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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200805006002/en/
EPR Properties Brian Moriarty, 888-EPR-REIT
www.eprkc.com
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