EPR Properties Reports Second Quarter 2018 Results - Covers Boyne And Vail Sales

EPR Properties has announced operating results for the second quarter and six months ended June 30, 2018.

EPR Properties is a specialty real estate investment trust (REIT) that invests in properties in select market segments which require unique industry knowledge, while offering the potential for stable and attractive returns. Total investments exceed $6.7 billion and our primary investment segments are Entertainment, Recreation and Education. 

Total revenue was $202.9 million for the second quarter of 2018, including a $45.9 million prepayment fee received from Och-Ziff Real Estate ("OZRE") as further discussed below, and represents a 37% increase from $147.8 million for the same quarter in 2017.

On May 7, 2018, Boyne USA, Inc. ("Boyne") purchased seven ski properties from OZRE that partially secured the Company’s mortgage note receivable due from OZRE. Following the acquisition by Boyne, OZRE made a partial prepayment to the Company of approximately $175.4 million on this mortgage note receivable, leaving a carrying value of $74.6 million at June 30, 2018 that is secured by the remaining six ski properties. In connection with the partial prepayment of this note, the Company recognized a prepayment fee totaling $45.9 million that is included in mortgage and other financing income.

On June 4, 2018, Vail Resorts, Inc. announced it intends to acquire four ski properties from OZRE. This sale is expected to close by the end of the year. These four properties partially secure the Company's mortgage note receivable from OZRE and in conjunction with this sale it is expected that OZRE will prepay the entire remaining note balance. In connection with this prepayment, the Company is entitled to receive a prepayment fee, the amount of which is dependent upon the timing of the note repayment, and is currently estimated to be approximately $15.0 million.

• Net income available to common shareholders was $85.5 million, or $1.15 per diluted common share, for the second quarter of 2018 compared to $74.6 million, or $1.02 per diluted common share, for the same quarter in 2017.
• Funds From Operations (FFO) (a non-GAAP financial measure) for the second quarter of 2018 was $139.0 million, or $1.84 per diluted common share, compared to $85.0 million, or $1.15 per diluted common share, for the same quarter in 2017.
• FFO as adjusted (a non-GAAP financial measure) for the second quarter of 2018 was $141.8 million, or $1.87 per diluted common share, compared to $94.9 million, or $1.29 per diluted common share, for the same quarter in 2017, representing a 45% increase in per share results.

Six Months Ended June 30, 2018

Total revenue was $357.8 million for the six months ended June 30, 2018, representing a 29% increase from $276.9 million for the same period in 2017.

Net income available to common shareholders was $109.0 million, or $1.47 per diluted common share, for the six months ended June 30, 2018 compared to $122.5 million, or $1.78 per diluted common share, for the same period in 2017.

FFO (a non-GAAP financial measure) for the six months ended June 30, 2018 was $200.1 million, or $2.67 per diluted common share, compared to $158.9 million, or $2.30 per diluted common share, for the same period in 2017.

FFO as adjusted (a non-GAAP financial measure) for the six months ended June 30, 2018 was $235.8 million, or $3.12 per diluted common share, compared to $171.4 million, or $2.48 per diluted common share, for the same period in 2017, representing a 26% increase in per share results.

“We are pleased to announce another quarter of record revenues and earnings, as well as an increase in our annual earnings guidance,” stated Company President and CEO Greg Silvers. “This ongoing strong performance is supported by our differentiated portfolio of high quality assets and the underlying strength of each of our investment segments. We also continued our successful capital recycling efforts, allowing EPR to earn attractive prepayment fees and to reinvest the proceeds in accretive opportunities. Additionally, with the completion of a $400 million bond offering our balance sheet is strong and well positioned for future growth.”

The Company's investment portfolio (excluding property under development) consisted of the following at June 30, 2018:

• The Entertainment segment included investments in 151 megaplex theatre properties, seven entertainment retail centers (which include seven additional megaplex theatre properties) and 11 family entertainment centers. The Company’s portfolio of owned entertainment properties consisted of 13.3 million square feet and was 99% leased, including megaplex theatres that were 100% leased.
• The Recreation segment included investments in 18 ski areas, 21 attractions, 31 golf entertainment complexes and ten other recreation facilities. The Company’s portfolio of owned recreation properties was 100% leased.
• The Education segment included investments in 65 public charter schools, 67 early education centers and 14 private schools. The Company’s portfolio of owned education properties consisted of 4.7 million square feet and was 98% leased.
• The Other segment consisted primarily of the land under ground lease, property under development and land held for development related to the Resorts World Catskills casino and resort project in Sullivan County, New York.
• The combined owned portfolio consisted of 21.2 million square feet and was 99% leased. As of June 30, 2018, the Company also had a total of $268.1 million invested in property under development.
• During the three months ended June 30, 2018, Six Flags Entertainment Corporation ("Six Flags") completed their acquisition of the leasehold interest in five of the Company's attraction properties which were previously operated by Premier Parks, LLC. As a result, Six Flags operates six of the Company's attraction properties at June 30, 2018.