EPR Properties — FY2021 Form 10-K
Business context and reporting period
Annual report for the year ended December 31, 2021. EPR is a REIT investing in experiential real estate, principally through long-term net leases and mortgages. At year-end, total investments were approximately $6.4 billion: 91% Experiential and 9% Education. Its owned portfolio comprised 333 properties, was 96.4% leased, and included approximately 20.4 million square feet. Management intends to focus growth on experiential properties and gradually dispose of the Education portfolio.
Financial and operating metrics
| Metric | FY2021 | FY2020 |
|---|---|---|
| Total revenue | $531.7 million | $414.7 million |
| Net income (loss) | $98.6 million | $(131.7) million |
| Net income (loss) available to common shareholders | $74.5 million; $1.00 diluted EPS | $(155.9) million; $(2.05) diluted EPS |
| FFOAA per diluted share (non-GAAP) | $3.09 | $1.43 |
| Net cash provided by operating activities | $306.9 million | $65.3 million |
Revenue increased 28% year over year, including higher rent collections, percentage rent, and activity at reopened properties. Experiential generated $492.8 million of revenue; Education generated $38.5 million. The filing does not provide a single consolidated operating-margin figure.
At December 31, 2021, cash and cash equivalents were $288.8 million, total debt was $2.804 billion, and the $1.0 billion revolving credit facility was undrawn. Net debt to adjusted EBITDAre was 5.2x and net debt to gross assets was 38% (both non-GAAP). Debt was 99% unsecured; management reported covenant compliance and no scheduled debt maturities until 2024. Operating cash flow rose substantially, while financing activities used $1.047 billion, primarily reflecting debt repayments and distributions.
Material changes versus comparable periods
- FY2021 revenue and earnings recovered from the pandemic-affected FY2020, but revenue remained below FY2019’s $652.0 million and FFOAA per diluted share remained below FY2019’s $5.44.
- Tenants and borrowers paid approximately 97% of contractual cash revenue in Q4 2021. EPR collected $63.8 million of previously deferred rent and interest from accrual-basis customers during FY2021.
- Common cash dividends resumed in July 2021 after suspension in 2020; the company declared $1.50 per common share for FY2021. The board’s future dividend rate is not assured.
- EPR terminated its covenant-relief period early in July 2021, repaid the remaining $590 million drawn on its line of credit and its $400 million term loan, and redeemed $275 million of notes due 2023. It issued $400 million of 3.60% unsecured notes due 2031 and replaced its credit agreement with a $1.0 billion revolving facility maturing in 2025, with extension options.
- FY2021 investment spending was $133.5 million versus $85.1 million in FY2020. Dispositions generated $96.1 million of net proceeds and a $17.9 million gain.
Outlook, risks, and unusual items
Management said stronger collections, resumed investment capacity, an active pipeline, and an improved balance sheet position it to return to growth. This is not quantified guidance; the filing provides no specific FY2022 earnings or FFOAA forecast. Management expects cash, operating cash flow, the revolver, and asset-sale proceeds to meet commitments, but notes financing availability and terms remain subject to market conditions.
- COVID-19 remains a material uncertainty, including renewed restrictions, changes in consumer behavior, tenant recovery, and customers’ ability to repay pandemic-related debt and rent deferrals. Some theatre tenants, including AMC and Regal, remained on cash-basis revenue recognition.
- Four customers—AMC, Topgolf, Regal, and Cinemark—accounted for approximately 50.5% of FY2021 total revenue. Their respective shares were 17.8%, 16.3%, 8.4%, and 8.0%. EPR also disclosed a $1.2 billion CAD judgment against Regal’s parent, Cineworld, which intended to appeal; EPR could not assure there would be no effect on Regal’s ability to meet its obligations.
- At year-end, $27.3 million of tenant deferrals and $0.4 million of borrower deferrals were recorded as receivables; additional tenant amounts were not booked because collection was not deemed probable. FY2021 rent abatements reduced rental revenue by $11.0 million.
- Unusual FY2021 items included a $22.0 million credit-loss benefit, $25.5 million of refinancing/payoff costs, $2.7 million of real-estate impairment charges, and $17.9 million of property-sale gains. FY2020 included $85.7 million of impairment charges and $65.1 million of tenant and straight-line receivable write-offs.
- Other key risks include discretionary consumer spending, inflation and interest rates, tenant defaults and lease renewals, leverage and balloon maturities, tenant concentration, theatre-industry changes, property illiquidity, weather and climate exposure, and REIT qualification. The company had $88.8 million of development funding commitments, including approximately $36.0 million expected in 2022, plus $11.8 million of mortgage-note commitments.
KPMG issued an unqualified opinion on the financial statements and concluded internal control over financial reporting was effective as of year-end. The auditor identified real-estate impairment assessments and collectibility of lease receivables as critical audit matters.
Important facts for investors to verify
- Whether collections, repayment of deferred balances, and tenant operating recovery continue—especially for the four largest revenue contributors.
- How much of unbooked deferrals and cash-basis tenant revenue is ultimately collected or recognized, and the status of tenant concessions and lease modifications.
- Progress on planned growth and Education-portfolio dispositions, including the returns and funding needs of development commitments.
- Debt covenant headroom, refinancing plans for maturities beginning in 2024, and the ability to maintain the common dividend as investment spending resumes.
- The outcome and potential implications of Cineworld’s appeal, and the effect of inflation, interest rates, and theatre release-window changes on tenant credit and rent coverage.