EPR Properties — FY2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023. This is an annual filing, not a standalone Q4 report. Amounts are in U.S. dollars.
Business context
EPR is a net-lease REIT focused on experiential real estate, with a legacy Education portfolio it intends to dispose of over time. At year-end, total investments were approximately $6.8 billion: 93% Experiential and 7% Education. The owned portfolio was 99% leased, excluding properties designated for sale. Management plans to reduce theatre exposure and grow other experiential property types.
Financial performance
| Metric | FY2023 | FY2022 | Change |
|---|---|---|---|
| Total revenue | $705.7 million | $658.0 million | +7% |
| Net income | $173.0 million | $176.2 million | -2% |
| Net income available to common shareholders | $148.9 million | $152.1 million | -2% |
| Diluted GAAP EPS | $1.97 | $2.03 | -3% |
| Diluted FFOAA per share | $5.18 | $4.69 | +10% |
| Net cash from operating activities | $447.1 million | $441.7 million | +1% |
| Investment spending | $269.4 million | $402.5 million | -33% |
| Common dividends per share | $3.30 | $3.25 | +$0.05 |
Revenue growth primarily reflected higher contractual and deferred rent collections, acquisitions and development, and increased mortgage financing income. Net income declined despite higher revenue, with the comparison affected by a $67.4 million impairment charge in 2023, versus $27.3 million in 2022, and higher operating and administrative costs. Net interest expense decreased to $124.9 million from $131.2 million. Approximate operating income margin was 43% (income from operations of $306.4 million divided by revenue of $705.7 million); this is a simple calculation from reported figures, not a company-reported margin.
Debt, liquidity and capital
- Debt was $2.816 billion at year-end, 99% unsecured. Net debt to gross assets was 39%; net debt to annualized Q4 adjusted EBITDAre was 5.3x, compared with 5.0x a year earlier.
- Cash and cash equivalents were $78.1 million, with $2.9 million of restricted cash. The $1.0 billion revolving credit facility had no balance outstanding; its year-end floating rate was 6.66%.
- Debt maturities include $136.6 million in 2024, $300.0 million in 2025 and $629.6 million in 2026. The company reported compliance with debt covenants at December 31, 2023.
- Management expects cash, operating cash flow, revolver availability and asset-sale proceeds to meet commitments, but notes refinancing or capital may not be available on acceptable terms.
- Commitments included $171.3 million for 15 development projects, with about $81.0 million expected to be funded in 2024, and $104.7 million of mortgage-note funding commitments, about $59.3 million expected in 2024.
Material developments, outlook and risks
- Regal restructuring: Regal emerged from Chapter 11 in July 2023. A new triple-net master lease covers 41 theatres at $65.0 million annual base rent, with 10% increases every five years and potential percentage rent. EPR took back 16 properties; two were sold in 2023 and nine remained slated for sale at year-end. The company recorded $42.4 million of impairment on eight surrendered properties. About $50.1 million of deferred rent tied to the master-lease properties is held in abeyance and may be forgiven if Regal avoids uncured defaults through the 15th anniversary.
- Concentration: Regal, Topgolf and AMC generated 14.7%, 13.9% and 13.4% of FY2023 revenue, respectively. Two theatre customers remained on cash-basis revenue recognition; AMC was among them.
- Portfolio and investment plans: Theatre industry recovery continued, but production delays from 2023 labor strikes may affect future film supply. EPR says near-term investment will be selective and constrained by elevated capital costs, with capital directed toward non-theatre experiential assets. No quantified earnings or FFO guidance is provided in the filing text.
- Unusual items and subsequent event: FY2023 included $67.4 million of property impairments and a $2.2 million loss on property sales. After year-end, two cultural properties were sold for approximately $44.9 million net proceeds; management expected an approximately $17.1 million gain in Q1 2024.
- Other risks: Discretionary consumer spending, inflation and interest rates, refinancing and balloon maturities, tenant defaults, theatre-sector concentration, property illiquidity, weather and climate exposure, and REIT qualification remain material risks. Management reported no known cybersecurity threat with a material impact as of the report date; the auditor issued unqualified opinions on the financial statements and internal control.
Key facts for investors to verify
- Regal’s rent payments, credit condition, deferred-rent terms and the outcome of planned theatre-property sales.
- AMC and Topgolf operating performance, rent coverage and the implications of the revenue concentration.
- 2024–2026 debt refinancing plans, interest costs, covenant headroom and funding of development and loan commitments.
- Whether FFOAA growth translates into sustainable cash available for distribution, given maintenance capital spending, debt service and preferred dividends.
- Execution of portfolio diversification, including dispositions and any changes in theatre exposure or occupancy.