EPR Properties is the leading diversified experiential net lease real estate investment trust (REIT), specializing in select enduring experiential properties in the real estate industry. The company has built an impressive portfolio of properties that cater to the growing demand for out-of-home leisure and recreation experiences, positioning it as a key player in the rapidly evolving experiential real estate sector.
Company History and Background
Established in 1997 as a self-administered Maryland real estate investment trust, EPR Properties completed its initial public offering of common shares on November 18, 1997. Since its inception, the company has focused on becoming a leading net lease investor in experiential real estate, with a mission to create value by facilitating out-of-home leisure and recreation experiences.
In its early years, EPR Properties concentrated on locating suitable properties, negotiating favorable lease or financing terms, and managing its growing portfolio as it continued to expand. The company leveraged management's industry knowledge and relationships to acquire, finance, and lease properties. Over time, EPR Properties diversified its investments into various experiential property types, including theatres, eat-play venues, attractions, ski properties, and fitness/wellness facilities.
Challenges and Adaptations
Throughout its history, EPR Properties has faced and overcome significant challenges. One of the most notable was the impact of the COVID-19 pandemic, which severely disrupted its theatre tenants' businesses. The company worked closely with its theatre customers during this period, providing rent deferrals and restructuring agreements to support their long-term viability. Additionally, EPR Properties navigated the writers' and actors' strikes in 2023, which caused production delays and impacted the supply of new films.
Despite these obstacles, EPR Properties remained committed to its strategy of investing in experiential real estate. The company made progress in disposing of vacant theatre properties and transitioning away from its legacy education portfolio to recycle capital into other experiential investments. By leveraging its balance sheet strength and relationships with tenants and developers, EPR Properties continued to grow its diversified experiential real estate portfolio over time.
Portfolio Overview
As of the end of 2024, EPR Properties' total investments stood at approximately $6.9 billion, with a diversified portfolio of 346 properties that are 99% leased or operated. The company's experiential portfolio, which accounts for 93% of its total investments, comprises 278 properties with 51 operators, including popular destinations such as theatres, eat & play venues, attractions, ski resorts, experiential lodging, fitness & wellness facilities, and cultural attractions.
The company's portfolio includes 157 theatre properties, 58 eat & play properties, 24 attraction properties, 11 ski properties, 4 experiential lodging properties, 22 fitness & wellness properties, 1 gaming property, and 1 cultural property as of December 31, 2024. EPR Properties has been focused on reducing its exposure to theatre properties and recycling capital into other experiential property types. It has sold 25 theatre properties since early 2021 and plans to continue to opportunistically dispose of remaining theatre assets.
Strategic Adaptability and Success
One of the hallmarks of EPR Properties' success has been its ability to adapt to changing market conditions and capitalize on emerging trends. During the COVID-19 pandemic, the company navigated the challenges faced by its customer base, providing support and working closely with its tenants to ensure their long-term viability. This proactive approach has paid dividends, as evidenced by the strong recovery in the company's portfolio performance.
Financials
In 2024, EPR Properties reported a 3.4% increase in earnings per share (excluding the impact of out-of-period deferred rent and interest collections), demonstrating the resilience of its business model. The company's focus on diversification has also proven to be a key strength, with its non-theatre portfolio maintaining a robust coverage ratio of 2.5 times during the year.
The company's strategic shift away from traditional retail and towards experiential properties has been a crucial driver of its success. EPR Properties has strategically reduced its exposure to the theatre industry, which was heavily impacted by the COVID-19 pandemic and subsequent industry disruptions, and has instead focused on expanding its presence in higher-growth, more experiential-focused sectors.
For the most recent quarter, EPR Properties reported revenue of $164 million and a net loss of $8.4 million. The decrease in net income for the quarter was primarily due to impairment charges related to certain theatre properties and joint venture investments. The company operates primarily in the United States and does not disclose performance by geographic market.
Liquidity and Balance Sheet Strength
This disciplined approach has enabled EPR Properties to maintain a strong balance sheet, with a net debt to adjusted EBITDAre ratio of 5.3 times at the end of 2024. The company's conservative financial management has provided it with the flexibility to navigate the current challenging macroeconomic environment, which has been characterized by elevated interest rates and inflationary pressures.
As of December 31, 2024, EPR Properties had a debt-to-equity ratio of 1.32, cash on hand of $22.1 million, and $825 million available on its $1 billion unsecured revolving credit facility. The company's current ratio and quick ratio both stood at 3.12, indicating a strong liquidity position.
Future Outlook and Growth Prospects
Looking ahead, EPR Properties is poised to continue its growth trajectory, with a pipeline of attractive investment opportunities in its target experiential property types. The company has issued guidance for 2025, projecting FFO as adjusted per share of $4.94 to $5.14, representing a 3.5% increase at the midpoint over 2024. This guidance reflects the company's confidence in its long-term growth prospects and the resilience of the experiential real estate sector.
EPR Properties is estimating North American box office for 2025 to be between $9.3 billion and $9.7 billion. The company is providing 2025 investment spending guidance of $200 million to $300 million and disposition guidance of $25 million to $75 million. Additionally, EPR Properties is expecting percentage rents and participating interest of $18 million to $22 million in 2025, an increase of over $5 million versus the prior year.
The company has also announced a 3.5% increase in its monthly cash dividend to common shareholders starting in April 2025, reflecting its commitment to delivering consistent returns to its investors. EPR Properties is guiding G&A expense of $52 million to $55 million for 2025.
Experiential Segment Performance
EPR Properties' Experiential segment, which represented 93% of the company's total investments as of December 31, 2024, continues to show strong performance across various property types:
Theatres: Despite a 4% decrease in total North American box office revenues in 2024 compared to 2023 due to production delays caused by the 2023 writers and actors strikes, theatre food and beverage revenues per customer visit have notably increased compared to 2019. This has contributed to improved rent coverage levels that were near pre-COVID levels for 2024.
Eat & Play: The eat & play portfolio, including golf entertainment complexes like Topgolf USA, entertainment districts, and family entertainment centers, continues to perform solidly. For the year ended December 31, 2024, approximately 14.4% of EPR's total revenue was derived from Topgolf.
Attractions: The company's attractions portfolio, primarily consisting of waterparks and amusement parks, continues to draw diverse customer segments with themed experiences appealing to all ages.
Ski: EPR's ski properties benefited from improved weather conditions in the first half of the 2024 ski season compared to the previous year, contributing to strong performance in this segment.
Other Experiential Properties: The company's investments in experiential lodging, fitness & wellness facilities, gaming, and cultural properties continue to diversify its portfolio and capitalize on growing consumer demand for out-of-home leisure and recreation experiences.
Education Segment
While EPR Properties does not plan to seek additional opportunities in the Education segment, this portfolio, which made up 7% of total investments as of December 31, 2024, continues to provide additional geographic and property diversity. The segment consists of early childhood education centers and private schools.
Conclusion
In conclusion, EPR Properties has established itself as a formidable player in the experiential real estate space, leveraging its diversified portfolio, strategic focus, and disciplined financial management to deliver consistent growth and value for its shareholders. As the demand for out-of-home experiences continues to rise, EPR Properties is well-positioned to capitalize on this trend and further solidify its position as the leading diversified experiential net lease REIT. With a strong balance sheet, a clear growth strategy, and a diverse portfolio of high-quality experiential properties, EPR Properties is poised for continued success in the evolving landscape of experiential real estate.