EPR Properties (NYSE:EPR) today announced operating results for
the fourth quarter and year ended December 31, 2022 (dollars in
thousands, except per share data):
Three Months Ended
December 31,
Year Ended
December 31,
2022
2021
2022
2021
Total revenue
$
178,703
$
154,906
$
658,031
$
531,680
Net income available to common
shareholders
36,287
38,523
152,088
74,472
Net income available to common
shareholders per diluted common share
0.48
0.51
2.03
1.00
Funds From Operations as adjusted (FFOAA)
(1)
94,967
80,880
355,157
231,293
FFOAA per diluted common share (1)
1.25
1.08
4.69
3.09
Adjusted Funds From Operations (AFFO)
(1)
96,799
83,290
370,340
243,937
AFFO per diluted common share (1)
1.27
1.11
4.89
3.26
(1) A non-GAAP financial measure
Fourth Quarter and 2022 Company Headlines
- Strong Fourth Quarter Caps Off Year of Significant Earnings
Growth - The Company's net income per diluted share and FFOAA
per diluted share for the year ended December 31, 2022 grew by
approximately 103% and 52%, respectively, versus the prior year
demonstrating the Company's continued strong recovery from the
impact of the COVID-19 pandemic.
- Executes on Investment Pipeline - The Company's
investment spending for 2022 totaled $402.5 million and consisted
of experiential acquisitions and development and redevelopment
projects. As of December 31, 2022, the Company has also committed
an additional approximately $250.0 million for experiential
development and redevelopment projects, which is expected to be
funded over the next two years without the need to raise additional
capital.
- Solid Deferral Collections - During the fourth quarter,
the Company collected $4.6 million of deferred rent from accrual
basis customers that reduced receivables and $6.2 million of
deferred rent from cash basis customers that were booked as
additional revenue. Through December 31, 2022, the Company has
collected over $120.0 million of rent and interest that had been
deferred as a result of the pandemic.
- Strong Liquidity Position - As of December 31, 2022, the
Company had cash on hand of $107.9 million, no borrowings on its
$1.0 billion unsecured revolving credit facility and a consolidated
debt profile, all at fixed interest rates with no maturities until
2024.
“We delivered significant earnings growth in 2022, demonstrating
our strong recovery and the resiliency of experiential
investments,” stated Greg Silvers, President and CEO of EPR
Properties. “We are pleased that in the fourth quarter and in
January and February of 2023, we have received all scheduled rent
and deferral payments from Regal, and we are working with them
through the bankruptcy process toward a resolution. During the
year, we also reinitiated our investment spending platform,
deploying capital in a disciplined manner across a variety of
experiential assets, and have an actionable growth pipeline
including capital already committed to forward projects. We
maintain a well-covered dividend and continue to generate strong
free cash flow, which along with our well-positioned balance sheet,
should allow us to continue to grow our experiential
portfolio.”
Investment Update
The Company's investment spending during the three months ended
December 31, 2022 totaled $81.2 million, bringing the total of
investment spending for the year ended December 31, 2022 to $402.5
million, and included funding of $56.8 million on a new mortgage
note secured by six fitness & wellness properties, as well
as the acquisition of a 92% interest in an experiential lodging
property for $6.8 million. Investment spending for the quarter also
included experiential build-to-suit development and redevelopment
projects.
As of December 31, 2022, the Company has also committed an
additional approximately $250.0 million for experiential
development and redevelopment projects, which is expected to be
funded over the next two years without the need to raise additional
capital. During 2023, we intend to be more selective in making
investments utilizing excess cash flow and borrowings under our
line of credit, until such time as our cost of capital returns to
acceptable levels.
Solid Deferral Collections
In addition to regular quarterly collections, during the fourth
quarter, the Company collected $4.6 million of deferred rent from
accrual basis customers that reduced receivables and $6.2 million
of deferred rent from cash basis customers that were booked as
additional revenue. Through December 31, 2022, the Company has
collected over $120.0 million of rent and interest that had been
deferred as a result of the pandemic.
At quarter-end, the Company had receivables from accrual basis
tenants of approximately $2.1 million that were deferred due to the
COVID-19 pandemic and are included in accounts receivable in the
accompanying consolidated balance sheet. The Company expects to
collect $1.6 million from accrual basis tenants in 2023.
Regal Update
On September 7, 2022, Cineworld Group, plc, Regal Entertainment
Group and the Company's other Regal theatre tenants (collectively,
“Regal”) filed for protection under Chapter 11 of the U.S.
Bankruptcy Code (the “Code”). Regal leases 57 theatres from the
Company pursuant to two master leases and 28 single property leases
(the “Regal Leases”). Revenue for Regal continues to be recognized
on a cash basis. As a result of the filing, Regal did not pay its
rent or monthly deferral payment for September 2022 but
subsequently paid portions of this amount pursuant to an order of
the bankruptcy court. Regal resumed payment of rent and deferral
payments for all Regal Leases commencing in October 2022 and has
continued making these payments through February 2023. However,
there can be no assurance that subsequent payments will be made in
a timely and complete manner.
We are currently in negotiations with Regal regarding the
properties Regal will continue to operate and the terms and
conditions of leases for those properties. Regal is entitled to
certain rights under the Code regarding the assumption or rejection
of the Regal Leases. There can be no assurance that these
negotiations will be successful and which Regal Leases, if any,
will be assumed under the Code. In December of 2022, Regal filed a
motion to reject leases for three of our properties, but
subsequently elected not to proceed with these rejections as of
February 22, 2023. Additionally, Regal owes us a significant amount
of rent deferred during the COVID-19 pandemic pursuant to a
Promissory Note. This amount is not on our balance sheet and there
can be no assurance how much of the amount, if any, we will recover
under the Promissory Note.
Other Income and Charges
During the fourth quarter, the Company recognized $7.0 million
in other income related to a sale participation payment received in
connection with the sale of Crème de la Crème's early childhood
education business to KinderCare. KinderCare is expected to
exercise a lease termination right effective during the second
quarter of 2023 with respect to five early education properties,
representing $2.8 million in annual rental income. The leases on
the remaining 16 early education properties contain a contractual
rent adjustment effective January 1, 2024, based on performance,
which we anticipate will partially offset the anticipated rent
reduction.
During the fourth quarter, the Company recognized $2.1 million
in other income related to a sale participation payment received in
connection with the sale of a ski property that secured a mortgage
loan that had previously been paid in full in 2019.
During the fourth quarter, the Company reassessed the holding
period of the five KinderCare properties subject to the lease
terminations as well as two of the Regal theatre properties subject
to the motion to reject leases, and determined that the estimated
cash flows were not sufficient to recover the carrying values.
Accordingly, during the three months ended December 31, 2022, the
Company recognized non-cash impairment charges totaling $23.0
million, which were comprised of $21.0 million of impairments of
real estate investments and a $2.0 million impairment of an
operating lease right-of-use asset at one of these properties.
Because the outcome of the negotiations with Regal are unknown,
there can be no assurance that there will not be future impairments
related to other theatres currently leased to Regal.
The sale participation income totaling $9.1 million and the
impairment charges of $23.0 million have been excluded from FFOAA
and AFFO.
Strong Liquidity Position
The Company remains focused on maintaining strong liquidity and
financial flexibility. The Company had $107.9 million of cash on
hand at year-end, no borrowings on its $1.0 billion unsecured
revolving credit facility and a consolidated debt profile all at
fixed interest rates with no maturities until 2024.
Portfolio Update
The Company's total assets were approximately $5.8 billion
(after accumulated depreciation of approximately $1.3 billion) and
total investments (a non-GAAP financial measure) were approximately
$6.7 billion at December 31, 2022 with Experiential investments
totaling $6.2 billion, or 92%, and Education investments totaling
$0.5 billion, or 8%.
The Company's Experiential portfolio (excluding property under
development and undeveloped land inventory) consisted of the
following property types (owned or financed) at December 31,
2022:
- 172 theatre properties;
- 57 eat & play properties (including seven theatres located
in entertainment districts);
- 23 attraction properties;
- 11 ski properties;
- seven experiential lodging properties;
- 15 fitness & wellness properties;
- one gaming property; and
- three cultural properties.
As of December 31, 2022, the Company's owned Experiential
portfolio consisted of approximately 20.0 million square feet,
which was 97% leased and included a total of $76.0 million in
property under development and $20.2 million in undeveloped land
inventory.
The Company's Education portfolio consisted of the following
property types (owned or financed) at December 31, 2022:
- 65 early childhood education center properties; and
- nine private school properties.
As of December 31, 2022, the Company's owned Education portfolio
consisted of approximately 1.4 million square feet, which was 100%
leased.
The combined owned portfolio consisted of 21.5 million square
feet and was 97% leased.
Guidance
Due to the uncertainty related to Regal's bankruptcy
proceedings, the Company is not providing 2023 earnings guidance at
this time. Earnings guidance is expected to be provided subsequent
to the resolution of such proceedings.
The Company is providing 2023 investment spending guidance of a
range of $200.0 million to $300.0 million.
Dividend Information
The Company declared regular monthly cash dividends during the
fourth quarter of 2022 totaling $0.825 per common share.
Additionally, the Board declared its regular quarterly dividends to
preferred shareholders of $0.359375 per share on both the Company's
5.75% Series C cumulative convertible preferred shares and Series G
cumulative redeemable preferred shares and $0.5625 per share on its
9.00% Series E cumulative convertible preferred shares.
Conference Call Information
Management will host a conference call to discuss the Company's
financial results on February 23, 2022 at 8:30 a.m. Eastern Time.
The call may also include discussion of Company developments and
forward-looking and other material information about business and
financial matters. The conference will be webcast and can be
accessed via the Webcasts page in the Investor Center on the
Company's website located at https://investors.eprkc.com/webcasts.
To access the audio-only call, visit the Webcasts page for the link
to register and receive dial-in information and a PIN providing
access to the live call. It is recommended that you join 10 minutes
prior to the start of the event (although you may register and
dial-in at any time during the call).
You may watch a replay of the webcast by visiting the Webcasts
page at https://investors.eprkc.com/webcasts.
Quarterly and Year-End Supplemental
The Company's supplemental information package for the fourth
quarter and year ended December 31, 2022 is available in the
Investor Center on the Company's website located at
https://investors.eprkc.com/earnings-supplementals.
EPR Properties
Consolidated Statements of
Income
(Unaudited, dollars in
thousands except per share data)
Three Months Ended
December 31,
Year Ended
December 31,
2022
2021
2022
2021
Rental revenue
$
152,652
$
137,345
$
575,601
$
478,882
Other income
16,756
9,014
47,382
18,816
Mortgage and other financing income
9,295
8,547
35,048
33,982
Total revenue
178,703
154,906
658,031
531,680
Property operating expense
13,747
12,933
55,985
56,739
Other expense
7,705
8,313
33,809
21,741
General and administrative expense
13,082
10,496
51,579
44,362
Transaction costs
993
60
4,533
3,402
Credit loss expense (benefit)
1,369
(2,295
)
10,816
(21,972
)
Impairment charges
22,998
—
27,349
2,711
Depreciation and amortization
41,303
40,294
163,652
163,770
Total operating expenses
101,197
69,801
347,723
270,753
Gain on sale of real estate
347
16,382
651
17,881
Income from operations
77,853
101,487
310,959
278,808
Costs associated with loan refinancing or
payoff
—
20,469
—
25,451
Interest expense, net
31,879
34,005
131,175
148,095
Equity in loss from joint ventures
3,559
2,059
1,672
5,059
Impairment charges on joint ventures
—
—
647
—
Income before income taxes
42,415
44,954
177,465
100,203
Income tax expense
86
397
1,236
1,597
Net income
$
42,329
$
44,557
$
176,229
$
98,606
Preferred dividend requirements
6,042
6,034
24,141
24,134
Net income available to common
shareholders of EPR Properties
$
36,287
$
38,523
$
152,088
$
74,472
Net income available to common
shareholders of EPR Properties per share:
Basic
$
0.48
$
0.51
$
2.03
$
1.00
Diluted
$
0.48
$
0.51
$
2.03
$
1.00
Shares used for computation (in
thousands):
Basic
75,022
74,806
74,967
74,755
Diluted
75,111
74,808
75,043
74,756
EPR Properties
Condensed Consolidated Balance
Sheets
(Unaudited, dollars in
thousands)
December 31, 2022
December 31, 2021
Assets
Real estate investments, net of
accumulated depreciation of $1,302,640 and $1,167,734 at December
31, 2022 and 2021, respectively
$
4,714,136
$
4,713,091
Land held for development
20,168
20,168
Property under development
76,029
42,362
Operating lease right-of-use assets
200,985
180,808
Mortgage notes and related accrued
interest receivable
457,268
370,159
Investment in joint ventures
52,964
36,670
Cash and cash equivalents
107,934
288,822
Restricted cash
2,577
1,079
Accounts receivable
53,587
78,073
Other assets
73,053
69,918
Total assets
$
5,758,701
$
5,801,150
Liabilities and Equity
Accounts payable and accrued
liabilities
$
80,087
$
73,462
Operating lease liabilities
241,407
218,795
Dividends payable
27,438
24,930
Unearned rents and interest
63,939
61,559
Debt
2,810,111
2,804,365
Total liabilities
3,222,982
3,183,111
Total equity
$
2,535,719
$
2,618,039
Total liabilities and equity
$
5,758,701
$
5,801,150
Non-GAAP Financial Measures
Funds From Operations (FFO), Funds From Operations As
Adjusted (FFOAA) and Adjusted Funds From Operations (AFFO)
The National Association of Real Estate Investment Trusts
(NAREIT) developed FFO as a relative non-GAAP financial measure of
performance of an equity REIT in order to recognize that
income-producing real estate historically has not depreciated on
the basis determined under GAAP. Pursuant to the definition of FFO
by the Board of Governors of NAREIT, the Company calculates FFO as
net income available to common shareholders, computed in accordance
with GAAP, excluding gains and losses from disposition of real
estate and impairment losses on real estate, plus real estate
related depreciation and amortization, and after adjustments for
unconsolidated partnerships, joint ventures and other affiliates.
Adjustments for unconsolidated partnerships, joint ventures and
other affiliates are calculated to reflect FFO on the same basis.
The Company has calculated FFO for all periods presented in
accordance with this definition.
In addition to FFO, the Company presents FFOAA and AFFO. FFOAA
is presented by adding to FFO transaction costs, credit loss
expense (benefit), costs associated with loan refinancing or
payoff, severance expense, preferred share redemption costs and
impairment of operating lease right-of-use assets and subtracting
sale participation income, gain on insurance recovery and deferred
income tax (benefit) expense. AFFO is presented by adding to FFOAA
non-real estate depreciation and amortization, deferred financing
fees amortization, share-based compensation expense to management
and Trustees and amortization of above and below market leases, net
and tenant allowances; and subtracting maintenance capital
expenditures (including second generation tenant improvements and
leasing commissions), straight-lined rental revenue (removing the
impact of straight-lined ground sublease expense), and the non-cash
portion of mortgage and other financing income.
FFO, FFOAA and AFFO are widely used measures of the operating
performance of real estate companies and are provided here as
supplemental measures to GAAP net income available to common
shareholders and earnings per share, and management provides FFO,
FFOAA and AFFO herein because it believes this information is
useful to investors in this regard. FFO, FFOAA and AFFO are
non-GAAP financial measures. FFO, FFOAA and AFFO do not represent
cash flows from operations as defined by GAAP and are not
indicative that cash flows are adequate to fund all cash needs and
are not to be considered alternatives to net income or any other
GAAP measure as a measurement of the results of our operations or
our cash flows or liquidity as defined by GAAP. It should also be
noted that not all REITs calculate FFO, FFOAA and AFFO the same way
so comparisons with other REITs may not be meaningful.
The following table reconciles net income available to common
shareholders, the most directly comparable GAAP measure, to FFO,
FFOAA and AFFO for the three months and year ended December 31,
2022 and 2021:
EPR Properties
Reconciliation of Non-GAAP
Financial Measures
(Unaudited, dollars in
thousands except per share data)
Three Months Ended
December 31,
Year Ended
December 31,
2022
2021
2022
2021
FFO:
Net income available to common
shareholders of EPR Properties
$
36,287
$
38,523
$
152,088
$
74,472
Gain on sale of real estate
(347
)
(16,382
)
(651
)
(17,881
)
Impairment of real estate investments, net
(1)
21,030
—
25,381
2,711
Real estate depreciation and
amortization
41,100
40,095
162,821
162,951
Allocated share of joint venture
depreciation
1,833
1,561
7,409
3,340
Impairment charges on joint ventures
(1)
—
—
647
—
FFO available to common shareholders of
EPR Properties
$
99,903
$
63,797
$
347,695
$
225,593
FFO available to common shareholders of
EPR Properties
$
99,903
$
63,797
$
347,695
$
225,593
Add: Preferred dividends for Series C
preferred shares
1,938
—
7,752
—
Add: Preferred dividends for Series E
preferred shares
1,939
—
7,756
—
Diluted FFO available to common
shareholders of EPR Properties
$
103,780
$
63,797
$
363,203
$
225,593
FFOAA:
FFO available to common shareholders of
EPR Properties
$
99,903
$
63,797
$
347,695
$
225,593
Transaction costs
993
60
4,533
3,402
Credit loss expense (benefit)
1,369
(2,295
)
10,816
(21,972
)
Costs associated with loan refinancing or
payoff
—
20,469
—
25,451
Sale participation income (included in
other income)
(9,134
)
—
(9,134
)
—
Gain on insurance recovery (included in
other income)
—
(1,151
)
(552
)
(1,181
)
Impairment of operating lease right-of-use
asset (1)
1,968
—
1,968
—
Deferred income tax benefit
(132
)
—
(169
)
—
FFOAA available to common shareholders of
EPR Properties
$
94,967
$
80,880
355,157
$
231,293
FFOAA available to common shareholders of
EPR Properties
$
94,967
$
80,880
$
355,157
$
231,293
Add: Preferred dividends for Series C
preferred shares
1,938
1,938
7,752
—
Add: Preferred dividends for Series E
preferred shares
1,939
1,939
7,756
—
Diluted FFOAA available to common
shareholders of EPR Properties
$
98,844
$
84,757
$
370,665
$
231,293
AFFO:
FFOAA available to common shareholders of
EPR Properties
$
94,967
$
80,880
$
355,157
$
231,293
Non-real estate depreciation and
amortization
203
199
831
819
Deferred financing fees amortization
2,109
2,335
8,360
7,666
Share-based compensation expense to
management and trustees
4,114
3,685
16,666
14,903
Amortization of above and below market
leases, net and tenant allowances
(90
)
(92
)
(355
)
(385
)
Maintenance capital expenditures (2)
(2,674
)
(1,718
)
(4,545
)
(4,631
)
Straight-lined rental revenue
(2,291
)
(1,974
)
(6,993
)
(5,664
)
Straight-lined ground sublease expense
581
89
1,692
382
Non-cash portion of mortgage and other
financing income
(120
)
(114
)
(473
)
(446
)
AFFO available to common shareholders of
EPR Properties
$
96,799
$
83,290
$
370,340
$
243,937
AFFO available to common shareholders of
EPR Properties
$
96,799
$
83,290
$
370,340
$
243,937
Add: Preferred dividends for Series C
preferred shares
1,938
1,938
7,752
—
Add: Preferred dividends for Series E
preferred shares
1,939
1,939
7,756
—
Diluted AFFO available to common
shareholders of EPR Properties
$
100,676
$
87,167
$
385,848
$
243,937
FFO per common share:
Basic
$
1.33
$
0.85
$
4.64
$
3.02
Diluted
1.31
0.85
4.60
3.02
FFOAA per common share:
Basic
$
1.27
$
1.08
$
4.74
$
3.09
Diluted
1.25
1.08
4.69
3.09
AFFO per common share:
Basic
$
1.29
$
1.11
$
4.94
$
3.26
Diluted
1.27
1.11
4.89
3.26
Shares used for computation (in
thousands):
Basic
75,022
74,806
74,967
74,755
Diluted
75,111
74,808
75,043
74,756
Weighted average shares
outstanding-diluted EPS
75,111
74,808
75,043
74,756
Effect of dilutive Series C preferred
shares
2,261
2,237
2,250
—
Effect of dilutive Series E preferred
shares
1,664
1,664
1,664
—
Adjusted weighted average shares
outstanding-diluted Series C and Series E
79,036
78,709
78,957
74,756
Other financial information:
Dividends per common share
$
0.8250
$
0.7500
$
3.2500
$
1.5000
(1) Impairment charges recognized during
the year ended December 31, 2022 totaled $28.0 million, which was
comprised of $25.4 million of impairments of real estate
investments, a $2.0 million impairment of an operating lease
right-of-use asset and $0.6 million of impairments on joint
ventures.
(2) Includes maintenance capital
expenditures and certain second generation tenant improvements and
leasing commissions.
The additional common shares that would result from the
conversion of the 5.75% Series C cumulative convertible preferred
shares and the 9.00% Series E cumulative convertible preferred
shares for the year ended December 31, 2021, and the corresponding
add-back of the preferred dividends declared on those shares are
not included in the calculation of diluted FFO, FFOAA and AFFO per
share for that period because the effect is anti-dilutive. The
conversion of the 5.75% Series C cumulative convertible preferred
shares and the 9.00% Series E cumulative convertible preferred
shares would be dilutive to FFO, FFOAA and AFFO per share for the
three months ended December 31, 2021, and the three months and year
ended December 31, 2022. Therefore, the additional common shares
that would result from the conversion and the corresponding
add-back of the preferred dividends declared on those shares are
included in the calculation of diluted FFO, FFOAA and AFFO per
share for those periods.
Net Debt
Net Debt represents debt (reported in accordance with GAAP)
adjusted to exclude deferred financing costs, net and reduced for
cash and cash equivalents. By excluding deferred financing costs,
net and reducing debt for cash and cash equivalents on hand, the
result provides an estimate of the contractual amount of borrowed
capital to be repaid, net of cash available to repay it. The
Company believes this calculation constitutes a beneficial
supplemental non-GAAP financial disclosure to investors in
understanding our financial condition. The Company's method of
calculating Net Debt may be different from methods used by other
REITs and, accordingly, may not be comparable to such other
REITs.
Gross Assets
Gross Assets represents total assets (reported in accordance
with GAAP) adjusted to exclude accumulated depreciation and reduced
for cash and cash equivalents. By excluding accumulated
depreciation and reducing cash and cash equivalents, the result
provides an estimate of the investment made by the Company. The
Company believes that investors commonly use versions of this
calculation in a similar manner. The Company's method of
calculating Gross Assets may be different from methods used by
other REITs and, accordingly, may not be comparable to such other
REITs.
Net Debt to Gross Assets Ratio
Net Debt to Gross Assets Ratio is a supplemental measure derived
from non-GAAP financial measures that the Company uses to evaluate
capital structure and the magnitude of debt to gross assets. The
Company believes that investors commonly use versions of this ratio
in a similar manner. The Company's method of calculating the Net
Debt to Gross Assets Ratio may be different from methods used by
other REITs and, accordingly, may not be comparable to such other
REITs.
EBITDAre
NAREIT developed EBITDAre as a relative non-GAAP financial
measure of REITs, independent of a company's capital structure, to
provide a uniform basis to measure the enterprise value of a
company. Pursuant to the definition of EBITDAre by the Board of
Governors of NAREIT, the Company calculates EBITDAre as net income,
computed in accordance with GAAP, excluding interest expense (net),
income tax (benefit) expense, depreciation and amortization, gains
and losses from disposition of real estate, impairment losses on
real estate, costs associated with loan refinancing or payoff and
adjustments for unconsolidated partnerships, joint ventures and
other affiliates.
Management provides EBITDAre herein because it believes this
information is useful to investors as a supplemental performance
measure as it can help facilitate comparisons of operating
performance between periods and with other REITs. The Company's
method of calculating EBITDAre may be different from methods used
by other REITs and, accordingly, may not be comparable to such
other REITs. EBITDAre is not a measure of performance under GAAP,
does not represent cash generated from operations as defined by
GAAP and is not indicative of cash available to fund all cash
needs, including distributions. This measure should not be
considered an alternative to net income or any other GAAP measure
as a measurement of the results of the Company's operations or cash
flows or liquidity as defined by GAAP.
Adjusted EBITDAre
Management uses Adjusted EBITDAre in its analysis of the
performance of the business and operations of the Company.
Management believes Adjusted EBITDAre is useful to investors
because it excludes various items that management believes are not
indicative of operating performance, and that it is an informative
measure to use in computing various financial ratios to evaluate
the Company. The Company defines Adjusted EBITDAre as EBITDAre
(defined above) for the quarter excluding sale participation
income, gain on insurance recovery, severance expense, credit loss
(benefit) expense, transaction costs, impairment losses on
operating lease right-of-use assets and prepayment fees.
The Company's method of calculating Adjusted EBITDAre may be
different from methods used by other REITs and, accordingly, may
not be comparable to such other REITs. Adjusted EBITDAre is not a
measure of performance under GAAP, does not represent cash
generated from operations as defined by GAAP and is not indicative
of cash available to fund all cash needs, including distributions.
This measure should not be considered as an alternative to net
income or any other GAAP measure as a measurement of the results of
the Company's operations or cash flows or liquidity as defined by
GAAP.
Net Debt to Adjusted EBITDAre Ratio
Net Debt to Adjusted EBITDAre Ratio is a supplemental measure
derived from non-GAAP financial measures that the Company uses to
evaluate our capital structure and the magnitude of our debt
against our operating performance. The Company believes that
investors commonly use versions of this ratio in a similar manner.
In addition, financial institutions use versions of this ratio in
connection with debt agreements to set pricing and covenant
limitations. The Company's method of calculating the Net Debt to
Adjusted EBITDAre Ratio may be different from methods used by other
REITs and, accordingly, may not be comparable to such other
REITs.
Reconciliations of debt, total assets and net income (all
reported in accordance with GAAP) to Net Debt, Gross Assets, Net
Debt to Gross Assets Ratio, EBITDAre, Adjusted EBITDAre and Net
Debt to Adjusted EBITDAre Ratio (each of which is a non-GAAP
financial measure), as applicable, are included in the following
tables (unaudited, in thousands except ratios):
December 31,
2022
2021
Net
Debt:
Debt
$
2,810,111
$
2,804,365
Deferred financing costs, net
31,118
36,864
Cash and cash equivalents
(107,934
)
(288,822
)
Net Debt
$
2,733,295
$
2,552,407
Gross
Assets:
Total Assets
$
5,758,701
$
5,801,150
Accumulated depreciation
1,302,640
1,167,734
Cash and cash equivalents
(107,934
)
(288,822
)
Gross Assets
$
6,953,407
$
6,680,062
Debt to Total Assets Ratio
49
%
48
%
Net Debt to Gross Assets Ratio
39
%
38
%
Three Months Ended
December 31,
2022
2021
EBITDAre and
Adjusted EBITDAre:
Net income
$
42,329
$
44,557
Interest expense, net
31,879
34,005
Income tax expense
86
397
Depreciation and amortization
41,303
40,294
Gain on sale of real estate
(347
)
(16,382
)
Impairment of real estate investments, net
(1)
21,030
—
Costs associated with loan refinancing or
payoff
—
20,469
Allocated share of joint venture
depreciation
1,833
1,561
Allocated share of joint venture interest
expense
2,215
1,145
EBITDAre
$
140,328
$
126,046
Sale participation income (2)
(9,134
)
—
Gain on insurance recovery (2)
—
(1,151
)
Transaction costs
993
60
Credit loss expense (benefit)
1,369
(2,295
)
Impairment of operating lease right-of-use
assets (1)
1,968
—
Adjusted EBITDAre
$
135,524
$
122,660
Adjusted EBITDAre (annualized) (3)
$
542,096
$
490,640
Net Debt/Adjusted EBITDAre Ratio
5.0
5.2
(1) Impairment charges recognized during
the three months ended December 31, 2022 totaled $23.0 million,
which was comprised of $21.0 million of impairments of real estate
investments and $2.0 million of impairments of operating lease
right-of-use assets.
(2) Included in other income in the
accompanying consolidated statements of income and comprehensive
income for the quarter. Other income includes the following:
Three Months Ended
December 31,
2022
2021
Income from settlement of foreign currency
swap contracts
$
246
$
41
Sale participation income
9,134
—
Gain on insurance recovery
—
1,151
Operating income from operated
properties
7,325
7,815
Miscellaneous income
51
7
Other income
$
16,756
$
9,014
(3) Adjusted EBITDA for the quarter is
multiplied by four to calculate an annualized amount.
Total Investments
Total investments is a non-GAAP financial measure defined as the
sum of the carrying values of real estate investments (before
accumulated depreciation), land held for development, property
under development, mortgage notes receivable (including related
accrued interest receivable), investment in joint ventures,
intangible assets, gross (before accumulated amortization and
included in other assets) and notes receivable and related accrued
interest receivable, net (included in other assets). Total
investments is a useful measure for management and investors as it
illustrates across which asset categories the Company's funds have
been invested. Our method of calculating total investments may be
different from methods used by other REITs and, accordingly, may
not be comparable to such other REITs. A reconciliation of total
assets (computed in accordance with GAAP) to total investments is
included in the following table (unaudited, in thousands):
December 31,
2022
December 31,
2021
Total assets
$
5,758,701
$
5,801,150
Operating lease right-of-use assets
(200,985
)
(180,808
)
Cash and cash equivalents
(107,934
)
(288,822
)
Restricted cash
(2,577
)
(1,079
)
Accounts receivable
(53,587
)
(78,073
)
Add: accumulated depreciation on real
estate investments
1,302,640
1,167,734
Add: accumulated amortization on
intangible assets (1)
23,487
20,163
Prepaid expenses and other current assets
(1)
(33,559
)
(24,865
)
Total investments
$
6,686,186
$
6,415,400
Total
Investments:
Real estate investments, net of
accumulated depreciation
$
4,714,136
$
4,713,091
Add back accumulated depreciation on real
estate investments
1,302,640
1,167,734
Land held for development
20,168
20,168
Property under development
76,029
42,362
Mortgage notes and related accrued
interest receivable
457,268
370,159
Investment in joint ventures
52,964
36,670
Intangible assets, gross (1)
60,109
57,962
Notes receivable and related accrued
interest receivable, net (1)
2,872
7,254
Total investments
$
6,686,186
$
6,415,400
(1) Included in other assets in the
accompanying consolidated balance sheet. Other assets include the
following:
December 31,
2022
December 31,
2021
Intangible assets, gross
$
60,109
$
57,962
Less: accumulated amortization on
intangible assets
(23,487
)
(20,163
)
Notes receivable and related accrued
interest receivable, net
2,872
7,254
Prepaid expenses and other current
assets
33,559
24,865
Total other assets
$
73,053
$
69,918
About EPR Properties
EPR Properties (NYSE:EPR) is the leading diversified
experiential net lease real estate investment trust (REIT),
specializing in select enduring experiential properties in the real
estate industry. We focus on real estate venues which create value
by facilitating out of home leisure and recreation experiences
where consumers choose to spend their discretionary time and money.
We have total assets of approximately $5.8 billion (after
accumulated depreciation of approximately $1.3 billion) across 44
states. We adhere to rigorous underwriting and investing criteria
centered on key industry, property and tenant level cash flow
standards. We believe our focused approach provides a competitive
advantage and the potential for stable and attractive returns.
Further information is available at www.eprkc.com.
CAUTIONARY STATEMENT CONCERNING
FORWARD-LOOKING STATEMENTS
The financial results in this press release reflect preliminary,
unaudited results, which are not final until the Company’s Annual
Report on Form 10-K is filed. With the exception of historical
information, certain statements contained or incorporated by
reference herein may contain forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended
(the “Securities Act”), and Section 21E of the Securities Exchange
Act of 1934, as amended (the “Exchange Act”), such as those
pertaining to our guidance, the uncertain financial impact of the
COVID-19 pandemic, uncertainties regarding the ultimate impact of a
customer's pending bankruptcy proceeding on our existing leases
with Regal theatre tenants, our capital resources and liquidity,
our pursuit of growth opportunities, the timing of transaction
closings and investment spending, our expected cash flows, the
performance of our customers, our expected cash collections and our
results of operations and financial condition. The forward-looking
statements presented herein are based on the Company's current
expectations. Forward-looking statements involve numerous risks and
uncertainties, and you should not rely on them as predictions of
actual events. There is no assurance the events or circumstances
reflected in the forward-looking statements will occur. You can
identify forward-looking statements by use of words such as “will
be,” “intend,” “continue,” “believe,” “may,” “expect,” “hope,”
“anticipate,” “goal,” “forecast,” “pipeline,” “estimates,”
“offers,” “plans,” “would” or other similar expressions or other
comparable terms or discussions of strategy, plans or intentions
contained or incorporated by reference herein. Forward-looking
statements necessarily are dependent on assumptions, data or
methods that may be incorrect or imprecise. These forward-looking
statements represent our intentions, plans, expectations and
beliefs and are subject to numerous assumptions, risks and
uncertainties. Many of the factors that will determine these items
are beyond our ability to control or predict. For further
discussion of these factors see “Item 1A. Risk Factors” in our most
recent Annual Report on Form 10-K and, to the extent applicable,
our Quarterly Reports on Form 10-Q.
For these statements, we claim the protection of the safe harbor
for forward-looking statements contained in the Private Securities
Litigation Reform Act of 1995. You are cautioned not to place undue
reliance on our forward-looking statements, which speak only as of
the date hereof or the date of any document incorporated by
reference herein. All subsequent written and oral forward-looking
statements attributable to us or any person acting on our behalf
are expressly qualified in their entirety by the cautionary
statements contained or referred to in this section. Except as
required by law, we do not undertake any obligation to release
publicly any revisions to our forward-looking statements to reflect
events or circumstances after the date hereof.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230222005747/en/
EPR Properties Brian Moriarty, 816-472-1700 www.eprkc.com
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