ACROFAN

EPR Properties Reports Second Quarter 2021 Results

Published : Tuesday, July 27, 2021, 1:18 pm
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KANSAS CITY, Mo.--(BUSINESS WIRE)--#EPR--EPR Properties (NYSE:EPR) today announced operating results for the second quarter and six months ended June 30, 2021 (dollars in thousands, except per share data):


 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

2021

 

2020

 

 

2021

 

2020

 

Total revenue

$

125,362

 

 

$

106,360

 

 

 

$

237,127

 

 

$

257,372

 

 

Net income (loss) available to common shareholders

12,519

 

 

(68,999

)

 

 

9,865

 

 

(37,915

)

 

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

0.17

 

 

(0.90

)

 

 

0.13

 

 

(0.49

)

 

Funds From Operations as adjusted (FFOAA) (1)

50,642

 

 

31,418

 

 

 

86,247

 

 

107,344

 

 

FFOAA per diluted common share (1)

0.68

 

 

0.41

 

 

 

1.15

 

 

1.39

 

 

Adjusted Funds From Operations (AFFO) (1)

53,006

 

 

33,313

 

 

 

91,932

 

 

123,380

 

 

AFFO per diluted common share (1)

0.71

 

 

0.44

 

 

 

1.23

 

 

1.59

 

 

 

 

 

 

 

 

 

 

(1) a non-GAAP financial measure

Second Quarter Company Headlines

  • Early Termination of Covenant Relief Period - Due to favorable performance during the second quarter of 2021, and the expectation of continued improvement going forward, the Company elected early termination of the covenant relief period relating to its Consolidated Credit Agreement and certain private placement notes.
  • Resumption of Monthly Cash Dividend to Common Shareholders - The Company announced a monthly cash dividend of $0.25 per common share payable on August 16, 2021 to shareholders of record on July 30, 2021.
  • Quarterly Collections Continue to Increase - Cash collections from customers continue to improve and were approximately 85% of contractual cash revenue for the second quarter of 2021 (an increase from 82% previously reported due to subsequent collections). In addition, year-to-date through July 26, 2021, the Company collected $48.9 million of deferred rent and interest from accrual basis tenants and borrowers that reduced receivables.
  • Property Openings Near 100% - As of July 26, 2021, approximately 99% of the Company's theatre and 100% of the Company's non-theatre locations were open, excluding normal seasonal closings.
  • Strong Liquidity Position - As of June 30, 2021, the Company had cash on hand of $509.8 million and no borrowings on its $1.0 billion unsecured revolving credit facility.

CEO Comments

“Our second quarter results and the early termination of our covenant relief period demonstrate the meaningful progress we have made to improve cash collections, stabilize our earnings and return to growth,” stated Greg Silvers, President and CEO of EPR Properties. “Almost all of our tenants have reopened and are enjoying the return of customers and ramp-up of their businesses, as consumers are again seeking the experiences our properties offer. We are particularly pleased to have announced the resumption of our monthly cash dividend to common shareholders and anticipate growing our common dividend over time alongside expected earnings growth. With the removal of investment restrictions that had been a condition to covenant relief, a strong liquidity position, and an increasingly constructive outlook as reflected in our guidance, we look forward to pursuing growth opportunities in the quarters ahead.”

COVID-19 Response and Update

Early Termination of Covenant Relief Period

As announced, on July 12, 2021, the Company provided notice of its election to terminate the covenant relief period early and submitted compliance certificates for the quarter ended June 30, 2021 for its Consolidated Credit Agreement that governs its $1.0 billion revolving credit facility (zero balance outstanding at June 30, 2021) and $400.0 million term loan, and its Note Purchase Agreement that governs its $316.2 million of outstanding private placement notes. The certificates provided that the Company was in compliance with all of its financial and other covenants, and would have been even if the covenant relief period had not been in effect during the second quarter.

The Company’s election to terminate the covenant relief period early means that, effective July 13, 2021, the interest rates on the debt returned to the previous levels defined in the agreements resulting in a reduction of approximately 100 basis points on the revolving credit facility and term loan, and 125 basis points on the private placement notes – in each case based on the Company's unsecured debt ratings. By terminating the covenant relief period, the Company was also released from certain restrictions under these credit facilities, including restrictions on investments, capital expenditures, incurrences of indebtedness, payment of dividends or other distributions and stock repurchases, and maintenance of a minimum liquidity amount.

Dividend Information

On July 13, 2021, following termination of the covenant relief period, the Company declared a monthly cash dividend of $0.25 per common share payable on August 16, 2021 to shareholders of record on July 30, 2021. This represents an annualized dividend of $3.00 per share.

Additionally, 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.

Collections and Property Openings

Approximately 99% of the Company's theatre and 100% of the Company's non-theatre locations were open for business as of July 26, 2021, excluding normal seasonal closings. Cash collections from tenants and borrowers continued to improve and were approximately 85% of contractual cash revenue for the second quarter (including approximately $1.0 million in deferred rent from cash basis tenants and from tenants for which the deferred payments were not previously recognized as revenue). Contractual cash revenue is an operational measure and represents aggregate cash payments for which the Company is entitled under existing contracts, excluding the impact of any temporary abatements or deferrals, percentage rent (rents received over base amounts), non-cash revenue and revenue from taxable REIT subsidiaries (TRSs).

In addition, year-to-date through July 26, 2021, collections of deferred rent and interest from accrual basis tenants totaled $48.9 million. These collections are in addition to the collection amounts above.

Strong Liquidity Position

The Company remains focused on maintaining strong liquidity and financial flexibility. The Company had $509.8 million of cash on hand at quarter-end. On April 9, 2021, due to stronger collections, proceeds from dispositions and significant liquidity, the Company used $90.0 million of its cash on hand to pay off the remaining borrowings under its $1.0 billion unsecured revolving credit facility.

Portfolio Update

The Company's total investments (a non-GAAP financial measure) were approximately $6.5 billion at June 30, 2021 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 and undeveloped land inventory) consisted of the following property types (owned or financed) at June 30, 2021:

  • 177 theatre properties;
  • 57 eat & play properties (including seven theatres located in entertainment districts);
  • 18 attraction properties;
  • 13 ski properties;
  • seven experiential lodging properties;
  • one gaming property;
  • three cultural properties; and
  • seven fitness & wellness properties.

As of June 30, 2021, the Company's owned Experiential portfolio consisted of approximately 19.3 million square feet, which was 95.0% leased and included $35.1 million in property under development and $20.2 million in undeveloped land inventory.

The Company's Education portfolio (excluding undeveloped land inventory) consisted of the following property types (owned or financed) at June 30, 2021:

  • 65 early childhood education center properties; and
  • nine private school properties.

As of June 30, 2021, 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 95.4% leased.

Investment Update

The Company's investment spending during the three months ended June 30, 2021 totaled $16.5 million (bringing the total of investment spending for the six months ended June 30, 2021 to $68.6 million), and included spending on Experiential build-to-suit development and redevelopment projects.

Capital Recycling

During the second quarter of 2021, the Company completed the sale of one theatre property for net proceeds of $14.9 million and recognized a gain on sale of $0.5 million. Disposition proceeds and mortgage note pay-offs totaled $33.7 million for the six months ended June 30, 2021.

Guidance

(Dollars in millions, except per share data):

Measure

 

2021 Guidance

Net income available to common shareholders per diluted common share

 

$

0.65

 

to

$

0.79

 

FFOAA per diluted common share

 

$

2.76

 

to

$

2.86

 

Disposition proceeds

 

$

40.0

 

to

$

50.0

 

The Company is introducing its 2021 guidance for FFOAA per diluted common share of $2.76 to $2.86. At this time, the Company is not providing investment spending guidance. The 2021 guidance for FFOAA per diluted share includes only previously committed additional investment spending of approximately $20.0 million for the last six months of 2021.

The 2021 guidance for FFOAA per diluted share is based on a FFO per diluted common share range of $2.81 to $2.91 adjusted for transaction costs and credit loss (benefit) expense. FFO per diluted common share for 2021 is based on a net income available to common shareholders per diluted common share range of $0.65 to $0.79 less estimated gain on sale of real estate of $0.02 to $0.06, plus estimated real estate depreciation of $2.16 and allocated share of joint venture depreciation of $0.02 (in accordance with the NAREIT definition of FFO).

Additional earnings guidance detail can be found in the Company's supplemental information package available in the Investor Center of the Company's website located at https://investors.eprkc.com/earnings-supplementals.

Conference Call Information

Management will host a conference call to discuss the Company's financial results on July 28, 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 7907776.

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

Quarterly Supplemental

The Company's supplemental information package for the second quarter and six months ended June 30, 2021 is available in the Investor Center on the Company's website located at https://investors.eprkc.com/earnings-supplementals.

EPR Properties

Consolidated Statements of Income (Loss)

(Unaudited, dollars in thousands except per share data)

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

2021

 

2020

 

2021

 

2020

Rental revenue

$

115,883

 

 

$

97,531

 

 

$

218,497

 

 

$

232,574

 

Other income

1,033

 

 

416

 

 

1,711

 

 

7,989

 

Mortgage and other financing income

8,446

 

 

8,413

 

 

16,919

 

 

16,809

 

Total revenue

125,362

 

 

106,360

 

 

237,127

 

 

257,372

 

Property operating expense

14,678

 

 

15,329

 

 

29,991

 

 

28,422

 

Other expense

3,025

 

 

2,798

 

 

5,577

 

 

12,332

 

General and administrative expense

11,376

 

 

10,432

 

 

22,712

 

 

21,420

 

Costs associated with loan refinancing or payoff

 

 

820

 

 

241

 

 

820

 

Interest expense, net

38,312

 

 

38,340

 

 

77,506

 

 

73,093

 

Transaction costs

662

 

 

771

 

 

1,210

 

 

1,846

 

Credit loss (benefit) expense

(2,819

)

 

3,484

 

 

(5,581

)

 

4,676

 

Impairment charges

 

 

51,264

 

 

 

 

51,264

 

Depreciation and amortization

40,538

 

 

42,450

 

 

80,864

 

 

86,260

 

Income (loss) before equity in loss from joint ventures and other items

19,590

 

 

(59,328

)

 

24,607

 

 

(22,761

)

Equity in loss from joint ventures

(1,151

)

 

(1,724

)

 

(2,582

)

 

(2,144

)

Impairment charges on joint ventures

 

 

(3,247

)

 

 

 

(3,247

)

Gain on sale of real estate

511

 

 

22

 

 

712

 

 

242

 

Income (loss) before income taxes

18,950

 

 

(64,277

)

 

22,737

 

 

(27,910

)

Income tax (expense) benefit

(398

)

 

1,312

 

 

(805

)

 

2,063

 

Net income (loss)

18,552

 

 

(62,965

)

 

21,932

 

 

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