Good day, ladies and gentlemen and welcome to your EPR Properties Second Quarter 2015 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions]. As a reminder this conference is being recorded. I would like to introduce your host for today’s conference, Brian Moriarty, Vice President, Corporate Communications. Sir, you may begin.

Great. Thank you for joining us today. I’ll start the call today by informing you that this conference may include forward-looking statements as defined by the Private Securities Litigation Act of 1995, identified by such words as will be, intend, continue, believe, may, expect, hope, anticipate, or other comparable terms. The Company’s actual financial condition and results of operations may vary materially from those contemplated by such forward-looking statements. Discussion of these factors that could cause results to differ materially from those forward-looking statements are contained in the Company’s SEC filings, including the Company’s reports on Form 10-K and 10-Q. Now, I’ll turn the call over to Company President and CEO, Greg Silvers.

Thank you, Brian and good afternoon to everyone. I’d like to remind everyone that slides are available to follow along via our website at www.eprkc.com. As we did last quarter, I’ll start with our quarterly headlines and then discuss the business in greater detail before turning the call over to our CFO, Mark Peterson for a discussion of our financial results and capital market activity. The first headline is continued quarterly performance momentum. This headline is supported by double-digit growth in both revenue and FFO as adjusted versus same quarter previous year. Second, key investment segments demonstrate strong performance. Box office receipts remain on a very solid trajectory toward the year-end; our SKI portfolio finished the year even stronger than we had forecasted at the end of the first quarter; and our Topgolf assets continue to exhibit strong rent coverage and excitement as they open across the U.S. Third, investment spending on strong pace. Our investment spending is ahead of last year's pace at this same period and given our robust pipeline, we remain confident in our investment spending guidance. Four, balance sheet strengthened. Recent amendments to the company's revolving credit and term loan facilities extended the maturity and lowered the rate of the Company's combined facility, enhancing our ability to fund our investment pipeline while lowering our cost of debt capital. With that, I'll now move on to discuss the business in further detail. During the second quarter of 2015, we continued our strong investment momentum with investment spending for the quarter totaling $198.3 million, bringing our year-to-date investment spending to $334.7 million. The quarter spending pace and balance reflects our commitment to disciplined investing and our ability to utilize deep industry knowledge and relationships to continue to access unique opportunities in our primary investment segments. In the entertainment…

Thank you Greg. I would like to remind everyone on the call that our quarterly investor supplemental can be downloaded from our website. Now turning to the first slide; FFO for the second quarter increased to $64.3 million or $1.12 per share from $50.4 million or $0.94 per share in the prior year. FFO as adjusted per share was $1.08 versus $0.97 in the prior year, an increase of approximately 11%. Before I walk through the key variances, I want to discuss three items that taken together had a net positive impact on net income, but are excluded from FFO as adjusted. First, as you may remember, during the first quarter, in connection with the audit of our Canadian Trust by the Canadian Revenue Agency or CRA, we recognized an additional $6.5 million in deferred tax expense which was excluded from FFO as adjusted, and an additional $1.4 million in current tax expense which was included in FFO as adjusted based on our proposed adjustments -- based on proposed adjustments provided by the CRA. The good news received during the second quarter was that we were successful in refuting the CRA's position, and the examination was completed with no proposed adjustments. Accordingly, we reversed the entry that was made in the first quarter and the resulting deferred tax benefit of $6.5 million along with other deferred tax benefits for the second quarter totaling $200,000 have been excluded from FFO as adjusted. Second, as previously disclosed in April, we amended, restated and combined our unsecured line of credit in term loan facilities. In connection with this, we recognized $243,000 in costs associated with loan refinancing. Finally, we exclude from FFO as adjusted transaction costs, which are required expense per GAAP. During the second quarter we incurred $4.4 million related to potential…

Thank you, Mark. As indicated by our headlines, the second quarter results reflect a very positive quarter and demonstrate our commitment to our strategy. We remain focused on executing our plan of leveraging industry relationships and knowledge to access and underwrite opportunities that deliver the consistent and reliable results that our shareholders and capital partners expect. Additionally, I want to make sure that people were aware that we're holding an Investor Day focused on our education segment on October 8 at the Grand Hyatt in Manhattan, New York and this will include a tour of our Brooklyn Private School. More information can be found on our website including how to register for that event. With that, I will open it up for questions.

[Operator Instructions] Our first question comes from the line of Tony Paolone with JPMorgan. Your line is now open.

So, I know you have this Investor Day on education segment, but as I look at your spending, the private school segment seems to be outpacing the charter school stuff and I was wondering if you could spend a minute on the background in terms of how you're getting comfortable that that’s a place to put as much as or not more capital into since we've heard a lot of charter schools over the years, but it seems like this private school component is taking more capital at the margin right now?

Tony, its Greg. I think that’s maybe an anomaly in this since I don't know that’s going to occur all the time as much as it is. For this quarter we've got several projects that have kicked off with the private school. So we do believe that there is a great opportunity as we’ve talked about in gateway cities for these private schools. It's really nice a nice bridge. The schools that we're talking about, several of them are actually operated off a platform from some of our charter school operators. So it is what we think is a very good bridge to quality education opportunities. But I do think over the long haul, the charger school opportunity will continue to be a driving force in our education platform.

Okay, and then on Adelaar, can you lay out exactly what the process is from here and how many other different hurdles need to be addressed? Because it seems like -- I thought that once you guys got awarded that there needed to be some short of due diligence and some pro forma stuff, but its seems like it's turning out to be more complicated than that?

Sure, let me tell you what our knowledge of the process. With the regulations adopted, there is a 60-day period for them to accept comments, and then there is a 30-day period following after that, if there is no kind of reworking of the regulations that they could then begin to award the license. So the timeframe that's out there is a about 90-day time frame from the publishing of the regs. So it's just regulatory process that they go through.

So that would take us to October, I guess at the earliest, and then there is anything else?

I mean it's their discretion upon them -- when they award the license or if they want to hold hearings or anything of that nature. But that is the prescribed timeframe within the regulatory framework.

Okay got it. And then Mark, just for the second half of the year, you laid out sort of these tax reversals and so forth. What's the net for adjusted FFO purposes? What's the net for the second half of the year? Is it -- will you have a tax expense or a tax benefit?

Tax expense; probably $4.50 a quarter, while saying FFO is adjusted. But by the way there is not much difference in the first half of the year because the expense nearly $800,000 in first half, net-net, forgetting the deferred piece.

Our next question comes from the line of Dan Altscher with FBR Capital Markets. Your line is now open.

Kind of a question more so on at a tenant level with AMC, given that there is been some management changes going on there. Is there any thought that maybe you guys have in terms of if there is any change AMC's strategy or anything that you are hearing just at the tenant level that might be helpful for us to understand?

Dan, I’ve spoken with most of, if not all the senior management, including Gerry Lopez, and there does not appear, and they’ve got no stated intent to have any change in strategy. In fact, I think if anything, they’re getting more aggressive with their thoughts on amenity theaters and conversions. I think they've announced in their recent calls they are upping the number of their planned conversions. So I think they are very firmly committed to the strategy and we don't see any deviation from that.

And then also the comments you made just about the theaters, with box office revenue and 6% tenants growth; it's pretty hard to think that that’s not being -- the tenant growth side not being entirely attributed to high amenity and rent received [ph] initiatives. Is there any other way to think about that?

I actually think that we think -- I think we should always acknowledge that there is a certain level of content driven, in the sense that there a lot of -- but there is no doubt what the research shows, is that the high amenity theaters is drawing new participants or reintroducing participants who had left the exhibition attendance metric, and they are coming back. And I think that’s a very, very exciting thing for the industry.

And just one quick one from me, just in terms of the capital sending guidance, or the investment spending guidance. I think you acknowledged that you are running clearly ahead of first half of last year and the pace is going really well. It seems like you could easily do an excess of the guidance -- you had also reviewed the page 20 of the supplement that looks that build-to-suit spending, but is there anything out there that makes you think that we maybe not -- will not do more than what that the guidance says and why only do a 500 to 550?

I think the main thing that driving Dan is the fact that we do so much -- we have quite a bit of build-to-suit and we’ve learned that those two move around. We think we’ll have a better view of those starts in the third quarter, and at this point in time we would be forecasting starts that haven't actually begun yet. So we would like greater visibility before we take that number up again.

Just to add to that, page 20 gets you to about $480 million roughly of things in process. And so like Erik said, you need new starts effectively to get to the 500 or the top end of 550. And although we feel confident of that, it's certainly not in the bag.

And maybe just one quick and round that all. So just using the page 20, it seems like very third quarter and the focus at least within the -- in the build-to-suit currently. Is that the right way to think about that; at least within the very near-term is going to be or the rest of the guidance contemplates ahead of your third quarter I suppose the fourth quarter?

Heavier third quarter, particularly in service heavy in the third quarter because we have a lot of schools going in service ahead of the school year, with Camelback finishes and completes, although that was mortgage that would convert. So yes, third quarter typically is our highest quarter for in service.

Our next question comes from the line of Craig Mailman with KeyBanc. Your line is now open.

Follow-up on the spending question there, Greg I think you said you are highly confident to meet or exceed the spending target here. And I get that from an earnings perspective in the back half of the year it's less meaningful. But I guess my question, as we look into 2016 and look at gross opportunities and the run rate, would you say that even though you guys kept the spending target the same for 2015, maybe the identified volume of opportunities has risen and put you on a better trajectory heading into 2016?

I think that is accurate statement. Craig. I think the reality is as we have -- as we've gone into some of these segments, like we said private, early ed, and now we’re starting to find not just the operator we started, but two, three, four additional operators. It creates more opportunity for us, and I think our visibility to that growth, the actual start date of when the project will kick off somewhat moves a little bit from the timing, but the actual depth of the pipeline is better at this point.

Go ahead

I was just going to add to that page 20 shows what we expect, things that have started already that we expect in 2016 and you’ll see a much bigger. Of course you’d expect that as time moves on towards the end of year, you have more identified for 2016 obviously, but I agree with Greg, we feel good about what we do this year means for 2016.

And I know you guys talked in the past about the seasonality of starts on the movie theatres. Could you guys -- now that you're doing more in the private schools and charter schools, what's the seasonality there in terms of the construction pushes?

It's very interesting Craig, because they are totally different models. The seasonality of a charter school is totally different in the sense that it's absolutely [ph] still only a nine month. So you think some of those will start in the fall for opening for the following fall just for that kind of timeframe. The private schools are -- again we're talking about major gateway cities, where we're talking Brooklyn, the San Francisco Bay Area, those sorts of things and constructing in those drives a longer timeframe. They're generally larger faculties and they also have a larger timeframe for approvals, actual construction. So they're little more complicated. So I would say are probably on the kind of closer to the 16 to 18 months’ type timeframe.

And then I know with the transformation in the theater segment going to sort of higher end, you guys haven’t been as worried about exploration and just looking at ‘16, ’17, you guys have eight years expiring any risk that one of those are coupled more or given back or are those kind of stay as it or are those transformation candidates?

I mean there is no -- there is no guarantee for anything. I will tell you what we've seen to-date is the fact that we haven't gotten anything back and generally people are wanting to engage us on theaters. So we haven't' had -- we have had on some of these some early renewals in fact. So there are some things that are -- like I said are very positive, but there is -- clearly it's not without risk but risk, we think that we've got good operating assets and that we would be able to either -- the renewer will be able to work a deal with the with an operator because like I said right there is a lot of demand for theater space.

Okay and then just lastly Mark, on the Camelback loan, I know it transitioned to mass release. Does it move at all on income statement? Should we be prepared for that?

Yes, the move, one of the reasons we called that out is it will move from interest income or financing income to rental revenue.

Okay, when does that happen in the quarter?

Well, you could probably model it mid third quarter. We don't give guidance on the pixel timing in the third quarter, but mid third quarter would be good estimate.

Our next question comes from the line of Nick Joseph with Citigroup. Your line is now open.

What this guidance assumes for percentage rents in the back half of the year through the year?

Really quite a bit lower number than prior year. If you recall last year we had $800,000 in percentage in rents from peak towards the end of the year. That won't repeat itself, and I think the number -- let me get that real quick, and then we’re being a little bit more conservative with our [indiscernible] given the wet Junes. So back of the year has in it -- full year is about $2.5 million and we’ve recorded to date about $400,000 roughly.

Okay thanks. And then in terms of current leverage levels, how do they compare with the targets? And then what does guidance assume for capital market sources in the back half of the year?

Let me just walk you through kind of how we think about the capital plan. We have a $100 million on a line of credit. Subsequent to the end of the quarter we took down that term debt $65 million and we raised $3 million in direct stock purchase plans. So if you think about it, just apply that to the line, my line is kind of free and clear with the capital I've already taken down since the end of quarter. So $650 million of line credit. Uses wise, if you think about our guidance, we have $216 million of additional spending at high end of the guidance, $56 million of debt payoff. So it's call it roughly $300 million of uses. If you think of that 60/40, that would de-lever us from where we are today. As I mentioned, we're at 43% today. If you think of 60/40 on the $280 million, it would be about a $170 million of equity. But the good news is we have flexibility. I have ability if I wanted to do it all in the line and I still have quite a bit of capacity left at the end of year and my leverage goes up to something like 45%. So I’m at 43. Our plans suggest taking it more down to more like 41, which is consistent with where we’ve always been. But I think I have a lot of flexibility depending the market to determine when and how and how we decide to go to raise equity.

Thanks then finally Greg as a new CEO, and as you review processes, should we consider moving the earnings call until the following day?

It is something -- I know Michael reached out to me and talked to me about it, and it's something that has come up for discussion. We're discussing in internally. All I can tell you Nick is we are discussing it and I’ll let you know.

Our next question comes from the line of [indiscernible]. Your line is now open.

Just kind of curious on the Imagine school back that you sold. What was the cap rate there and also why the switch on the other Imagine school to a differential operator?

Again Dan, part of this was -- and remember, the stated cap rate and -- remember because of the effective interest method, we actually also have to overcome some to have no loss or no gain. We have to overcome what would be effectively straight line rent, but it's in the effective interest rate. So I think that the stated cap rate was about 9 on the sell. As far as the change of the operator, again we were approached by an authorizer about changing out Imagine. It met with our strategy of lowering our investment exposure to that, and we worked with the authorizer to accomplish that.

Did you have to change the rent or did it just stay kind of at the same level as state impact?

I think we did change the rent but we also extended the period. So I don't think we had any real measurable -- any real measurable diminution of the IRR over the life of the asset.

Sure. And then if I look at page 20, it looks like some projects that were slated to be delivered in the second quarter got pushed into the third quarter. What was kind of the -- what happened with that? Is that actually what happened.

It was. It's primarily related to our Brooklyn school, of which we would hope to deliver in the second quarter, but it will be delivered third quarter, prior to school opening.

If you noticed, that was offset by another property that we put in service earlier than planned by about $10 million, because I think the net change was like $33 million difference. And so $43 million of it was Brooklyn and the other $10 million was going the other way.

And then how should we think about the deliveries and the timing of those delivers from a modeling standpoint? Is it just the conservative or the right way to think about it is just have all the income from your build-to-suits in the third quarter be delivered on -- or start hitting the income statement about September 1st. Is that fair?

I think mid-quarter is a fair convention.

And then just curious on what you guys did at Camelback building the water park hotel? Is that a model that’s repeatable at some of the other Ski holes that you have? I don't think you have -- many of the Ski holes don't really have resorts or hotels on them or water parks. So just kind of curious if that’s a source of growth for you guys going forward; or is Camelback kind of really a one off type of deal.

I think there is opportunity. I will tell you we've been contacted by several of our operators about that. It really is location driven and dependent if there is enough support for that. And you could downsize that to make it work. So there clearly is an opportunity set but it has to work in conjunction with A, as I said the performance, but also the capabilities. Are they willing to have a professional group come in and manage that? So that we’re not going to let necessarily a Ski operation who doesn't know how to manage that sort of activity or asset -- all of a sudden think they just want it. It has to work, it has to underwrite and they have to have the Skills capability to operate it.

And then as far as the development pipeline for charter schools, how much is the new development pipeline buildings, schools for an existing school base. So for instance if you have like a elementary school and those students are trickling on to middle school and then on to high school; how much of you development if you could quantify is from kind of that repeat type of business work, continuing on and in the same type of market?

It's actually quite, -- it's growing. You are actually dead on with something in the since that we are being now contacted by -- in markets where we have several charter elementary schools, and now as we been with that group three, four, five years, they are now approaching us about middle schools and with a plan toward a high school. So I would say we’re at the beginning point of that. We probably have three or four junior highs and one high school, but that demand is growing.

Right now we have nine expansions going on due to demand.

But those doesn't mean expanding our elementary service as well..

Could be matriculating or just demand of the existing [indiscernible].

And I think you've done quite a bit with Basis. What are their plans for growth and what type of role if you think you'll play in that growth? You’ve been a big backer or Topgolf, and I think you maybe had some exclusivity with them. Do you have something similar going on with Basis and what’s their growth plans as far as you are aware?

Yes, we do Dan. We do have a -- much like it's very akin to what Topgolf is. We have a right of exclusivity with Basis for $500 million. That’s a one way meaning that we don't have to do the deal but we have the ability to do that. I think part of that is maintaining their ability and how they roll out, but it's very reasonable to think that they could get on a glide path of one to two private schools a year, and then if you look at those being in the $35 million to $45 million per facility, thinking about just them as an operator, and you start to combine other operators along with the charter schools and early ed and you get to what is a very attractive educational platform that will drive growth for the foreseeable future.

Okay got it. And then just lastly on the Topgolf. Can you talk about how the coverage has trended there? Are the mature sites starting to see their growth slow at all? Do they have or did they have better coverages as they get easily get older?

Actually it's became remarkably stable in the sense that they’re running fairly strong capacities. So they will start off unbelievably and mitigate from maybe – approaching 4 down to around the 3.5 range, which seems to the kind of long-term average for the portfolio.

The next question comes from Rich Moore with RBC Capital Markets. Your line is now open.

The number of starts you had in the quarter on various projects seemed to go down. It seemed kind of modest. Is that my imagination or was there some sort of seasonality factor that you're talking about before and are you going to see the number of starts I guess begin to pick up going forward in the various categories?

I think you're right, Rich. It was more seasonality and since that we'll see more starts as we get into third and fourth quarter. I think it was a lot of -- if you look in the schools, people are not starting schools now, just because of the fact with starting schools, to just open, from a build cycle it doesn't make sense to start -- to start now. Likewise, we've got 11 Topgolfs going under construction right now, and some of that is their capability, as we've got several of those that will deliver here in third and fourth quarter and they will run right around and ramp back up to more starts.

Okay, Got you. So you didn’t have anything to do with any change you've made, no rule or anything like that?

No

Okay got you then on the Topgolfs, are you still targeting 30 and 40 a year…

Yes, I think it will be around number. I think ours is targeted more at an investment level. So it will be driven kind on the land cost and everything else, but think it will be somewhere in that 25 to 30 range.

Okay good thanks. And then on the C&L lifestyle portfolio you guys are looking at, is there an update on that? Is there any news about that?

No don't think it's -- we don’t think it's appropriate that we comment on anything but beyond just it was again something that is widely published that they were looking at, but we're not get a comment on any specific deal.

And then -- I happened to be reading an article where Paramount is working I guess with AMC and Cineplex to kind of shorten the time that consumers can get a move at home from 90 days to the two weeks. I don't know if you saw that, and if you did.

Yes, Rich. I actually not only see it; I spoke to both CEOs about it. So to Jerry before he left and I would say Cineplex regarding that. They both maintain that A; if you follow what it was is that it’s a very specific scenario. There are horror genre pictures that have a very specific timeframe in which they can operate, and a very short shelf life relative to their viability. It's an agreement that they worked out the -- it actually is that it can go to direct after it goes below 300 screens in the U.S. If you look at their numbers that they earned, over 90% to 95% of revenue in the first 14 days of a horror picture. So the estimate is this would go to direct in day 17 and therefore -- and then they would actually get to participate in the sharing of revenues beyond that. But both were very quickly to point out that this was a test model. They did not think this would go broadly beyond these very specific short genres of certain pictures and that they had not expectation that for the broadly accepted movies, that the 75-day window would change.

And Regal the biggest operators come out and said they're not going to participate.

Okay is it 75 or 90 days? I don’t know if it’s 90 days ahead.

The 75 days which is the absolute -- the shortest period that before release to any alternatives, but at that point most films have earned 95% to 97% of their revenue.

And Mark, could you remind me when the preferreds are callable? Is it anytime in the near future?

Well, the two coverts really aren’t callable. They are convertible by the shareholder. We have one that’s callable. I believe -- why don’t we get back to you? It’s a five-year call. So it’s got to be. It’s 18 I think, in terms of the…

And then last thing guys is, did you say Mark that bad debt expense was up for the quarter?

Yes.

And what was the bad debt expense on?

It was really tenant add FEC family entertainment center that we've had cut out of our guidance all year long but we’re still recording revenue and bad debt expense because they are making progress. We’ll see whether they survive or we’ll get another tenant into replacement.

So it's just that one guy?

Yes.

Our next question comes from the line of Jane Wong with Bank of America. Your line is now open.

Just kind of a housekeeping question. For the theater acquisition in the second quarter, what was the cap rate? And can you give us an update on what you’re seeing in terms of the acquisition environment, what’s in you pipeline and the competition you are seeing? Any increase in assets available for sale?

Sure. The theater acquisition was around an 8. It's -- there is no doubt Jane that there is significant competition for standing inventory. There is a lot of both public REITs and other private owners that will actively pursue that. We've said that market is down. The cap rate compression is pretty significant. Those are not the kind of cap rates we’re enjoying in our build-to-suit program, but we thought that was an opportunity for us to buy an asset that will -- is in the process of being converted. So there may be an opportunity for a deployment of capital that would change our returns. But I think overall you are looking at a market that’s probably comfortably in the somewhere 7 to 7.5 for stating inventory on theaters and it probably goes below that on the coast.

And what about for the other [indiscernible] segments?

I think as we said, clearly the broadest market that we have, early childhood education we see a lot of those. We’re building those. Those are in the low 7s. We’re starting to see charter schools that are trading in what I would call mid to upper 7s. We traded at Imagine like I said at a 9. Now it’s had somewhat of a troubled name. So we thought it was the right thing to do for our asset management. But I think there is no doubt that these assets are trading one of our public REITs competitors get a Ski deal at 8. So I think cap rate compression is there. Now we've been able to maintain what we think are nice spreads relative to that, and our ability to access product that others are not -- not necessarily -- we’re not necessarily executing on well circulated bid processes. We’re accessing our product through our relationships and we think we’re able to be value add in that equation.

At this time, I'm showing no further questions over the phone.