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Section 1: 8-K (8-K)

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 5, 2020
EPR Properties
(Exact name of registrant as specified in its charter)
Maryland
 
001-13561
 
43-1790877
(State or other jurisdiction of
incorporation)
 
(Commission
File Number)
 
(I.R.S. Employer
Identification No.)
909 Walnut Street,
Suite 200
Kansas City,
Missouri
64106
(Address of principal executive offices) (Zip Code)
(816)
472-1700
(Registrant’s telephone number, including area code) 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Trading symbol(s)
 
Name of each exchange on which registered
Common shares, par value $0.01 per share
 
EPR
 
New York Stock Exchange
 
 
 
 
 
5.75% Series C cumulative convertible preferred shares, par value $0.01 per share
 
EPR PrC
 
New York Stock Exchange
 
 
 
 
 
9.00% Series E cumulative convertible preferred shares, par value $0.01 per share
 
EPR PrE
 
New York Stock Exchange
 
 
 
 
 
5.75% Series G cumulative redeemable preferred shares, par value $0.01 per share
 
EPR PrG
 
New York Stock Exchange

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    o






Item 2.02 Results of Operations and Financial Condition.

On August 5, 2020, the Company announced its results of operations and financial condition for the second quarter and six months ended June 30, 2020. The public announcement was made by means of a press release, the text of which is set forth in Exhibit 99.1 hereto and is hereby incorporated by reference herein.
In addition, on August 5, 2020, the Company made available on its website an investor slide presentation and supplemental operating and financial data for the second quarter and six months ended June 30, 2020, the text of which are set forth in Exhibits 99.2 and 99.3 hereto, respectively, and are hereby incorporated by reference herein.
The information set forth in Item 2.02 of this Current Report on Form 8-K, including Exhibits 99.1, 99.2 and 99.3, is being “furnished” and shall not be deemed “filed” for the purposes of or otherwise subject to liabilities under Section 18 of the Securities Exchange Act of 1934, as amended, and shall not be deemed to be incorporated by reference into the filings of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.

Item 9.01 Financial Statements and Exhibits.
 
 
 
 
Exhibit
No.
  
Description
  
  
Press Release dated August 5, 2020 issued by EPR Properties announcing its results of operations and financial condition for the second quarter and six months ended June 30, 2020.
 
 
  
Investor slide presentation for the second quarter and six months ended June 30, 2020, made available by EPR Properties on August 5, 2020.
 
 
 
 
Supplemental Operating and Financial Data for the second quarter and six months ended June 30, 2020, made available by EPR Properties on August 5, 2020.
 
 
 
104
 
Cover Page Interactive Data File (embedded within the Inline XBRL document)







SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
 
 
 
 
EPR PROPERTIES
 
 
 
 
By:
 
/s/ Mark A. Peterson
 
 
 
Mark A. Peterson
 
 
 
Executive Vice President, Treasurer and Chief Financial
Officer
Date: August 5, 2020
 




















































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Section 2: EX-99.1 (PRESS RELEASE)

Exhibit

Exhibit 99.1




EPR PROPERTIES REPORTS SECOND QUARTER 2020 RESULTS

Kansas City, MO, August 5, 2020 -- EPR Properties (NYSE:EPR) today announced operating results for the second quarter and six months ended June 30, 2020 (dollars in thousands, except per share data):    
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2020
 
2019 (1)
 
2020
 
2019 (1)
Total revenue from continuing operations
$
106,360

 
$
161,740

 
$
257,372

 
$
312,267

Net (loss) income available to common shareholders
(68,999
)
 
60,560

 
(37,915
)
 
119,875

Net (loss) income available to common shareholders per diluted common share
(0.90
)
 
0.79

 
(0.49
)
 
1.59

Funds From Operations as adjusted (FFOAA) (a non-GAAP financial measure)
31,418

 
105,219

 
107,344

 
208,210

FFOAA per diluted common share (a non-GAAP financial measure)
0.41

 
1.36

 
1.39

 
2.73

Adjusted Funds From Operations (AFFO) (a non-GAAP financial measure)
33,313

 
105,621

 
123,380

 
209,920

AFFO per diluted common share (a non-GAAP financial measure)
0.44

 
1.37

 
1.59

 
2.75

 
 
 
 
 
 
 
 
(1) The operating results of the Company's public charter school portfolio for the three and six months ended June 30, 2019, include $6.5 million and $11.5 million in termination fees, respectively, and are included in all metrics in these columns except for total revenue from continuing operations. The remaining public charter school portfolio was sold subsequent to June 30, 2019.

Second Quarter Company Headlines

Strong Liquidity Position - With over $1.0 billion of cash on hand, it is currently estimated that the Company would have approximately six years of liquidity even if the elevated second quarter negative cash run rate were to persist.
Property Openings - Approximately 88% of non-theatre properties are open as of August 4, 2020.
Restructured AMC Leases - In exchange for agreeing with AMC to place 46 of the Company's 53 AMC leased theatres into a new master lease that reduces future restructuring risk and increases the average lease term by 9 years, the Company agreed to reduce annual fixed minimum rents by approximately 21%.
Collections - Through August 4, 2020, customers paid approximately 21% and 28% of second quarter and July 2020 pre-COVID contractual cash rent and interest payments, respectively.
Customer Agreements - The Company has reached resolution with customers representing 85% of its annualized pre-COVID contractual cash rent and interest payments, with no payment deferral for 18%, and deferral agreements for 67%.
Permanent Rent Adjustments - Permanent rent adjustments are expected to lower annualized pre-COVID contractual cash rent and interest payments by approximately 5% to 7%, including the AMC rent reduction.

CEO Comments
“As the country continues to face extraordinary challenges related to the COVID-19 pandemic, we have taken a number of steps to manage through this difficult time. We have effectively fortified our balance sheet and maintained sufficient liquidity, while working with our customers to help facilitate re-openings and operations in this current environment, and ensuring a strong positioning for the long term,” stated Greg Silvers, Company President and CEO. “Importantly, we have reached agreements with the vast majority of our customers including our largest tenant, AMC Theatres, which provides us additional certainty going forward.  A number of our customers have been reopening, and they are seeing visitors return and exhibit their desire to participate in such experiences. While the outlook remains uncertain as the pandemic persists, we look forward to the eventual reopening of all of our customers and remain confident in our strategy of focusing on experiential real estate.”

COVID-19 Response and Update

AMC Restructuring
On July 31, 2020, the Company entered into a Forbearance Agreement (“Forbearance Agreement”), a Master Lease Agreement ("the Master Lease") and seven amended lease agreements (the "Transitional Leases" and collectively with the Master Lease, the "Leases") with American Multi-Cinema, Inc. and certain affiliates (“AMC”) relating to 53 properties currently leased by the Company to AMC (the “Leased Properties”). The Company and AMC entered into the Master Lease relating to 46 theatres



(“Master Lease Properties”) and amended the Transitional Leases relating to seven theatres (“Transitional Properties”), each of which is effective July 1, 2020.

Under the Leases, the Company agreed to reduce total annual fixed cash rent by approximately 21%, or $25.6 million, to $95.9 million (including $8.0 million of ground rent and the repayment of deferral amounts for the months of April, May and June, 2020 described below). The Company previously agreed to defer all of the fixed rent due under the Leases for the months of April, May and June 2020. The deferred amounts are included in the calculation of the new fixed cash rent of the Leases amortized over the first 14 years of the term of the applicable Lease or the expiration of the current term of the Lease, whichever is earlier. Additionally, the Master Lease has fixed escalators of 7.5% every five years on fixed rent excluding the portion attributable to deferred rent.

Pursuant to the Master Lease and the Forbearance Agreement, during the period of July 1, 2020 through December 31, 2020, AMC will pay percentage rent (15% of gross receipts) in lieu of fixed rent for the Leased Properties. The difference between the percentage rent paid and fixed rent due under the Leases represents an additional deferred amount that, beginning in February 2021, will be added to fixed cash rent and amortized over the first 14 years of the term of the applicable Lease or the expiration of the current term of the Lease, whichever is earlier. For the month of July, the Company expects no percentage rent given AMC theatres had not re-opened.

The Master Lease Properties have been divided into four tranches, with the initial term of each tranche expiring annually from June 30, 2034 to June 30, 2037. The Transitional Leases have expiration dates occurring between November 2026 and March 2029.

The Company believes that the AMC restructuring significantly improves the Company’s long-term position with respect to AMC, while providing AMC with deferrals it needs during the pandemic and better performing theatres in the future. Specifically:

The Master Lease was designed with the intention that the parties will respect the master lease characterization at all times, which the Company believes will enhance its position in the event of a reorganization proceeding regarding AMC,
The lease terms on properties included in the Master Lease were increased by an average of nine years, and
The Company has the ability to reduce its exposure to AMC through the option to terminate each of the seven Transitional Leases and re-brand or sell them with the cooperation of AMC.

The material terms of the agreements with AMC described above will be more fully described in the Company’s Quarterly Report on Form 10-Q.

Collections and Property Openings
The Company's COVID-19 Task Force, an internal team comprised of individuals from across the Company, has been working diligently with customers negatively impacted by the pandemic to provide solutions for the parties' long-term mutual interests, including establishing appropriate repayment plans for deferred obligations and assisting these customers in establishing re-opening plans. The customers occupying substantially all of the Company's theatre properties are currently closed but most currently anticipate opening for business by the end of August subject to local restrictions. Approximately 88% of the customers in the Company's non-theatre portfolio are open for business as of August 4, 2020. Tenants and borrowers paid approximately 21% and 28% of second quarter and July 2020 pre-COVID contractual cash rent and interest payments, respectively. As many of the Company's customers remain temporarily closed or are only beginning to re-open, the Company has entered into agreements or is currently negotiating agreements to defer the rent and mortgage payments for substantially all of the customers that did not pay full rent or interest during the second quarter of 2020 and has classified tenants and borrowers (inclusive of AMC) into various categories described in the table below.

Additionally, as shown in the table below, during the quarter, the Company deferred approximately $64.0 million of amounts due from customers that were booked as revenue and receivables, and approximately $41.0 million that were not booked as revenue and receivables as the full amounts were not deemed probable of collection as a result of the COVID-19 pandemic. During the quarter, the Company reduced rental revenue by $3.3 million due to contractual rent abatements and provided $3.8 million in rent concessions. Permanent rent reductions are expected to total approximately 5% to 7% of annualized pre-COVID contractual revenue, inclusive of the AMC rent reduction discussed above.



Classification of Customers and Deferral Information
($ in millions)
 
 
 
Three months ended June 30, 2020





 
 Annualized Revenue (1)
 
Deferrals Recognized
Deferrals Not Recognized
 
Projected Total Deferrals
No Payment Deferral
 
$
115

18
%
 
$

$

 
$

Payments Deferred and Recognized as Revenue During Deferral Period
 
310

50
%
 
64


 
131

Payments Deferred But Not Recognized as Revenue During Deferral Period
 
25

4
%
 

4

 
11

Cash Basis/Lease Restructurings (2)
 
166

27
%
 

37

 
n/a (3)

New Vacancies
 
8

1
%
 


 

Total
 
$
624

100
%
 
$
64

$
41

 
$
142

 
 
 
 
 
 
 
 
 
(1) Represents annualized pre-COVID contractual revenue which includes cash rent (including tenant reimbursements) and interest payments.
(2) Includes leases for tenants accounted for on a cash basis and/or leases for tenants that have been or are expected to be restructured which generally have a ramp up in cash rent and some permanent reduction in rent after the ramp up period. This category includes AMC.
(3) Projected amounts not shown for this category as tenants are on a cash basis and/or agreements have been or are expected to be restructured.

Statistics for the $142.0 million of projected total deferrals shown above as well as the status of all agreements based on annualized pre-COVID contractual revenue is shown below:
Average Deferral Period
11 months
Average Months Deferred
5 months
Average Collection Period
32 months

 
Projected Total Deferrals
 
Annualized Revenue (1)
No Deferral
n/a

 
18
%
Executed
86
%
 
67
%
Subtotal
86
%
 
85
%
Approved
%
 
1
%
Pending
14
%
 
13
%
Vacant
n/a

 
1
%
Total
100
%
 
100
%
 
(1) Represents annualized pre-COVID contractual revenue which includes cash rent (including tenant reimbursements) and interest payments.

Strong Liquidity Position
The Company remains focused on maintaining a strong balance sheet, strong liquidity and financial flexibility through the pandemic. The Company has no scheduled debt maturities until 2022 and over $1.0 billion of cash on hand. As previously announced and further discussed below, the Company entered into amendments to the agreements governing its bank credit facilities and private placement notes in the second quarter of 2020 to, among other things, waive the Company's obligations to comply with certain covenants. The Company also temporarily suspended its monthly cash dividend to common shareholders subsequent to the common share dividend previously declared and payable on May 15, 2020 and suspended its previously disclosed share repurchase program. In addition, the Company continues to limit investment spending.




The Company’s cash outflows from operations (which includes interest payments), less preferred dividends was approximately $38.0 million during the second quarter. The Company anticipates having a lower quarterly cash burn rate subsequent to the second quarter as collections are expected to continue to improve; however, even at the elevated second quarter negative cash burn rate, the Company would have approximately six years of liquidity based on the ending cash balance at June 30, 2020 of over $1.0 billion, and committed investment spending and anticipated maintenance capital expenditures totaling approximately $103.0 million during the remainder of 2020 and 2021 (assuming that none of the Company's available cash would be used for the repayment of principal on the Company's indebtedness, either at maturity or upon an acceleration event).

Portfolio Update
The Company's total investments (a non-GAAP financial measure) were approximately $6.7 billion at June 30, 2020 with Experiential totaling $5.9 billion, or 89%, and Education totaling $0.8 billion, or 11%.

The Company's Experiential portfolio (excluding property under development) consisted of the following property types (owned or financed) at June 30, 2020:
180 theatre properties;
56 eat & play properties (including seven theatres located in entertainment districts);
18 attraction properties;
13 ski properties;
six experiential lodging properties;
one gaming property;
three cultural properties; and
seven fitness & wellness properties.

As of June 30, 2020, the Company's owned Experiential portfolio consisted of approximately 19.4 million square feet, which was 97% leased and included $39.0 million in property under development and $22.7 million in undeveloped land inventory.

The Company's Education portfolio consisted of the following property types (owned or financed) at June 30, 2020:
69 early childhood education center properties; and
16 private school properties.

As of June 30, 2020, the Company's owned Education portfolio consisted of approximately 1.9 million square feet, which was 100% leased and included $3.5 million in undeveloped land inventory.

The combined owned portfolio consisted of 21.3 million square feet and was 97.3% leased.

Investment Update
The Company's investment spending for the three months ended June 30, 2020 totaled $11.7 million (bringing the year-to-date investment spending to $53.6 million), and included spending on Experiential build-to-suit development and redevelopment projects.

Balance Sheet and Liquidity Update
At June 30, 2020, the Company's net debt to gross assets ratio (a non-GAAP Financial Measure) was 41%.

The Company had $1.0 billion of unrestricted cash on hand and $750.0 million outstanding under its $1.0 billion unsecured revolving credit facility at June 30, 2020. The Company has no scheduled debt maturities until 2022 when its unsecured revolving credit facility comes due.

As previously announced, on June 29, 2020, the Company amended the agreements governing its bank credit facilities and private placement notes. The amendments modified certain provisions and waived the Company's obligation to comply with certain covenants under these debt agreements in light of the continuing financial and operational impacts of the COVID-19 pandemic on the Company and its tenants and borrowers. The changes are generally effective during the covenant relief period, which began at the execution of the amendment and end on the earlier of April 1, 2021 or when the Company provides notice that it elects to terminate the covenant relief period, subject to certain conditions. The loans subject to the modifications bear interest at higher rates during the covenant relief period, however, the rates will return to previous levels at the end of such



period, subject to certain conditions. The rates are subject to change based on long-term unsecured debt ratings, as defined in the agreements.
The share repurchase program previously approved by the Company's Board of Trustees (the "Board") was scheduled to expire on December 31, 2020, however, the Company suspended the program on June 29, 2020, the effective date of the covenant modification agreements. During the three months ended June 30, 2020, the Company repurchased 4,066,716 common shares under the share repurchase program for approximately $106.0 million at an average price of $26.06 per share. The repurchases were made under a Rule 10b5-1 trading plan.
The amendments to the agreements governing the Company's bank credit facilities and private placement notes also impose additional restrictions on the Company during the covenant relief period, including limitations on certain investments, incurrences of indebtedness, capital expenditures, payment of dividends or other distributions, and share repurchases, in each case subject to certain exceptions.

Impairment Charges
As a result of the COVID-19 pandemic, the Company reassessed the expected holding periods of certain properties during the six months ending June 30, 2020, and determined that the estimated cash flows were not sufficient to recover the carrying values of six properties. Accordingly, the Company recognized non-cash impairment charges of $51.3 million, which were comprised of $36.3 million of impairments of real estate investments and $15.0 million of impairments of operating lease right-of-use assets at two of these properties. Additionally, the Company recognized other-than-temporary non-cash impairment charges of $3.2 million on the Company's equity investments in three theatre projects located in China.

Dividend Information
The Board declared monthly cash dividends during the second quarter of 2020 totaling $0.3825 per common share. As discussed above, the monthly cash dividend to common shareholders was suspended following the common share dividend paid on May 15, 2020 to shareholders of record as of April 30, 2020. The Company is restricted from paying dividends on its common shares during the covenant relief period, subject to certain limited exceptions, and there can be no assurances as to the Company's ability to reinstitute cash dividend payments to common shareholders or the timing thereof.

The Board also declared its regular quarterly dividends to preferred shareholders of $0.359375 per share on its 5.75% Series C cumulative convertible preferred shares, $0.5625 per share on its 9.00% Series E cumulative convertible preferred shares and $0.359375 per share on its 5.75% Series G cumulative redeemable preferred shares.

Conference Call Information
Management will host a conference call to discuss the Company's financial results on August 6, 2020 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 http://investors.eprkc.com/webcasts. To access the call, audio only, dial (866) 587-2930 and when prompted, provide the passcode 8734836.

You may watch a replay of the webcast by visiting the Webcasts page at http://investors.eprkc.com/webcasts.

Quarterly Supplemental
The Company's supplemental information package for the second quarter and six months ended June 30, 2020 is available in the Investor Center on the Company's website located at http://investors.eprkc.com/earnings-supplementals.



EPR Properties
Consolidated Statements of (Loss) Income
(Unaudited, dollars in thousands except per share data)
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2020
 
2019
 
2020
 
2019
Rental revenue
$
97,531

 
$
147,003

 
$
232,574

 
$
287,295

Other income
416

 
5,726

 
7,989

 
6,070

Mortgage and other financing income
8,413

 
9,011

 
16,809

 
18,902

Total revenue
106,360

 
161,740

 
257,372

 
312,267

Property operating expense
15,329

 
14,597

 
28,422

 
30,148

Other expense
2,798

 
8,091

 
12,332

 
8,091

General and administrative expense
10,432

 
12,230

 
21,420

 
23,940

Severance expense

 

 

 
420

Costs associated with loan refinancing or payoff
820

 

 
820

 

Interest expense, net
38,340

 
36,458

 
73,093

 
70,421

Transaction costs
771

 
6,923

 
1,846

 
12,046

Credit loss expense
3,484

 

 
4,676

 

Impairment charges
51,264

 

 
51,264

 

Depreciation and amortization
42,450

 
38,790

 
86,260

 
74,792

(Loss) income before equity in (loss) income from joint ventures, other items and discontinued operations
(59,328
)
 
44,651

 
(22,761
)
 
92,409

Equity in (loss) income from joint ventures
(1,724
)
 
470

 
(2,144
)
 
959

Impairment charges on joint ventures
(3,247
)
 

 
(3,247
)
 

Gain (loss) on sale of real estate
22

 

 
242

 
(388
)
(Loss) income before income taxes
(64,277
)
 
45,121

 
(27,910
)
 
92,980

Income tax benefit
1,312

 
1,300

 
2,063

 
1,905

(Loss) income from continuing operations
$
(62,965
)
 
$
46,421

 
$
(25,847
)
 
$
94,885

Discontinued operations:
 
 
 
 
 
 
 
Income from discontinued operations before other items

 
10,399

 

 
20,568

Gain on sale of real estate from discontinued operations

 
9,774

 

 
16,490

Income from discontinued operations

 
20,173

 

 
37,058

Net (loss) income
(62,965
)
 
66,594

 
(25,847
)
 
131,943

Preferred dividend requirements
(6,034
)
 
(6,034
)
 
(12,068
)
 
(12,068
)
Net (loss) income available to common shareholders of EPR Properties
$
(68,999
)
 
$
60,560

 
$
(37,915
)
 
$
119,875

Net (loss) income available to common shareholders of EPR Properties per share:
 
 
 
 
 
 
 
Continuing operations
$
(0.90
)
 
$
0.53

 
$
(0.49
)
 
$
1.10

Discontinued operations

 
0.27

 

 
0.49

Basic
$
(0.90
)
 
$
0.80

 
$
(0.49
)
 
$
1.59

 
 
 
 
 
 
 
 
Continuing operations
$
(0.90
)
 
$
0.53

 
$
(0.49
)
 
$
1.10

Discontinued operations

 
0.26

 

 
0.49

Diluted
$
(0.90
)
 
$
0.79

 
$
(0.49
)
 
$
1.59

Shares used for computation (in thousands):
 
 
 
 
 
 
 
Basic
76,310

 
76,164

 
77,388

 
75,426

Diluted
76,310

 
76,199

 
77,388

 
75,467




EPR Properties
Condensed Consolidated Balance Sheets
(Unaudited, dollars in thousands)
 
June 30, 2020
 
December 31, 2019
Assets
 
 
 
Real estate investments, net of accumulated depreciation of $1,034,771 and $989,254 at June 30, 2020 and December 31, 2019, respectively
$
5,110,059

 
$
5,197,308

Land held for development
26,244

 
28,080

Property under development
39,039

 
36,756

Operating lease right-of-use assets
189,058

 
211,187

Mortgage notes and related accrued interest receivable
357,668

 
357,391

Investment in joint ventures
28,925

 
34,317

Cash and cash equivalents
1,006,981

 
528,763

Restricted cash
2,615

 
2,677

Accounts receivable
134,774

 
86,858

Other assets
107,615

 
94,174

Total assets
$
7,002,978

 
$
6,577,511

Liabilities and Equity
 
 
 
Accounts payable and accrued liabilities
$
96,454

 
$
122,939

Operating lease liabilities
229,030

 
235,650

Dividends payable
6,053

 
35,458

Unearned rents and interest
81,096

 
74,829

Debt
3,854,088

 
3,102,830

Total liabilities
4,266,721

 
3,571,706

Total equity
$
2,736,257

 
$
3,005,805

Total liabilities and equity
$
7,002,978

 
$
6,577,511


The historical financial results of the public charter schools sold by the Company in 2019 are reflected in the Company's consolidated statements of income as discontinued operations for the three and six months ended June 30, 2019. The operating results relating to discontinued operations are as follows (unaudited, dollars in thousands):
 
Three Months Ended June 30, 2019
 
Six Months Ended June 30, 2019
Rental revenue
$
10,327

 
$
20,758

Mortgage and other financing income
3,631

 
7,215

Total revenue
13,958

 
27,973

Property operating expense
174

 
416

Interest expense, net
(180
)
 
(317
)
Depreciation and amortization
3,565

 
7,306

Income from discontinued operations before other items
10,399

 
20,568

Gain on sale of real estate
9,774

 
16,490

Income from discontinued operations
$
20,173

 
$
37,058





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 costs associated with loan refinancing or payoff, transaction costs, severance expense, preferred share redemption costs, impairment of operating lease right-of-use assets, termination fees associated with tenants' exercises of public charter school buy-out options and credit loss expense and subtracting 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 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 a supplemental measure 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 summarizes FFO, FFOAA and AFFO for the three and six months ended June 30, 2020 and 2019 and reconciles such measures to net income available to common shareholders, the most directly comparable GAAP measure:

EPR Properties
Reconciliation of Non-GAAP Financial Measures
(Unaudited, dollars in thousands except per share data)
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2020
 
2019
 
2020
 
2019
FFO:
 
 
 
 
 
 
 
Net (loss) income available to common shareholders of EPR Properties
$
(68,999
)
 
$
60,560

 
$
(37,915
)
 
$
119,875

Gain on sale of real estate
(22
)
 
(9,774
)
 
(242
)
 
(16,102
)
Impairment of real estate investments, net (1)
36,255

 

 
36,255

 

Real estate depreciation and amortization
42,151

 
42,098

 
85,676

 
81,612

Allocated share of joint venture depreciation
378

 
554

 
761

 
1,109

Impairment charges on joint ventures
3,247

 

 
3,247

 

FFO available to common shareholders of EPR Properties
$
13,010

 
$
93,438

 
$
87,782

 
$
186,494

 
 
 
 
 
 
 
 
 
FFO available to common shareholders of EPR Properties
$
13,010

 
$
93,438

 
$
87,782

 
$
186,494

Add: Preferred dividends for Series C preferred shares

 
1,939

 

 
3,878

Add: Preferred dividends for Series E preferred shares

 
1,939

 

 
3,878

Diluted FFO available to common shareholders of EPR Properties
$
13,010

 
$
97,316

 
$
87,782

 
$
194,250

 
 
 
 
 
 
 
 



FFOAA:
 
 
 
 
 
 
 
FFO available to common shareholders of EPR Properties
$
13,010

 
$
93,438

 
87,782

 
$
186,494

Costs associated with loan refinancing or payoff
820

 

 
820

 

Transaction costs
771

 
6,923

 
1,846

 
12,046

Severance expense

 

 

 
420

Termination fees included in gain on sale

 
6,533

 

 
11,534

Impairment of operating lease right-of-use assets (1)
15,009

 

 
15,009

 

Credit loss expense
3,484

 

 
4,676

 

Deferred income tax benefit
(1,676
)
 
(1,675
)
 
(2,789
)
 
(2,284
)
FFOAA available to common shareholders of EPR Properties
$
31,418

 
$
105,219

 
$
107,344

 
$
208,210

 
 
 
 
 
 
 
 
 
FFOAA available to common shareholders of EPR Properties
$
31,418

 
$
105,219

 
$
107,344

 
$
208,210

Add: Preferred dividends for Series C preferred shares

 
1,939

 

 
3,878

Add: Preferred dividends for Series E preferred shares

 
1,939

 

 
3,878

Diluted FFOAA available to common shareholders of EPR Properties
$
31,418

 
$
109,097

 
$
107,344

 
$
215,966

 
 
 
 
 
 
 
 
AFFO:
 
 
 
 
 
 
FFOAA available to common shareholders of EPR Properties
$
31,418

 
$
105,219

 
$
107,344

 
$
208,210

Non-real estate depreciation and amortization
299

 
257

 
584

 
486

Deferred financing fees amortization
1,651

 
1,517

 
3,285

 
3,019

Share-based compensation expense to management and trustees
3,463

 
3,283

 
6,972

 
6,460

Amortization of above and below market leases, net and tenant allowances
(108
)
 
(58
)
 
(260
)
 
(117
)
Maintenance capital expenditures (2)
(1,291
)
 
(510
)
 
(2,219
)
 
(807
)
Straight-lined rental revenue
(2,229
)
 
(3,223
)
 
7,479

 
(5,637
)
Straight-lined ground sublease expense
207

 
205

 
383

 
389

Non-cash portion of mortgage and other financing income
(97
)
 
(1,069
)
 
(188
)
 
(2,083
)
AFFO available to common shareholders of EPR Properties
$
33,313

 
$
105,621

 
$
123,380

 
$
209,920

 
 
 
 
 
 
 
 
AFFO available to common shareholders of EPR Properties
$
33,313

 
$
105,621

 
$
123,380

 
$
209,920

Add: Preferred dividends for Series C preferred shares

 
1,939

 

 
3,878

Add: Preferred dividends for Series E preferred shares

 
1,939

 

 
3,878

Diluted AFFO available to common shareholders of EPR Properties
$
33,313

 
$
109,499

 
$
123,380

 
$
217,676

 
 
 
 
 
 
 
 
FFO per common share:
 
 
 
 
 
 
 
Basic
$
0.17

 
$
1.23

 
$
1.13

 
$
2.47

Diluted
0.17

 
1.22

 
1.13

 
2.45

FFOAA per common share:
 
 
 
 
 
 
 
Basic
$
0.41

 
$
1.38

 
$
1.39

 
$
2.76

Diluted
0.41

 
1.36

 
1.39

 
2.73

AFFO per common share:
 
 
 
 
 
 
Basic
$
0.44

 
$
1.39

 
$
1.59

 
$
2.78

Diluted
0.44

 
1.37

 
1.59

 
2.75

Shares used for computation (in thousands):
 
 
 
 
 
 
 
Basic
76,310

 
76,164

 
77,388

 
75,426

Diluted
76,310

 
76,199

 
77,388

 
75,467

 
 
 
 
 
 
 
 
 
Weighted average shares outstanding-diluted EPS
76,310

 
76,199

 
77,388

 
75,467

Effect of dilutive Series C preferred shares

 
2,158

 

 
2,151

Effect of dilutive Series E preferred shares

 
1,628

 

 
1,625

Adjusted weighted average shares outstanding-diluted Series C and Series E
76,310

 
79,985

 
77,388

 
79,243

Other financial information:
 
 
 
 
 
 
 
Dividends per common share
$
0.3825

 
$
1.1250

 
$
1.5150

 
$
2.2500

Amounts above include the impact of discontinued operations, which are separately classified in the consolidated statements of income for all periods.

(1) Impairment charges recognized during the three and six months ended June 30, 2020 totaled $51.3 million, which was comprised of $36.3 million of impairments of real estate investments and $15.0 million of impairments of operating lease right-of-use assets.
(2) Includes maintenance capital expenditures and certain second generation tenant improvements and leasing commissions.




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 and FFOAA per share for the three and six months ended June 30, 2019. 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 and FFOAA per share for these 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
Net Debt to Gross Assets 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 Net Debt to Gross Assets 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 EBITDA
Management uses Adjusted EBITDA in its analysis of the performance of the business and operations of the Company. Management believes Adjusted EBITDA 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 EBITDA as EBITDAre (defined above) for the quarter excluding severance expense, credit loss expense, transaction costs, impairment losses on operating lease right-of-use assets and prepayment fees.

The Company's method of calculating Adjusted EBITDA may be different from methods used by other REITs and, accordingly, may not be comparable to such other REITs. Adjusted EBITDA 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.




Reconciliations of debt and total assets (all reported in accordance with GAAP) to Net Debt, Gross Assets, Net Debt to Gross Assets, EBITDAre and Adjusted EBITDA (each of which is a non-GAAP financial measure) are included in the following tables (unaudited, in thousands):
 
June 30,
 
2020
 
2019
Net Debt:
 
 
 
Debt
$
3,854,088

 
$
3,216,623

Deferred financing costs, net
35,907

 
31,957

Cash and cash equivalents
(1,006,981
)
 
(6,927
)
Net Debt
$
2,883,014

 
$
3,241,653

 
 
 
 
Gross Assets:
 
 
 
Total Assets
$
7,002,978

 
$
6,746,655

Accumulated depreciation
1,034,771

 
954,806

Cash and cash equivalents
(1,006,981
)
 
(6,927
)
Gross Assets
$
7,030,768

 
$
7,694,534

 
 
 
 
Net Debt to Gross Assets
41
%
 
42
%
 
 
 
 
 
Three Months Ended June 30,
 
2020
 
2019
EBITDAre and Adjusted EBITDA:
 
 
 
Net (loss) income
$
(62,965
)
 
$
66,594

Interest expense, net
38,340

 
36,278

Income tax benefit
(1,312
)
 
(1,300
)
Depreciation and amortization
42,450

 
42,355

Gain on sale of real estate
(22
)
 
(9,774
)
Impairment of real estate investments, net (1)
36,255

 

Costs associated with loan refinancing or payoff
820

 

Equity in loss (income) from joint ventures
1,724

 
(470
)
Impairment charges on joint ventures
3,247

 

EBITDAre
$
58,537

 
$
133,683

 
 
 
 
Transaction costs
771

 
6,923

Credit loss expense
3,484

 

Impairment of operating lease right-of-use assets (1)
15,009

 

Adjusted EBITDA
$
77,801

 
$
140,606

 
 
 
 
Amounts above include the impact of discontinued operations, which are separately classified in the consolidated statements of (loss) income and comprehensive (loss) income.
 
(1) Impairment charges recognized during the three and six months ended June 30, 2020 totaled $51.3 million, which was comprised of $36.3 million of impairments of real estate investments and $15.0 million of impairments of operating lease right-of-use assets.




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 investments to total assets (computed in accordance with GAAP) is included in the following table (unaudited, in thousands):
 
June 30, 2020
 
December 31, 2019
Total Investments:
 
 
 
Real estate investments, net of accumulated depreciation
$
5,110,059

 
$
5,197,308

Add back accumulated depreciation on real estate investments
1,034,771

 
989,254

Land held for development
26,244

 
28,080

Property under development
39,039

 
36,756

Mortgage notes and related accrued interest receivable
357,668

 
357,391

Investment in joint ventures
28,925

 
34,317

Intangible assets, gross (1)
58,784

 
57,385

Notes receivable and related accrued interest receivable, net (1)
14,037

 
14,026

Total investments
$
6,669,527

 
$
6,714,517

 
 
 
 
Total investments
$
6,669,527

 
$
6,714,517

Operating lease right-of-use assets
189,058

 
211,187

Cash and cash equivalents
1,006,981

 
528,763

Restricted cash
2,615

 
2,677

Accounts receivable
134,774

 
86,858

Less: accumulated depreciation on real estate investments
(1,034,771
)
 
(989,254
)
Less: accumulated amortization on intangible assets
(14,624
)
 
(12,693
)
Prepaid expenses and other current assets
49,418

 
35,456

Total assets
$
7,002,978

 
$
6,577,511

 
 
 
 
(1) Included in other assets in the accompanying consolidated balance sheet. Other assets include the following:
 
 
 
 
 
June 30, 2020
 
December 31, 2019
Intangible assets, gross
$
58,784

 
$
57,385

Less: accumulated amortization on intangible assets
(14,624
)
 
(12,693
)
Notes receivable and related accrued interest receivable, net
14,037

 
14,026

Prepaid expenses and other current assets
49,418

 
35,456

Total other assets
$
107,615

 
$
94,174

About EPR Properties
EPR Properties is a leading 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 nearly $6.7 billion in total investments 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 Quarterly Report on Form 10-Q 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 the uncertain financial impact of COVID-19, our capital resources and liquidity, expected liquidity and performance of our customers, including AMC, our expected revenue and customer deferral agreements, our expected dividend payments and share repurchases and our results of operations and financial condition. The estimates presented herein are based on the Company's current expectations and, given the current economic uncertainty, there can be no assurances that the Company will be able to continue to comply with other applicable covenants under its debt agreements, which could materially impact actual performance. 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. While references to commitments for investment spending are based on present commitments and agreements of the Company, we cannot provide assurance that these transactions will be completed on satisfactory terms. 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 Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 filed with the Securities and Exchange Commission ("SEC") on May 11, 2020.
 
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.


EPR Properties
Brian Moriarty, 888-EPR-REIT
www.eprkc.com

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Section 3: EX-99.2 (EARNINGS RELEASE PRESENTATION)

q22020earningscall
Second Quarter 2020 Earnings Call August 6, 2020


 
DISCLAIMER 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 the uncertain financial impact of COVID-19, our capital resources and liquidity, expected dividend payments, expected liquidity and performance of our customers, including AMC, future expenditures for development projects and our results of operations and financial condition. The estimates presented herein are based on the Company's current expectations and, given the current economic uncertainty, there can be no assurances that the Company will be able to continue paying dividends at expected levels, or at all, or continue to comply with applicable covenants under its debt agreements, which could materially impact actual performance. 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. While references to commitments for investment spending are based on present commitments and agreements of the Company, we cannot provide assurance that these transactions will be completed on satisfactory terms. 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 Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 filed with the Securities and Exchange Commission ("SEC") on May 11, 2020. 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. 2


 
INTRODUCTORY COMMENTS This information is as of the date indicated and, to our knowledge, was timely and accurate when presented. We are under no obligation to update or remove outdated information other than as required by applicable law or regulation. 3


 
PORTFOLIO UPDATE 4


 
PORTFOLIO OVERVIEW Portfolio Snapshot Q2 Update $6.7B Total Investments* Investment Spending $11.7M Occupancy at 97.3% 369 Properties * See investor supplemental for the applicable period for definitions and calculations of this Non-GAAP measure 5


 
EXPERIENTIAL PORTFOLIO PORTFOLIO HIGHLIGHTS $6.0B INVESTED* 97% OCCUPIED 284 PROPERTIES IN SERVICE THEATRES EAT & PLAY SKI ATTRACTIONS 3 PROPERTIES UNDER DEVELOPMENT EXPERIENTIAL GAMING CULTURAL FITNESS & LODGING WELLNESS 44 OPERATORS * See investor supplemental for the applicable period for definitions and calculations of this Non-GAAP measure 6


 
PORTFOLIO REOPENING Theatres Reopening – Expected to begin mid- to late-August but dependent on studio release schedule • Planned timing is state by state and city by city • Operators are diligently developing health & safety measures 7


 
PORTFOLIO REOPENING Theatres Film Slate – Strong titles scheduled for remainder of 2020 and 2021 Planned 2020 Releases Planned 2021 Releases 8


 
PORTFOLIO REOPENING Other Experiential and Education Reopening – 88% of non-theatre properties are open 9


 
COLLECTIONS AND DEFERRAL AGREEMENTS Collections • Collected 21% of Q2 & 28% of July 2020 pre-COVID contractual cash rent and interest payments Permanent Rent Adjustments • Anticipate permanent rent reductions, including AMC will total approximately 5-7% of annualized pre-COVID contractual cash rent and interest payments Deferral Agreements Scope • Worked closely with customers to structure agreements to ensure long- term health and protect our position as landlord • Addressed 85% of annualized pre-COVID contractual cash rent and interest payments Key Features • Agreements structured to ramp up through 2020 and beyond; vast majority provide repayment of all deferred rent • Where rent concessions were provided, we received greater or equal value through additional lease term, additional collateral, or other benefits 10


 
AMC RESTRUCTURING Restructured AMC Lease Agreements – Reduces risk, improves collateral and enhances our position in the event of a reorganization in exchange for rent reduction and deferrals Key Features • Entered into Master Lease for 46 of our 53 AMC theatres o Extended our average lease term by 9 years to 15.5 years o Rent Escalator: 7.5% every five years o Master Lease divided into four tranches with staggered initial terms • 7 Transitional Property Leases o Opportunity to reduce exposure to AMC through termination and re- leasing or selling • Rent Reduction and Deferrals o Reduced total annual fixed cash rent by approx. 21% or $26M to $96M o Master Lease deferred rent repaid in equal monthly installments over first 14 years of lease term o Transitional Leases deferred rent repaid over term of each lease 11


 
FINANCIAL REVIEW 12


 
DEFERRAL INFORMATION Classification of Customers and Deferral Information ($ in millions) For the three months ended June 30, 2020 Deferrals Projected Annualized Deferrals Not Total Revenue1 Recognized Recognized Deferrals $ $ No Payment Deferral $ 115 18% $ - - - Payments Deferred and Recognized as 310 50% 64 - 131 Revenue During Deferral Period Payments Deferred But Not Recognized 25 4% - 4 11 as Revenue During Deferral Period Cash Basis/Lease Restructurings2 166 27% - 37 n/a3 New Vacancies 8 1% - - - Total $ 624 100% $ 64 $ 41 $ 142 (1) Represents annualized pre-COVID contractual revenue which includes cash rent (including tenant reimbursements) and interest payments. (2) Includes leases for tenants accounted for on a cash basis and/or leases for tenants that have been or are expected to be restructured which generally have a ramp up in cash rent and some permanent reduction in rent after the ramp up period. This category includes AMC. n/a (3) (3) Projected amounts not shown for this category as tenants are on a cash basis and/or agreements have been or are expected to be restructured. 13


 
DEFERRAL INFORMATION Statistics for the $142M of projected total deferrals and the status of all agreements based on annualized pre-COVID contractual revenue: Average deferral period 12 months Average months deferred 5 months Average collection period 32 months Projected Total Annualized Deferrals Revenue1 No Deferral n/a 18% Executed 86% 67% Sub-total 86% 85% Approved - 1% Pending 14% 13% Vacant n/a 1% Total 100% 100% n/a (3) 14


 
FINANCIAL HIGHLIGHTS Financial Performance* Quarter ended June 30, 2020 2019(1) $ Change % Change Total Revenue (Continuing Ops) $106.4 $161.7 ($55.3) (34%) Net Income - Common (69.0) 60.6 (129.6) (214%) FFO as adj. – Common* 31.4 105.2 (73.8) (70%) AFFO – Common* 33.3 105.6 (72.3) (68%) Net Income/share – Common (0.90) 0.79 (1.69) (214%) FFO/share - Common, as adj.* 0.41 1.36 (0.95) (70%) AFFO/share - Common* 0.44 1.37 (0.93) (68%) (In millions except per-share data) (1) The operating results of the Company's public charter school portfolio for the three months ended June 30, 2019, include $6.5 million in termination fees, and are included in all metrics in this column except for total revenue from continuing operations. The remaining public charter school portfolio was sold subsequent to this period. * See investor supplementals for the applicable periods for definitions and calculations of these non-GAAP measures 15


 
CAPITAL MARKETS UPDATE Net Debt to Gross Assets was 41% at 6/30/20 • $3.9B total debt; $3.1B fixed rate or fixed through int. rate swaps at wtd. avg. = 4.50% • $750M drawn on $1B revolver • Weighted average debt maturity ~5 years; No scheduled debt maturities until revolver matures in 2022 • On 6/29/20, amended Credit Agreement and Note Purchase Agreements o Modified certain provisions and waived certain covenants in light of impacts of the COVID-19 pandemic Liquidity Position • $1.0B unrestricted cash • Implies six years of liquidity even at elevated Q2 cash burn rate (assuming no cash would be used for the repayment of principal on current indebtedness) Share Repurchase Plan • Repurchased 4.1M common shares for $106.0M at average price of $26.06 • Suspended program on effective date of covenant modifications 16


 
EXPECTED REVENUE RECOGNITION AND COLLECTIONS Last 2 Quarters Full Year of 2020 2020 % of pre-COVID contractual cash 65% - 75% 70% - 80% revenue to be recognized % of pre-COVID contractual cash 50% - 60% 55% - 65% revenue to be collected 17


 
CLOSING COMMENTS 18


 
EPR Properties 909 Walnut Street, Suite 200 Kansas City, MO 64106 www.eprkc.com 816-472-1700 [email protected]


 
(Back To Top)

Section 4: EX-99.3 (SUPPLEMENTAL OPERATING AND FINANCIAL DATA)

Exhibit
Exhibit 99.3


404873701_eprsupplementalcoverd1a02.jpg


                        
Supplemental Operating and Financial Data
Second Quarter and Six Months Ended June 30, 2020




TABLE OF CONTENTS
 
 
 
 
 
 
 
 
 
SECTION
 
 
 
 
 
 
 
PAGE
 
 
 
 
 
 
 
 
 
Company Profile
Investor Information
Selected Financial Information
Selected Balance Sheet Information
Selected Operating Data
Funds From Operations and Funds From Operations as Adjusted
Adjusted Funds From Operations
Capital Structure
Summary of Ratios
Summary of Mortgage Notes Receivable
Investment Spending and Disposition Summaries
Property Under Development - Investment Spending Estimates
Lease Expirations
Top Ten Customers by Total Revenue
Definitions-Non-GAAP Financial Measures
Appendix-Reconciliation of Certain Non-GAAP Financial Measures


404873701_image5a13.jpg
 
 
Q2 2020 Supplemental
Page 2
 
 
 


CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS


The financial results in this document reflect preliminary, unaudited results, which are not final until the Company's Quarterly Report on Form 10-Q 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 the uncertain financial impact of COVID-19, our capital resources and liquidity, expected dividend payments, expected liquidity and performance of our customers, including AMC, future expenditures for development projects and our results of operations and financial condition. The estimates presented herein are based on the Company's current expectations and, given the current economic uncertainty, there can be no assurances that the Company will be able to continue paying dividends at expected levels, or at all, or continue to comply with applicable covenants under its debt agreements, which could materially impact actual performance. 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. While references to commitments for investment spending are based on present commitments and agreements of the Company, we cannot provide assurance that these transactions will be completed on satisfactory terms. 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 Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 filed with the Securities and Exchange Commission ("SEC") on May 11, 2020.

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.

NON-GAAP INFORMATION

This document contains certain non-GAAP measures. These non-GAAP measures, as calculated by the Company, are not necessarily comparable to similarly titled measures reported by other companies. Additionally, these non-GAAP measures are not measurements of financial performance or liquidity under GAAP and should not be considered alternatives to the Company's other financial information determined under GAAP. See pages 22 through 24 for definitions of certain non-GAAP financial measures used in this document and the reconciliations of certain non-GAAP measures on pages 9 and 10 and in the Appendix on pages 25 through 29.




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Q2 2020 Supplemental
Page 3
 
 
 


COMPANY PROFILE
THE COMPANY
 
COMPANY STRATEGY
EPR Properties ("EPR" or the "Company") is a self-administered and self-managed real estate investment trust. EPR was formed in August 1997 as a Maryland real estate investment trust ("REIT"), and an initial public offering was completed on November 18, 1997.
 
EPR's primary business objective is to enhance shareholder value by achieving predictable growth in Funds from Operations As Adjusted ("FFOAA") and dividends per share.
 
 
Since that time, the Company has been a leading Experiential net lease REIT, specializing in select enduring experiential properties. We are focused on growing our Experiential portfolio with properties that offer a variety of enduring, congregate entertainment, recreation and leisure activities. Separately, our Education portfolio is a legacy investment that provides additional geographic and operator diversity.
 
Our strategic growth is focused on acquiring or developing experiential real estate venues which create value by facilitating out of home congregate entertainment, recreation and leisure experiences where consumers choose to spend their discretionary time and money. These are properties which make up the social infrastructure of society.
 
This focus is consistent with our depth of knowledge across each of our property types, creating a competitive advantage that allows us to more quickly identify key market trends. We deliberately apply information and our ingenuity to target properties that represent logical extensions within each of our existing property types or potential future investments.
404873701_portfoliocompositionnewa02.jpg
 
 
As part of our strategic planning and portfolio management process we assess new opportunities against the following underwriting principles:
 
404873701_iptgraphica02.jpg
 
 
 
 
 
BUILDING THE PREMIER EXPERIENTIAL REAL ESTATE PORTFOLIO
 
 
 
 
 
 
 
404873701_amca02.jpg
 
404873701_topgolfa02.jpg
 
404873701_aquatopiaa02.jpg
 
404873701_skia02.jpg

404873701_image5a13.jpg
 
 
Q2 2020 Supplemental
Page 4
 
 
 


INVESTOR INFORMATION
 
 
 
SENIOR MANAGEMENT
 
 
 
Greg Silvers
 
Mark Peterson
President and Chief Executive Officer
 
Executive Vice President and Chief Financial Officer
 
 
 
Craig Evans
 
Greg Zimmerman
Executive Vice President, General Counsel and Secretary
 
Executive Vice President and Chief Investment Officer
 
 
 
Tonya Mater
 
Mike Hirons
Senior Vice President and Chief Accounting Officer
 
Senior Vice President - Asset Management
 
 
 
COMPANY INFORMATION
 
 
 
CORPORATE HEADQUARTERS
 
TRADING SYMBOLS
909 Walnut Street, Suite 200
 
Common Stock:
Kansas City, MO 64106
 
EPR
888-EPR-REIT
 
Preferred Stock:
www.eprkc.com
 
EPR-PrC
 
 
EPR-PrE
STOCK EXCHANGE LISTING
 
EPR-PrG
New York Stock Exchange
 
 
EQUITY RESEARCH COVERAGE
 
 
 
Bank of America Merrill Lynch
Jeffrey Spector/Joshua Dennerlein
646-855-1363
Citi Global Markets
Michael Bilerman/Nick Joseph
212-816-4471
Janney Montgomery Scott
Rob Stevenson
646-840-3217
J.P. Morgan
Anthony Paolone/Nikita Bely
212-622-6682
Kansas City Capital Associates
Jonathan Braatz
816-932-8019
Keybanc Capital Markets
Jordan Sadler/Craig Mailman
917-368-2280
Ladenburg Thalmann
John Massocca
212-409-2056
Raymond James & Associates
Collin Mings
727-567-2585
RBC Capital Markets
Michael Carroll
440-715-2649
Stifel
Simon Yarmak
443-224-1345
SunTrust Robinson Humphrey
Ki Bin Kim
212-303-4124

EPR Properties is followed by the analysts identified above. Please note that any opinions, estimates, forecasts or recommendations regarding EPR Properties’ performance made by these analysts are theirs alone and do not represent opinions, estimates, forecasts or recommendations of EPR Properties or its management. EPR Properties does not by its reference above or distribution imply its endorsement of or concurrence with such information, conclusions or recommendations.

404873701_image5a13.jpg
 
 
Q2 2020 Supplemental
Page 5
 
 
 


SELECTED FINANCIAL INFORMATION
(UNAUDITED, DOLLARS AND SHARES IN THOUSANDS)

 
 
 
 
 
 
 
 
 
THREE MONTHS ENDED JUNE 30,
 
SIX MONTHS ENDED JUNE 30,
Operating Information:
2020
 
2019
 
2020
 
2019
Revenue (1)
$
106,360

 
$
161,740

 
$
257,372

 
$
312,267

Net (loss) income available to common shareholders of EPR Properties
(68,999
)
 
60,560

 
(37,915
)
 
119,875

EBITDAre (2)
58,537

 
133,683

 
173,667

 
265,179

Adjusted EBITDA (2)
77,801

 
140,606

 
207,730

 
276,745

Interest expense, net (1)
38,340

 
36,458

 
73,093

 
70,421

Capitalized interest
242

 
1,530

 
504

 
4,667

Straight-lined rental revenue
2,229

 
3,223

 
(7,479
)
 
5,637

Dividends declared on preferred shares
6,034

 
6,034

 
12,068

 
12,068

Dividends declared on common shares
30,081

 
86,097

 
119,077

 
170,440

General and administrative expense
10,432

 
12,230

 
21,420

 
24,360

 
 
 
 
 
 
 
 
 
JUNE 30,
 
 
 
 
Balance Sheet Information:
2020
 
2019
 
 
 
 
Total assets
$
7,002,978

 
$
6,746,655

 
 
 
 
Accumulated depreciation
1,034,771

 
954,806

 
 
 
 
Cash and cash equivalents
1,006,981

 
6,927

 
 
 
 
Total assets before accumulated depreciation less cash and cash equivalents (gross assets)
7,030,768

 
7,694,534

 
 
 
 
Debt
3,854,088

 
3,216,623

 
 
 
 
Deferred financing costs, net
35,907

 
31,957

 
 
 
 
Net debt (2)
2,883,014

 
3,241,653

 
 
 
 
Equity
2,736,257

 
3,044,898

 
 
 
 
Common shares outstanding
74,613

 
77,556

 
 
 
 
Total market capitalization (using EOP closing price)
5,725,973

 
9,397,591

 
 
 
 
Net debt/gross assets
41
%
 
42
%
 
 
 
 
Net debt/Adjusted EBITDA ratio (3)
Footnote 6

 
5.8

 
 
 
 
Adjusted net debt/Annualized adjusted EBITDA ratio (2)(4)(5)
Footnote 6

 
5.5

 
 
 
 
 
 
 
 
 
 
 
 
(1) Excludes discontinued operations.
(2) See pages 22 through 24 for definitions. See calculation as applicable on page 28.
(3) Adjusted EBITDA in this calculation is for the quarter multiplied times four. See pages 22 through 24 for definitions. See calculation on page 28.
(4) Adjusted net debt is net debt less 40% times property under development. See pages 22 through 24 for definitions.
 
 
 
 
(5) Annualized adjusted EBITDA is adjusted EBITDA for the quarter further adjusted for in-service and disposed projects, percentage rent and participating interest and other non-recurring items which is then multiplied times four. These calculations can be found on page 28 under the reconciliation of Adjusted EBITDA and Annualized Adjusted EBITDA. See pages 22 through 24 for definitions.
(6) Not presented as this ratio is not meaningful given the temporary disruption caused by COVID-19 and the associated accounting for tenant rent deferrals and other lease modifications.

404873701_image5a13.jpg
 
 
Q2 2020 Supplemental
Page 6
 
 
 


SELECTED BALANCE SHEET INFORMATION
(UNAUDITED, DOLLARS IN THOUSANDS)
 
 
 
 
 
 
 
 
 
 
 
 
 
ASSETS
 
2ND QUARTER 2020
 
1ST QUARTER 2020
 
4TH QUARTER 2019
 
3ND QUARTER 2019
 
2ND QUARTER 2019
 
1ST QUARTER 2019
Real estate investments
 
$
6,144,830

 
$
6,208,685

 
$
6,186,562

 
$
6,558,790

 
$
6,553,052

 
$
5,992,707

Less: accumulated depreciation
 
(1,034,771
)
 
(1,023,993
)
 
(989,254
)
 
(989,480
)
 
(954,806
)
 
(920,409
)
Land held for development
 
26,244

 
28,080

 
28,080

 
28,080

 
28,080

 
28,080

Property under development
 
39,039

 
30,063

 
36,756

 
31,825

 
80,695

 
315,237

Operating lease right-of-use assets
 
189,058

 
207,605

 
211,187

 
219,459

 
220,758

 
211,299

Mortgage notes and related accrued interest receivable
 
357,668

 
356,666

 
357,391

 
413,695

 
550,131

 
527,627

Investment in direct financing leases, net
 

 

 

 
20,727

 
20,675

 
20,616

Investment in joint ventures
 
28,925

 
33,897

 
34,317

 
35,222

 
35,658

 
35,188

Cash and cash equivalents
 
1,006,981

 
1,225,122

 
528,763

 
115,839

 
6,927

 
11,116

Restricted cash
 
2,615

 
4,583

 
2,677

 
5,929

 
5,010

 
11,166

Accounts receivable
 
134,774

 
72,537

 
86,858

 
99,190

 
108,433

 
111,146

Other assets
 
107,615

 
112,095

 
94,174

 
94,014

 
92,042

 
87,458

Total assets
 
$
7,002,978

 
$
7,255,340

 
$
6,577,511

 
$
6,633,290

 
$
6,746,655

 
$
6,431,231

 
 
 
 
 
 
 
 
 
 
 
 
 
LIABILITIES AND EQUITY
 
 
 
 
 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
Accounts payable and accrued liabilities
 
$
96,454

 
$
112,167

 
$
122,939

 
$
121,351

 
$
126,015

 
$
117,746

Operating lease liabilities
 
229,030

 
232,343

 
235,650

 
244,358

 
245,372

 
235,612

Common dividends payable
 
19

 
30,063

 
29,424

 
29,340

 
29,084

 
28,306

Preferred dividends payable
 
6,034

 
6,034

 
6,034

 
6,034

 
6,034

 
6,034

Unearned rents and interest
 
81,096

 
84,190

 
74,829

 
89,797

 
78,629

 
85,012

Line of credit
 
750,000

 
750,000

 

 

 
240,000

 
70,000

Deferred financing costs, net
 
(35,907
)
 
(35,933
)
 
(37,165
)
 
(38,384
)
 
(31,957
)
 
(32,838
)
Other debt
 
3,139,995

 
3,139,995

 
3,139,995

 
3,139,995

 
3,008,580

 
3,008,580

Total liabilities
 
4,266,721

 
4,318,859

 
3,571,706

 
3,592,491

 
3,701,757

 
3,518,452

Equity:
 
 
 
 
 
 
 
 
 
 
 
 
Common stock and additional paid-in-capital
 
3,849,803

 
3,845,911

 
3,835,674

 
3,815,278

 
3,759,032

 
3,597,916

Preferred stock at par value
 
148

 
148

 
148

 
148

 
148

 
148

Treasury stock
 
(260,351
)
 
(154,357
)
 
(147,435
)
 
(147,435
)
 
(147,143
)
 
(146,906
)
Accumulated other comprehensive income
 
(4,331
)
 
(5,289
)
 
7,275

 
4,659

 
5,174

 
8,397

Distributions in excess of net income
 
(849,012
)
 
(749,932
)
 
(689,857
)
 
(631,851
)
 
(572,313
)
 
(546,776
)
Total equity
 
2,736,257

 
2,936,481

 
3,005,805

 
3,040,799

 
3,044,898

 
2,912,779

Total liabilities and equity
 
$
7,002,978

 
$
7,255,340

 
$
6,577,511

 
$
6,633,290

 
$
6,746,655

 
$
6,431,231

 
 
 
 
 
 
 
 
 
 
 
 
 

404873701_image5a13.jpg
 
 
Q2 2020 Supplemental
Page 7
 
 
 


SELECTED OPERATING DATA
(UNAUDITED, DOLLARS IN THOUSANDS)
 
 
 
 
 
 
 
 
 
 
 
 
 
2ND QUARTER 2020
 
1ST QUARTER 2020
 
4TH QUARTER 2019
 
3RD QUARTER 2019
 
2ND QUARTER 2019
 
1ST QUARTER 2019
Rental revenue
$
97,531

 
$
135,043

 
$
154,765

 
$
150,962

 
$
147,003

 
$
140,292

Other income
416

 
7,573

 
8,386

 
11,464

 
5,726

 
344

Mortgage and other financing income
8,413

 
8,396

 
7,195

 
6,930

 
9,011

 
9,891

Total revenue
106,360

 
151,012

 
170,346

 
169,356

 
161,740

 
150,527

 


 
 
 
 
 
 
 
 
 
 
Property operating expense
15,329

 
13,093

 
16,097

 
14,494

 
14,597

 
15,551

Other expense
2,798

 
9,534

 
10,173

 
11,403

 
8,091

 

General and administrative expense
10,432

 
10,988

 
10,831

 
11,600

 
12,230

 
11,710

Severance expense

 

 
423

 
1,521

 

 
420

Costs associated with loan refinancing or payoff
820

 

 

 
38,269

 

 

Interest expense, net
38,340

 
34,753

 
34,914

 
36,667

 
36,458

 
33,963

Transaction costs
771

 
1,075

 
5,784

 
5,959

 
6,923

 
5,123

Credit loss expense
3,484

 
1,192

 

 

 

 

Impairment charges
51,264

 

 
2,206

 

 

 

Depreciation and amortization
42,450

 
43,810

 
42,398

 
41,644

 
38,790

 
36,002

(Loss) income before equity in (loss) income from joint ventures, other items and discontinued operations
(59,328
)
 
36,567

 
47,520

 
7,799

 
44,651

 
47,758

Equity in (loss) income from joint ventures
(1,724
)
 
(420
)
 
(905
)
 
(435
)
 
470

 
489

Impairment charges on joint ventures
(3,247
)
 

 

 

 

 

Gain (loss) on sale of real estate
22