EPR Properties

Hello and welcome to the EPR Properties First Quarter 2026 Earnings Call. We ask that you please hold all questions until the completion of the formal remarks, at which time you will be given instructions for the question and answer session.

Also, as a reminder, this conference call is being recorded today.

If you have any objections, please disconnect at this time. I will now hand the floor over to Brian Moriarty, CEO and Vice President of Corporate Community Communications.

Thank you, operator. Thanks for joining us today for our first quarter 2026 earnings call on the webcast. Participants on today's call are Greg Silver, Chairman and CEO, Ben Fox, Executive Vice President and CIO, and Mark Peterson, Executive Vice President and CFO. I'll start by informing you that this is my main clue for the Wednesday Statements as outlined by the Private Securities Litigation Act of 1995, identified by such words as will be, intend, continue to believe, and may expect, hope, anticipate, or other such comparable terms. Accompanying the actual financial condition and the results of operations made very, very materially from the non-conflict of such words in the Wednesday Statements. Discussion shows that factors that would cause results to differ materially from these four key statements are contained in the company's SEC filings, including the company's reports on Form 10-K and 10-Q. Additionally, this will contain references to certain non-GAAP measures, which we believe are useful in evaluating the company's performance. A reconciliation of these measures to the most directly comparable gap measures are included in today's earnings release and supplemental information for earnings to the SEC under Form 8K. If you wish to follow along, today's earnings release, supplemental, and earnings presentation are all available on the Investor Center page of the company's website, www.eprkc.com. Now I'm going to call over to Greg Silvers. Thank you, Brian.

Good morning, everyone, and welcome to our first quarter 2026 earnings call webcast. In previous quarters, we discussed our focus on accelerating growth. For the quarter, we delivered a 5.9% increase in FFO as adjusted per share versus the prior year, and an established strong momentum as we accelerate our investment spending for the year. The centerpiece of our investments was our announced acquisition of a seven-part regional portfolio of six flags. This $315 million portfolio is our largest acquisition in the post-COVID era, and we're pleased to own parts that have demonstrated success in the past and offer significant opportunities for the future. These properties comprise more than 1,600 acres across six states and Canada, including 418 natural attractions and established guest spaces that attract approximately 4.5 million visitors annually. We are delighted to be partnering with Proven Operators in changing parks from roughly U.S. parks and running operations from roughly Rome and Montreal. These parks have become safe for their communities and have established a multi-generational path of usage by delivering fun, exciting, and lasting memories. Supporting the sustainability of our portfolio and our confidence in our investments outlawed is the sustained growth of consumer spending in the industry's current economy. As we continue Personal consumption expenditures in most of the categories we've invested in have been growing for many years, and most recently increased 7% from 2020 to 2025. In an environment with a variety of macro and non-consumers, our overall portfolio coverage remains stable and resilient, with most tenants reporting steady or improved results. We're pleased to see Box Office running ahead of last year, supported by a variety of jobs and titles. Additionally, fitness and wellness continue to demonstrate resilience, as many consumers use this category as an essential part of their lifestyle. This reordering of priorities for consumers increasingly treat fitness and wellness as protected, non-discretionary spending, reinforces the duality of the asset segment, and supports the long-term thesis behind our investments in this category. Lastly, I want you to report that we're increasing both our investment spending and earnings guidance. Last year, we delivered 5.1% growth to FFO as adjusted per share. With today's update, the midpoint of our 2020 guidance for FFO as adjusted per share represents 6.5% growth. This significant growth reflects the strength of our investments to date, our future pipeline, the quality of our portfolio, and the momentum we've established. As our portfolio continues to expand and diversify, we anticipate additional opportunities to capitalize on the regional movement and strengthen our competitive advantage. Now I want to turn the call to Ben Fox, who is joining us for his first call as CIO. We look forward to his leadership contributions in the coming years.

Ben, Ben, please take it from here. Thank you, Greg. I appreciate that. I am very pleased with the positive momentum we have demonstrated today with our business activity. In the first quarter, we completed $51.3 million in investments, including the previously announced acquisition of a 5-by-5 line gym located on the lower east side of Hatton, as well as our committed development capital. Subsequent to our end, we completed the acquisition of six properties from Six Flags Entertainment. This is a no-no investment which further diversifies the portfolio alongside best-in-class operators and underscores our proposition we are uniquely positioned to deliver. Our deep roster of fine relationships enabled us to provide Six Flags with a one-stop solution as it sought to reduce its operating footprint. By bringing trusted, proven operating partners to the table, we helped Six Flags achieve its objectives while acquiring irreplaceable real estate. In addition to these high-line investments, as of March 31st, we expect approximately $71 million in additional development and redevelopment projects, substantially all in which we're fond of the balance of this year. Given the acceleration in our investment velocity, we're pleased to increase our investment guidance to $500 million to $600 million, which represents our highest investment expectation since COVID.

This increase is reflective of the depth and breadth of opportunities we're

We expect investment activity for 2026 to be weighted more toward acquisitions than development. We also expect to continue employing convertible or other similar mortgage structures selectively where it makes sense for us and our clients. Significantly, this increase in investment pay cases demonstrates the depth and quality of relationships our business team has created. Allowing us to generate attractive, proprietary fuel flow across the experience economy. Before turning to the portfolio update. sector is generally a competitive market, we're seeing cap rates only stay for the investments we target. Again, this is reflective of the unique relationships we have and the insights that our underlying asset management teams provide. If anything, the continued volatility in the capital markets is provided by an uplift in both the number and the course line conversion ratio for turning these opportunities into closed investments. Turn now to an authentic portfolio. At the end of the quarter, our portfolio represents $7.1 million of gross investment value. The remaining 60% of the portfolio represents an education segment comprised of 55 properties leased by 5 operators. At the end of the quarter, these properties were 100% eased. Importantly, the portfolio remains very healthy, with two times the level of coverage. This coverage demonstrates the resilience of our portfolio diversification tree. Moreover, it's also reflective of resilient consumer spending patterns and the continued prioritization of senior businesses. Notably, within our industry segment, the first quarter saw a 25% increase in North American box office gross, benefiting from an increase in both attendance and the number of films released. The current film selling sets the rest of the year very favorably compared to last year. Several recent announcements have continued to endure uncertainty while demonstrating the enduring power of theatrical exhibition. First, both the writers and screenwriters' guilds have reached new four-year agreements, removing any concerns or strikes for the foreseeable future. Second, Amazon's RGM has announced a commitment to 15 theatrical releases in 2027, with the standard theatrical window of 45 days. Following this move, Universal Service Forrester on its previous 17-day window now made it to the 16-day window within at least 45 days. And most recently, Netflix announced on Friday that the upcoming release of Narnia, which initially was slated for a two-week release exclusively in IMAX, will be getting a wide release in both IMAX and standard formats for a 49-day theatrical window before moving to streaming. These movements reflect the studio's recognition that theatrical releases serve a dual purpose, generating success as an economic front, while meaningfully enhancing the value of the film's streaming window downstream. Within the indie play segment, our artworks were formed in line with the prior year, seeing a small amount of attendance volatility offset by higher average spending per visit.

Geographic preservation

With significant outperformance in the Middle Atlantic to East Coast properties, more than offsetting historically poor snowfall across the western United States. Our fitness and wellness segment continues to deliver a solid performance and we're continuing to see incremental gains at some of our recent results. Lastly, our education portfolio continues to perform well, and coverage in this segment remains strong. Touching upon dispositions, the asset management team has done an outstanding job over the past several years on risk management and on resolving naked cases. Although dispositions targeting proactive risk management will remain a core element of our asset management strategy, in the near term will be on generating creative proceeds through sales of non-agore assets. Accordingly, we are increasing our distribution guides by $25 million on the lower and upper bounds to a new range of $15 million to $100 million. In summary, our portfolio continues to be resilient, and we remain enthusiastic about the investment landscape. We are encouraged by the depth of our investment pipeline at this point in the year and have confidence in our revised investment guidance. With that, I'll turn it over to Mark for a review of our financial performance.

Thank you, Ben. Today I discussed our strong financial performance for the first quarter, provided an updated balance sheet, and closed by discussing the increases to our revised investment spending guidance for the year. FFO's adjusted for the quarter was $1.26 per share, versus $1.19 in the prior year, an increase of 5.99%, and an AFO for the quarter was $1.29 per share, compared to $1.21 in the prior year, an increase of 6.66%. Before I walk you through the key variances amongst 22 items excluded from FFO's adjusted and AFO, First, during the quarter, we exercised a purchase option to convert a $7 million mortgage no receivable by an external lodging property into a wholly owned rental property subject to a long-term contractual lease. At the time of the conversion, we recognized a $1 million gain on real estate transactions and a $1.3 million benefit for credit losses. Second, the benefit for credit losses was $5.6 million for the quarter, and related to the first mention I discussed, as well as changes to our current expected credit losses in our third-party model, based on improvements to property level performance and certain relevant economic conditions. Now, moving to the key variances. Total revenue for the quarter was $101.3 million versus $175 million in the prior year, an increase of $6.3 million. This increase was mostly due to the impact of investment spending as well as the rent-to-interest response. This was partially offset by dispositions, and a decrease in the percentage of rents and participant interest, which was $2.5 million for the quarter, versus $5.1 million in the prior year. This decrease was mostly due to the period percentage of rent and participant interest totaling $2.99 million, recognized in the first quarter of 2005. Both other income and other expense related primarily to consolidated operating properties, including the Akai-Koakon Inland Water Park, and our four operating theaters. The decrease in the income expense for the first part of the year is primarily due to the sale of two operating theater properties in the first quarter of 2025. On the other side, the interest expense net increased by $1.7 million due to an increase in the average power earnings and a decrease in the capitalized interest for the first part of the year. Turn the next slide over to some of the company's key credit ratios. As you can see, our target ratio continues to be very strong on fixed charge coverage at 3.3 times both interest and debt service coverage ratio at 3.99 times. Our pro-forma net debt to annualized adjusted debt to RE was 4.8 times or N, which is below the low end of our target range of 5,556 times. Proforma NetDebt is calculated by subtracting from the NetDebt the estimated net proceeds from the forward sales agreement we executed during the quarter end that I will discuss shortly. Additionally, our Proforma NetDebt to gross assets was 39% on the basis of the quarter end. And our common dividend continues to be very well covered with an AFO-PAR ratio of 70% for the first quarter. Now let's move to our capital market activities and balance sheet, which is in great shape to support our continued growth. At quarter end, we had a consolidated debt of $2.99 billion. of which all is either fixed-rate debt or debt that is fixed or interest-rate swaps of an overall blended group of approximately 4.4%. Our liquidity position remains strong with 68.5 million cash on hand in the quarter and no balance drawn on a $1 million revolver. Additionally, the market was pleased to enter into a forward sales agreement under an ATM program to sell an aggregate 797,422 common shares for initial gross grossing of $47.5 million or an average sale price of $59.92 per share. We can settle the outstanding share at any time before March 1, 2027 for the gross proceeds subject to various adjustments. As of today, we have not settled any of these shares. We are increasing our $2,026,000 adjusted per share guys to the range of $5.57, $5.53 from the range of $5.28 to $5.48, representing an increase versus the prior year of 6.5% at the midpoint. We expect a similar percentage increase in head of upper share. We are also increasing our 2026 guide for investment spending to a range of $500 to $600 million, from a range of $400 to $500 million, and increasing disposition proceeds to a range of $50 to $100 million, from a range of $25 million to $75 million. We are improving our percentage rate and participating interest rate income guide to $18.5 million, $22.5 million, which continues to be very heavily weighted to the back half of the year. We are also confirming our G&A expense guide, $56,000,000 to $9,000,000, and the guide for our consolidated operating properties, which is provided by the G&A range for our income and expense.

Guide details can be found on page 23 of our supplemental.

Finally, we are pleased to have increased our monthly income and dividend by 5.1% to $372,000,000. which began with the dividend available on April 15th to shareholders of the record as of March 31st. We expect our 2020-2021 dividend to be well covered with an AFO-Payout ratio below 70% based on the Inventor Guide guidance. Now, without further ado, I'd like to take a break for the rest of our remarks. Thank you, Mark.

As discussed today, both our investments and earnings are accelerating and reflect the resiliency and opportunity of our institutional focus. We've also demonstrated our ability to utilize multiple sources of capital to fuel this growth, with the initial execution of our ATM program, along with opportunities to recycle capital to plan asset sales. All of these positives reinforce our conviction that APR's unique platform and asset classes position us to deliver outside shareable returns. With that, operator, what are we waiting on for questions?

At this time, if you would like to ask a question, please click on the raise hand button which will be found on the black bar at the bottom of your screen. When it is your turn, you will receive a message on your screen from the host allowing you to talk and then you will hear your name called. Please be set, unmute your audio and ask your question. If you are on mobile device using the app, simply tap And lastly, if you're calling in today, star nine will activate the eraser's hand and you star six to mute and unmute. We will wait one moment to allow you to perform. Our first question will come from Yana Yalakalan with the BFA. Please unmute yourself, accept, and ask your question.

Yana? Thank you. Good morning and congrats on a really nice first quarter. Mark, for the increasing AFO guidance, can you help us out how much came from a slightly better first quarter and then how much you're seeing from the acceleration investment activity or is there going to be also better yields on investment activity?

Yeah, we did, you know, we're a little better for the core, about a hundred or two. But then as you look forward, we really increased due to a couple of things. One, obviously, we raised our investment spending and paid for that via the capital raise to the specific property. I think more broadly, we got a benefit from being fairly conservative with respect to the 6-5 transaction at the end of the year, because we were sure it would close and when exactly it would close. So I think the ultimate outcome of that was that it anticipated. And I think the remaining investments, not just the increase per year, but the remaining investments, Our company is coming in a little bit sooner than planned and at a better cap rate. The last thing I'll mention in the impact that our FOA guides was the Margaritaville conversion from a note to a lease. We got incremental straight line rent from that, and that was probably a little under $0.02 in terms of straight line benefit converting from a mortgage to now a 20-year lease. Thank you.

And then maybe just one more on the strategy to employ more convertible or more structures as a way to invest in assets. I'm just curious, is the first quarter purchase option that you guys exercised a key example of what this would look like?

Yeah, that's exactly right. You know, really, the mortgages that we use, as I mentioned, are pathways to real estate ownership. And so that conversion of the mortgages is exactly representative of the types of structures we enter into. And so, as entrepreneurs present themselves, we will convert those and use those selectively.

Thank you. Thank you.

Hi, thank you. I just wanted to follow up on these convertible mortgage opportunities. Could you maybe talk a little bit about how many you have and what that could look like in the next couple of years as you go down that path?

Yeah, it's a good question. And really, if you look at our mortgage book, the majority of those, probably more than 80%, are confirmations. What we're highlighting here is with this transaction and marketable, that is just an example of the opportunities within the existing portfolio, as well as the types of structures that you could see a system into in the upcoming course of years.

Okay, thanks. And then I just want to ask you on the acquisition of, Do you guys see that, I guess, a potential partner going forward to shed more, what they would spend on assets? Is that something you're willing to lean into more in this time structure?

I think, again, I think clearly we demonstrated a partnership with them. So we'll definitely take a look at that. I think their story, I think, you know, real estate solutions are being explored across the board in the interaction space. And I think our team has demonstrated our ability to be a market leader in that space, whether that's with Six Flags or with other participants. So I think us carving out our leadership position will ultimately probably create more opportunities, which I think we find very attractive.

Great. Thank you. Appreciate it.

Thank you. Thank you.

Thank you.

So I think our point was, again, long-term, we look at these as incredibly stable assets. If you look over time, these are market-dominant. You just cannot create, as has been reported, these assets where, you know, I've had millions of dollars spent on them that we can buy very attractively, which we think create long-term stability. They're very much part of the communities where they exist. So we feel like this is a really strong anchor to make a great portfolio. I think, again, as I said, there's really been no new parts built in decades. So we feel the durability and resilience of these are quite good. And we will continue, as I said, to explore our opportunities.

I think what occurs is kind of what I talked about in the beginning.

Experience has been to continue to accelerate and continue to see, you know, multiple reports about how people are valuing experiences over things. They continue to prioritize those. So, again, we're just trying to fitness and play across the board. We're seeing strength. And so, therefore, I think we would say that almost all of our categories are I think that's exactly right.

It really is across the board. And, you know, just the ability to get a lot of our relationships to the table is increasing. And there's a general increased willingness to transact and decrease capital markets exposure. Sure, sure.

Thank you.

Thank you.

Thank you.

Yeah, this is Justin from Michael Goldsmith.

Thanks for taking my questions.

Are you seeing any cap rate compression or any increased competition in your top three active seconds of fitness and wellness, attractions, and even playing? Are those still your top three in terms of acquisition focus?

I would say, yeah. I mean, again, especially around our flow business, I mean, clearly with the traction this year, that was a big anchor transaction with our flow business. I think those are still the top, and it's been coming in as opening comments, I think, are capturing. as kind of a leading market participant here makes us get the first call usually on these types of assets. So I think there is always going to be competition, but again, everyone in this space knows who we are and we're going to get that call. So I think that's the note for us to continue to grow that pipeline more and more and more.

Okay, great. And does the strong box office performance in the first quarter here, does that change anything about your exposure? And has there been any private interest at all?

I think there's no doubt that there continues to be beginning and improving movements space as this continues, especially with some of the things that Ben mentioned in his comments. You've got the studios now kind of embracing much more on a theatrical forward Great, thank you.

Thank you. Our next question will come from Michael Cowell with RBC Capital Markets. You will see a message on your screen. Please accept and unmute your audio and ask a question. Michael, please go ahead.

Yep, yep, thanks. Greg, can you talk a little bit about the current macro uncertainty and how that has impacted the experience in your space? I guess mainly, have you received any calls from potential sellers looking to further de-risk, I guess, their company, and maybe you need to be able to give them the potential volatility that could be caused in the capital markets?

I think it's said that we're getting in and out of people who are – I think the idea of it used to be at the beginning of the industry or way, way, way, way, it's proven now. I think that utility and marketing has helped in that sense.

I think the underlying –

The thing that's got us is the underlying support and resiliency of the activity. I mean, you know, as I said, our country remains very strong against this backdrop. So I think it gives us confidence to move forward and the consumer is still there. And I think there has been some people on the capital side are saying, okay, it doesn't look like rates are going to go down, and there is a risk where we're at of them going down. So let's see if we can lock in transactions. That's consistent. That's consistent with what we're seeing. Yep, yep.

Okay.

I think it's going to be interesting to see that probably will be a bulk of that. I think you will also see us, as I mentioned earlier, hopefully capitalize on some really interesting opportunities on the other side, self-assessed, so that we can show some real interest in that. So we'll have to do that.

And on the theater side, the cell assets, I'm assuming you can't do much out of AMC, and that's not an answer, right? So should we think about those potential sales being with smaller operators?

Yeah, one of the opportunities there, which is exactly correct, it will not probably be on the mass release. Great, thank you. Thank you.

There are no more questions, so I'll turn the call back over to Greg Sills, the Chairman and CEO for any closing remarks.

Thank you, guys. I appreciate your time and attention today. We look forward to talking to you as we go through the rest of the year and appreciate your interest.

Thank you all. Thank you. Thank you for joining EPR Property Service for the 2026 Earnings Call. This call is a day-to-day call. You may now disconnect.