam with Dwayne Johnson, which has grossed over $115 million since opening on October 21.

The Marvel Universe film Black Panther will conduct forever opening November 11th and Avatar the way of water opening December 16th.

The 2023 slate is beginning to take shape, the top five announced titles each of which could exceed $200 million in North American box office include Ant man and the Wasp Guardians of the Galaxy three little Mermaid, Captain Marvel two and Aquaman too.

As this year's results demonstrate when there are movies to see consumers of all ages are returning to the theater. They still want to see good films on the big screen with studios recognizing the economic benefit of a theatrical run and more films beginning production post Covid, we are confident supply will improve.

Finally, as previously disclosed on September seven 2022 Senate World filed for bankruptcy protection in the United States bankruptcy Court for the Southern District of Texas.

While we did not receive September rent or September deferred rent, we did receive our entire October and November rent payments, along with the October and November deferred rent payments.

This week there have been headlines in the press, suggesting that Senate world reached a bankruptcy settlement with its landlords and lenders without mentioning EPR. Specifically this appears to have created the impression that we and Senate worlds other landlords have resolved any discussions about leases with Senate world, while we can't see.

For other landlords we are in the early phase of discussions with Cineworld and have not reached any agreements of any kind.

The settlement referred to by the media was limited to the approval of a modified and improved $1 $9 billion debtor in possession or dip financing, which included several protection <unk> world's landlords. In addition Senate World agreed to pay its landlords a portion of the unpaid post petition.

<unk> September stub rent over four months. This settlement did not address issues regarding assumption of rejection of leases future rent or the future management and operation of properties.

Because of the bankruptcy process is ongoing beyond those updates we will not comment about cineworld.

Turning now to an update on our other major customer groups. We continue to see good results and ongoing consumer demand across all segments of our drive to value oriented destinations.

Our eat and play assets continued their strong post <unk> pandemic performance with portfolio revenue up 15% and EBITDA arm up 9% over Q3 2021.

Through much through much of our attractions and cultural portfolio attendance and EBITA arm were up over Q3 2021, we are particularly pleased with the performance of our recently acquired Canadian Parks villages <unk> car T and Calypso Waterpark construction of the hotel the glass ice hotel.

<unk> will begin in the coming weeks with opening scheduled for January for Us.

We continue to see extremely strong occupancy and continued ADR growth at the Springs resort.

Based on reported solid season pass sales, we are anticipating a good ski season during the off season lift replacements were completed at five of our assets.

Revenue growth continued across our experiential lodging portfolio with continued ADR growth, we are seeing uplift from our renovations at the Beachcomber and Bellwether Beach resort in St. Pete Beach, we prepared for the impact of Hurricane Ian at both properties, but when the past shifted south we avoided any significant.

Image we.

We celebrated the Grand opening of the second phase of our successful camp Margaritaville RV resort in large in Pigeon Forge, Tennessee and are making progress with the planned enhancements at our Jelly Stone park warrants and Cajun palms RV resort.

Our education portfolio continues to perform well with year over year increases of 17% in revenue, 28% and EBITDA arm and 24% and enrollment across the portfolio.

After the close of the quarter, our early childhood education tenant <unk>, which operates 21 of our early childhood education assets was acquired by Kindercare. We view this as a positive credit enhancement.

Turning to a quick update on capital recycling during the quarter, we sold two vacant theaters and a vacant land parcel for total net proceeds of $9 9 million and recognized a combined gain of 300000.

We have executed contracts of sale for two of our three remaining vacant theaters and expect them to close in 2022 or 2023, we continue discussions with multiple parties on the <unk> theater.

During the quarter, our investment spending was $82 million, we closed on the acquisition of a former conference Center and Marietta, California for approximately $43 6 million in a sale leaseback transaction.

<unk> is in Riverside County, Midway between Los Angeles, and San Diego The asset has natural Hot Springs, and was originally developed and $19 two as a hot Springs resort and operated for many years as a wellness center.

In partnership with the operator of our very successful Springs resort and Pagosa Springs, Colorado, EPR will invest another approximately $50 million.

Over the next two years to redevelop the existing buildings into a brand new Hot Springs resort.

As discussed on last quarter's call in Q3, we also closed on an additional approximately $26 million in financing for our premier for season Alyeska resort in Goodwood Alaska.

After the end of the quarter, we closed on the acquisition of additional land and Pagosa Springs for the expansion of the Springs resort for approximately $5 6 million EPR has committed to invest an additional approximately $58 million over the next two years for the expansion.

And finally again after quarter end, we closed on our commitment with a new partner to provide up to $68 million in long term mortgage financing to fund. The addition of an indoor waterpark as part of the expansion of an existing project. We are excited about the opportunity and we'll share more details after our new <unk>.

<unk> has publicly announced the project.

We've made substantial progress on our investment pipeline coming out of the Covid pandemic cap rates are around 8% and should create compelling long term value. We're pleased with the investment cadence and diversity, we will achieve through 2022 and beyond we are seeing a lot of high quality opportunities to fund <unk>.

Build to suit redevelopment and expansion projects in many of our experiential categories.

By their nature redevelopment and expansion projects tend to stretch over several years and as a result, there was a timing lag for capital deployment after commitment.

We are updating our investment spending guidance for funds deployed in 2022 to a range of 375 million to $425 million through the end of Q3, we have funded over $321 million for acquisition refinancings, and new development projects and Eaton play attractions.

<unk> health and wellness and experiential lodging.

In addition, with transactions that have closed through October 31 that are not yet funded we have committed an additional approximately $250 million for experiential development and redevelopment projects to be deployed over the next two years.

Finally, given our cost of capital and the current inflationary economic environment, we have consciously decided to reduce our near term investment spending and to fund those investments primarily from cash from operations and with our borrowing availability under our unsecured revolving credit facility, we are being more judicious.

Future investments and acquisitions to Shepherd capital under economic until economic conditions improve and our cost of capital returns to historical levels among.

Among the positives of our focus on development redevelopment investments as we restarted our investment pipeline. In 2022 is increased revenue in 2023 and 2024 as they fully come online I will now turn it over to Mark for a discussion of the financials. Thank.

Thank you 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.

<unk> as adjusted for the quarter was $1 16 per share versus <unk> 86 in the prior year and <unk> for the quarter was $1 22 per share compared to <unk> 92 in the prior year.

Now moving to the key variances.

Total revenue for the quarter was $161 4 million versus $139 6 million in the prior year.

This increase was due primarily to improved collections from certain tenants, which continued to be recognized in revenue on a cash basis or had previously received abatements.

To Regal received all rent and deferral of payments for July and August , but as Greg mentioned, we did not receive their rent or the deferral payment for September .

Also contributing to the increase for the quarter was scheduled rent increases as well as the effect of acquisitions and developments completed over the past year. This increase was partially offset by the impact of property dispositions.

During the third quarter, all deferred rent and interest was collected as scheduled except Regal September deferral payment that I just mentioned.

We collected $4 5 million of deferred rent from accrual basis tenants and borrowers that reduced receivables, leaving a balance on our books at September 30 of $7 million.

We expect to collect approximately $5 million of this remaining balance in the fourth quarter.

Additionally, during the quarter, we collected $4 6 million of deferred rent and <unk> 8 million of deferred interest from cash basis customers that were recognized as revenue when received and.

And which were not included in our guidance at September 30, we had approximately $143 million of deferred rent owed to us not on the books.

We will continue which will continue to be recognized only as cash is received.

<unk> makes up approximately $92 million of this balance and is subject to the bankruptcy bankruptcy negotiation that Greg mentioned.

I will provide more on cash basis, the FERC collections when a review of our updated earnings guidance.

Moving on we had higher other income and other expense of $3 3 million and $1 $3 million, respectively. Due to improved performance at the Cartwright resort indoor water Park and two theater properties that we operate.

Mortgage and other financing income was $9 6 million for the quarter versus $8 5 million in the prior year. The increase was primarily due to $8 million deferred collections from a cash basis borrower I mentioned previously.

Percentage rent for the quarter totaled $1 5 million versus $3 1 million in the prior year.

The decrease versus prior year related to less percentage rent from an early education tenant based on a restructured lease which has higher base rents in 2022.

This was partially offset by higher percentage rents recognized from our golf Entertainment tenants.

G&A expense increased by $1 4 million versus prior year.

Primarily due to an increase in payroll and benefit costs, including stock grant amortization.

As well as an increase in travel expenses and professional fees.

Lastly, <unk> adjusted from joint ventures increased by $2 1 million versus prior year to $2 7 million.

This was due primarily to the performance of our investment in the Jelly Stone RV Park in Wisconsin that was purchased in late August of 2021, and our new investment in the Cage and palms RV resort in Louisiana.

Turning to the next slide I'll review some of the company's key credit ratios.

As you can see our coverage ratios continue to be strong with fixed charge coverage at three two times in both interest and debt service coverage ratios at three eight times.

Our net debt to adjusted EBITDA was five two times and our net debt to gross assets was 39% on a book basis at September 30.

Lastly, our common dividend continues to be very well covered with an <unk> payout ratio for the third quarter of 68%.

Now, let's move to our balance sheet, which is in great shape.

At quarter end, we had a consolidated 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 consolidated debt maturity is five five years with no scheduled debt maturities until 2024.

We had over $160 million of cash on hand at quarter end and no balance drawn on our $1 billion.

Yes.

We are revising our guidance for 2022 <unk> as adjusted per share to a range of $4 50 to 468 from a range of $4 50 to $4 60.

Reflecting an increase of <unk> <unk> per share at the midpoint.

Shown on the slide revised guidance at the midpoint includes full rental payments for Regal leases of approximately $7 1 million per month.

For October November and December .

Note that our policy regarding deferral payments from cash basis customers is to including guidance only if already received.

Accordingly for Q4, we ever included deferral of payments of $1 5 million per month received from Regal for October and November and <unk> 5 million per month received from non Regal tenants for October and November .

The lower end of guidance among other things reflects the uncertainty of the timing and amount of rent for December from Regal, giving its pending bankruptcy.

The upper end of guidance among other things reflects the potential to collect additional deferral payments from Regal and non <unk> customers for December not included in the midpoint.

As well as the potential to collect a portion of Regal September rent before year end.

With that background I thought it'd be helpful to provide a reconciliation of the increase in the midpoint of our <unk> as adjusted per share guidance of <unk>.

Two $4 59 from the prior midpoint of $4 55.

As you can see on the slide the increase is due to two including 12 of additional deferral collections for Q3, and Q4 from cash basis customers.

All of which has been received to date.

In prior guidance plus <unk> from an increase in the expected percentage rents primarily from certain attraction properly properties.

Offset by <unk> <unk> for Regal September rent.

Note also that the midpoint of our guidance for the year implies an <unk> <unk>.

Per share for Q4 that is similar to that of Q3.

While we do expect an additional month of Regal minimum rent and higher percentage rents for Q4. This is expected to be offset primarily by seasonal losses at our managed properties and joint ventures.

Finally, we are reducing our guidance for investment spending to a range of 375 million to $425 million from a range of $500 million to $700 million.

This is due primarily to the mix of deals being more skewed towards development and redevelopment, where we're finding better risk adjusted returns versus acquisitions.

As a result, we had approximately $250 million of commitments on closed experiential development and redevelopment projects as of October 31 that we expect to fund over the next couple of years.

Given our strong balance sheet and liquidity as well as our anticipated significant cash flow generation, we do not anticipate the need to raise additional capital to fund these commitments.

Guidance details can be found on page 24 of our supplemental.

Now with that I'll turn it back over to Greg for his closing remarks.

Thank you Mark.

As our quarterly performance indicates the experiential economy continues to perform despite the headwinds of inflation.

Company written coverage driven primarily by our non theatre portfolio is now above 2019 levels and we continue to be pleased with the recovery of the exhibition business.

Overall, we had a very productive quarter with strong results and quality investments as Greg discussed with approximately $250 million of future commitments. We are again, demonstrating the depth of our investment pipeline, yet we remain prudent in our capital deployment, given the backdrop of challenging capital markets.

Our confidence is grounded in the resiliency of the experiential sector and our ability to execute on our strategy.

With that why don't I open it up for questions.

Yes.

Thank you at this time, we will conduct a question and answer session. As a reminder to ask a question you will need to press star one on your telephone and wait for your name to be announced please standby, while we compile the Q&A roster.

Our first question comes from Joshua generally at Bofa. Joshua go ahead with your question.

Yes, good morning, everyone.

Alright.

I wanted to kind of hear a little bit more on I don't know if theres any more you can kind of share on the discussions with video and how youre thinking about.

The bankruptcy kind of riskier assets.

Josh It really not in the sense that we are.

<unk>.

It's a legal process, we're actively engaged it doesn't snow.

Good for us to negotiate on an open line like this with without our partner being part of it.

We've said before we feel that we have an above average repo portfolio.

As as coverages indicate that the industry is recovering.

We.

I appreciate that everyone's questions and concerns and wanting resolution of this sooner rather than later.

Wanting to know more details about it it's just something that until were considerably further in this process, we were really not able to discuss.

Okay.

Is there.

Is there a way you can kind of handicap, what the timeframe that we might be able to kind of hear something like further details on.

How long do these processes.

Okay.

Again, I would love to tell you that there is a defined but if anybody has been involved in bankruptcy before the debtor has a heart.

Going on we know they have a significant number of landlords that they need to.

With and worked through.

Again, I will tell you we are wanting to resolve this as expeditiously as we can but with that said, we're really not in control of the of the timeframe they've got a lot of interested parties both on their capital their balance sheet side as well as landlords that.

I think they're working through and what I can commit to you is as we get.

More clarity on our situation will be we'll be glad to share that.

Okay, and how should we think about it in our coverage.

As we head into <unk>, because it's I know it.

One quarter lag.

Is that going to dip further just based on the commentary on I.

August and September .

I think our I think if you look about and this is this is I am going to quote.

Industry and I'll ask Greg to say this alright that was based upon a $7 $1 billion trailing 12 months I think most.

People think that for the 12 months calendar year that it will be higher than that number. So overall box office should be higher.

So hopefully that portends to two better than what were showing right now, but Greg yes, absolutely I think overall box office will be higher and Josh If you look at the three films that are opening.

Black Adam has performed extremely strongly out of the gate and Black Panther will condo forever is getting rave reviews. So we anticipate a really strong end of the year.

Okay I'll jump back in the queue.

Thanks, guys.

Thanks, Josh.

Our next question.

Comes from.

Nick Joseph with Citi. Nick go ahead with your question.

Thanks, and good morning, everyone. So it's actually Nick on for Joseph right now.

The question is on those 8% yields I think you mentioned so is that across the whole portfolio and then specifically in the experiential portion.

Is that trending in 'twenty, three and if there is any specific verticals that deviate from that 8%.

Greg I'll, let you take that yes, Nick.

Thank you.

It's generally across all of our verticals the 8% cap rates may be slightly under that some may be slightly over that I don't think that were seeing any meaningful.

Compression in cap rates for sure in any of our verticals and we're seeing slight expansion.

As the economy slows down.

Okay.

And again, we're not investing in any theaters or education. So all of our investments are in our experiential portfolio.

Yeah.

Thanks, and then.

Just on.

If you guys are changing your underwriting assumptions on.

Future capital commitments, given sort of where we stand right now any color on that would be appreciated.

I think and I'll, let Greg comment as well I think we've always approached these very conservatively again, we never really took into consideration the kind of the bump.

Whether you call. It revenge spending we were underwriting to what we think are long term trends.

I think.

There is always as we go into a challenging environment, you probably added tinge more conservatism, but remember we're generally leasing these for 15 to 20 years. So youre looking at this over a prolonged period of time in multiple economic cycles, So you're always going to have.

Standard deviations from your mean underwriting that you want to look at and stress those but Greg I think thats what footprint.

Thanks.

Thanks, Nick.

Our next question is coming right out.

Next is Anthony <unk> with J P. Morgan Anthony go ahead with your question.

Thank you and good morning.

I guess just first on <unk> can you give us what the annualized or monthly scheduled rent is I know you gave kind of a per share and we can kind of back into a rough number but just to kind of make sure. We have the right figures there.

Yes, it's about $7 1 million in terms of kind of regular rent and the deferral payment.

Previously it was about $1 $5 million per month.

Okay, and then in that one five that.

Relates to I think the $92 million, you said that that they kind of ode and that they were chipping away at is that what that is.

Yes, correct.

Okay got it and just want to understand it and then just second with regards to thinking about the guidance and the swing factor for the rest of the year.

The I guess $31 million difference between the 123 in the 92 related to Regal is any of that factored into the guide.

Sorry, I'm not following what number you're referring to yes, 23, yes, I think you said, though I mean, if you.

Yes, I think Tony if you look at the slide.

It's factored in the guide.

Mark I thought did a really good job of telling people, what's in and out of the guide. So the rent is in but the deferral for December is not in.

Right right I see what Youre, saying, you pick that 701 and added the 105 and Youre talking about the whole thing, yes, we tried to lay that out as Greg said on the slide where October November regular rent and deferral payments are in the guide that we got subsequent to the end of the quarter.

And then regular rent for December , but not the deferral payment because our policy with respect to deferral payments is to not include until we have them in hand.

Okay, I understand and just sorry, I, probably wasn't being very clear.

Beyond Regal now just with the other potential.

Deferred rent you might correct sort of the rest of that 123 million.

Outside of.

Regal.

None of that is contemplated in the guide right now.

Now, let's see right below that on the same slide non Regal deferral payments. We did include.

$5 million in October and a 5 million November that we've already received that could be another half million for December that's not in our guidance.

Part of the upside from the midpoint, but.

Right below that you see the non <unk> cash basis deferral payments on the slide.

So thats outlined.

Got it Okay and then just.

Last question, just you mentioned yields at kind of 8% and they feel like they have been at eight for pretty long time, but then you had also said.

Reason to be disciplined was was sort of this bid ask spreads so just wondering like where.

What would get you to deploy more capital I guess benign or is it.

In the half for kind of like how big is that spread right now for you.

I think Tony and I will let Greg comment on this as well we're very focused on.

What I would call relationship transactions, where were supporting our existing tenants.

Again, it's probably not that quarter point, but also.

What we feel will fuel future growth as we move forward Greg.

Greg and his team are really good at negotiating kind of the ability to see.

A plethora of deals as we move beyond these turbulent periods.

No.

We're focused probably not on that next quarter point, but what helps fuel our pipeline as we move forward either through relationships or relationship agreements that give us access to more product as we get out of this kind of get beyond this.

<unk> period.

Yes, Tony I think that's absolutely correct I mean, we're focused this year.

Our expanding Pagosa, we bought Marietta in conjunction with our partner at Pagosa, We did additional financing.

And going forward there is a lot of focus on either existing relationships or building new relationships and I completely agree with Greg that's more important to us than a quarter of term.

Okay, great. Thank you.

Thanks, Tony.

As a reminder, please keep your questions in one question and one follow up please.

Next question.

It's coming from.

RJ Milligan with Raymond James RJ go ahead with your question.

Thanks, and good morning.

We appreciate the updated coverage information.

Greg in the past you've talked about the profitability of the Regal theaters.

Relative to the to the other Regal theaters in the country. I was just curious if you could give any color on the coverage levels for those specific assets or or at least comment if they are running in trend with the rest of the portfolio when that coverage is above 2019 levels.

Thanks again.

Well the coverages on all theaters are not above 2019 levels, let's be clear what we've tried to say is.

First of all I think we do have an above average regal portfolio. So on average, yes, I think they are running better than most.

Regal and they're in fact, probably as a percent outperforming there what was their percentage of the box office in 2019.

When we look at we look at coverages now what we talked about earlier. If you recall was coverage about a one O kind of breakeven at around the 6 billion and we had said at the levels. We thought we would be at one and a quarter to $1 35.

Where things were being predicted on where box office.

I think this points to how well, we understand and Greg and his team understands that industry to indicate kind of where we're landing out.

I also think that it points to the theatre business is healthier than people think even at these reduced levels.

I believe there were a lot of investors when we spoke to them that they thought coverages were like below one at these levels and we're showing that it's not we don't have to necessarily get back to 11 billion to have a healthy portfolio because of the strength of our portfolio and.

I think thats the message we wanted to convey.

And to be clear RJ that coverage is 123 times against a $7 $1 billion trailing 12 and in 2019. It was one seven times against an $11 4 billion box up.

And as we said earlier.

Expect.

<unk> office to continue.

Publicly and through the year, the trailing 12 months numbers, probably a little low for the full year.

Yes.

Got it.

Then we've heard from some of your peers more of on a one off basis about the ability to re tenant some of these theaters I'm just curious what's the demand out there.

For me they are local operators or national operators too.

Take on or re tenant.

We're profitable locations.

Again, I think theres going to be.

Sure.

This isn't set but its location by location I mean, I think Greg and his team. This year, we've done a really good job of transferring theatres to non theaters.

Selling off for other uses as we've talked about on previous calls.

Good locations.

<unk> always going to be demand because most of the operators and the studios seed this business recovery.

Recently.

Alex.

Once by a lot of studios have continued to reiterate that.

The streaming model is really just a replacement for the networks and that it is.

They need films to perform well in theaters generate excess cash flow. So.

It's it's just as we've talked about before production ramping back up and getting back to a level that works, but everybody through this testing period has seen the power of it but Greg, but no I think thats right. The only thing I would add is the Paramount just earlier this week reaffirmed the best.

Model for them economically as theatrical release to streaming.

The <unk> first then just to strength with a windows sorry, yes. Thanks.

Great. Thank you guys.

Thanks RJ.

Our next question.

Comes from Michael Carroll with RBC capital markets. Mike Go ahead with your question.

Yes. Thanks.

Last quarter, you guys were pretty optimistic about the 2023 box office I know there has been some reshuffling with some Marvel movies being delayed and I think there's a star wars movie is delayed I mean, how should we think about that that does that reduce the optimism for 2023 or is that just kind of normal things that we should.

<unk> expects.

Just given that we're so far out still from some.

Some of those movies being released.

Yes, and I think Theres a lot of moving things it's never.

But Canada, it's never great to see what you think is a big title moving out of a year into a different year, but we're still kind of in the early stages of how 2023 will look.

So I don't think.

I think we still think there's there can be improvement and.

But it's as we've said before it's getting better it's just not quickly getting better it's gradually and building.

Yes, I'd say it just takes time to restart the pipeline and clearly Hollywood is in the midst of doing that and I think youll see continued ramp up through 'twenty three 'twenty four Michael.

Great Greg Zimmerman, you're kind of highlighting obviously several movie titles I mean is there a good way for us to think about it as like how many tentpole type films do we need to see a quarter or a year for that to be a good very good box office year or is there a way that we can think about that.

Yes, probably the best metric is were probably down about 50% in total titles. This year, so as that number of title increases titles increase.

The box office will increase that's the real issue.

Okay, and I can just sneak one more in there can you talk a little bit about that coverage ratio highlighted I know you have several tenants I mean, historically I think that <unk> line was that all your tenants or right around that that average coverage number I mean is that true today I mean, how big is that band of those <unk>.

Individual tenants right around that average coverage number.

Again, there is there is dispersion.

Again, I think we think on a relative basis the performance of our properties that it's all.

Fairly strong getting into specific coverages.

Is is very very at least as we're dealing with Regal right now something that we'd rather not do because were for specific information.

It becomes a little problematic, but like I said overall the.

The calculation that we did in 2019 and how we talked about it then is the exact same way as it is right now.

Okay, great. Thank you.

Thanks, Michael.

Yeah.

Our next question.

Comes from John <unk> from Lindenberg Thalmann.

John go ahead with your question.

Good morning.

Good morning, John .

Can you just.

Just to clarify the high end of the new guidance range contemplates.

All of the rent and deferral of payments from cash basis tenants correct did I hear that right.

Yeah, Thats correct Thats part of our can contributed to the upside along with the fact, we may get a portion of september's rent that we didn't collect yet.

And then if I'm thinking about this guidance the high end versus prior guidance, what amount of kind of cash rent and deferral payment was contemplated in that prior Hyatt number.

Well.

No deferral cash basis deferral payments were unless they had been received right.

Did not include so previously.

Our guidance at the end of June we counted only deferral payments through June and our guidance up a brand and lower end did not contemplate deferrals deferral payments. Okay. Now we move to third quarter were including just because we want to talk about what will receive subsequent ended the quarter, particularly with respect to <unk>, we're including what we receive.

<unk> not only through September but also October November so the upside to our guidance now since we are kind of dealing with post quarter end deferral payments really becomes the Regal deferral four one months, which is $1 5 million for December and a $5 million for the non <unk> customers.

For the month of December and then as I mentioned there is the September rent payment out there that in our midpoint of guidance, we don't anticipate getting but we could get a portion of that yet this year. So that that contributes to the upside and then along with the fact that we do have managed properties and so forth.

There is a band that those could come in at higher LOE, which impact the guidance as well.

Okay.

<unk>.

Then switching gears, a little bit the myriad of California investment apologies, if I missed that in there isn't a prepay.

Prepared remarks.

How is that investment structure does that at.

At least initially or is that going to be in kind of a JV or operator model.

Just kind of how are you looking at that investment from a structure perspective.

Yes, John it's a sale leaseback.

Hi.

That clears that.

That's it for me thank you very much.

Thanks, John .

That was our final question I would now like to turn it back over to Greg Silvers for some closing remarks.

Thank you and thank you everyone.

Time and attendance.

I want to reiterate again I appreciate and understand that we have a lot of questions that go on about our theater portfolio, but as we've met with many of you talked about the strength the resiliency of our non theater kind of experiential portfolio and as these coverages today.

<unk>, we talked about those properties were doing incredibly well and that coverage indicates we're talking about moving from two two to two eight <unk>.

And remember that still represent 62% of our portfolio. So with that I. Appreciate your time and attention and we look forward to talk to our year end.

Thank you.

Thank you for your participation in today's conference.

Does conclude the program you may now disconnect.