EPR Properties at Nareit REITweek: Strategic Diversification in Focus

EPR Properties (NYSE:EPR) presented a strategic overview at the Nareit REITweek: 2025 Investor Conference on Tuesday, 03 June 2025. The company’s focus on diversifying its portfolio and capitalizing on the recovery in the experiential property sector was highlighted. While the company reported strong recovery in theaters, it is also reducing exposure in this area, shifting investments into golf and wellness sectors.

Key Takeaways

• EPR Properties is actively diversifying its portfolio by reducing theater and education exposure, investing in experiential areas like golf and wellness.
• The company has reset its dividend payout ratio to 70%, allowing for more cash retention for investments.
• Strong performance in the theater segment, with increased food and beverage spending per customer.
• EPR Properties maintains a conservative leverage ratio, focusing on generating free cash flow for investments.
• Future growth is expected to be slightly above its peer group, driven by retained cash flow and strategic investments.

Financial Results

• Annualized box office revenue is projected between $9.3 billion and $9.7 billion.
• The first quarter saw a 17% decline in box office revenue, but recent trends show a 25% increase.
• Average spend per person at theaters has risen to over $7, up from $4 in 2018.
• EPR Properties generates approximately $130 million in free cash flow above dividend and interest payments.
• The company can invest about $250 million annually without accessing equity markets.
• Current debt to EBITDA leverage ratio stands at approximately 5x, with expected growth slightly over 4%.

Operational Updates

• EPR has sold 27 theaters over the past four years and is finalizing contracts on two more vacant theaters.
• The company is expanding into golf, attractions, and fitness/wellness sectors, with significant investments such as an $80 million expansion of the Pagosa Springs Hot Springs Resort.
• Challenges include the impact of the Six Flags/Cedar Fair merger, which may lead to park closures.
• The company has successfully recycled capital from theater and education dispositions into new experiential investments.

Future Outlook

• EPR anticipates earnings growth in 2025 to be in line with or slightly better than its peers.
• The company plans to continue investing in experiential properties and reducing theater exposure.
• Expected FFO/AFFO growth ranges from 2.5% to 3% from acquisitions and around 1% from escalators.
• Management is open to larger transactions if current equity trading levels are maintained.

Q&A Highlights

• Discussions focused on box office performance and its financial impact on EPR Properties.
• Questions were raised about the Six Flags/Cedar Fair merger and potential opportunities for EPR.
• Analysis of CapEx requirements and minimal CapEx needs was addressed.

For a detailed understanding of EPR Properties’ strategic direction and financial performance, refer to the full transcript below.

Full transcript - Nareit REITweek: 2025 Investor Conference:

RJ, Host: Okay. Good afternoon, everybody, and thanks for coming. We’re happy to have EPR properties here. And we’ve got Greg, Greg and Mark. And we’re going to do a quick run through or a little update on the company, but then we want to open it up to Q and A.

I’ve got a list of questions as well, but make that

Mark Peterson, Chief Financial Officer, EPR Properties: to we’re Mark Peterson, our Chief Financial Officer.

EPR properties, we are organized as a, generally speaking, a triple net REIT, which has a different focus than a lot of triple nets. We’re focused on what we call experiential properties. So, again, not something where you necessarily go to buy an item, but you go to have an experience. A

RJ, Host: lot

Mark Peterson, Chief Financial Officer, EPR Properties: of that in our one of our primary previous in our history investment categories is the theater business. I thought, again, for a lot of people, we’ve been fighting the idea that this business is going away. Hopefully, everybody now understands after we just had a record breaking Memorial Day weekend, the largest ever. So all of you who went to see Mission Impossible are Lilo and Stitch, me and my family, thank you. We’re greatly appreciative of that.

But again, that business is clearly, clearly doing quite well now, as is really all experiential businesses. It’s a growing area. It’s a niche that we have dominated for twenty plus years. It’s something that we’re very proud of, that we built built our reputation in there, and it’s where the consumer continues to spend and spend their money. Yet, you know, in all situations, even in recessions, people don’t give up funds.

It’s even if it’s escapism, people are looking for that alternative, and we’ve seen that proven out through years. What that’s helped us to do, if you look back over our history, there’s no doubt we had challenged it during COVID. But prior to COVID, a twenty year total shareholder return, I think we were number two of all REITs. And if you look at now on a five year or four year or three year or two year or one year, we’re top two in triple net, one or two, and probably top 15 of all REITs. So, again, it’s a position that we’re very proud of and looking to continue to grow that and deliver the results that we think we have delivered for the past and we can deliver again.

But with that, RJ, why don’t I see what people want to discuss?

RJ, Host: Sure. Well, we’ll just start off and maybe you guys could give a little bit more color on the box office, sort of what we saw in the first quarter, what we’ve seen since the first quarter as we’ve had a couple of big weekends over the past couple of weeks. And then sort of how does that translate into where coverage has been and where you think it’s going?

Mark Peterson, Chief Financial Officer, EPR Properties: Sure. What I tell people all the time is we are ridiculously bad at predicting how successful a movie will be. We’re decently good at predicting a quarter. We’re really good at predicting a year. So we came into this year and said we thought the the annualized box office for this year would be somewhere between 9,300,000,000.0 and $9,700,000,000 We came out of the first quarter down about 17%, so that prediction looked a little bit frightening.

Through last weekend, we’re up 25%. So again, you see those things ebb and flow. And so we think that our prediction for 9.3, nine point seven, at 9.5% kind of midpoint is still a very good target for what we think the year will be. What that really means for us from a coverage standpoint is, and I would ask everyone if you get the opportunity and you need something to look at as you’re trying to fall asleep, our investor presentation has a really good slide on what box office means and what that’s how it’s changed. If you go back to 2018, box office was roughly $11,300,000,000 And I’m saying this year, it’s going to be $9,500,000,000 But what we’re all doing now is we’re spending more at the theater.

As anybody who goes to the movies, you’ve realized they do not give that popcorn away. They do not give that 55 gallon drum of Diet Coke away. And now we’ve introduced beer and wine. So the average spend right now that the person who goes to the theater used to be in 2018 about $4 It’s now over $7 that you’re spending. And the margins on that business are quite good.

So about 82%. Don’t hold it against people. That’s just the nature of the business. But so a $9,500,000,000 box office and the contribution with the current food and beverage spend is the equivalent of an $11,300,000,000 box office for the amount of EBITDA that that generates to the operators. So actually, our coverage will be as good or better than it was in 2018.

RJ, Host: What about on the ski business side? Obviously, there’s been some Vail stock has been all over the place. What about the underlying business and how you feel about it?

Mark Peterson, Chief Financial Officer, EPR Properties: The underlying business, we feel, is still very good. Not not withstanding what everybody some of the headlines that you read, the introduction of the pass into the ski business has been a godsend to the stability of that industry. We used to our business used to be kind of week to week how the weather was and how people would react to it. Now almost all the business is done via pass. There were some headlines this year with Vail, mainly regarding some of their resort destinations.

Park City, they had a strike, they had some things that went on there. Actually, business, which is more regional, we nicely up this year.

RJ, Host: There’s obviously a lot of concerns about the consumer, a lot of volatility in the market. One of the concepts that I think we’ve heard over time is that even if the economy or the consumer takes a downturn, we’ll see them trade down. We’ve seen a lot of sustained spending in experiential. And we’ve also not really seen a lot of weakness towards the higher end of the consumer just yet. How do you think that all plays into EPR’s specific businesses?

Mark Peterson, Chief Financial Officer, EPR Properties: I think it’s going to demonstrate the resiliency for which we underwrote these assets. If you look at historically, and not every recession is the same, but if you look at it historically, the theater business actually outperforms in recession. It’s it’s most people are looking for some form of cheap escapism or what you will see is the type of movies will change. We won’t get hardcore dramas or things you’ll get more light hearted. You’ll get more family pictures.

But they, it actually, in the last three recessions, it’s actually trended up as a reference in the box office. I think the other, when you look at our portfolio, it is a moderately priced option. So I think we hope we’re going to benefit from some downs. We haven’t seen real sustained kind of weakness. So we feel well how we’re positioned and think that the consumer is still highly supportive of Experiential and our properties.

RJ, Host: And then staying on the different business lines, if we go into eat and play, Topgolf, one of your top tenants. It’s also been in the news over the past couple of years. Just curious how that business is trending and coverage levels there.

Mark Peterson, Chief Financial Officer, EPR Properties: Again, I think for us, it’s been still relatively strong. I mean, we’ve been affiliated with them for now probably approaching twenty years. So again, a lot of we’re in major metropolitan areas and feel good about that. I think they are figuring out how they’re going to separate from Callaway, and that kind of seems that story seems to be changing. We’ll see how it works out.

But we feel very confident that that when you if you look at our coverages that they’re very strong properties and will have no issues in in what we own. And hopefully that if you look at what they did, Callaway bought them and asked them to be a growth vehicle in total number of units. If you talk to them now, they want to get back to growing more purposely and fewer units but higher productive units, which reflects our portfolio.

RJ, Host: This is probably a good time to pause as we’re talking about the different business segments and tenant exposure if we have any questions from the audience. Sure.

Mark Peterson, Chief Financial Officer, EPR Properties: Yeah, let me take that on. Again, historically, triple nets that we’re a part of, concentration is viewed as a weakness. You know, they want greater diversity. Our exposure in theaters is about 37%. What we want to do is reduce that exposure, not because we don’t like theaters, but because we want to increase our diversity.

We’ll always have an exposure to theaters because we think it fits in an experiential kind of portfolio as ours. It’s just that there are when you’re that concentrated, if you have issues, you know, like COVID or something, you certain things get exasperated. So we want to kind of increase our diversity. The second point was education. As much as I’d like to convey to people that going to school is experiential, I can’t carry that argument.

So that’s a strategic fit. So again, we’ve said that just doesn’t fit in with the kind of the experience. The business is quite good. It’s performed very well. Our coverages in early ed are higher than they were in 2018.

It’s just really from a strategic kind of telling our story and being concise and it being experiential.

RJ, Host: And that probably lends itself to a good follow-up. Just if you could talk about some of the recent successes that you guys have had in that capital recycling on the disposition side year to date.

Mark Peterson, Chief Financial Officer, EPR Properties: Yeah. And I’ll let Greg, who’s kind of led that effort, kind of talk about that. Sure.

Greg Silvers, EPR Properties: So I think, RJ, a couple of things. One, as a result of the Regal bankruptcy and the restructuring we did with AMC, we took back a number of theaters with the thought that we would sell them over time. And over the past four years, we’ve sold 27 theaters. So right now, as it stands, we only have three vacant theaters. And of those, we have contracts of sale and two of them.

So we’re quite pleased with the results on that. With respect to early childhood education, we had restructuring of one of our tenants, KinderCare, took it over and then went public. So through that, we also had a couple of vacancies which we sold. And then we have said all along, as Greg mentioned, that since education is not a core part of our portfolio going forward at the appropriate time, we’d monetize. So we were able to announce a deal where we sold some assets for a 7.4% cap, which we’re quite pleased with.

And I think as you think about our education portfolio going forward, it will be recycling when we have the opportunity to use that capital to deploy into other experiential opportunities.

RJ, Host: And then maybe just some more color on the proceeds or the pricing that you’ve been able to achieve on some of those.

Mark Peterson, Chief Financial Officer, EPR Properties: I think you referenced we did 7.4 on the education.

Greg Silvers, EPR Properties: Yeah, and on the theater side, RJ, if that’s what you’re asking. I mean, most of those theaters were vacant, so we’re selling them for real estate value. We have a contract to sell two theaters that are leased by an operator back to that operator that we hope to close at a nine cap. We’re not seeing a lot of trades yet of cash flowing theaters in the public markets because of the theater recovery.

RJ, Host: And what do you think the catalyst is to start seeing some trades in the theater space? Obviously, the box office is recovering quite well. We’re seeing higher food and beverage spend.

Mark Peterson, Chief Financial Officer, EPR Properties: I think it’s it’s really again, there’s two sides to that, and I’ll talk to both of them. I I think on the private side, you’re gonna start to see it because debt availability and and again, that is really what’s gonna drive that. On the public side, it’s I hate to point the finger at investors. There if you think about all the public groups, they for a large majority of them, they own theaters for a while. And then we went through COVID, and that was like, oh, don’t wanna own theaters.

And people used to start their earnings call going, oh, and by the way, don’t own any theaters. You never owned any theaters before. But but I think as investors make it okay, which we’re starting to see that, you know, questions like, do you really wanna get rid of something that’s working? Those sorts of things that we’ll start to see that that open up as

RJ, Host: well. Questions?

Mark Peterson, Chief Financial Officer, EPR Properties: Sure. I think it’s I’m going to challenge that a little bit because if you think about Six Flags merged the last couple of years with Cedar Fair. And so while the name says six, all of the management is Cedar Fair. Richard Zimmerman runs that. I think they’re going through a process now where when you combine two companies and they went from about twenty five and eighteen or twenty five and twenty, they’re rationalized they’re expanding certain parts, parts, but they’re not nobody’s really building a brand new part.

So they’re looking at rationalizing some of their what I’ll call their fleet, where they have two parts that are too close, they’re wanting to so I think we continue to talk to them and work with them to see if we can be part of that solution, meaning some other operator that is interested in that or how they want to do that. It’s been a very good and close relationship. Greg and I were down meeting with them two weeks ago in Charlotte. So I think it’s they’re working through that process. And if you heard their last earnings call, they talked about it.

They’re very hopeful and excited about this coming year with the fact of something you mentioned, RJ, staycation kind of thing. They’re actually quite positive on how the year is going to play out for them. But hopefully that will lead to opportunities that we’ll be able to be a part of. But Greg, I don’t know if you

RJ, Host: have No, I think that’s

Mark Peterson, Chief Financial Officer, EPR Properties: Yes, here it comes. Two part question. The first one Concrete, wet and it’s The 3% of locations and 8% of I think that’s mostly in the rearview mirror. Remember, when we went through these things, we called. And and so I I don’t think that we have that.

But, Greg, I mean, don’t think you No.

Greg Silvers, EPR Properties: Again, I would say, you know, as we’ve said, we’re intent on reducing our exposure. So if the right opportunities come along, we will continue to trade in theaters. But I don’t think we’ll see a lot

Mark Peterson, Chief Financial Officer, EPR Properties: of to us. Kind of been through that. Well, sounds like, you know, even the low performing ones are turning a little bit of a profit now. Well, but I mean, most of the low performance ended up being vacant theaters that we took back. Exactly.

Work through and sold. Right. Thank you.

RJ, Host: A big part and Mark will get you involved. A big part of the success that EPR has had, the returns that they’ve had has been the dividends. And part of that is just the amount of free cash flow that the portfolio generates. Can you talk about the free cash flow? Can you talk about the dividend policy, recently increased dividend and how you think about that going forward?

Mark Peterson, Chief Financial Officer, EPR Properties: Yes, we took the opportunity kind of post COVID to reset our dividend at about a 70% payout ratio, whereas before we were in the low 80% payout ratio of cash flow. So we’re retaining more cash. And the beauty of that is we generate probably roughly $130,000,000 above and beyond our dividend and interest payments, which that’s cash that’s got pretty good juice as far as growth. So we’re using that 130,000,000 plus some of these disposition proceeds. So it allows us to do about $250,000,000 of investments per year without having to access the equity capital market.

Because our equity, although it’s gotten much better, isn’t quite there where we can raise equity accretively. So we’re able to do $250,000,000 keep our leverage, which currently is about five times debt to EBITDA, so at the low end of our range and still grow. This year our growth is a little over 4%, which is better than the triple net peer group with a lot less execution risk because we have that retained cash flow, we have the benefit of some disposition proceeds and low leverage. So really it’s a pretty good setup. And then you combine that with some of the box office improvements and then we participate in the regal percentage rents and so forth, which is also helping to fuel that growth.

So low execution risk and a result that’s I think better than the peer group in terms of growth.

RJ, Host: And so as part of that free cash flow, can you maybe talk about the investment pipeline, what you’re seeing out there? And then maybe the decision tree as to at what point do you take a more offensive position to potentially issue equity to go additional assets. And I think one of the things to point out for EPR is that because of that retained cash flow, I think that the 2025 earnings growth is going to be in line if not slightly better than the peer group.

Mark Peterson, Chief Financial Officer, EPR Properties: I think so. But I’ll let Greg talk about it.

Greg Silvers, EPR Properties: Yes. Mean we feel good about the investment pipeline. As I said on the call, we continue to see a lot of opportunities in most of our verticals. I would say probably fewer in casinos nowadays. But already this year, we’ve introduced a foray into golf, which we’ve been looking at for a number of years.

We feel really good about that. We did another deal with an attractions operator outside Philadelphia. We feel really, really good about the fitness and wellness space. So again, as I mentioned on the call, we opened our expansion of our Pagosa Springs, Hot Springs Resort in Pagosa Springs, Colorado, a couple of weeks ago, dollars 80,000,000 expansion. We also opened an $80,000,000 indoor water park in Frankenmuth, Michigan.

So we feel good about the breadth of the opportunities we have. And I’ll let Greg talk about when we hit the gas pedal or when I get told to hit the gas pedal.

Mark Peterson, Chief Financial Officer, EPR Properties: I think it’s getting more interesting. Mean, candidly, I mean, we’re trading above an 11 multiple. So clearly, we could do things now that are GAAP accretive, if not a push at cash accretive. The reality is, you know, what this means is it opens us up for looking at potentially some larger transactions. You know, we I think the depth of what we have and Greg talks about good and high quality.

But we’re very mindful of the fact that we’re stewards of your guys’ capital and the fact that it’s our job to every dollar we spend needs to be an accretive dollar and create consistent and reliable cash flows. So I I think as as you mentioned, we’re starting to get where it’s starting to get interesting. It started to get interesting in the last two weeks. So I again, maybe we would you can’t turn it just that quick, But we’re excited about if you think about what we did kind of pre COVID, we did 500 to $600,000,000 a year, about 10% net asset growth. We think

RJ, Host: Additional questions? Go ahead. Fire away.

Mark Peterson, Chief Financial Officer, EPR Properties: If you ask one more, they’re gonna think we’re related. Again, the key to it is a couple of things. So if you think about this first two fifty million dollars so we’re using free cash flow and leverage so that we’re making probably 600 basis points on that, dollars $250,000,000, which is a substantial the thing that’s we all talk about REITs that you make 100 basis points of spread minimum, let’s just say that. But if you’re making 100 basis points of spread, the next $200,000,000 makes $2,000,000 That first, that retained cash and investing in that is really kind of the rocket fuel. Now with that, we also have a lot of leases that we don’t straight line.

So we’re getting real FFO and AFFO cash boost from our increases escalators and our leases. So you combine those two. And candidly, we’ve gotten POPs from almost everything we have has some level of percentage rent kind of participation in there. And those are really starting to kick in. So we’re seeing growth along all of those.

And that percentage rent’s not people always think about that in terms of, you know, as one tenant, we’re getting it in theaters, we get it in ski, we got it in early ed, we’re getting it in eat and play. So it’s coming across the board as these businesses continue Right? It’s probably going to be kind of Mark will help me. It’s probably going to be 2.5% to 3% of our from our acquisition growth, another kind of 1% or so on our escalators.

So that’s kind of how we kind of get there.

RJ, Host: And then I have one final question, but we still have five minutes. If anybody else has any more questions, feel free to ask. One of the things that we love about the net lease space is the CapEx and the minimal CapEx requirements, but it’s also very important to maintain theaters and make sure that the operator is keeping them up to standards and if not improving them. Can you just talk about how that works with your tenant relationships?

Mark Peterson, Chief Financial Officer, EPR Properties: Yeah. And Greg and his team do a really good job that is different than I think you would see in a lot of retail. Like Vail has a cap ex escrow that they have to fund for ski. Six Flags has one. A lot of our leases have built in features which require our tenants to fund those sorts of things.

So we will generally, we’ll go through, we’ll say, you know, what is the normal CapEx expenditure, whether it’s 234% of revenues, and we will make them fund that throughout the year. And then we’ll pull it down allow them to pull it out to fund those. But Greg, I don’t know.

Greg Silvers, EPR Properties: Yeah. And RJ, another thing that we talked about when we did the Regal deal is we made an arrangement with them that we would meet them halfway on CapEx as long as it was going to be So we get a return on it. And so we try to do that as well with some of our tenants. So if indeed they need more money, we’ll advance it, but we need get a return and we need to be comfortable that we’re going to get the return.

So we underwrite it.

RJ, Host: And with that, any additional questions? If not, thank you guys very much. Thank you, everybody.

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