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EPR Properties Reports Fourth Quarter and 2020 Year-end Results

·18-min read

EPR Properties (NYSE:EPR) today announced operating results for the fourth quarter and year ended December 31, 2020 (dollars in thousands, except per share data):

Three Months Ended
December 31,

Year Ended December 31,

2020 (1)

2019 (2)

2020 (1)

2019 (2)

Total revenue from continuing operations

$

93,412

$

170,346

$

414,661

$

651,969

Net (loss) income available to common shareholders

(26,011

)

30,263

(155,864

)

178,107

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

(0.35

)

0.39

(2.05

)

2.32

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

13,088

99,667

108,733

423,186

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

0.18

1.26

1.43

5.44

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

17,352

99,160

143,430

422,726

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

0.23

1.25

1.89

5.44

(1) The operating results for the three months and year ended December 31, 2020, include $2.4 million and $65.1 million of straight-line and other receivable write-offs, or $0.03 per share and $0.86 per share, respectively, related primarily to customers moved to cash basis for revenue recognition purposes during the year ended December 31, 2020. These write-offs are reflected in all metrics in these columns except that AFFO per diluted share for the three months and year ended December 31, 2020 excludes the impact of the straight-line portion of these write-offs totaling $1.0 million and $38.0 million, respectively.

(2) The operating results of the Company's public charter school portfolio for the three months and year ended December 31, 2019, include $1.2 million and $24.1 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 during the fourth quarter of 2019.

Fourth Quarter Company Headlines

  • Quarterly Collections Continue to Ramp Up - Cash collections from customers continue to improve and were approximately 46% of pre-COVID contractual cash revenue for the fourth quarter. January and February 2021 cash collections increased to approximately 66% and 64% of pre-COVID contractual cash revenue, respectively.

  • Significant Capital Recycling - During the fourth quarter, the Company received $224.0 million in net proceeds and recognized a net gain of $49.9 million from property dispositions including the exercise of a tenant purchase option on six private schools and four early childhood education centers.

  • Strong Liquidity Position - The Company had cash on hand in excess of $1.0 billion at year-end. Subsequent to year-end, due to stronger collections, proceeds from dispositions and significant liquidity, the Company used a portion of its cash on hand to reduce borrowings under its unsecured revolving credit facility by $500.0 million, resulting in a remaining balance of $90.0 million on this $1.0 billion facility.

  • Extension of Covenant Waivers - Waivers of certain covenants related to the Company’s bank credit facilities and private placement notes have been extended through December 31, 2021, subject to certain conditions as previously disclosed, providing additional flexibility to work through issues with customers as needed.

CEO Comments

"We have continued to successfully focus on several key areas in light of the ongoing impact of the pandemic, including improving cash collections, maintaining strong liquidity and remaining in compliance with our debt agreements," stated Greg Silvers, Company President and CEO. "With 94% of our non-theatre tenants open and operating, we are encouraged by the resilience displayed by many of our tenants and anticipate that theatres will follow a similar pattern when they open more widely and key titles are consistently released. We are also pleased with the capital recycling we completed during the quarter, which allowed us to further enhance our balance sheet and progress in our evolution towards an experientially focused portfolio. While it will take time for a full post-vaccine rebound, we are optimistic as we are seeing stabilization, and believe that we remain solidly positioned with improving cash collections and strong liquidity."

COVID-19 Response and Update

Collections and Property Openings

Approximately 94% of the Company's non-theatre and 60% of the Company's theatre locations were open for business as of February 23, 2021. Cash collections from tenants and borrowers continued to improve and were 46% of pre-COVID contractual cash revenue for the fourth quarter vs. 29% and 43% in the second and third quarter, respectively. Such cash collections further increased to 66% and 64% in January and February of 2021, respectively. Pre-COVID contractual cash revenue is an operational measure and represents aggregate cash payments for which the Company was entitled under existing contracts prior to the COVID-19 pandemic, excluding percentage rent (rents received over base amounts) and cash payments for subsequently disposed properties, net.

Customers representing approximately 95% of our pre-COVID contractual cash revenue are either paying their pre-COVID-19 contract rent or interest or have a deferral agreement in place. In those deferral agreements, we have granted approximately 5% of permanent rent and interest payment reductions. However, there can be no assurance that additional permanent rent or interest payment reductions or other term modifications will not occur in future periods in light of the continued adverse impact of the pandemic, particularly ongoing uncertainty in the theatre industry.

Theatre Update

Theatre operators are facing several challenges as they diligently try to reopen. As a result of the impact of the COVID-19 pandemic, some of the Company's theatre locations remain closed due to state and local restrictions, including key markets in New York and California. Other theatres are closed by operator choice as movie studios have delayed the release of blockbuster movies in hopes that larger audiences will be available as additional markets open. The delay of these movie releases has had a significant negative impact on current and expected box office performance.

Due to the challenges facing theatres and the continued uncertainty caused by the pandemic during 2020, the Company determined it was appropriate to begin recognizing revenue from AMC and Regal as well as certain other customers on a cash basis. Accordingly, the Company recorded write-offs of accounts receivable of approximately $2.4 million, or $0.03 per share, and $65.1 million, or $0.86 per share, for the three months and year ended December 31, 2020, respectively, related to tenants moved to cash-basis for revenue recognition purposes. The write-offs were recorded primarily as a reduction in rental revenue and consisted of $1.0 million and $38.0 million in straight line rent receivables and $1.4 million and $27.1 million of other receivables for the three months and year ended December 31, 2020, respectively. In addition, contractual and other rent abatements totaled $6.8 million and $13.6 million for the three months and year ended December 31, 2020, respectively.

Below provides an update of classification of customers as of December 31, 2020:

Classification of Customers

($ in millions)

Annualized Revenue (1)

No Payment Deferral

$

88

14

%

Sold Properties

25

4

%

Payments Deferred and Recognized as Revenue During Deferral Period

231

37

%

Payments Deferred But Not Recognized as Revenue During Deferral Period

30

5

%

Cash Basis/Lease Restructurings (2)

233

37

%

New Vacancies

17

3

%

Total

$

624

100

%

(1) Represents pre-COVID contractual cash revenue plus pre-COVID percentage rent, both of which have been annualized.

(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. This category includes AMC and Regal.

Capital Recycling

On December 29, 2020, pursuant to a tenant purchase option, the Company completed the sale of six private schools and four early childhood education centers for net proceeds of $201.2 million and recognized a gain on sale of $39.7 million. The Company realized an unlevered internal rate of return of 13% over the life of its ownership of these assets.

Additionally, during the quarter ended December 31, 2020, the Company completed the sale of four experiential properties and two land parcels for net proceeds totaling $22.8 million and recognized a combined gain on sale of $10.2 million.

Strong Liquidity Position

The Company remains focused on maintaining strong liquidity and financial flexibility through the pandemic. The Company’s cash provided by operations (which includes interest payments) was $5.8 million during the quarter. The Company has no scheduled debt maturities until 2022 and had over $1.0 billion of cash on hand at year-end. As previously disclosed, during the fourth quarter, the Company amended the agreements governing its bank credit facilities and private placement notes to, among other things, extend the waiver of the Company's obligations to comply with certain covenants through the earlier of December 31, 2021, or when the Company provides notice that it elects to terminate the covenant relief period, subject to certain conditions.

In January 2021, due to stronger collections, proceeds from dispositions and significant liquidity, the Company used $500.0 million of its cash on hand to reduce the balance outstanding on its $1.0 billion unsecured revolving credit facility from $590.0 million to $90.0 million.

Other Charges

As a result of the ongoing impact of the COVID-19 pandemic, the Company reassessed the expected holding period of four theatre properties during the fourth quarter, and determined that the estimated cash flows were not sufficient to recover the carrying value. Accordingly, during the three months ended December 31, 2020, the Company recognized non-cash impairment charges on real estate investments of $22.8 million for these properties. Also during the fourth quarter, the Company recognized credit loss expense totaling $20.3 million that primarily related to fully reserving the outstanding principal balance of $6.1 million and the unfunded commitment to fund $12.9 million related to notes receivable from one borrower, as a result of recent changes in the borrower's financial status due to the COVID-19 pandemic. Additionally, during the fourth quarter, the Company recognized $2.9 million in severance expense.

Portfolio Update

The Company's total investments (a non-GAAP financial measure) were approximately $6.5 billion at December 31, 2020 with Experiential totaling $5.9 billion, or 91%, and Education totaling $0.6 billion, or 9%.

The Company's Experiential portfolio (excluding property under development) consisted of the following property types (owned or financed) at December 31, 2020:

  • 178 theatre properties;

  • 55 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 December 31, 2020, the Company's owned Experiential portfolio consisted of approximately 19.3 million square feet, which was 93.8% leased and included $57.6 million in property under development and $20.2 million in undeveloped land inventory.

The Company's Education portfolio consisted of the following property types (owned or financed) at December 31, 2020:

  • 65 early childhood education center properties; and

  • 10 private school properties.

As of December 31, 2020, the Company's owned Education portfolio consisted of approximately 1.4 million square feet, which was 100% leased and included $3.0 million in undeveloped land inventory.

The combined owned portfolio consisted of 20.7 million square feet and was 94.2% leased.

Investment Update

The Company's investment spending for the three months ended December 31, 2020 totaled $22.8 million (bringing the year-to-date investment spending to $85.1 million), and included spending on Experiential build-to-suit development and redevelopment projects.

Dividend Information

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 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 February 25, 2021 at 8:30 a.m. Eastern Time. The call may also include discussion of Company developments, and forward-looking and other material information about business and financial matters. The conference will be webcast and can be accessed via the Webcasts page in the Investor Center on the Company's website located at https://investors.eprkc.com/webcasts. To access the call, audio only, dial (866) 587-2930 and when prompted, provide the passcode 5899833.

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

Quarterly and Year-end Supplemental

The Company's supplemental information package for the fourth quarter and year ended December 31, 2020 is available in the Investor Center on the Company's website located at https://investors.eprkc.com/earnings-supplementals.

EPR Properties

Consolidated Statements of (Loss) Income

(Unaudited, dollars in thousands except per share data)

Three Months Ended December 31,

Year Ended December 31,

2020

2019

2020

2019

Rental revenue

$

84,011

$

154,765

$

372,176

$

593,022

Other income

968

8,386

9,139

25,920

Mortgage and other financing income

8,433

7,195

33,346

33,027

Total revenue

93,412

170,346

414,661

651,969

Property operating expense

16,406

16,097

58,587

60,739

Other expense

1,462

10,173

16,474

29,667

General and administrative expense

11,142

10,831

42,596

46,371

Severance expense

2,868

423

2,868

2,364

Costs associated with loan refinancing or payoff

812

1,632

38,269

Interest expense, net

42,838

34,914

157,675

142,002

Transaction costs

814

5,784

5,436

23,789

Credit loss expense

20,312

30,695

Impairment charges

22,832

2,206

85,657

2,206

Depreciation and amortization

42,014

42,398

170,333

158,834

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

(68,088

)

47,520

(157,292

)

147,728

Equity in loss from joint ventures

(1,364

)

(905

)

(4,552

)

(381

)

Impairment charges on joint ventures

(3,247

)

Gain on sale of real estate

49,877

3,717

50,119

4,174

(Loss) income before income taxes

(19,575

)

50,332

(114,972

)

151,521

Income tax (expense) benefit

(402

)

530

(16,756

)

3,035

(Loss) income from continuing operations

$

(19,977

)

$

50,862

$

(131,728

)

$

154,556

Discontinued operations:

Income from discontinued operations before other items

4,937

37,241

Impairment on public charter school portfolio sale

(21,433

)

(21,433

)

Gain on sale of real estate from discontinued operations

1,931

31,879

(Loss) income from discontinued operations

(14,565

)

47,687

Net (loss) income

(19,977

)

36,297

(131,728

)

202,243

Preferred dividend requirements

(6,034

)

(6,034

)

(24,136

)

(24,136

)

Net (loss) income available to common shareholders of EPR Properties

$

(26,011

)

$

30,263

$

(155,864

)

$

178,107

Net (loss) income available to common shareholders of EPR Properties per share:

Continuing operations

$

(0.35

)

$

0.57

$

(2.05

)

$

1.70

Discontinued operations

(0.18

)

0.62

Basic

$

(0.35

)

$

0.39

$

(2.05

)

$

2.32

Continuing operations

$

(0.35

)

$

0.57

$

(2.05

)

$

1.70

Discontinued operations

(0.18

)

0.62

Diluted

$

(0.35

)

$

0.39

$

(2.05

)

$

2.32

Shares used for computation (in thousands):

Basic

74,615

78,456

75,994

76,746

Diluted

74,615

78,485

75,994

76,782

EPR Properties

Condensed Consolidated Balance Sheets

(Unaudited, dollars in thousands)

December 31,

2020

2019

Assets

Real estate investments, net of accumulated depreciation of $1,062,087 and $989,254 at December 31, 2020 and 2019, respectively

$

4,851,302

$

5,197,308

Land held for development

23,225

28,080

Property under development

57,630

36,756

Operating lease right-of-use assets

163,766

211,187

Mortgage notes and related accrued interest receivable

365,628

357,391

Investment in joint ventures

28,208

34,317

Cash and cash equivalents

1,025,577

528,763

Restricted cash

2,433

2,677

Accounts receivable

116,193

86,858

Other assets

70,223

94,174

Total assets

6,704,185

$

6,577,511

Liabilities and Equity

Accounts payable and accrued liabilities

$

105,379

$

122,939

Operating lease liabilities

202,223

235,650

Dividends payable

6,070

35,458

Unearned rents and interest

65,485

74,829

Debt

3,694,443

3,102,830

Total liabilities

4,073,600

3,571,706

Total equity

$

2,630,585

$

3,005,805

Total liabilities and equity

$

6,704,185

$

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 months and year ended December 31, 2019. The operating results relating to discontinued operations are as follows (unaudited, dollars in thousands):

Three Months Ended
December 31, 2019

Year Ended
December 31, 2019

Rental revenue

$

5,231

$

36,289

Mortgage and other financing income

1,863

14,284

Total revenue

7,094

50,573

Property operating expense

(11

)

573

Costs associated with loan refinancing or payoff

43

181

Interest expense, net

(7

)

(351

)

Depreciation and amortization

2,132

12,929

Income from discontinued operations before other items

4,937

37,241

Impairment on public charter school portfolio sale

(21,433

)

(21,433

)

Gain on sale of real estate

1,931

31,879

(Loss) Income from discontinued operations

$

(14,565

)

$

47,687

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 (loss) 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 gain on insurance recovery and deferred income tax (benefit) expense. AFFO is presented by adding to FFOAA non-real estate depreciation and amortization, deferred financing fees amortization, share-based compensation expense to management and Trustees and amortization of above and below market leases, net and tenant allowances; and subtracting maintenance capital expenditures (including second generation tenant improvements and leasing commissions), straight-lined rental revenue (removing 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 (loss) 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 months and year ended December 31, 2020 and 2019 and reconciles such measures to net (loss) 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 December 31,

Year Ended December 31,

2020

2019

2020

2019

FFO:

Net (loss) income available to common shareholders of EPR Properties

$

(26,011

)

$

30,263

$

(155,864

)

$

178,107

Gain on sale of real estate

(49,877

)

(5,648

)

(50,119

)

(36,053

)

Impairment of real estate investments, net (1)

22,832

23,639

70,648

23,639

Real estate depreciation and amortization

41,786

44,242

169,253

170,717

Allocated share of joint venture depreciation

361

551

1,491

2,213

Impairment charges on joint ventures

3,247

FFO available to common shareholders of EPR Properties

$

(10,909

)

$

93,047

$

38,656

$

338,623

FFO available to common shareholders of EPR Properties

$

(10,909

)

$

93,047

$

38,656

$

338,623

Add: Preferred dividends for Series C preferred shares

1,937

7,754

Add: Preferred dividends for Series E preferred shares

1,939

7,756

Diluted FFO available to common shareholders of EPR Properties

$

...

)

$

96,923

$

38,656

$

354,133

...

FFOAA:

FFO available to common shareholders of EPR Properties

$

(10,909

)

$

93,047

$

38,656

$

338,623

Costs associated with loan refinancing or payoff

812

43

1,632

38,450

Transaction costs

814

5,784

5,436

23,789

Severance expense

2,868

423

2,868

2,364

Termination fees included in gain on sale

1,217

24,075

Gain on insurance recovery (included in other income)

(809

)

(809

)

Impairment of operating lease right-of-use assets (1)

15,009

Credit loss expense

20,312

30,695

Deferred income tax (benefit) expense

(847

)

15,246

(4,115

)

FFOAA available to common shareholders of EPR Properties

$

13,088

$

99,667

$

108,733

$

423,186

FFOAA available to common shareholders of EPR Properties

$

13,088

$

99,667

$

108,733

$

423,186

Add: Preferred dividends for Series C preferred shares

1,937

7,754

Add: Preferred dividends for Series E preferred shares

1,939

7,756

Diluted FFOAA available to common shareholders of EPR Properties

$

13,088

$

103,543

$

108,733

$

438,696

AFFO:

FFOAA available to common shareholders of EPR Properties

$

13,088

$

99,667

$

108,733

$

423,186

Non-real estate depreciation and amortization

228

288

1,080

1,045

Deferred financing fees amortization

1,823

1,621

6,606

6,192

Share-based compensation expense to management and trustees

3,437

3,349

13,819

13,180

Amortization of above and below market leases, net and tenant allowances

(96

)

(119

)

(480

)

(343

)

Maintenance capital expenditures (2)

(247

)

(2,276

)

(11,377

)

(5,453

)

Straight-lined rental revenue

(898

)

(3,516

)

24,550

(13,552

)

Straight-lined ground sublease expense

150

237

749

882

Non-cash portion of mortgage and other financing income

(133

)

(91

)

(250

)

(2,411

)

AFFO available to common shareholders of EPR Properties

$

17,352

$

99,160

$

143,430

$

422,726

AFFO available to common shareholders of EPR Properties

$

17,352

$

99,160

$

143,430

$

422,726

Add: Preferred dividends for Series C preferred shares

1,937

7,754

Add: Preferred dividends for Series E preferred shares

1,939

7,756

Diluted AFFO available to common shareholders of EPR Properties

$

17,352

$

103,036

$

143,430

$

438,236

FFO per common share:

Basic

$

(0.15

)

$

1.19

$

0.51

$

4.41

Diluted

(0.15

)

1.18

0.51

4.39

FFOAA per common share:

Basic

$

0.18

$

1.27

$

1.43

$

5.51

Diluted

0.18

1.26

1.43

5.44

AFFO per common share:

Basic

$

0.23

$

1.26

$

1.89

$

5.51

Diluted

0.23

1.25

1.89

5.44

Shares used for computation (in thousands):

Basic

74,615

78,456

75,994

76,746

Diluted

74,615

78,485

75,994

76,782

Weighted average shares outstanding-diluted EPS

74,615

78,485

75,994

76,782

Effect of dilutive Series C preferred shares

2,184

2,164

Effect of dilutive Series E preferred shares

1,640

1,631

Adjusted weighted average shares outstanding-diluted Series C and Series E

74,615

82,309

75,994

80,577

Other financial information:

Dividends per common share

$

$

1.1250

$

1.5150

$

4.5000

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

(1) Impairment charges recognized during the year ended December 31, 2020 totaled $85.7 million, which was comprised of $70.7 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, FFOAA and AFFO per share for the three months and year ended December 31, 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, FFOAA and AFFO 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 (loss) income, computed in accordance with GAAP, excluding interest expense (net), income tax (benefit) expense, depreciation and amortization, gains and losses from disposition of real estate, impairment losses on real estate, costs associated with loan refinancing or payoff and adjustments for unconsolidated partnerships, joint ventures and other affiliates.

Management provides EBITDAre herein because it believes this information is useful to investors as a supplemental performance measure as it can help facilitate comparisons of operating performance between periods and with other REITs. The Company's method of calculating EBITDAre may be different from methods used by other REITs and, accordingly, may not be comparable to such other REITs. EBITDAre is not a measure of performance under GAAP, does not represent cash generated from operations as defined by GAAP and is not indicative of cash available to fund all cash needs, including distributions. This measure should not be considered an alternative to net income or any other GAAP measure as a measurement of the results of the Company's operations or cash flows or liquidity as defined by GAAP.

Adjusted EBITDAre

Management uses Adjusted EBITDAre in its analysis of the performance of the business and operations of the Company. Management believes Adjusted EBITDAre is useful to investors because it excludes various items that management believes are not indicative of operating performance, and that it is an informative measure to use in computing various financial ratios to evaluate the Company. The Company defines Adjusted EBITDAre as EBITDAre (defined above) for the quarter excluding gain on insurance recovery, severance expense, credit loss expense, transaction costs, impairment losses on operating lease right-of-use assets and prepayment fees. For the three months ended December 31, 2020, Adjusted EBITDAre was further adjusted to add back prior period receivable write-offs related to certain theatre tenants placed on cash basis or receiving abatements during the quarter.

The Company's method of calculating Adjusted EBITDAre may be different from methods used by other REITs and, accordingly, may not be comparable to such other REITs. Adjusted EBITDAre is not a measure of performance under GAAP, does not represent cash generated from operations as defined by GAAP and is not indicative of cash available to fund all cash needs, including distributions. This measure should not be considered as an alternative to net income or any other GAAP measure as a measurement of the results of the Company's operations or cash flows or liquidity as defined by GAAP.

Reconciliations of debt, total assets and net (loss) income (all reported in accordance with GAAP) to Net Debt, Gross Assets, Net Debt to Gross Assets, EBITDAre and Adjusted EBITDAre (each of which is a non-GAAP financial measure), as applicable, are included in the following tables (unaudited, in thousands):

December 31,

2020

2019

Net Debt:

Debt

$

3,694,443

$

3,102,830

Deferred financing costs, net

35,552

37,165

Cash and cash equivalents

(1,025,577

)

(528,763

)

Net Debt

$

2,704,418

$

2,611,232

Gross Assets:

Total Assets

$

6,704,185

$

6,577,511

Accumulated depreciation

1,062,087

989,254

Cash and cash equivalents

(1,025,577

)

(528,763

)

Gross Assets

$

6,740,695

$

7,038,002

Net Debt to Gross Assets

40

%

37

%

Three Months Ended December 31,

2020

2019

EBITDAre and Adjusted EBITDAre:

Net (loss) income

$

(19,977

)

$

36,297

Interest expense, net

42,838

34,907

Income tax expense (benefit)

402

(530

)

Depreciation and amortization

42,014

44,530

Gain on sale of real estate

(49,877

)

(5,648

)

Impairment of real estate investments, net

22,832

23,639

Costs associated with loan refinancing or payoff

812

43

Allocated share of joint venture depreciation

361

551

Allocated share of joint venture interest expense

872

735

EBITDAre

$

40,277

$

134,524

Gain on insurance recovery (1)

(809

)

Severance expense

2,868

423

Transaction costs

814

5,784

Credit loss expense

20,312

Accounts receivable write-offs from prior periods (2)

4,301

Straight-line receivable write-offs from prior periods (2)

870

Adjusted EBITDAre

$

68,633

$

140,731

Amounts above include the impact of discontinued operations, which are separately classified in the consolidated statements of (loss) income and comprehensive (loss) income.

(1) Included in other income in the accompanying consolidated statements of income. Other income includes the following:

Three Months Ended December 31,

2020

2019

Income from settlement of foreign currency swap contracts

$

110

$

252

Gain on insurance recovery

809

Operating income from operated properties

45

7,996

Miscellaneous income

4

138

Other income

$

968

$

8,386

(2) Included in rental revenue from continuing operations in the accompanying consolidated statements of (loss) income and comprehensive (loss) income. Rental revenue includes the following:

Three Months Ended December 31,

2020

2019

Minimum rent

$

79,342

$

139,529

Accounts receivable write-offs from prior periods

(4,301

)

Tenant reimbursements

4,831

5,790

Percentage rent

3,040

6,428

Straight-line rental revenue

1,768

2,926

Straight-line receivable write-offs from prior periods

(870

)

Other rental revenue

201

92

Rental revenue

$

84,011

$

154.765

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. The Company's 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):

December 31, 2020

December 31, 2019

Total Investments:

Real estate investments, net of accumulated depreciation

$

4,851,302

$

5,197,308

Add back accumulated depreciation on real estate investments

1,062,087

989,254

Land held for development

23,225

28,080

Property under development

57,630

36,756

Mortgage notes and related accrued interest receivable

365,628

357,391

Investment in joint ventures

28,208

34,317

Intangible assets, gross (1)

57,962

57,385

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

7,300

14,026

Total investments

$

6,453,342

$

6,714,517

Total investments

$

6,453,342

$

6,714,517

Operating lease right-of-use assets

163,766

211,187

Cash and cash equivalents

1,025,577

528,763

Restricted cash

2,433

2,677

Accounts receivable

116,193

86,858

Less: accumulated depreciation on real estate investments

(1,062,087

)

(989,254

)

Less: accumulated amortization on intangible assets

(16,330

)

(12,693

)

Prepaid expenses and other current assets

21,291

35,456

Total assets

$

6,704,185

$

6,577,511

(1) Included in other assets in the accompanying consolidated balance sheet. Other assets include the following:

December 31, 2020

December 31, 2019

Intangible assets, gross

$

57,962

$

57,385

Less: accumulated amortization on intangible assets

(16,330

)

(12,693

)

Notes receivable and related accrued interest receivable, net

7,300

14,026

Prepaid expenses and other current assets

21,291

35,456

Total other assets

$

70,223

$

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 $6.5 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 Annual Report on Form 10-K is filed. With the exception of historical information, certain statements contained or incorporated by reference herein may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), such as those pertaining to the uncertain financial impact of the COVID-19 pandemic, our capital resources and liquidity, our expected cash flows and liquidity, continuing waivers of financial covenants related to our bank credit facilities and private placement notes, the performance of our customers, including AMC and Regal, our expected cash collections, expected use of proceeds from dispositions 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. Forward-looking statements necessarily are dependent on assumptions, data or methods that may be incorrect or imprecise. These forward-looking statements represent our intentions, plans, expectations and beliefs and are subject to numerous assumptions, risks and uncertainties. Many of the factors that will determine these items are beyond our ability to control or predict. For further discussion of these factors see "Item 1A. Risk Factors" in our most recent Annual Report on Form 10-K and, to the extent applicable, our Quarterly Reports on Form 10-Q.

For these statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. You are cautioned not to place undue reliance on our forward-looking statements, which speak only as of the date hereof or the date of any document incorporated by reference herein. All subsequent written and oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. Except as required by law, we do not undertake any obligation to release publicly any revisions to our forward-looking statements to reflect events or circumstances after the date hereof.

View source version on businesswire.com: https://www.businesswire.com/news/home/20210224006016/en/

Contacts

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