Q3 2024 EPR Properties Earnings Call
The End
Speaker Change: Good day and thank you for standing by. Welcome to the EPR Properties 3rd Quarter 2024 Arnie's Conference Call. At this time, operative events are an illistened only mode.
Speaker Change: I would now like to hand, the conference over to your first speaker today, Brian Moriarty. Please go ahead.
Speaker Change: Thank you thanks for joining us today for our third quarter 2024 earnings call and webcast.
Brian Moriarty: 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 will start the call by informing you that this call may include forward looking statements.
Brian Moriarty: Defined in the private Securities Litigation Act of $19 95 identified by such words as will.
Brian Moriarty: 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 those factors that could cause results to differ materially from these forward looking statements.
Brian Moriarty: <unk> are contained in the company's SEC filings, including the company's reports on Form 10-K and 10-Q.
Brian Moriarty: Additionally, this call will contain references to certain non-GAAP measures, which we believe are useful in evaluating the company's performance.
Brian Moriarty: 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.
Speaker Change: With 352 properties that are 99% leased excluding properties, we intend to sell during the quarter, our investment spending was $82 million, 100% of the spending was in our experiential portfolio.
Speaker Change: Our experiential portfolio comprises 283 properties with 52 operators and accounts for 93% of our total investments were approximately $6 4 billion.
Speaker Change: And at the end of the quarter, excluding the properties, we intend to sell was 99% leased our education portfolio comprises 69 properties with eight operators and at the end of the quarter. Excluding the properties, we intend to sell was 100% leased.
Speaker Change: Turning to coverage. The most recent data provided is based on a June trailing 12 month period.
Overall portfolio coverage remains strong at two one times down slightly from last quarter trailing 12 month coverage for the non theater portion of our portfolio remains at two six times.
Speaker Change: Trailing 12 month coverage for theaters is one five times with box office at $8 1 billion for the same period.
Speaker Change: Our theater coverage reporting assumes that the Regal deal was in place for the entire trailing 12 month period the.
Speaker Change: Readers' Choice awards construction of the extension of the extensive expansion at the Springs resort in Pagosa Springs continues with opening scheduled for spring 2025, even with the constructions. The strength continues its strong performance.
Speaker Change: And we're confident the expansion will drive growth at this outstanding asset.
Speaker Change: Finally, our Murray at a hot Springs resort is completely open and continues its ramp up while receiving good reviews.
Speaker Change: And our experiential lodging portfolio collectively our operator's revenue was up slightly year over year.
Speaker Change: Our education portfolio continues to perform well our customers' revenue across the portfolio was up 3% year over year, while EBITDAR decreased by 1% driven largely by wage increases.
Speaker Change: Kindercare, which operates 15 of our early childhood education assets under their Crem brand went public after the end of the third quarter.
Speaker Change: Turning to our operating properties are managed theaters continued to show improvement with the box office recovery performance at our joint venture experiential lodging assets was lower than expected driven primarily by the impact of the two hurricanes on St. Petersburg and other weather related issues.
Speaker Change: During Q3, our investment spending was $82 million and year to date is $214 6 million weekly.
Speaker Change: Common dividend continues to be very well covered with an <unk> payout ratio for the third quarter of 66%.
Speaker Change: Now, let's move to our balance sheet, which is in great shape.
Speaker Change: At quarter end, we had consolidated debt of $2 9 billion of which $2 8 billion is either fixed rate debt or debt that has been fixed through interest rate swaps with a blended coupon of approximately four 4%.
Speaker Change: During the quarter, we repaid in full our $136 6 million of series a private placement notes using funds available under our line of credit.
Speaker Change: Accordingly at quarter end, our weighted average consolidated debt maturity is just under four years with only 300 million maturing through 2025.
Speaker Change: As previously announced on September 19th, we amended and restated our $1 billion revolving credit facility to extend the maturity to October 2028 with.
Speaker Change: With the extensions at our option for a total of 12 additional months subject to conditions.
Speaker Change: We are pleased that the new facility reduces the interest rate spread we pay on borrowings under the facility by 15 basis points.
Speaker Change: Lessens, our financial covenants consistent with being investment grade rated.
Speaker Change: And modifies and simplifies the capitalization rates used to value assets under the facility.
Speaker Change: Italy, we like major markets.
Speaker Change: If you look at the three that we've done San Jose.
Speaker Change: Suburban la and King of Prussia, all open to top five locations for their chain.
Speaker Change: So given our position and the strength of the properties that we have we're very comfortable with our exposure we like the fact that they are.
Speaker Change: Again being.
Speaker Change: Sure.
Speaker Change: If it occurs spun out with no financial leverage and $200 million of cash.
Speaker Change: So what we see I don't know that Thats, a rapid or even a high growth area for us, but we're very comfortable with with our exposure in the performance of our assets, but Greg I don't know if you covered it great.
Speaker Change: Thank you.
Speaker Change: Our next question comes from Smedes Rose of Citi.
Speaker Change: Yes.
Speaker Change: Hi, Thank you.
Smedes Rose: I'm just wondering if you had any thoughts at this point of what the box office could look like for 2025.
Speaker Change: Costs have also risen because we had a sofa based loan.
Speaker Change: <unk> for the loan agreement needed to buy a cap on that expired in June so obviously, putting that cap out again at a cap of three 5% on so far was kind of expensive. So I would say also interest had risen. So it was marginally profitable I don't think its going to have a big impact on 2025 earnings.
Speaker Change: But certainly the hurricane deductibles involved in sort of the what we're looking at and made it a fairly easy decision and then just one more thing not to continue.
Speaker Change: <unk>.
Speaker Change: We have no visibility into what instrument insurance premium costs will be going forward. After this kind of devastation. So there was significant concern about that as well.
Speaker Change: I guess that.
Speaker Change: Last comment does that basically influence your desire to invest in any type of property in coastal Florida for the foreseeable future.
Speaker Change: Or is it case by case.
Speaker Change: It's case by case, I mean, as Greg noted earlier most of our other properties actually sustained little to no damage in Florida.
Speaker Change: Is very unique in that it set right on the beach and therefore, it its exposure and its insurer ability have become increasingly troublesome for us.
Speaker Change: Take that out of numbers are.
Speaker Change: So it's therefore, not a not a major impact as that kind of what's likely to happen, yes, correct, we'll see how the accounting shakes out we removed the EBITDA from St. Pete in the fourth quarter in our in our guidance.
Speaker Change: But yes.
Speaker Change: The expectation is that it'll just be remove the EBITDA the interest and so forth going forward will be just taken out of the numbers.
Speaker Change: Yes.
Speaker Change: Okay and then.
Speaker Change: My second question is I think you all mentioned that some of your tenants are seeing cost pressures and so forth.
Speaker Change: Can you comment on just.
Speaker Change: Any sort of watch list or or even any smaller.
Speaker Change: Tenants that we might not be seeing on the major tenant list that they're giving you any concern or cost be on the coverage side at this point.
Not really Tony I mean again like our coverage is still two six which is 30% higher than when we went into with pre.
Speaker Change: Pre COVID-19.
Speaker Change: So again, it's holding up I think everybody is is dealing with the idea that it's not as easy to pass these cost pressures on so on the margin we're seeing as Greg mentioned slight decreases in EBITDA and not enough that it's moved the needle yet, but there is no.
Speaker Change: So there's no one that's kind of standing out as saying I'm feeling it.
Speaker Change: Disproportionately or getting where an area of concern for us as we've said.
Our watch list is probably.
Smaller than it's ever been in the last four or five years, given the given all the work that we did through Covid.
Speaker Change: Yeah.
Okay. Thank you.
Speaker Change: Thank you Tony.
They're generally large parcels and remember our ownership is generally very major metropolitan area. So again these are.
High quality performing and if you go back and you look at top golf sales.
Speaker Change: Most of the top golf sales have been low sevens or below.
Speaker Change: We've got records.
Fort Myers, I think sold at a five here in the last two years. So again, it's generally been a fairly robust market for the for their well located assets.
Speaker Change: Okay. Thank you.
Speaker Change: <unk>.
Speaker Change: Thank you. This concludes the question answer session I would now like to turn it back to Greg Silvers for closing remarks.